Rwanda - Transport Sector Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-5250-RW MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 31.1 MILLION TO THE RWANDESE REPUBLIC FOR A TRANSPORT SECTOR PROJECT APRIL 30, 1990 This decument has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otberwise be disclosed without World Bank authorization.  RWANDA TRANSPORT SECTOR PROJECT CURRENCY EQUIVALENTS Currency Unit = Rwandese Franc (FRW) US$1.00 = FRW 80 FRW 100 - US$1.25 The U.S. dollar/Rwandese franc rate is subject to change, since the FRW is pegged to the SDR. Conversions in the Staff Appraisal Report were made at US $ 1.00 FRW 80, the average exchange rate at the time of appraisal in July 1989. WEIGHTS AND MEASURES 1 meter (m) - 3.28 feet (ft) 1 kilometer = 0.62 mile (mi) 1 square kilometer (km2) - 0.386 square miles (sq mi) 1 hectare (ha) - 2.47 acres 1 metric ton (m ton) - 2,204 pounds (lbs) ACRONYMS AND ABBREVIATIONS EEC = European Economic Community EDP = European Development Fund FRG = Federal Republic of Germany KfW Kreditanstalt fur Wiederaufbau ONATRACOM = Office National des Transports en Commun OPEC = Organization of Petroleum Exporting Countries MINITRANSCO = Ministry of Transport and Communications MINITRAPE = Ministry of Public Works, Energy, and Water SDC = Swiss Development Cooperation STIR = Societ des Transports Internationaux du Rwanda UNDP = United Nations Development Program Government of Rwanda FISCAL YEAR nuary 1 - December 31  FOR OFFICUIL USE ONLY RWANDA TRANSPORT SECTOR PROJECT Credit and Prolect Summary Borrower: Rwandese Republic Beneficiaries: Ministry of Public Works, Energy and Water (MINITRAPE) Ministry of Transport and Communications (MINITRANSCO) Amount: SDR 31.1 million (US$ 40.0 million) Terms: Standard IDA terms with 40 years' maturity Financing Plan: (US$ million) Total Z of Total IDA - Transport Sector Project 40.0 272 Sixth Highway 4.1 3% EEC/EDF 32.6 222 Swiss Cooperation 9.4 62 OPEC 4.0 32 FRGIKFW 4.7 32 Government 54.1 362 Total 148.9 1002 Economic Rate of Return: 45 percent over 86 percent of total costs Staff Appraisal Report: Rwanda Transport Sector Project, Report No. 8386-RW Maps: IBRD 21189 IBRD 21834 R 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.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE RWANDESE REPUBLIC FOR A TRANSPORT SECTOR PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Rwandese Republic for SDR 31.1 million (US$ 40.0 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with a maturity of 40 years and would help support the transport sector in Rwanda. The project would be cofinanced with EDP (US$32.6 million equivalent), OPEC (US$4.0 million equivalent), Swiss Development Cooperation (US$9.4 million equivalent), and KfW (US$4.7 million equivalent). 2. Background. Rwanda is a landlocked country with a hilly to mountainous topography and densely settled population. In this setting, transport infrastructure helps reduce the isolaticn of the country from its neighbors, and that of one region of the country from another. Infrastructure has been given a high priority in Rwandese development planning. Transport investments and policies as stated in these plans have aimed in particular at: (a) improving international transport connections; (b) upgrading to paved standard of the network of mein roads (some 970 km) to facilitate the country's development and its social and administrative integration; (c) ensuring better maintenance of the road network in general (which totals some 12,500 km); and (d) improving transport services and lowering transport costs in the rural areani. Since the main road network is well developed, the Government, in its preparation of four-year road programs, is now giving more emphasis to maintenance and rehabilitation. This has been strongly encouraged by IDA, in concert with other donors. For international transport, the most important objective is to strike the right balance between the cost of access to and from Rwanda and its reliability. In the past, imbalances in cost and reliability have resulted from restrictive regulatory policies, which will be revised and streamlined under the project. 3. Rationale for IDA Involvement. IDA has played an important role in the transport sector in Rwanda, including the rebuilding of the most important external road link, and in refocusing the road program towards improved road maintenance. The involvement in neighboring countries and in regional studies, the Great Lakes Corridor Study being the latest, has provided a good opportunity for IDA to lead donor and regional coordination for the sector. Development of rural transport in support of agriculture is another main IDA concern that would be continued under the project. 4. Prolect Oblectives. As a sector-wide operation, the project aims to address requirements for roads and other needs of the transport sector. The most important policy dimensions include actions to streamline the regulatory environment, ensure regular financing of sector expenditures, reclassify the road network, and improve institutional arrangements and responsibilities in the sector. Policy directions for the sector are  - 2 - outlined in a Letter of Sectoral Development Policy which the Government has transmitted to IDA. Specific measures in support of the policies are contained in an Action Plan accompanying the Letter of Policy. The principal public enterprises In the sector will be assisted through a performance contract between the Government and the bus company ONATRACOM, and through assistance in the privatization of the trucking company STIR. Responsibilities in the sector between central and local authorities would be clarified. Specific objectives of this sectoral approach are tot (a) consolidate the achievements of the program begun under the Highway VI project (Cr. 1641-RW), particularly with regard to cost recovery for road maintenance; (b) improve the organization of road maintenance; (c) expand maintenance to include a pilot project for communal roads; (d) relieve constraints imposed by unnecessary regulation; and (e) in consultation with concerned donors, ensure support for essential training needs and institutional development of the transport sector. 5. Project Description. The project focuses on road maintenance, implementation of a pilot project of about 600 km of rural (communal) roads, and support for improved international access, including deregulation of international transport. IDA would participate with other donors in the reconstruction of a 75-km section of two of the main roads remaini-ig to be upgraded under the overall roads program. For the transport sector, the project includes a small shipyard on Lake Kivu and support to improved vehicle safety inspection. Institutional strengthening, assistance and professional training are included for the ministries concerned (MINITRAPE and MINITRANSCO), as well as to improve road safety and develop local road contractors. The project, to be carried out over four years, would provide funds for civil works, equipment, supplies, training and technical assistance. 6. Project cost. The total cost of the project is estimated at US$ 148.85 million. Of this amount, the foreign exchange cost is US$96.61 million (65%). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursements, and the disbursement schedule, are shown in Schedule B. A timetable of key processing events and the status of Bank Group operations in Rwanda are given in Schedules C and D, respectively. Staff Appraisal Report No. 8386- RW, dated April 30, 1990, is being distributed separately. 7. Agreed Actions. The main policy measures promoted by the project concern the regulatory framework (including participation in public enterprise reform), financing of the sector, donor coordination and international access. In accordance with the Action Plan accompanying the Letter of Sectoral Development Policy, the Government would (i) remove an obligation to move certain products by air transport; (ii) draft new legislation for international transport; (iii) reduce present road transport tariffs; (iv) remove the requirement for consular clearance for truck transport from Kenya; and (v) review freight handling at Kigali airport. TIe Action Plan would be reviewed on an annual basis and modified as necessary. Annual preparation of three-year expenditure programs for roads,  - 3 - begun under Highway VI, would be continued and extended to the whole transport sector. IDA would review the three-year program, on an annual basis. The manpower development programs of M4INITRAPE and MINITRANSCO would also be strengthened. Conditions of disbursements are a conclusion of agreements with co-donors for the Gitarama-Kibuye road and a plan for resettlement and expropriation for this road; a contract for operation of the Lake Kivu shipyard; and operating agreements between communes and MINITRAPE for the communal road program. 8. The financing of sectoral expenditures would be placed on a sounder footing. The Road Fund, which receives the proceeds from special taxes and road tolls, is expected to meet at least half, but not all, of road maintenance requirements. Collection of charges for the Road Fund from road users has already begun. A new law and decree on implementation procedures concerning the Road Fund has been passed. The rest of road maintenance requirements would be provided by the national Development Budget. 9. Local governments (communes) would carry out the communal roads pilot project under the technical guidance from MINITRAPE. Promulgation of a decree on road reclassification would be a condition of effectiveness. 10. Justification. Improvement of road maintenance, and selective road upgrading, would reduce vehicle operating costs and lessen the need for costly future rehabilitation, especially for the paved network. Improvement of the rural roads would support food production and exports of coffee and tea. Less costly international access would promote exports and reduce the cost of imports. The project would also support the development of local contractors for road works and further privatization of transport services. 11. Environmental Assessment. An environmental assessment of the proposed Gitarama-Kibuye road paving was undertaken during - oject preparation. It recommended that further attention be given to the disposal of fill from road works, the relocation of any families displaced by the works, the impact on tourism in the Kibuye area, and road safety. The Government has responded on each of these points. Survey teams are determining the number of families affected, and a study of tourism requirements and potential in Kibuye is underway. Assurances that the environmental aspects identified would be satisfactorily addressed during implementation have been obtained. 12. Risks. Cost overruns on the Gitarama-Kibuye road, delays in the road maintenance program, and cost increases and/or delays with the communal roads pilot program are the main risks of the project. The likelihood of cost overruns for the Kibuye road has been minimized through detailed design, based on recent cost data from ongoing construction works in similar terrain. Delays in the road maintenance program would be minimized through the timely funding of expenditures from the strengthened Road Fund, as well as through training of MINITRAPE staff. The main  response to the institutional risks of the communal roads pilot project Is through intensive project monitoring, and supporting tecbnLacl assistance, through spreading the participation geographically and by different means of implementation (i.e., works partly by administration, partly by contractors). 13. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D.C. April 30, 1990  Schedule A RWANDA TRANSPORT SECTOR PROJECT ESTIHATED COSTS AND FINANCING PLAN Estimated Costs 11 Local Foreign Totsai Foreign -------(US$ million)- as Z of total Transport Component 1.69 1.94 3.63 533 Road Component Gitarama-Kibuye 11.62 35.41 47.03 75X Periodic maintenance 6.85 14.55 21.40 682 Routine maintenance 7.67 4.96 12.63 39Z Minitrape t-rvices 3.22 5.86 9.08 652 Communal roads 7.05 5.02 12.07 42Z Institutional development 0.37 3.41 3.78 902 Base Cost 38.47 71.15 109.62 65S Physical Contingencies 3.85 7.11 10.96 Price Contingencies 9.92 18.35 28.27 Total Project Costs 52.24 96.61 148.85 651 Financing Plan: Local Forein Total -------(US$ million)------ Government 24.90 29.16 54.06 EEC/EDF 8.10 24.50 32.60 Swiss Development Cooperation 2.34 7.03 9.37 OPEC 1.00 3.00 4.00 FRG/KFW 1.52 3.23 4.75 IDA - Transport Sector Project 12.70 27.30 40.00 Sixth Highway 1.68 2.39 4.07 Total 52.24 96.61 148.85 1 Costs are net of taxes which are estimated at FRW 608 million (US$ 7.6 million equivalent)  -6- Schedule B RWANDA TRANSPORT SECTOR PROJECT PROCUREMENT METHOD AND DISBURSEMENTS Procurement Project Element Procurement Method Total ICB LCB Other N.A. Cost -----------(US$ million)--------- Civil Works 29.65 7.47 51.68 30.62* 119.42 (10.56) (5.16) (6.21) - (21.93) Equipment, Materials, Supplies, and Support 13.57 - 7.05 - 20.62 Services (11.24) - (0.50) (11.74) Consultant Services - - 8.81 - 8.81 _ - (6.33) - (6.33) Tctal 43.22 7.47 67.54 30.62 148.85 (21.80) (5.16) (13.04) (40.00) Notet Figures in parenthesis are the respective amounts financed by the Association. Under other are included Civil Works by Force Account. * Includes amounts for items financed by EECIEDF and procured under its own procedures. Disbursements Category Amount Percentase (USS million) Civil Works By contract: Gitarama-Kibuye 10.56 35S of expenditures Other contracted works 5.16 90% of expenditures By force account: 6.21 901 of expenditures Equipment, spare parts, 11.74 100% of foreign expenditures materials and supplies or 90% of local expenditures Consultant services 6.33 10OZ of foreign expenditures or 90% of local expenditures Estimated IDA Disbursements IDA Fiscal Year 91 92 93 94 95 96 97 --------------(US$ million)----------- Annual 1.8 5.4 7.4 7.8 8.8 6.8 2.0 Cumulative 1.8 7.2 14.6 22.4 31.2 38.0 40.0  Schedule C RWANDA TRANSPORT SECTOR PROJECT Tlme-able of Rev Project Processing Events (a) Time taken to prepares Two years (b) Prepared bys Government with IDA assistance (c) First IDA missions May 1988 (d) Appraisal departurot June 1989 (e) Negotiations: April 6-12, 1990 (f) Planned effectiveness: December 1, 1990 (g) List of relevant PCRs and PPARss First, Second and Third Highways (PPAR No. 2545), Fourth Highway (PPAR No. 6209)  Schedule 1) Page 1 of 2 STATUS OF BANK GROUP OPERATIONS IN RWANDA A. STATEMENT OF BANR LOANS AND IDA CREDITS -----------------------------.------_-- (March 31, 1990) Loan or Amount in US$ Million Credit Year ------------------------------ number Signed Borrower Bank IDA (1) Undisbursed Twenty credits fully disbursed 187.22 1217 1982 MIN. OF PLANNING Technical Assistance 5.00 0.00 1263 1982 REP. OF RWANDA Second Education 10.00 1.59 1283 1983 GOVT LF RWANDA Bugesara & Gisaka Migongo 16.30 1.33 1420 1983 REP. OF RWANDA Rusizi II Regional Hydroelec 15.00 0.19 1546 1985 GOVT OF RWANDA Agricultural Research 11.50 4.80 1565 1985 GOVT OF RWANDA Technical Assistance 4.80 4.16 1641 1986 MIN. PUBLIC WORKS Sixth Highways 11.00 9.73 A008-0 1986 MIN. PUBLIC WORKS Sixth Highways (SFA) 15.00 0.15 1650 1986 GOVT /BRD Fourth BRD 9.00 5.84 1669 1986 GOVT OF RWANDA Gitarama Agric Dev. 12.70 6.71 1678 1986 REP. OF RWANDA Family Health 10.80 10.41 1683 1986 REP. OF RWANDA Third Education 15.60 13.12 1783 1987 REP. OF RWANDA 2nd Water Supply 15.00 10.93 1796 1987 REP. OF RWANDA Sectoral Pre-Investment Studies 7.40 7.73 1811 1987 REP. OF RWANDA 2nd Integrated Forestry 14.10 12.67 A008-1 1988 MIN. PUBLIC WORKS Sixth Highways Supplement (SFA) 10.00 10.65 ** 2026 1989 REP. OF RWANDA Agricultural Services 19.90 20.63 ** 2041 1989 REP. OF RWANDA Urban Institution Sector Dev. 32.00 33.00 2113 1990 REP. OF RWANDA Public Enterprise Reform 4.4 4.39 Subtotal 18 active projects 0.00 239.50 158.03 Total less cancellationss 0.00 426.72 of which has been repaid 0.00 3.12 Total outstanding incl. undisbursed: 0.00 423.60 (2) Amount sold : 0.00 4.38 of which has been repaid 0.00 4.38 Total now held by Bank and IDA (1) : 0.00 255.12 (2) Total undisbursed s 0.00 158.03 (2) * Not yet signed. ** Not yet effective. (1) USS amounts are computed at rate of negotiations dates for Original Principals, whereas the current rate is applied to the Undisbursed Amounts. (2) Because of the depreciation of the $US w.r.t. the SDR (i) it is possible that the Undisbursed amount is higher than the Original amount, and (ii) the sum of Total now held by IDA and Bank and Total Undisbursed, is higher than Total outstanding.  9 Schedule D Page 2 of 2 STATUS OF DANK GROUP OPERATIONS IN RWANDA 8. STATDIENT OF IFC INVESTMENTS IN RWAND EMPRSSED IN USS ------.-_---------------.---------------------------_--- (March 31, 1990) Amount Investment Number Yoar Obligor Type of Business Loan Equity Total 337-RW 1976 Soruathe Food & Food Proc. 0.54 0.54 470-RW 1979 Sorwathe 0.23 0.06 0.29 764-RW 1985 Sorwatho 0.29 0.29 1028-RW 1988 SORWAL Manufacturing (*) 0.20 0.20 Total Gross Comiltmontas 1.05 0.26 1.31 Lesss Cancellations, termination, "change adjustments, repayments write-offs, and sales 1.04 0.06 1.10 Total coauitments hold by IFC 0.01 0.20 0.21 Total undisbursed 0.00 0.00 0.00 Total disbursed 0.01 0.20 0.21 --------------------------------------_----------------------------__--------__------- * Loan guarantee of US$2.07 million provided by IFC.  I RD 211 U G A N D A t aio WetIvyy GREAT LAKES REGION I t v INTERNATIONAL SURFACE TRANSPORT w\ j _ if aCONNECTIONS: 1 991 di pwad krocds ___k_ Upaed roods (. / Mbororra } ; RadIways u h ; un m o / | i K i K E N Y A Lake navigation * Not,onal cap.tals + Ruhhuruuo kft> 93dukobu J @ > Urnorrak ---- Interntraonal boundafies Go m zi j MuserN 'NAIROG, X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A (S WSALCAAJM /s. \ 8 2 ( ihLI 5 > J s ~~~~~~~~~~~~~S E R E N G E T It*.xle Homud Cy ass cu.n .1 v '1~~~~~~~~C-u. 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