Tanzania - Trucking Industry Rehabilitation and Improvement Project

Document of The World Bank FOR OFFICIAL USE ONLY Report Ne.7571 PROJECT PERFORMANCE AUDIT REPOKf TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) DECEMBER 30, 1988 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Appraisal (1976) - US$ 1 = TSh 8.38 1977 - 1984 - US$ 1 = TSh 9.55 Completion Year (1985) - US$ 1 = TSH 16.42 June 1988 - US$ 1 = TSH 94.00 GLOSSARY OF ABBREVIATIONS ICB - International Competative Bidding IDA - International Development Association MCT - Ministry of Communications and Transport MICS - Management Information and Control System NIT - National Institute of Transport NTC - National Institute of Transport NRHC - National Road Haulage Corporation OED - Operations Evaluation Department PCR - Project Completion Report PCU - Project Coordinating Unit PPAM - Project Performance Audit Memorandum PPAR - Project Performance Audit Report RETCOs - Regional Transport Companies SAR - Staff Appraisal Report SMC - State Moror Corporation TRDB - Tanzania Rural Development Bank UNITED REPUBLIC OF TANZANIA FISCAL YEAR July 1 - June 30 THE WORLD DANK FOR OFFICIAL USE ONLY Wastngton. D.C. 20433 U.S.A. offe of oiectr-GWaI OpMMn aluaton Dezember 30, 1988 NEMRANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Tanzania Trucking Industry Rehabilitation and Improvement Project (Credit '743-TA) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on Tanzania Trucking Industry Rehabilitation and Improvement Project (Credit 743-TA)" prepared by the Operations Evaluation Department. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. PROJECT PERFORMANCE AUDIT REPORT FOR OMCIAL USE ONLY TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) TABLE OF CONTENTS Page No. PREFACE ........................... BASIC DATA SHEET ............................................. EVALUATION SUMARY ........................................... V PROJECT PERFOMNWCE AUDIT ME1ORANDUM Introduction ....................... I Project Inception and Preparation ...................... 3 Implementation Experience ...... .. .. ....... ........ 4 Lessons and Conclusions ................................ 7 PROJECT CCMPLETION REPORT I. Introduction ............................. 13 II. Project Preparation and Appraisal ............... 15 III. Project Implementation and Cost ......................... 19 IV. Operating Performance ................................ 26 V. Financial Performance ... ............................* 28 VI. Institutional Development ............................*** 30 VIT. Economic Re-evaluation ...... ..................... .*** 31 VIII.Conclusions .....................*** 33' Tables 1. Composition of Technical Assistance ..................... 35 2. Details of Technical Assistance to RETCOS ............... 36 3. Details of Technical Assistance to NTC (coordination unit) ................................. 37 4. Regional and Size Distribution of Trucks/Trailers Procured Under Cr. 743-TA ...............................8 5. Project Cost ............................................ 3 6. Cumulative Disbursement Schedule ........................ 40 7. Operating Performance of RETCOS ......................... 41 8. Consolidated Profit and Loss Statement of Project Companies ................................... 42 9. Consolidated Balance Sheets of Project Companies ........ 43 10. Economic Re-evaluation ............ ...*. ......... .. .... 44 11. Assessment of Operating Costs: Without Project .......... 45 12. Economic Re-evaluations Assuming Additional Truck Purchases in Without Project Case ................. ... 46 13. Without Project: Assessment of Investment Requirements .. 47 IThis docuament 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 authodiution. PROJECT PERFORMANCE AUDIT REPORT TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) PREFACE 1. This is the performance audit of the Trucking Industry kehabilitation and Improvement Project for which Credit 743-TA in the amount of US$15.0 million was approved on October 4, 1977. The original Closing Date (June 30, 1983), was extended twice and by the final Closing Date (June 30, 1985), the Credit was fully disbursed. 2. The Project Performance Audit Report (PPAR) consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED), and a Project Completion Report (PCR) prepared by the Eastern and Southern Africa Projects Department. 3. The PPAM is based on a review of the Staff Appraisal (SAR) and the President'a Report (PR), of the legal documents and the transcripts of the Executive Directors' meetings which considered the project, related documents in the Bank's files, and information supplied by the Borrower. After studying the file and discussing the project with Bank staff in Washington, OED conducted a field mission to Tanzania in May-June 1988 to secure the views of the Borrower. 4. The PCR contains a thoughtful account of objectives and achievements but, in the audit's opinion, considers the project somewhat too restrictively. It compares intentions listed in the SAR with accomplishments measured against a possibly over-scrupulous performance scale which does not take into adequate account the macroeconomic environment where the Executing Agency and the truckb* companies, established under the project, have been obliged to operate. As part of a comprehensive country study, 0D has recently reviewed Bank Group experience in Tanzania between 1966 and 1988. The PPAM has therefore attemptee to examine the Trucking Industry and Rehabilitation Project from the wider perspective afforded by this review. 5. Following standard OED procedures, copies of the draft PPAR were sent to the Government and the Borrower. No comments were, however, received. - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET TANZANIA TRUCKIXG INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) BASIC DATA SHEET KEY PROJECT DATA Actual as 2 Appraisal of Appraisal Estimate Actual Estimate Total Project Cost (US$ million) 18.2 22.1 21.4% Credit MAount (US$ million) 15.0 15.0 100% Project Completion Date 12/82 12/84 -- Proportion Completed by Appraisal Completion Date (2) 100 74 -- Economic Rate of Return Assistance to Transport Companies 372 102 -- Replenishment of Stock of Spare Parts )38Z 38% -- CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ thousand) FT78 FY89 FY80 FY81 FY82 F FY84 FY85 Estimates 275 4,000 8,300 12,250 14,000 15,000. Actual 23 3,630 4,423 5,140 5,760 11,710 13,965 15,000 Actual as Z of Estimate 8 91 53 42 41 78 PROJECT DATES Actual as 2 of Original Plan Actual Alppralsal Estimate First Mentioned in Files - 3108174 -- Appraisal 8/76 9/76 -- Negotiations - 7/13/77 -- Board Approval Date - 10104/77 -- Credit Agreement Date - 11/03/77 - Effectiveness Date 2/02/78 4/03/78 -- Closing Date 6/30/83 6/30/85 -- STAFF INPUTS (staff weeks) FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FT85 Preappraisal 18.4 7.4 Appraisal 48.8 0.4 Negotiations 0.4 7.4 Supervision 6.3 8.5 5.9 13.5 8.9 11.8 9.1 2.7 Other 1.0 0.3 0.1 0.0 0.0 0.2 Total 18.4 57.5 14.4 8.6 5.9 13.5 8.9 11.8 9.1 2.7 FY86 FY87 TOTAL Preappraisal 25.8 Appraisal 49.2 Negotiations 7.8 Supervision 0.4 10.6 77.5 Other 1.5 Total 0.4 10.6 161.8 MISSION DATA Number of Number of Man-weeks MonthfYear Weeks Persons in Field Report Date Preparation 3/76 2.3 3 7.0 6102/76 Appraisal 9/76 3.0 3 9.0 11109/76 5.3 16.0 Supervision 1 10177 3.0 3 9.0 12/07/77 2 1/78 2.0 1 2.0 3/16/78 3 9178 1.4 2 2.9 12/18/78 4 2/79 1.3 2 2.6 4/13/79 5 6/79 1.9 1 1.9 8/03/79 6 3/80 0.6 3 1.7 4/15/80 7 7/80 1.1 1 1.1 8/18180 8 11/80 1.1 1 1.1 1/06:81 9 5/81 1.1 1 1.1 6125/81 10 4/82 1.1 1 1.1 5/17/82 11 2/83 0.8 3 2.4 4/21/83 12 3/84 0.9 2 1.7 4103/84 13 11184 0.9 2 1.7 12/03/84 14 10/84 1.4 1 1.4 1130/85 18.6 31.7 - iv - OTHER PROJECT DATA Borrowers United Republic of Tanzania (TA) Executing Agencys National Transport Corporation Follow-On Proiectsa None - v- PROJECT PERFORMANCE AUDIT REPORT TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) EVALUATION SUMMARY Backaround and Objectives 1. The project was a pilot operation (SAR, para 4.01; PR, pars 46) to reverse the deteriorating trend in road transport. For the industry As a whole, the objective was to encourage "liberalization" by promoting a freer imports regime and by fostering more competition. For public transport, the objective was to establish five financially viable regional transport companies (PPAM, para 6; PCR, para 2.11). 2. Throughout project inception and preparation, the question was whether IDA should focus on public transport, when private truckers were moving 85% of the traffic. IDA decided that country relations made it appropriate to assist the public sector and macroeconomic factors suggested that project success would have to be judged more in terms of organizational achievements, than in terms of strictly financial results. In the audit's view, appraisal did not take proper account of macroeconomic factors (PPAM, para 13; PCR, par&, 8.01). Implementation Experience 3. The project was successful. It contributed to the improvement of the import process (PCR, para 3.17), and strengthened manpower training through the National Institute of Transport (PCR, para 3.12). Establishing financially viable transport companies meant the creation of entities capable of meeting their operational and capital requirements. Introduction of proper operational practices and management procedures did not create major difficulties (PPAM, para 9; PCR, paras 4.02-4.04, 6.01-6.03) but provision of adequate equity capital, although eventually arranged, did pose problems for more than two years (PPM, para 9; PCR, paras 3.06-3.07). Results 4. There was a 21% cost overrun (from US$18.2 to US$22.1 million), and completion was delayed from 1982 to 1984, largely because of equity capital difficulties (PCR, paras 3.18, 3.06-3.07). The National Transport Corporation (NTC), the project's Executing Agency, performed well (PPAM, para 16). The regional transport companies (RETCOs) established under the project have performed better than the rest of the public trucking sector (PCR, para 7.03). In the long run, they may not be financially viable but this is due to factors beyond their control: no freedom to charge -_,onomically justified tariffs for intra-regional movements, no incentives fc local staff, shareholder demands for less than economic pricing for services offered to them (PPAM, para 17; PCR, para 4.04). Project-financed technical assistance has made importmnt contributions to institution building (PCR, paras 3.08-3.11), and NTC operates - vi - a monitoring and control system, including systematic data collection on vehicle operating costs (PCR, para 6.01). The PCR, following assumptions comparable to those used at appraisal, concludes (PCR, paras 7.01-7.04) that the re-estimated economic rate of return for assistance to transport companies is 102 (as against 372 at appraisal) and the corresponding figure for replenishment of spare parts is 382 (as against also 382 at appraisal). In the audit9s view, these figures, though arithmetically correct, are not sufficient indices of success. Institutional and organizational achievements (establishment of scrupulously run public transport companies; creation of the only reliable information system for truck operations in Tanzania) cannot be fully reflected in financial and economic rate of return calculations (PPAM, paras 11 and 16). Sustainability 5. Sustainability of project results depends upon conditions outside RETCO and NTC control. Viable RETCOS must be able to recruit and retain capable staff, to charge reasonable rates, and to procure spare parts and vehicle replacements. Such conditions would be met only after the macroeconomic environment has improved significantly. This will take time and, meanwhile, NTC is making every effort to extend the services of the technical assistance staff, without which RETCO performance would be jeopardised. Through the 1986 Sixth Highway (Rehabilitation) Project, IDA is financing the continuation of RETCO and NTC technical assistance staff until the end of calendar 1989 (PPAM, para 17). Findings and Lessons (a) IDA was hasty in preparing the project, particularly regarding the difficulties of securing equity capital for RETCOs. Given Tanzania's financial straits and that this was IDA's first intervention in road transport, the haste betrays undue optimism, or undue eagerness to proceed, or both. Subsequent developments repeat a lesson of previous projects with which IDA ought to be familiar: preparation which devotes proper attention to contentious issues contributes to smoother execution, and to better IDA-Government relations (PPAM, para 14). (b) The project's satisfactory outcome is due to the professional and personal qualities of the NTC Chairman and to the technical assistance staff assigned to NTC and to RETCOs. In view of the Executing Agency's performance, NTC management proposals and initiatives made during project implementation deserved stronger IDA support (PPAM, pare 15). (c) Contrury to the intentions explicitly stated in both the President's and the Staff Appraisal Reports, there has been no follow-on project, possibly because IDA resources for transport were primarily allocated to highway maintenance. In reviewing its current lending program to Tanzania, IDA might now consider some further assistance to the trucking sector (PPAM, para 18). - vii - (d) Project experience suggests three aspects which IDA might take into account in its future policy dialogue. First, under the right circumstances, Tanzania is willing to use expatriate personnel in line positions. Second, there is room for road transport development through carefully-designed assistance both to the public and to the private sector. Third, management talent is not lacking in Tanzania and IDA might consider further support to encourage such talents which offer the best guarantee for the proper deployment of local manpower and for the most effe-tive use of expatriate technical assistance (PPAM, pars 19). - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) Introduction 1. IDA-assisted operations to strengthen the transport sector began in 1964 and the Sixth Highway (Rehabilitation) Project is ongoing in 1988.11 Summaries of audit and project completion reports are as followas The Revised First ninhway Projects Credit 48-TA Credit 115-TA of 1964 would finance construction of eight road sections. Delays and increased costs led IDA to reappraise the project, and provide a US$3 million supplementary credit in 1968. Project completion registered major delais and cost increases, largely due to scarcity of technical staff. The Second Highway Prolect: Loan 586-TA: Credit 142-TA of 1969 would assist the construction of two sections of the Tanzania-Zambia highway. The project was economically successful only because of fortuitous circumstances. An important issue on distribution of benefits was raised upon completion at appraisal it was expected that most benefits (85%) would accrue to Tanzania; on completion it has become evident that 45% of the benefits had accrued to Zambia. East African Community -- Second and Third Harbour Proiectas Loans 638 and 865-EA of 1969 and 1972 were for development of facilities in Mombasa, Dar es Salaam and Tanga. They registered significant overruns in both time and cost and the audit suggested that future projects ought to emphasize productivity, manpower development, and maintenance. East African Community -- Third Railway Prolects Loan 674-EA of 1971 was to rationalize tariffs and reduce operating down costs. A cost- based tariff was not implemented because the economic, political and operational consequences were not foreseen. The cost reduction program failed to materialize because of political differences among the Partner States in the East African Community. By the planned completion date only 5 per cent of the project had been carried out, and it never was completed. There were substantial 1, A full review of Bank Group activities in the Tanzanian transport sector over the 1964-1988 period is under preparation in OED and will be incorporated in a country study scheduled for completion in 1989. -2- cost increases though the extent of the overrun could not be documented in the absence of adequate cost records. The Third Hishway Projects Credit 265-TA& Loan 586-TA of 1971 (later supplemented by a transfer of a US$1.9 million surplus from the Second Highway Project) would construct a section of trunk road in the southern part of the country; Improve and maintain feeder rods in the north; and strengthen maintenance. There were significant cost overruns; improvement of feeder roads was short lived; training of Tanzanian engineers met with limited success; and the staffing program was not carried out. The goal of stimulating agricultural production was not met. Investments in the trunk road had a 41 rate of return, and those in feeder roads had negative rates of return. The Fourth Highway (Maintenance) Project: Credit 507-TA of 1974 was the first of two phases intended to establish a trunk road maintenance organization but failed to achieve its physical objectives. The Fifth Hishway Proiects Credit 876-TA of 1979 was the second phase but its scope was also too large. The need to reduce the project area became obvious during implementation but Government was reluctant to scale it down. Implementation capacity was affected by the Executing Agency's unwillingness to employ expatriate staff in line positions. The Port Rehabilitation Proiect: Credit 1636-TA of 1984 (ongoing in mid-1988) is to rehabilitate and modernize the port of Dar-es- Salam. The Sixth Highway (Rehabilitation) Project of 1986 (ongoing in mid- 1988) is to rehabilitate the most important sections of the highway network and to improve road maintenance by encouraging work by contract rat4er than by force account. 2. The Trucking Industry Rehabilitation and Improvement Proiect of 1977, IDA's first attempt to assist the road transport industry, was identified and prepared under inauspicious conditions. Until 1973, almost all road freight was carried by private transporters but Government chose to create specialized transport companies, as well as transport wings in manufacturing, trading and crop marketing parastatals. The President's Report (PR) on the Trucking Project explained this decision as follows: "Tanzania's transport priorities and policies have changed over the years in response to changing national needs and conditions" (para 26). However, the PR acknowledged that results were not encouraging: "Since their establishment, these entities have been characterized by inefficiency, low productivity and unreliable provision of services. Rapidly established, they have inexperienced management, - 3 - and suffered from a lack of working capital while carrying high debt obligations" (para 32). The new transport entities were often required to carry freight on the most difficult routes, and accept unprofitable rates for doing so. Lacking incentives for high productivity and efficient operation, they registered low scores for truck utilization and truck availability compared to private truckers. Then, in 1974, Government set up a licensing scheme for the import of vehicles and spare parts, a move which further reduced truck availability and utilization for both public and private operators. The scheme was administered by the State Motor Corporation (SMC) which was made the sole agency for importing trucks and spare parts, even though it did not have trained staff to collect and analyze data on trucking industry needs. Import applications were submitted to the Central Bank which allocated the necessary foreign exchange, although, like SMC, it lacked proper staff and had no way of determining actual needs. Government intervention was thus responsible for the trucking sector's deteriorating performance but IDA would not say this openly, and the Government would not admit it. Proiect Inception and Preparation 3. In March 1974, having noted the adverse effects of poor road transport upon agricultural development, IDA suggested a review of the trucking sector. A report was prepared by a Consultant in early 1976 and an appraisal took place in September of the same year. Both the PR and the SAR presented the project as a pilot attempt to "support Government's efforts to reverse the deteriorating trend in truck transport, a mode upon which the predominantly agricultural economy depends heavily" and the SAR continues: "While early Improvements will necessarily be modest, the experience and skills gained under the project are expected to provide a basis for subsequent comprehensive rehabilitation and Improvement of the transport industry" (para 4.01). The PR states: "Lessons learned in initial operations will be integrated into later efforts" (para 46). 4. The project was negotiated in July 1977. The Government knew that public transport was not performing well but was disinclined to return to a fully private system. IDA implicitly acknowledged this and the project file contains numerous memoranda2l recording internal debates at the Bank as to whether sufficient attention was being paid to the private-public transport issue. The PCR suggests (para 8.01) that while acknowledging reality, the Bank deferred to politics and made the best out of a difficult situation by proposing that the project assist with the establishment of five public 21 Those dated January 6, 1977, February 2, 1977, April 4, 1977, April 20, 1977 and June 21, 1977 summarize the crystallization of the Bank's position. -4- trucking companies, including technical assistance, procurement and rehabilitation of trucks, and provision of repair facilities. Mindful of the fact that about 80% of all freight carried by road was still being transported on private trucks, IDA suggested, and Government agreed, that the project should also assist the industry as whole by providing training of drivers, mechanics and accountants, replenishing the spare parts inventory, and improving the spare parts and truck import systems. 5. The Board approved the project in October 1977, the Credit Agreement was signed in November 1977, and the project became effective in April 1978. Total project cost was estimated at US$18.2 million, with a foreign exchange component of US$15 million to be financed by IDA. Project implementation, scheduled to begin in early 1978, was expected to be completed by December 1982. Implementation Experience 6. The project0a primary objectives were two: for the industry as a whole, to encourage "liberalization";I/ and, for public transport, to establish five financially viable regional transport companies (RETCOs). 7. Encouraging "liberalization" required two relatively modest steps which would precede any more drastic measures: first, improving the process of importing spare parts, and, second, providing better training for industry personnel. The project mads some contribution in the first direction (PCR, para 3.17), and even more in the second, through the project-assisted training at the National Institute of Transport (NIT). 8. Establishing financially viable transport companies meant the creation of entities capable of meeting their operational and capital requirements. Poor performance of parastatal organizations already engaged in road transport, dictated that procedures be laid down for monitoring and control of the new companies. The project's Executing Agency --the National Transport Corporation (NTC)-- would supervise the RETCOs which would otherwise operate with considerable autonomy within their respective regions.4/ Given the scarcity of appropriately trained local personnel, the project financed technical assistance to design management guidelines, assist local managers, and train workshop personnel. 9. Project preparation hinted (SAR, para 4.06) --and project implementation demonstrated (PCR, para 5.02)-- that financial feasibility of the new companies would not be easy. For a RETCO to be viable, it would have to recruit and retain capable staff, charge economic rates, be able to procure spare parts and vehicle replacements, and command adequate amounts of 3/ The SAR, paras 4.02(i)-(ii), uses this term to imply, without actually saying, that the end objective ought to be a freer regime for imports and a greater degree of competition in road transport. !/ SAR, paras 4.03-4.12. -5- equity capital. While some iSsues (notably staff recruitment and tariff setting) remain problematic because of the macroeconomic context, they did not generate insurmountable obstacles during project implementation. By contrast, providing RETC0s with adequate equity capital did create problems which, in turn, were largely responsible for the 2-year delay in project completion. Eventually, Government provided virtually all of the equity financing needed but, while sources of equity contribution were being debated and IDA missions were suggesting cancellation of the project,5/ IDA could not disburse for procurement of trucks. This impeded implementation progress because technical assistance was in place but, in the absence of trucks and equipment, could not be effectively utilized. 10. Since 1980, progress was satisfactory: RETCOs were established, trucks and spare parts were delivered, technical assistance to the RETCOs and to the NTC made possible an acceptable RETCO performance. An information and management control system is in place and provides the only reliable road transport cost data. Institution-building has been particularly successful (PCR, paras 6.01-6.03) at NTC, the RETCOs, and NIT. It is true that even more could have been accomplished if RETC0s, and the NTC, did not have to operate under the constant prospect of losing good staff to the private sector. However, givev the low salaries and absence of effective incentives in the civil service, this is a problem not amenable to fast solutions. Throughout, NTC management did its best to recruit local staff, to establish RETCOs, to equip workshops, and to retain competent expatriates. In view of the Executing Agency's fine performance, IDA staff could have been more supportive of NTC, especially in the 1978-1982 period when too much attention was in- vested in futile attempts to encourage national transport planning,6/ and in over-detailed exchanges on the background and qualifications of technical assistance staff that NTC wished to recruit.7/ 11. The PCR (para 5.02) states that RETCO financial performance has not been good enough to cover their asset replacement needs from the cash they &J A June 25, 1981 Back-to-Office Report reads in part: "Should Government commitment in the form of proposed equity contributions not materialize in the specified time-frame, I would recommend cancellation of the project." g/ Despite the Tanzanian disregard at the time for even the most rudimentary data collection (e.g., between 1970 and 1985, road transport statistics are non-existent; vehicle registrations by the Central Transport Licensing Authority ceased in 1981), IDA staff were keen to encourage comprehensive national transport planning exercises (cf., Back-to-Office Report dated December 6, 1978; IDA letter to Government dated December 29, 1980, Government letter to IDA dated July 21, 1982). Z1 cf., in the Project File, NTC letter to IDA dated February 5, 1980, the series of telexes between IDA and NTC during August-December 1980, the correspondence between NTC and IDA between June 1981 and February 1982. - 6 - generate, and that "the realized economic rate of return, based on assumptions broadly consistent with those made at appraisal, is significantly less than the appraisal estimate" (para 7.04). The audit concurs with this judgment but notes that performance targets established at appraisal were not based on a reliable body of data. SAR para 2.24 states that the basic document for project preparation (the consultants' report submitted in early 1976) "was not very successful in analyzing problems and developing a remedial program, in part because of a lack of detailed industry data." Para 3.12 states that "there is little data available on the numbers, types, and duration of services licenses issued as the Licensing Authority does not compile statistics, analyze demand, or assess performance of license holders." Para 3.17 states that while detailed data are not available, interviews and direct observation in Tanzania show that private truck owners achieve a much higher availability rate than parastatals..." Para 4.04 scates that "in the absence of detailed information on local conditions and needs, it would not be meaningful to try to anticipate exact fleets, organizational, manpower and equipment requirements for the five companies." Nevertheless, absence of data did not impede appraisal: SAR para 4.06 states that "while detailed forecasts and breakdowns of individual company structures and financial statements -annot be usefully prepared at present ... these target figures have been used in the economic analysis of the proposed aid to the five companies ... and represent reasonably attainable objectives for them." Para 4.07 states that "while detailed financial forecasts cannot meaningfully be made at this stage, it is possible to project anticipated financial performance in general terms." Notwithstanding the absence of reliable figures, the SAR concluded that the proposed investment in the five RETCOs would yield a 37% economic return (para 5.05), and that investment for spare parts imports, "whose benefits, though undoubtedly large, are difficult to estimate, would yield 38%" (para 5.08). The PCR (paras 7.03-7.05), using a methodology similar to that of the SAR, shows rates of return of 10% and 38% respectively. These figures are arithmetically accurate but do not, in the audit's view, adequately reflect the significant organizational strengthening and institution-building to which the project has visibly contributed. -7- Lessons and Conclusions (a) Preparation 12. IDA was hasty in preparing the project and submitting it to the Board. The consultants, whose report formed the basis of IDA assistance, were selected too quickly but, even though their work was deficient, project preparation did not slow down to examine important aspects superficially covered (PCR, para 2.01). IDA precipitousness is noted in the PCRs "While in the field the mission decided that it had gathered sufficient information and had reached an acceptable degree of agreement on project scope and content with Government to proceed with an appraisal" (para 2.04). In fact, the agreed scope was the same as that drawn up (on the basis of the consultant's deficient report) in March 1976, with one addition: besides providing assistance to the National Road Haulage Corporation (NRHC), assistance would also be provided to four RETCOs. However, NRHC went into liquidation prior to Board presentation after defaulting on its debts; it was replaced in the project by another RETCO (PCR, para 2.05). 13. Throughout inception and preparation, the basic question was whether or not, in its first attempt to strengthen road transport, IDA should focus primarily on public transport when private truckers were moving about 85Z of the traffic. In the mid-1960s, IDA-Tanzania relations were not such that IDA would be prepared to challenge Government ideology and, after some internal debate98/ IDA concluded that, under the circumstances, "this unorthodox project was appropriate."91 With this decision, IDA embarked upon a program of assistance which (given the state of the Tanzanian economy, the lack of reliable data, and Government's preference for non-market solutions to economic and financial problems), would be difficult to evaluate according to benefit-cost methods applicable in environments where free competition prevails. In the auditOs view, project success would eventually have to be judged in terms of organizational strengthening rather than in terms of profit-and-lose statements, since the factors determining RETCO profits and losses (rate setting, legitimate access to spare parts, recruitment of qualified staff, prevention of private truck overloading) would be outside RETCO control. Appraisal did not, in the audit's view, take proper account of these macroeconomic factors. 14. Also, appraisal assumed that RETCO capital structure would be strengthened by attracting as shareholders potential public sector users of transport services. The SAR concluded that no difficulties should be expected: 81 cf. the January 6, 1977 memo from the Senior Vice President, and the February 2 and April 4, 1977 staff responses. 9/ cf. the June 24, 1977 note from the Transportation Department. -8- "Equity capital will be subscribed by the shareholders and all other assistance to the trucking companies will be in the form of loans," (para 4.25). Given Tanzania's financial straits, this statement betrays undue optimism, or undue eageraess to proceed, or both. Subsequent developments,L0I acknowledged in the PCR (;?ara 2.08), point to a lesson with which IDA ought to have been familiar, especially after the difficulties encountered in the Third and Fourth Highway Projects: preparation which devotes proper attention to contentious issues contributes to smoother execution, and to better IDA- Government relations. (b) Implementation 15. The PCR notes (paras 3.09, 6.01), and the audit shares the belief, that the project's satisfactory outcome is due to the professional and personal qualities of the NTC Chairman and to the technical assistance staff assigned to NTC and to RETCOs. The Executing Agency proved that the opinions expressed in the SAR were justified,11/ and supervision reports contain nothing but praise for the Executing Agency's performance. Accordingly, more IDA support for NTC suggestions and initiatives would have been welcome. For example, greater understanding could have been shown in approving study tours for Tanzanian staff, not only because the travel would have been professionally rewarding but, also, because NTC management could have offered these opportunities as rewards for good performance to selected members of the underpaid RETCO and NTC staff. The audit believes that a project which allocated more than US$5.0 million for technical assistance might have allocated one tenth of that amount for the familiarization of local staff with road transport procedures in foreign countries. (c) Results and Sustainability 16. Much needs to be done in trucking but the audit believes that the project did assist in the slow process for improvement by establishing public companies which, in an environment where statistics are not always given their 10/ After appraisal, the Back-to-Office Report, dated November 9, 1976, pointed at no major issues and suggested that a Decision Meeting would not be needed. Seven months later, a June 21, 1977, memorandum indicated that five issues had emerged: Timing of the project; Project financing; Composition of the public trucking companies; Spare parts; and the role of the private sector. One year later, a June 26, 1978 memorandum noted that equity capital for the RETCOS would not be easily forthcoming. This issue caused friction between the Government and IDA until 1982, when it became clear that all outstanding equity contributions would be made by Treasury. 11/ SAR para 3.02 reads in part as follows: ONTC fulfills its duties adequately, particularly since the recent appointment of an able and energetic chairman and managing director as its head." - 9 - due, regularly publish data on their operations. Also, the project did facilitate, as planned, the import process for spares. In addition, it demonstrated that scrupulously run public companies can continue to operate over a number of years. All these are institutional and organizational accomplishments that cannot be fully reflected in financial and economic rate of return calculations related to small part of the industry at a time when even rudimentary cost data on private trucking is still missing. In this sense, the project contributed to increased transparency in road transport operations and NTC, and specifically its Chairman, deserve credit for a performance which, in every aspect within NTC's control, has been truly exceptional by Tanzanian standards.12/ 17. The PCR correctly, and repeatedly, points outl3/ that sustainability of project results depends on factors outside NTC and RETCO control. Main such factors ares no freedom to charge economically justified tariffs for intra-regional movements; no incentives for local staff; RETCO shareholders demands for less than economic pricing of services provided to them; limited investment opportunities for RETCOs except truck purchases and, at the same time, shortages in the supply of trucks. For day-to-day purposes, perhaps the most pressing need is for expatriate staff. The May 1988 audit mission to Tanzania noted that NTC is making every effort to extend the services of technical assistance staff and it is encouraging that, through fund reallocations in the 1986 Sixth Highway Project, IDA is financing the continuation of RETCO and NTC expatriate staff until the end of calendar 1989. (d) Follow-on Projects 18. There have not been many successful IDA-assisted operations in Tanzanial4/ and it is surprising that, contrary to the explicit intentions in 12/ The NTC (which, among other transport entities and in addition to the RETCOS, controls the National Bus Service and the Dar Es Salaam Motor Transport Company),is not directly engaged in transport operations but exercises substantial influence over the policies and activities of its subsidiary operating organizations. Also, it controls the training activities of the National Institute of Transport (NIT), which was strengthened under the project. Policy formulation at NTC is thoughtful, comprehensive, and based on the only reliable road transport data collected in Tanzania. NTC reports are models of analysis and presentation (cf., Proposal for a Policy and Procedures for Fixing Freight Rates and Bus Fares (August 1984); A Proposal for a National Road Transport Policy -- Trucks and Buses (July 1985); and Feasibility Report on the Establishment of a regional Transport Company in Rukwa Region (February 1987). 13/ Paras. 5.03, 6.02, 8.02, 8.03. 14/ cf. OED Reports No. 791 (June 26, 1975), 4029, 4030 and 4031 (all three of June 30, 1982), 4533 (June 3, 1983), 6483 (November 7, 1986). - 10 - both the President's and the Staff Appraisal Reporta (para 3, above), there has not been a follow-on project. In an October 10, 1984, letter from the Ministry of Finance to IDA, Government expressed the desire for a new project. This would have covered the July 1985-June 1990 period, and cost an estimated US$25 million. It would have expanded assistance to the private sector, and strengthened training activities at the NIT for both private and public truckers. The Project File does not contain IDA's response, and the fact that no follow-on project has been approved is probably due to lending program stringencies which reserved all available funds in the transport sector for highway maintenance activities. In reviewing its lending program to Tanzania, IDA might now consider some further assistance to the trucking sector. (e) Policy Dialogue 19. Project experience suggests three aspects which IDA might take into account in its future policy dialogue with the Government. First, Tanzania is willing to use expatriate personnel in line positions but under the right circumstances. Successful collaboration among NTC management, RETCO staff, and technical assistance personnel, shows that the unsatisfactory outcome of other IDA-supported transport projects (e.g., the Fourth and Fifth Highways Projects) may have been due, at least in part, to the selection of unsuitable expatriates. The Trucking Project has demonstrated that when technical assistance staff selection is entrusted to a competent Executing Agency, few problems arise. Second, between the paralysis of full nationalization and the jungle of full privatization, there is room for balance. RETCOs have performed two functions not anticipated at appraisal: they make transport available to remote areas where a purely commercial enterprise (partly because of low transport demand and partly because of extremely poor roads) would not freely choose to go; and, by generating truthful cost data, they provide a check upon the activities of private truckers who, in the absence of effective regulatory agencies, can be counted upon to maximize profits by truck overloading and other illegal practices. In a country of poor, scattered farmers, where regulatory agencies are ineffective and collusion easy, private truckers alone are not the answer: properly run public transport services are a precondition for rural development and deserve the type of assistance extended through this project. Third, as demonstrated by NTC, management talent is available in Tanzania. IDA may consider further support to encourage such talents which offer the best guarantee for the proper deployment of local manpower and, simultaneously, for the most effective use of expatriate technical assistance. - 11 - PROJECT COMPLETION REPORT TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA May 21, 1987 Eastern and Southern Africa Projects Department Transportation Division - 13 - I. INTRODUCTION 1.01 Tanzania has a large territory (945,000km2) with a widely dispersed population of 19.8 million, a low population density (21 persons per kn), and sharply contrasting terrain (0-19,340ft. above sea level). Economic activity is widely dispersed over the country. The combination of these factors makes the transport system a complex one with transport movements over long distances an important characteristic. Roads are the predominant transport mode, especially for domestic traffic. The railways network, consisting of two systems, the Tanzania Zambia Railways Authority and Tartzania Railways Corporation, are important transport arteries for the international trade of neighboring land-locked countries. 1.02 The Bank Group became involved in the transport sector of Tanzania in 1964, with the First Road Project (Credit 48-TA). This was followed by two further Credits in 1969 (Cr. 142-TA) and 1971 (Cr. 265-TA). These projects were directed towards investments in new roads. The Fourth Highway (Maintenance) Project (1974) signaled a shift in Bank strategy towards maintenance, institution-building and training. In 1977, the Bank Group became involved for the first time in providing specific assistance - to the trucking sub-sector through the Trucking Industry Rehabilitation and Improvement Project. Subsequently, a significant measure of assistance is. being provided to the trucking sub-sector under the ongoing Sixth Highway (Rehabilitation) Project (Cr. 1688-TA). 1.03 The Trucking Industry Rehabilitation and Improvement Project was prepared in March 1976 and appraised in September 1976. The IDA Credit of US$15 million was to finance the foreign exchange costs of trucks, technical assistance and workshop facilities for selected public companies, provide foreign exchange to Government in support of the liberalization of spare parts imports and provide assistance to a transport industry training institute. The executing agency was the National Transport Corporation (NTC) which was established in 1969 with a charter to conduct or engage in the businesses of carrying, for hire, persons and goods by land, sea, inland waterway or air transport. Since its establishment NTC has operated as the holding company for various public passenger and freight transport companies and for a coastal shipping line. It has also played an active part in the formulation of Government policy with respect to the road transport industry. 1.04 This completion report is based on: (i) a review of the project files; (ii) the information provided in the project completion report prepared by NTC; - 14 - (ILL) information collected on a mssion to Tanzania in January 1987; (iv) review of two documents on the Tanzania trucking industzy prepared by Mason-Gilling Associates (Study of Road Transport Policy and Practice and the Role of the Public Sector) and by Messrs. Beenhakker and Bruzelius (Transport and Marketing of Agricultural Products in Tanzania). - 15 - II. PROJECT PREPARATION AND APPRAISAL 2.01 The poor operating performance of the trucking industry had, prior to 1974, been identified by several World Bank missions as a major source of economic dislocation in Tanzania, particularly in the agricultural sector. In February 1974, the Government of Tanzania requested assistance from the World Bank in determining the cavses of the industry's poor performance and the measures that should be taken to rationalize it. Based on this request, the Association decided to include a study of the industry as a component of the Fourth Highway Project. The study was to, inter alia, review the structure of the industry and recommend measures to overcome constraints to its efficient performance. This proposed study was to form the basis of specific Bank Group assistance to the industry. 2.02. Consultants, selected on a sole-source basis, were appointed in June 1975 to undertake the study. A draft final report was submitted in December 1975. The report identified seven major constraints on the efficient performance of the industry, namely (a) lack of operational and management skills; (b) inefficiency of the major parastatal trucking company, the National Road Haulage Corporation (NRHC); (c) shortage of spare parts; (d) shortage of storage for agricultural produce; (e) inadequate regulatory framework; (f) shortage of trucks. However, both the Association and the Government considered the report deficient iu its analysis of the industry, and incomplete because of its lack of assessment of the costs of its recommendations. Nonetheless, it was felt by the Association that the consultants had done sufficient work to justify fielding a preparation mission in advance of the consultants's revised report. 2.03 A preparation mission was sent to Tanzania in March 1976. The mission's main findings were that the lack of operating and management skills and the poor condition of the roads were the major causes of the industry's poor performance. Accordingly it recommended that components of a proposed trucking industry project be confined to assistance in traiiing in transport activities, assistance in strengthening YRC's managevial and operating capability and assist-nce in the maintenance of roads other than trunk roads. This proposed project scope was subsequently modified to exclude the road maintenance component end to include assistance in the procurement of trucks and a study of vehicle spare parts availability and distribution in the country. The maintenance of secondary roads was considered better addressed in a future project. Inclusion of a truck Import component was expected to Increase the project's impact on the trucking sector in the immediate future. In respect to the spare parts component, the mission found little evidence of an absolute shortage of spare parts. However, there was considerable evidence of an inadequate distribution of the available stock of spare parts. The proposed financing of a spare parts study would lend weight to an Association proposal to review the operations of the State Motor Corporation (SMC) which was responsible for the allocation of spare parts and which was due to take over the import of spare parts. The proposed project scope and content as subsequently modified was agreed with Government. - 16 - 2.04 Owing to a lack of appropriately qualified staff in the Ministry of Communications and Transport (MCT), progress in preparing the project for appraisal was exceedingly slow. In September 1976, a mission was sent to Tanzania to assist Government in project preparation, and if it judged it appropriate, to appraise the project. While in the field the mission decided that it had gathered sufficient information and had reached an acceptable degree of agreement on project scope and content with Government to proceed with an appraisal. 2.05 The project as appraised followed substantially the proposal agreed and with Government following the March 1976 preparation mission. The only change was the enlargement of the scope of assistance to the public sector trucking industry to include four regional trucking companies (RETCOs) in addition to NRHC.1 Assistance in the procuremeut of trucks and the provision of technical assistance in operations and management was proposed for these entities. 2.06 No major issues were identified by the appraisal mission and no decision meeting was held. However, during processing of the appraisal report, two issues were consistently raised: (i) whether financing of a study of spare parts availability was* the best means for the Association to assist in improving the country-wide availability of spare parts; (ii) whether the organizational and financial structure of the trucking companies to be assisted should be firmly established before presentation to the Board. In respect of spare parts, it was decided that the Association should assist in the financing of spare parts. However, such assistance was to be conditional on Government taking acceptable measures to liberalize the Import of spare parts. In respect of the organizational and financial structure of the trucking companies, it was ultimately decided that little was to be gained by delaying project processing by thoroughly defining them at the appraisal stage. Assistance to the companies would be phased and disbursements against the procurement of trucks would be conditional on the Association's satisfaction with the organizational and financial arrangements proposed for these companies. A key element of such arrangements was to be a capital structure that ensured the financial viability of the companies and that ensured participation of the major prospective users of the companies' services as shareholders. The significant level of technical assistance proposed for these companies and the National Transport Corporation (NTC) would assess the financial requirements of the companies as well as provide some insurance against start-up risks. 2.07 Underlying the Association's preparation and appraisal of the project was the key issue of the most effective ownership and 11 NRRC went into liquidation prior to Board presentation after defaulting on its debts; it was replaced in the project by another regional trucking company. - 17 - organisational arrangements in the trucking industry. The private sector accounted for 702 of the country's truck fleet and had a disproportionately higher share of truck transport services. However, Government was committed to a policy of promoting the public sector segment of the industry. In view of this, the Association saw concentration of its assistance on the public sector-owned segment of the industry as the best available means of enabling it to address industry issues with Government and to encourage rational development of this segment. The private sector was considered best assisted through financing of training for drivers,. mechanics and managers in the industry as a whole and through encouraging Government to take appropriate action to facilitate the flow of spare parts to it. 2.08 Further, given the impact of poor truck transporz on the agricultural sector, Government and the Association were keen to ensure that project processing was as.expeditious as possible. It was felt that the then existing base of knowledge on the industry could not be expanded upon without significant delays. Moreover, MCT did not possess the capacity for the extensive project preparation the detailed definition of the project scope would involve. A major consequence of this attitude was the inadequate attention that was devoted to the financial arrangements for the project companies. In particular, the capacity or willingness of the prospective shareholders in these companies to invest was not assessed during appraisal but was deferred for detailed consideration by the proposed technical assistance staff during implementation. This approach was to prove ultimately.counter-productive as the resolution of the capitalization of the companies accounted for significant delays in project implementation and a wasteful use of technical assistance resources (para. 3.07). 2.09 The project was presented to the Board on October 4, 1977 and the Development Credit was signed on November 3, 1977. Project Implementation was expected to start in early 1978 and the project was expected to be completed by the end of 1982. Proiect Goals 2.10 The goal of the project was to support Government's efforts to reverse the deteriorating trend in truck transport, a mode on which the predominantly agricultural economy depended heavily. The project's initial impact was expected to be modest. However, the experience and skills gained in project implementation were expected to provide the basis for subsequent comprehensive rehabilitation and improvement of the industry. 2.11 This overall goal was to be achieved through specific assistance to the public sector segment of the industry and generalized assistance to the industry as a whole. In terms of specific assistance to the public sector trucking industry, the project's objectives were twofold: (i) to strengthen the operating capability of selected companies in regions where agricultural activity was severely constrained by inadequate truck transport services through direct assistance in procuring and rehabilitating trucks and through strengthening of management and management information systems; - 18 - (iL) to put these trucking companies on a sound financial footing through both operating improvements and covenanted requirements for adequate rates to ensure that they can be self-financing. (iii) to strengthen the Tanzanians' carability to run these trucking companies. In respect of generalized assistance to the industry as a whole, the project's objective was to improve- the industry's utilization of existing capacity through improved operating and managerial practices and through facilitating a change--in the existing system of spare parts import and distribution. Project-Description 2.12 The description of the project was as follows: (1) provision of trucks and spare parts for the rehabilitation of trucks for five selected RETCOs; (ii) technical assistance for the management operations and training of staff of the selected RETCOs; (iii) provision of workshop equipment for the selected RETCOs; (iv) strengthening of the recently established National Institute of Transport through the provision of instructors, teaching aids and equipment; (v) replenishment of the country's inventory of spare parts; (vi) provision of technical assistance to the project implementation agency, NTC, for project coordination, monitoring and policy advice. - 19 - III. PROJECT IMPLEMENTATION AND COSTS Start-Up 3.01 Project start-up was relatively smooth. During negotiations the Government had proposed the National Transport Corporation (NTC) as the implementine agency for the project. NTC had significant experience in the trucking industry through Its control of NRHC. The proposal was acceptable to the Association. The project provided for the appointment of a coordinator and an assistant in NTC to strengthen its project monitoring and control capability. In November 1977 NTC submitted the curriculum vitae of a candidate for the post of Project Coordinator. The Association was initially reluctant to approve the selected candidate because of his lack of experience in the operation and management of trucking companies. However, it eventually agreed with NTC's assessment that the candidateos experience in starting and monitoring projects in Tansania.was more valuable an attribute than specific trucking experience. However, the Association was insistent that his deputy should possess an acceptable amount of industry experience. The Project Coordinator was appointed in January 1978. No candidate acceptable to the Association was found for the position of Assistant Coordinator. 3.02 The project was declared effective in April 1978, two months later than originally scheduled. There was one condition of disbursement in. respect of the RETCOs' trucks and workshop equipment component of the project: the execution of a subsidiary loan agreement, satisfactory to the Association, between the Tanzania Rural Development Bank (TRDB)--the financial intermediary through which the Association's funds for this component were to be chaneled to the individual RETCOs--and the RETCOs. Owing to difficulties in attracting sufficient equity capital commitments to the RETCOs, which was a condition for the Association's approval of any subsidiary loan agreement, the agreements were not entered into until late 1979 (paras. 3.06-3.07). Technical Assistance 3.03 The project provided for twenty technical assistance specialists in the RETCOs, two in the Project Coordinating Unit (PCU) in iNTC and two vehicle import advisors to Government who would be attached to NTC. Four expatriate instructors were also to be provided for NIT. NTC and the Association agreed that recruitment for all staff except the Project Coordinator and the Assistant Project Coordinator in the PCU should be undertaken by consultants selected on a competitive basis. This would reduce the demands on NTC's administrative resources that would be entailed by direct recruitment of such a large number of technical assistance specialists. It would also confer on NTC the benefit of a larger pool of potential candidates with exposure to different operating environments to which a suitable recruitment firm would have access. 3.04 In May 1978 a consulting firm was selected out of 16 firms offering proposals to undertake recruitment of technical assistance staff for NTC. In August 1978 NTC sought Association approval for five technical assistance staff recruited by the consultants. Although the Association - 20 - granted approval for their appointment, it noted that all the candidates were of the same nationality. This was counter to the expectation that a consulting firm would recruit a better spread of nationalities. 3.05 By November 1978 the Association had granted approval for a total of 15 technical assistance specialists of whom 14 were designated for positions in the regional companies. In November 1978 approval was sought from the Association for the appointment of a further ten technical assistant staff of which six were for positions in the RETCOs, two for positions in NIT as instructors and two for NTC. An interesting aspect of this batch of candidates was the significant proportion drawn from expatriates working for other parastatals in Tanzania. NTC felt that the experience of these expatriates in Tanzania made them more effective advisors or managers for the RETCOs. The Association was, however, concerned that these expatriates were being drawn away from other enterprises prior to the expiration of their contracts. Accordingly, it was reluctant to grant approval for their appointment until it had confirmation that NTC had rhe approval of their existing employers. NTC was able to confirm that domestically-based expatriates were recruited only at the end of their contracts or with the approval of their existing employers. 3.06. Little progress had been made in attracting outside capital to the RETCOs. Recruitment of technical assistance staff to this point had been for advisory/managerial positions in the three RETC0s that were already in existence. The vehicle fleet of these companies was small and aged and their management teams were generally recognized as poor in quality. However, without a degree of equity capitalization judged adequate by the Association to provide a cushion for its onlent funds, disbursements for the procurement of additional new trucks could not be made. Equally important, without the change in ownership that equity resources from new sources would entail, the management teas could not be changed. Technical assistance personnel could not be effectively deployed under these circumstances. As uf November 1978, the assessment ot the required level of external funds and the likely contribution from the prospective shareholders had not been made. In the light of this, the Association decided that financing for the companies be resolved before appointment of the additional ten proposed technical assistance experts. 3.07 NTC completed its assessment of the vehicle fleet, .the equity fund requirements and the time-phasing of such requirements of the RETCOs in December 1978. However, the prospective shareholders approached were either willing but unable to invest because of their poor financial situation or, like some crop authorities, were reluctant to participate because of their desire to expand their own transport operations. No progress was made in adequately capitalizing the RETCOs until the Ministry of Finance and Planning (MFP) intervened in October 1979 to instruct the identified prospective shareholders to either (i) contribute equity in the form of cash; or (ii) where they owned sizeable vehicle fleets in the designated regions of operation of the RETCOs, by handing over all but a small portion of such fleets. MFP undertook to finance any shortfall in contribution. This comaitment enabled TRDB to finalize the subsidiary loan agreements with the individual RETCOs. By January 1980, one prospective shareholder had committed to provide its equity contribution in cash while - 21 - the other shareholders had committed to provide a total of 61 vehicles of assorted ages and condition in kind. However, it was not until July 1980 that MFP met its commitment to provide the shortfall on required funds for the first phase. The formalities of establishing new companies, changing the Board of Directors of the existing companies and recruiting new management teams for the companies were not completed until December 1980. 3.08 By January 1981, 277 man-months (36%) of the total of 774 man- months of eventual technical assistance to the RETCOs had been utilized. The quality and adaptability to Tanzanian conditions of some of the technical assistance personnel initially recruited were poor. This was however, overcome by subsequent recruitment of technical assistance staff largely from within Tanzania and with the active participation of NTC in the recruitment process. More importantly, the large expenditure on technical assistance resources was not effectively utilized for the first three years of project implementation because of the delay in forming the regional companies. This could have been avoided if the time and resources had been devoted at preparation or appraisal to (i) assessing the amount of equity capital required in the RETCOs; (ii) assessing the capacity or willingness of the identified prospective shareholders to invest; (iii) clearly fixing Government's obligation to provide the shortfall in the equity requirements by a designated period. Such an alternative approach - was hinted at during appraisal report processing. Although a timetable for the individual companies' formation was agreed upon with Government at negotiations, the delays that can arise from the process of company formation appear not to have been fully appreciated. Ultimately, too much reliance was placed on the provisions of the Credit Agreement, which provided for Government underwriting of the companies' funding but did not stipulate a time frame within which Government had to honor its underwriting commitment. Further, no indication was provided to Government of the likely magnitude of its commitment. On its part, Government proved very slow in making the necessary budgetary provisions for the equity capital in the companies after it became clear that the prospective shareholders were unwilling or unable to subscribe to the RETCOs' capital. 3.09 In contrast to the under-utilization of technical assistance staff in the RETCOs, the technical assistance staff in NTC proved very effective during this period. In addition to the Project Coordinator, two vehicle import advisors were appointed in August 1978. In addition, NTC argued for, and the Association ultimately agreed to, the financing of an expatriate Financial Advisor. The Project Coordinator and the Financial Advisor played an important role in drawing up or supervising the design of performance indicators, reporting procedures and financial, workshop and operating manuals for the three existing companies in the period 1978 to 1980. These management control tools are now an integral and key part of the system of control in the RETCOs. NTC also developed substantial capacity for analysis of industry issues during this period. 3.10 With the full establishment of all the RETCOs in 1981, the effectiveness of technical assistance improved substantially. NTC had, on the basis of the experience of use of technical assistance staff, argued that two of the four technical assistance positions in the RETC0s were redundant. In particular, advisors to the general managers and.traffic managers were considered unnecessary since the financial advisors could - 22 - undertake both roles. Further, the RETCOs were able to recruit and train (at NIT) qualified Tanzanians for most of these positions. The Association agreed to this assessment. The financial advisors proved effective in these roles. Another lesson learnt from the earlier period was that the expatriate personnel could be easily perceived simply as advisors and their advice taken by their counterparts on a discretionary basis. A part of the problem was that without a clear mandate over the companies, NTC could not impose the expatriates on the existing management teams as equal management partners. This problem was essentially resolved once NTC was given a clear administrative mandate with the reconstitution of the old companies and formation of the new ones. 3.11 The project was extended twice and was eventually closed in June 1985. Much of the technical assistance to the RETCOs and NTC was also extended to the ultimate closing date. Technical assistance to the RETCOs and NTC has subsequently been further continued under the Sixth Highway (Rehabilitation) Project. Technical assistance to the RETCOs and NTC undoubtedly was one of the key elements responsible for the relatively good operational performance of the RETCOs. However, it is generally agreed that such good performance is not sustainable in the absence of expatriate personnel. Over the project period, the RETCOs have experienced substantial difficulties in recruiting or retaining good staff, particularly in the areas of financial and workshop management. The underlying problems have been both a country-wide shortage of persons with such skills and the relatively uncompetitive remuneration of such skills by the RETCOs. The result has been that the major project objective of strengthening the Tanzanians' capability to run their own trucking operations has not been fully realized. Assistance to NIT 3.12 The technical assistance staff provided to NIT under the project made a substantive contribution to the strengthening of this institution. Although at appraisal it was expected that the instructors would participate primarily in the development of three-month courses for relatively experienced transport industry personnel, NIT's early experience suggested that the demand for such courses was not strong since the pool of such people was limited. Further, employers could not afford to release them for such extended periods.- However, appropriate courses entailing shorter releases from work were developed by the instructors and these proved both popular and effective. Procurement 3.13 The tender documents for the procurement of trucks and associated spare parts were completed and sent to the Association in January 1981. The appraisal report had provided for a total of 160 trucks and related spares to be procured out of the Credit at an estimated cost of US$4.7 million. At appraisal, the truck fleet to be procured was envisaged as consisting of 100 trucks of 12-ton capacity and 60 trucks of 7-ton capacity. However, the precise requirements both in terms of sizes and numbers of trucks were to be established by NTC and the RETCOs' technical assistance staff based on detailed reviews of regional market conditions and the types of trucks provided by the prospective shareholders as equity - 23 - in kind. NTC and the RETCOs' technical assistance staff assessed the RETCOs requirements at 163 trucks and 63 trailers with a total estimated cost of US$7.5 million (including spare parts). The composition of this proposed truck fleet was as follows: Number of trucks Size of trucks 78 7 tons 37 10 tons 48 12 tons 163 NTC argued for the inclusion of 10-ton trucks amongst the trucks to be procured on the grounds that they offered a cost advantage of about 10% per ton-km in intra-regional freight transport compared to 7-ton trucks and were more appropriate for this type of traffic than 12-ton trucks. The number of 12-ton trucks to be procured was reduced from the level indicated in the appraisal report. However, their capacity was to be substantially enhanced by the procurement of 9-ton trailers. This-would enable them to be used competitively for long-distance inter-regional freight transport. The Association had no objections to the composition of vehicles proposed by NTC. This fleet requirement was included in the tender document, which- was well prepared. The Association's only major objection was in relation to the provision that bidders must have established agents in Tanzania on the date of bidding and that they must also furnish their past performance record in fulfilling contracts in Tanzania. This would effectively have Jmited the pool of potential bidders to vehicle manufacturers or their agents already established in Tanzania. The invitation to bid was issued in July 1981 and bids were opened on September 22, 1981. The response was good with 18 bids received and eight bids declared responsive. The award was made in November 1981 and Association approval for such award granted in December 1981. The final award was for 174 trucks and 65 trailers at a total cost of US$4.9 million. In the negotiations prior to the signing of the contracts for the supply of vehicles, the lowest evaluated bidder in respect of the 12-ton trucks to be procured offered 15-ton trucks in ' substitution for the 12-ton trucks on the same terms and conditions as its bid. The 15-ton trucks were considered by NTC to be technically more appropriate for operations in the hilly terrain of the regions where much of the long-distance traffic was expected to be generated. In May 1983 the . Association agreed to the procurement of 19 additional trucks on the same terms and prices as the original award. The distribution of the trucks procured under the Credit by size and region is given in Table 4. 3.14 NTC was initially uncomfortable with the prospect of putting out the tenders for trucks to international competitive bidding (ICB) since there was the possibility that the lowest evaluated bid would be for trucks not then familiar to Tanzanian mechanics and drivers. In the event, although the tender was awarded in part for an unfamiliar make of vehicle (10-ton and 15-ton trucks), NTC has been well satisfied with the results for two reasons: (i) the performance of the vehicles has been exceptionally good; (ii) the bids were significantly lower than expected. 3.15 Although most of the trucks orderqd were received by July 1982, it was not until June 1983 that all of them were fully operational. The - 24 - trucks were ordered on a chassis and cab basis o"ly. Body-building was to be contracted to the well developed locel body-building industry. However, the selected body-builders did not have adaquate access to imported steel plates and welding components and this accounted for the significant delays in making trucks fully opetational. The source of the problem was essentially the lack of familiarity on the part of NTC with the constraints on the body-building industry. NTC now involves body-builders in the planning process for procurement of trucks. 3.16 A significant amount of spare parts was bundled with the purchase of vehicles. The rationale for this was to insulate the companies from the impact on operations of potential shortages of foreign exchange. However, at the time of drawing up the vehicle and spare part specifications, there was no firm knowledge of the makes of vehicles to be ordered and the likely rate and distribution of spare parts consumption under Tanzanian conditions. The mix of spare parts ordered has proven inappropriate, with some items considered critical proving to be slow-moving and vice-versa. A way to have avoided this consistent with preserving the original rationale for bundling would have been to reduce the proportion bundled and to phase the procurement of the balance of the assessed requirements with evolving experience of operating the trucks. Spare Parts 3.17 The provision in the project for the replenishment of the country*s inventory of spare parts was based on an assessment of the likely surge in imports of such items if controls .were relaxed. Government was considered by the Association to have fulfilled the objective of liberalization of import of spare parts with its increased allocation of foreign exchange for such imports from TSh76.1 million in 1976 to TSh320.1 million in 1978. This raised the amount allocated as a proportion of the amount applied for from 22% in 1976 to 351 in 1978 and there was evidence that both the actual use of allocations and the proportion of spare parts destined for up-country had improved. Approval for disbursement of the funds for this component was given in May 1979 after Government submitted a study prepared by NTC on the impact of the liberalization of the import of. vehicle spare parts on the availability and distribution of such items. Project Costs 3.18 The estimated and actual project costs are set out in Table 5. Total project costs were estimated at US$18.2 million including contingencies and taxes. Actual project costs were US$22.1 million, an increase of US$3.9 million on the estimated costs. There were two major causes of the cost overruns: (i) greater than anticipated truck body- building costs due to increased units of trucks procured aid unit-building prices; and (ii) the cost of workshop buildings not taken into account in the appraisal estimates. Disbursements 3.19 The cumulative disbursements are given in Table 6. Actual disbursements lagged the appraisal estimates significantly until the third quarter of FY82 when the disbursements against the initial procurement of - 25 - trucks were made. Thereafter, the rate of disbursement was acceptable, taking into account the two-year extension of the project to allow effective use of technical assistance. Reporting 3.20 NTC provided quarterly progress reports of a good quality during project implementation. - 26 - IV. OPERATING PERFORMANCE 4.01 Details of the operating performance of the RETC0s over the period 1981182 to 1984/85 are given in Table 7. The performance of the RETCOs compared to the appraisal targets is given below: 1981/8& 1982183 1983/84 1984/85 Running kms per truck p.a. (km) Average all RETCOs - 34,832 39,161 42,458 35,430 Appraisal Targets 40,000 50,000 Truck Availability (%) Average all RETCOs 77 74 68 58 Appraisal Targets 70 80 Ton-kms per truck p.s. (ton-kms) Average all RETCOs 161,725 202,341 247,268 229,464 - Appraisal Targets 125,000 250,000 4.02 As the table indicates, thu RETCOs' productivity improved up to 1983/84 but declined sharply in 1984/85. A notable feature of the RETCOs' performance has been the poor record of truck availability, which has declined consistently from 772 in 1981/82 to 582 in 1984/85. A significant part of this decline is attributable to the non-availability of spare parts and tires. Although provision was made in the Credit for the procurement of spare parts, the mix of such items acquired proved inappropriate to actual operating conditions. A further problem has been the RETCOs' restricted access to unofficial or parallel sources of spare parts and tires during this period. This was a period when foreign exchange shortages and price controls on and official allocation of such items led to the growth of* significant parallel and unofficial markets for spare parts, and tires. Finally, deficiencies in the RETCs* stores management system and the inability of the workshops to recruit an adequate complement of skilled mechanics were significant contributory factors to the record of poor vehicle availability. 4.03 The performance in respect of running-kilometers and trucking services performed (ton-kms) relative to the appraisal targets was good up to 1983184. However, this partly reflected the fact that the composition of the fleet acquired and the mix of services provided was significantly different from that envisaged at appraisal. About 37Z of the fleet purchased from Credit funds were 15-ton trucks devoted to long-distance inter-regional haulage. This compares to an envisaged fleet of only 7-ton and 10-ton trucks to be devoted mainly to intra-regional transport. In addition, the vehicle fleet's capacity was further enhanced by the procurement of trailers. This was not envisaged at appraisal. The subsequent deterioration in performance in 1984/85 reflected mainly the Impact of the sharp deterioration in vehicle availability and severe fuel shortages. The RETCOs have taken appropriate measures (operation of own - 27 - fuel tanker fleets to scurce fuel from Dar es Salaam) to insure against the disruptive effects of fuel shortages on operations. In respect of spare parts and tires, the Association has further provided assistance under the current Sixth Highway Project for the replenishment of the country0a stock of spare parts and, for the procurement of tires and fast moving spare parts by the RETCOs. More importantly, Government has abolished controls on the pricing and allocation of spare parts, thereby enabling entities like the RETCOs to'freely acquire such items. 4.04 In terms of Government's explicit objective of promoting the public sector in the industry, recent evidence suggests that productivity of the private sector truckers is significantly better than that of the public sector segment of the industry. However, the RETCOs' performance is superior to that of other parastatal trucking entities and the smaller private operators. Furthermore, although the RETCOs enjoy relatively never vehicle fleets and substantial managerial resources in the form of technical assistance, they are restricted in their operating flexibility, particularly in respect of the incentives they can offer drivers, the charges they can levy for delays at looding and unloading points and the areas in which they operate. This probably accounts for a large part of their poorer performance compared to the larger private operators. - 28 - V. FINANCIAL PERFORMANCE 5.01 The RETCOs' consolidated financial performance is given in Tables 8 and 9. The appraisal report did not include a detailed review of the prospective financial performance of the RETCOs. However, operating cost and-ratio targets were set for the companies. The basis for the derivation of these targets is not clear. Nonetheless, as illustrated in the table below, the RETCOs have performed better than or in line with these targets. 1981182 198qVg3 1983/84 1984/85 Cost/ton-km (TSh) Actual: All RETCOs (current) 2.18 1.53 1.81 2.77 (1977 prices) 0.94 0.50 0.47 0.53 Appraisal Target (1977 prices) 1.00 0.80 Operating Ratio (%) Actual: All RETCOs 86 75 81 85 Appraisal Target (100 <90 5.02 A major project objective was to ensure that the RETCOs were self- financing with respect to their operating and capital requirements. The RETCOs have been highly profitable and cash generative. However, the PCR mission has estimated that taking into account (i) the RETCOs' truck fleet sise and composition in 1984185; (U1) the age of the fleet; and (iii) the replacement cost of trucks in 1984/85, depreciation charges on the truck fleet on a replacement cost basis will result in a loss of about TSh 7.0 million on transport operations before financing charges in FY84/85. A firm interpretation of this figure is complicated by lack of knowledge of the financial performance of the passenger services operation of the RETCOi. Nonetheless, it is broadly indicative of the fact that tariffs and productivity in 1984185 were not sufficient to ensure that the RETCOs as a group earned a sufficient surplus to preserve their carrying capacity in the long run. 5.03 - A detailed review of the RETCOs' applications for tariff increases revealed that whereas they take into account the replacement cost of vehicles and make adequate provisions for truck lives and most inputs, they also take into account load factors and target running-kms that are unrealistically high given actual operating conditions in the regions. This has tended to make tariffs applied for intra-regional movements lower than economically justified. Moreover, tariffs applied for have not in all instances been granted. Furthermore, the RETC0s ownership structure whereby the shareholders are also the main users, has tended to inhibit the appropriate pricing of the RETCOs' services. In effect, the shareholders have been getting their returns through less than economic pricing of services provided - 29 - them. These restrictions on the RETC0s pricing flexibility has created a substantial incentive for them to change their vehicle fleet mix to offer more capacity for long distance inter-regional traffic. Finally, the RETCOs have had little incentive to be very cash generative since their investment options outside the purchase of trucks is limited as is the supply of trucks. -30- VI. INSTITUTIONAL DEVELOPMENT 6.01 The major project objective was to assist in the establishment of viable public trucking companies serving the agricultural areas. A major element of such assistance was to be the strengthening of the capacity of Tanzanians to run these companies effectively. The technical assistance provided to this end has resulted in the Institution of an excellent uniform Management Information and Control System (MICS) in the RETCOs. This system comprises a simple but effective traffic information system, a workshop and stores management system and an accounting system. The degree of integration between these systems is high-and efficient. General management and NTC control of operations is effected through a simple but well-defined operations budgeting system with clearly defined performance indices evolved through the early period of project implementation. NTC, which acts as the effective holding company for the RETCOs, has a strong performance monitoring capability. This capability has been well deployed in assisting Government in the formulation of policy for the industry, including preparation of a strategy for the industry which was a requirement in the Credit Agreement. The RETCOs and NTC are now the main source of credible and systematic information on the financial and operating performance of the trucking industry in Tanzania. 6.02 The project has, however, been much less successful in imparting to Tanzanians the skills.necessary to operate and use the MICS. As a consequence, the project objetive of creating managerially self-sustaining entities has not been fully realized. Technical assistance has been effective in treting the basis for good management but due to the RETCOs' inability to attract or retain appropriately skilled personnel a cadre of proficient managers has not been developed. NTC has good and dynamic indigenous senior managers, but expatriate technical assistance staff still play a major role in the key technical functions of monitoring of the RETCOs' performance and conduct of industry studies. 6.03 The assistance to NIT has been instrumental in strengthening 'an institution which plays a key role in the development of key technical and managerial personnel for the local transport industry. NIT is also increasingly atttacting students from other African countries. - 31 - VII. ECONOMIC RE-EVALUATION 7.01 Two components of the project were subjected to economic evaluation at appraisal: (a) assistance to the five selected trucking companies; and (b) assistance in the replenishment of the inventory of spare parts held in the country. These components accounted for 91% of the estimated total economic cost of the project. 7.02 In respect of assistance to the RETCOs, the appraisal economic analyses assumed that the principal benefit of the technical assistance and the investments in trucks, associated spare parts, workshops and workshop facilities would be gains in truck productivity. These gains were expected to arise from a reduction in unit costs as a result of the improvement in truck availability from around 50% to 802 and an increase in load factors from about 50% to 702 expected with project implementation as compared to typical parastatal trucking operations. The economic return on the proposed investments in the RETCOs was estimated at 37%, with the foreign exchange costs of investments shadow priced by a factor of 1.33. Without such shadow pricing, the economic rate of return would have been assessed at about 52% at appraisal. 7.03 In the economic re-evaluation, the economic rate of return on the investments in the RETCOs is estimated on the basis that without the project, the transport service actually performed by the RETCOs would have been generated at a higher cost by comparable parastatal trucking operators. This reflects the evidence that other parastatal operators perform much poorer than the RETCOs, with running-kilometers per vehicle per annum generally significantly lower than 30,OOkm. per annum and load factors that are significantly lower on average than is experienced by the RETCOs. It is assumed that the average running-kilometers per vehicle per annum and load factors thtt would have been attained without the project would have been respectively 25,000km. and 502. These assumptions are consistent with the productivity assumptions in the without-project case made at appraisal. Further, and consistent with assumptions made at appraisal, it is assumed that without the project a vehicle fleet size consistent with the lower productivity levels assumed would have been available from existing vehicle resources. On this basis, the ex-post economic return (without shadow pricing of foreign exchange costs) is estimated at about 102. Detailed calculations and assumptions are given in Tables 10 and 11. 7.04 The realized economic rate of return, basud on assumptions broadly %onsistent with those made at appraisal, is significantly less than the ippraisal estimate. This reflects the fact that truck transport cost savings are estimated as being much lower than envisaged at appraisal. However, it is unlikely that vehicle fleet size consistent with (a) the productivity of the other parastatal trucking operators and (b) the RETCOs' actual transport service (ton-km) performance would have been available, in the without-project case, to comparable intra-regional parastatal trucking operators.2 On the more conservative assumption that without the project, 11 The prospective shareholders who represented the largest pool from which Continued on next page - 32 - the transport service actually performed by the RETC0s would have been generated only with the acquisition of additional trucks over and above the size of the RETCOs' fleet, the ex-post eu-nomic return to the project is 402. Detailed calculations are given in Tables 12 and 13. On this basis the economic return on this project component is good, albeit much lower than would have been the case at appraisal with a comparable assumption. 7.05 The economic return on the Association's assistance for the replenishment of the country's in-entory of spare parts was estimated at 38% at appraisal. This was based on the assumption that such procurement would lead to the avoidance of the import of 2,500 trucks, and at least a third of this added vehicle capability would be efficiently utilized. The same assumptions on truck productivity and operating cost used in the appraisal calculations are valid for application to a re-evaluation of the economic return on this component. The evidence suggests that Government allocated a greater amount of foreign exchange for imports of spare parts with the expectation that the incremental amounts would be partly financed with Association funds. On the basis of the foregoing, the realized rate of return on this component is at least as great as assessed at appraisal. Continued from previous page trucks for intra-regional transport of agricultural products and inputs on a third party basis would have been drawn were in fact reluctant or unable to provide to the RETCOs any significant number of serviceable trucks, in lieu of cash, as equity (para. 3.07 above). - 33 - VIII. CONCLUSIONS Maior Prolect Objectives 8.01 The project represented the Bank Group's first direct assistance to the.Tanzania trucking industry. As such it was a logical extension of its close involvement in the development of Tanzania's road network. Assistance to the industry was provided in the context of strong Government commitment to the development of the public sector. Given this commitment, the Association was compelled to direct the major part of its assistance to the public sector segment of the industry notwithstanding the existence of a dominant private sector. In view of this, an evaluation of the impact of the project must ultimately address two issues: (i) whether Association involvement attained its objective of assisting in the creation of viable and self-sustaining public transport companies; (ii) whether the channelling of resources into the public sector was the most efficient way of attaining the ultimate goal of relaxing the constraints on the transportation of agricultural products and inputs. 8.02 In respect of the first question, the Association's assistance has resulted in the establishment of potentially viable and self-sustaining public sector companies. But this.potential will only be realized if the expatriate staff now responsible for much of the day-to-day management of operations is replaced by indigenous staff and the companies ability to price their services appropriately is increased. There has been little discernible progress made in attracting suitable financial and workshop management personnel for the RETCOs. This problem can ultimately only be satisfactorily resolved through greater national effort in training of staff, particularly engineers and accountants and through the provision of competitive remuneration for such staff. In respect of the RETCOs' pricing of their services, Government has, in fulfillment of one of the conditions for disbursement of a second tranche of the Multisector Rehabilitation Credit, announced a new policy of allowing the rates for the intra-regional transport of goods to be determined by akrket forces rather than by rate fixing boards. This should give the RETCOs greater pricing flexibility and ensure that they maintain their primary commitment to intra-regional trucking. *This will, however, only happen if their shareholders who are also their primary users will permit the exercise of such flexibility. 8.03 The RETCOs' operating performance has been satisfactory given the constraints under which they operate. However, this performance has been attained and is, at least for the near future, sustainable only with a significant input of technical assistance. Given the operating capability of the privace sector, it is likely that, ceteris paribus, the game or better results could have been obtained by channelling similar resources to it but without the large expenditures on technical assistance. Nonetheless, given the constraints on the Bank's ability to do this during project preparation and the such poorer operating performance of other parastatal transport operations, the assistance to the RETCOs has been a satisfactory if second- best use of the Association's resources. -34- Performance of the Association and Lessons Learned 8.04 The borrower expressed satisfaction with the quality of the supervision missions but felt that there should not have been so many Bank staff changes. 8.05 The project experienced considerable delays because of delays in capitalizing the RE1COs. The project was the first one undertaken by the Region9s Transport Division that attempted to attract a diverse set of shareholders as investors in commercially oriented companies. It was also the only commercially oriented project appraised by the then Highways Division. As a result the legal and financial ramifications of the formation of companies were not fully appreciated. Indeed, it was only during the latter stages of project Implementation that financial analysts were involved in project supervision. Much closer involvement of Bank financf&l staff is now required in all projects, particularly commercially oriented ones. 8.06 Technical assistance has been invaluable in developing systems. However, there has been little transfer of knowledge. This points to the fact that without both a strong specific skills training component in projects and an appropriate incentive system in the assisted organization, technical assistance aimed at strengthening indigenous management can prove ineffective. Both these factors have been taken into account in recent lending to the sector in Tanzania. 8.07 Finally, although the RETCOs have been relatively successful compared to other parastatal trucking operators, their performance.relative to private operators has been mixed. In particular, despite considerable technical assistance, they have not yet been able to display a capacity to be managerially self-sustaining. This is in contrast to the private sector. To utilize all available resources effectively in the industry, the Association now pays particular attention to providing assistance on a non-discriminatory basis to all segments of the industry (e.g. provision of spare parts under the Sixth Highway Rehabilitation Project). - 35 - Table 1 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA COMPOSITION OF TECHNICAL ASSISTANCE ORGANIZATION MAN-MONTHS National Transport Corporation (NTC) Project Coordination Unit 159 Vehicle Imports Advisors 60 National Institute of Transport (NIT) 229 Regional Transport Companies (RETCOa) Dodoma RETCO 216 Ruvuma RETCO 171 Mtwara RETCO 190 Mwanza RETCO 99 Tabora RETCO 96 1,222 Table 2 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA DETAILS OF TECHNICAL ASSISTANCE TO RETCOs 1978179 1979{84 1 8 1 {1 1989/81 198''82 19S2'63 1983/84 !984/86 M-Total RETCO Man- ha- an Mn*Ma*ra - ha-94Ma-nTot months USS months USS o U1S monthe US$ months uSI months I month* USI months 'US11 Dodoma 36 246,288 46 184,388 38 144,288 a5 141,015 39 126,769 24 111,144 12 66,572 216 902,427 Mtwara 10 64,128 46 192,384 41 164,326 24 96,696 24 100,866 25 115,776 2 66,672 190 789,401 Ruvsma 16 72,144 43 172,344 28 112,224 24 96,696 24 160,698 22 101,882 12 65,572 171 711,478 Mwanza - 3 12,024 16 72,144 24 98,698 24 100,89 24 111,144 6 27,786 99 420,402 I Tabor* - 13 62,194 17 88,138 is 60,435 24 190,608 21 97,251 8 27,78 96 486,320 TOTAL 89 276,662 163 613,224 140 661,126 122 491,638 128 528,192 116 637,196 46 222,286 774 3,239,110 Total- (TSh. equiv.) 2,287,986 6,062,966 4,896,574 4,810,628 8,417,533 0,480,937 4,912,298 36,687,919 - 37 - Table 3 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA DETAILS OF TECHNICAL ASSISTANCE TO NTC (COORDINATION UNIT) Amount Amount Man-months (US$) (TSh) 1977/78 6 31,150 249,200 1978/79 23 96,795 800,495 1979/80 24 113,840 938,042 1980/81 21 95,550 799,754 1981/82 21 106,299 997,085 1982183 24 137,875 1,389,050 1983/84 24 144,912 2,282,364 1984/85 13 74,551 1,345,646 TOTAL 800,972 8,801,636 - 38 - Table 4 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA REGIONAL AND SIZE DISTRIBUTION OF TRUCKSITRAILERS PROCURED UNDER CREDIT 743-TA ?ZaCO 7-TONNER 10-TONNER 15-TONNER TRAILER TOTAL Ruvuma - 6 32 17 55 Dodoma 21 5 13 15 54 11twara 22 13 6 8 49 Whranza 23 12 15 17 67 Tabora 16 3 6 8 33 82 39 72 65 258 - 39 - Table 6 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA PROJECT COST Cost Estimates per Appraisal Report Actual Cost Forelun Local Total F Loa1 Total . U(S5. ) e 7 ) 1. Project Coordination 9.36 0.25 0.33 0.85 17.79 1.82 2. Assistance for Transport Companies (a) Training and technical assistance 2.38 2.68 2.63 3.23.. - 3.23 (b) Truck Rehabilitation (1) Parts 6.32 0.33 0.36 - 4.5 6.54 (11) Labor - 1.50 6.18 - 6.5 e'96 (c) Repair Facilities (1) Materials, equipment and spare* 0.44 6.75 0.53 0.26 3.56 6.68 (ii) Labor - 1.00 0.03 - - - (d) New trucks and spares 4.73 11.08 6.068 6.12 38.25 9.31 (*) Other fixed assetst/ - - - 0.21 29.0 2.02 Assistance to NIT (a) Instructors 0.31 0.26 6.34 6.94 0.5 0.98 (b) Equipment and teaching aids 0.20 6.50 0.26 0.16 0.66 0.17 4. Assistance for Spare Parts A Truck Imports Analysis and Management 6.26 0.17 0.22 0.23 0.26 6.25 S. Truck Spare Parts Imports 3.00 2.60 3.30 3.06 - 3.00 Sub-total 1-S 11.88 26.41 14.33 15.00 35.05 26.99 6. Contingencies (a) Physical 0.89 0.21 1.10 - - - (b) Price 2.34 0.46 2.79 - - - Total Project Cost .15.11 3.11 18.22 15.0 35.65 22.6 1/ Underlying exchange rates used are: TSh:USS1 1978/79 8.27 1979/80 8.24 1980/81 8.37 1981/82 9.38 1982/83 12.16 1983/84 15.7s 1984/85 18.05 / Mainly office equipment (USS0.89m) and workshop buildings. - 40 - TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA CUMULATIVE DISBURSEMENT SCHEDULE (USS 86) Cumulative Disburs*ment at End of Quarter . * Appreissel IDA Fiscal Year and Quarter Estimate Actual 1977-78 March 31, 1976 45 - June 30, 1978 275 23 1978-79 September 3e, 1976 400 177 December 31, 1978 8e 283 March 31, 1979 1,500 437 June 30, 1979 4,66S 3,636 1979-86 September 89, 1979 4,896 3,819 December 31, 1979 6,6 4,913 March 31, 1989 7,29 4,269 June 80, 1969 8,36 4,423 September 89, 198 9,296 4,426 December 31, 1980 10,566 4,639 March 81, 1981 11,256 4,886 June 89, 1981 12,26 5,149 1981-82 September 3e, 1981 12,60 5,289 December 31, 1981 13,266 5,489 March 31, 1982 13,866 6,740 June 30, 1982 14,96 6,760 1982-83 September 86, 1982 14,666 19,439 December 81, 1982 15,60 11,979 March 81, 1988 - 11,22. June 80, 1988 - 11,710 1983-84 September 89, 1983 * 11,879 December 31, 1988 - 12,119 March 31, 1984 - 12,06 June 39, 1984 - 13,986 1984-96 September 80, 1984 - 14,486 December 31, 1984 - 14,831 March 81, 1985 - 14,988 June 39, 1985 - 15,60w -41 - Table 7 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA OPERATING PERFORMANCE OF RETCOs 1981182 1982/83 1983/84 1984/85 Running-1ms/truck per annum (km) 34,852 39,161 42,458 35,430 Truck Availability (%) 77 74 68 58 Truck Utilization (2) 80 76 76 73 Load Factor (%) 62 66 66 - 64 Ton-km/truck/p.a. (ton-km) 161,725 202,341 247,268 229,464 Cargo Transported (tons): Agricultural Produce & Inputs 60,736 120,402 154,852 160,960 General Cargo 39,307 55,826 61,205 60,661 TOTAL 100,043 176,228 216,057 221,621 - 42 - Tabt*.. TANZANIA PROJECT COMPLETION RORT TRUCKING INDUST RMABILITATION AND IMPROVEMENT PROJECT REDT 743-TA CNSOLIDATED PROPIT AND LOSS STATEMEN7S OF PROJECT COMPANIES (ikk. 'S0) 1!!LL21992S 1993/84 1984185 Pr.ight Income 25,718 79,731 135,238 198,660 Passenger Fare l"Coms 11,364 16,596 2,183 31,662 Othar Incoe 3,186 6,039 4,642 4,681 40,178 1M0,36 1m9,963 234,961 PetroI Station Sale- (Godoma RETCO) . 9,731 20,773 46,939 55,941 Total IRevenu 49,9U9 121,139 2ØS,902 29,962 COMT j=hIcia Running Costs$ Repalre and Maintonance 4,491 10,198 18,988 38,613 Fmel and 01i l 6,968 16,06m 28,841 0,00 Tyre. and Tubem 2,491 6,984 13,384 16,668 ilscellanoug 640 1,291 2,8 3,36 14,490 34,679 83,246 106,647 Fizod Coste: - - - Slorles and Wages -,216 13,276 28,48 . 28,891 Depreciation 7,576 16,289 26,643 27,762 Other Administrative Costa 4,880 9,736 16,962 32,862 Vehicle Insurance and Licence. 1,682 3,249 3,719 3,677 Ittereat 14 3,634 3,291 3,677 20,199 46,82 88,976 96,687 Petrol Station Coat of Sale* (Dodoma RETCO) 8,C92 17,Ne0 48,938 60,468 Total Costs 43,281 96,221 173,157 262,698 NET PROFIT BEFORE TAX Transport Operations 5,489 21,265 27,742 32,727 Petrol Stations Sales (KAUDO) 1,139 3,713 6,6e3 6,482 TOTAL 6,628 24,918 32,748 38,209 Oper*ting Coat (exel. deprociation, interest and petrol station costa) 27,692 60,338 18,387 i76,896 Tecbnical Assistance to RETCOs 4,611 6,418 8,461 4,012 31,703 6,758 111,648 174,9Ø7 Operati ng Cost/ton-ke performed (TS) 'Excl. Techical Assistance 2.18 1.53 1.81 2.77 Incl. Technical Assistance 2.6 1.69 1.96 2.8¥ - 43 - Table 9 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA CONSOLIDATED BALANCE SHEETS OF PROJECT COMPANIES jTSh. '000) As at As at As at As at PARTICULARS 30/6/82 3016183 3016184 3016/85 ASSETS EMPLOYED Fixed Assets At Cost 48,620 110,022 121,426 149;635 Lesst Depreciation 17,314 29,713 53,658 79,598 31,306 80,309 67,768 70,041 Net Current Assets Current Assets 30,516 89,453 129,031 139,879 Less: Currant Liabilities 5,467 12,470 36,854 40,327 25,049 76,983 92,177 99,552 56,355 157,291 159,945 169,593 FINANCED BY Share Capital 33,162 71,743 71,717 71,627 Government Grants 19,421 21,941 21,941 24,383 Aecumulated Profits (6,516) 14,658 31,594 48,484 Long Term Loans 10,288 48,950 34,693 25,099 56,355 157,292 159,945 169,593 awa * WWa gaae eWe - 44 - Table 1o ANIZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IWRVEMENT PROJECT CREDIT 748-TA ECMIC RE-EVALUATg avestments2( OooretingLCosts Incremental With Without WIt Wthout Project Project3 / poject Projectl/ ProjectS/ Benefits 1977/78 - * * - 1978/79 1.9 - * * (1.9) 1979/86 3.64 - * * (8.5) 198/81 17.8 14.7 - - (2.0) 1981/82 26.8 * 11.6 13.9 (16.2) 19/83 17.4 - 19.4 22.8 (14.5) 198/84 8.4 - 26.8 33.3 (1.4) 1984/86 9.8 - 32.3 43.4 10.8 1985/86 B.6 - 82.3 43.4 16.3 1988/87 0.8 - 32.3 48.4 16.3 1987/88 0.8 - 32.3 43.4 10.3 1968/89 0.8 - 82.3 484 10.3 1989/9 0.8 3- . 43.4 19.8 199/91 0.6 - Economic Return 106 I/ Current prkes deflated by following inflation factors (based on Tanzania Consumer Price Index): Year Deflator Year Deflator 1977/78 1.64 1981/82 2.31 1978/79 1.19 1982/88 3.96 1979/89 1.44 1983/84 3.89 196/81 1.87 1984/86 5.26 / Investments include Government equity subscription in with or without project case; assumed that age profile of vehicles in with or without project case are similar. 3/ Technical assistance assumed to continue at 1984/85 level In with project case. H/ No operating cost reduction benefits assumed for the project before full formation of companies and importation of project trucks and spare parts. 3f Operating cost assumptions :Z without project case: (a) fuel consumption per running-ki assumed 29X higher; (b) other costs per kilometer excluding labor assumed the same as RETCOs; (c) crew costs in RETCOs assumed to be 353 of salary and wages disclosed in accounts; (d) running and crow costs in without project case adjusted for greater vehicle fleet and runs (See Table 10). - 45 - Table 11 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 743-TA WITHOUT PROJECT: ASSESSMENT OF OPERATING COSTS 1990/81 1991/L2 1982/83 1983L64 1 L94/85 (A) WITH PROJECT RETCO fleet she ( trucks) 77 195 231 269 RETCO fleet capacity (tons) 661 1,941 2,295 2,688 RETCOs: ton-km performed (Ot-km) 12,463 89,468 67,119 61,725 Government Equity Infusion (TSh.m) 27.0 43.0 * * - IDA truck/workstop Credit (TSh.m) - - 47.6 24.1 - Operating costs!/ (1977 TSh.w) - 11.5 19.4 20.3 32.3 (8) WITHOUT PROJECT Ton-km performance: SOX load factor * 25,680 km/truck per annum (68t-km) 6,888 24,203 28,68 32,360 Shortfall on RETCO performance (6Mkm) 6,565 15,193 28,431 -29,375 Additional 1Q-tn trucks required (# trucks) 45 77 16 8 Operating coot*V (1977 TSh.m) * 13.9 22.3 33.3 43.4 / Excluding depreciation and technical assistance; date based on RETCOs' consolidated financial statements. V/ Excluding depreciation; data based on RETCOs financial performance as adjusted-see Table 9, footnote 5. Source: PCR mission estimates based on date supplied by NTC. - 46 - Table 12 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 748-TA ECONOMIC RE-EVALUATION: ASSUMING ADDITIONAL TRUCK PURCHASES IN WITHOUT PROJECT CASE (1977 TSh. million) Investments2(_ OPerating Costs Incremental with Wrthout Witn Without Project Project3l Project i/ r{g ProJec6e/ Benef Its 1977/78 - * * * 1970/79 1.0 - * * (1.9) 1979188 3.54 - - * (3.5) 1986/81 17.3 14.7 - - (2.6) 1981/82 20.6 7.6 11.5 13.9 (10.6) 1982/88 17.4 12.7 19.4 22.3 (1.8) 1908/84 8.4 17.2 26.3 33.3 15.8 1984/85 0.8 1.3 32.3 43.4 11.6 1985/8 18.7 26.4 82.3 43.4 17.6 1966/87 26.5 32.6 82.3 43.4 23.2 1987/88 6.8 23.7 82.3 43.4 28.0 1988/69 7.2 7.7 32.8 43.4 11.6 1989/96 0.6 - 32.8. 48.4 10.3 1996/91 6.8 - 82.3 48.4 16.3 Economic Return 40X ./ Current prices deflated by following inf'stion factors (based on Tanzania Consumer Price Index): Year Deflator Year Deflator 1977/78 1.64 1981/82 2.31 1973/79 1.19 1982/83 8.06 1979/86 1.44 1983/84 3.9 1980/81 1.87 1984/86 5.26 / Investments include Government equity subscription to with or without project case. / Technical assistance assumed'to continue *t 1984/85 level in with project case; trucks assumed to have an economic life of five Years. f/ Assumed in without project case that vehicle fleet capacity upto amount provided through Association financing could be made available locally; the Incremental trucks requirement in the without project case is calculated in Table 10. / No operating cost reduction benefits assumed for the project before full formation of companies and importation of project trucks and spare parts. / Operating cost assumptions in without project case: (a) fuel consumption per running-km assumed 29 higher; (b) other costs per kilometer excluding labor assumed the same as RETCOs; (c) crew costs in RETCOs assumed to be 35 of salary and wages disclosed in accounts; (d) running and crew costs in without project case adjusted for greater vehicle fleet and runs. - 47 - Table 18 TANZANIA PROJECT COMPLETION REPORT TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT CREDIT 748-TA WITHOUT PROJECT: ASSESSMENT OF INVESTMENT REQUIREMENTS 198.0L1 19.1/2 1992l83 16.3.84 1984L6 (A) WITH PROJECT **t size (# trucks) 77 195 281 269 **t capacity (tons) 651 1,941 2,295 2,588 ton-ke performed (Met-km) 12,463 39,456 57,119 61,725 nt Equity Infusion (TSh.m) 27.6 43.6 - - - . .-k/workshop Credit (TSh.m) - - 47.6 24.1 * (8) WITHOUT PROJECT Ton-km performance: ad factor * 26,G00 km/truck annum (686t-ko) 8,688 24,263 28,68 32,356 all on RETCO performance (ffft-km) 5,585 15,193 28,431 29,375 onal 16-ton trucks required (# trucks) 45 77 18 8 rck (excl. duties A taxes) (TSh.000) 388 564 632 - 88 ental Investment to trucks (TSh.m) 17.5 38.8 67.8 7.6 Total Investment (TSh.0) 27.6 17.5 3.8 67.6 7.6 Total Investment (1977 TSh.m) 14.7 7.6 12.7 17.2 1.8 Source: PCR mission estimates based on data supplied by NTC.