Angola - Transport Recovery Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 10520-ANG STAFF APPRAISAL REPORT PEOPLE'S REPUBLIC OF ANGOLA TRANSPORT RECOVERY PROJECT August 10, 1992 Rep':rt ,E X Ib Vt c,u~ AH I UPY : A~ j~~': AQUL, J- -t-HM\ : },xt .;At3At_r, hn.J 7141 -_ePt.AP f1 Infrastructure Operations Division South Central and Indian Ocean Department Africa Region I This docrment 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 authonization. . _ . . -. .~~  CURRENCY AND EXCHANGE RATES D-a-te Currencv Unit New Kwanza As of April 16, 92 US$1.00 c NKz55O Base Rate 1/ [/ Applicable to imports and exports, official fiwnncial transactions and calculations of custom duties since April 1992. Other transactions may be conducted through the commercial banks at market rates. In July 1992, the prevailing market rate was about NKzs 1,800 = US$1. WEIGHTS AND MEASURES 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.624 miles 1 kilogram (kg) = 2.2 pounds (lb.) ! meter (m) = 3.28 feet 1 metric ton (m ton) = 2.204 (lb.) 1 square kilometer (km2) = 0.386 square mile (sq.m.) ABBREVIATIONS AND ACRONYMS CCCE - French Aid Agency (Caisse Centrale de Cooperation Economique) CFB - Benguela Railway (Caminho de Ferro de Benguela) CFL - Luanda Railway (Caminho de Ferro de Luanda) CIF - Cost Instirance Freight DANIDA - Danish International Development Agency FAC - Fonds d'Aide et Cooperation FIATA - International Federation of Forwarding Agents GNP - Gross Nati.nal Product ICB - International Competitive Bidding ICE - Portuguese Economic Cooperation Agency (Instituto para a Cooperasao Economica) IDA - Intemational Development Association INMA - Angola Highway Institute (Instituto de Estradas de Angola) IRE - Infrastructure Rehabilitation Engineering Project LCB - Local Competitive Bidding LPT - Labor Promotion and Training MINPLAN - Ministry of Plan MINOPU - Ministry of Public Works and Urban Development MAINTEC - Ministry of Transport and Communication PPF - Project Preparation Facility SAR - Staff Appraisal Report SDR - Special Drawing Rights SIDA - Swedish International Development Agency SME - Small and Medium Enterprise TA - Technical Assistance TEU - Twenty Foot Equivalent Unit (Container Size) TOR - Terms of Reference RO/RO - Roll-on/roll-cff vessel UNCTAD - Uaited Nations Conference on Trade and Development FISCAL YEAR January 01 - December 31  FOR OMFCIUL USE ONLY STAEEiAE ISAL.BER I. INTRODUCTION . 1OIEC lT!e of Cgtegft r ~~~. .......... .......... ... ..... ... . ... .........,i A. Country Background .... 1 B. Project Backgronmd ................................ 2 II. IE TRANPOTSECTOR ..4 A. The TransportSystem. 4 B. Road Infrastructure .5. S C. Raiways andPorts ................ 6 D. Sector ssues and Strategy. 7 E. Donor Experience in the Transport Sector .8 F. Rationale for MDA nvolvement. 8 MI. HER.ET. ........ 9 A. Project Concept and Composition. 9 B. Project Cost and Finacing .13 C. Project Supervision and Implementation ....... . ...... 16 D. Environmebtal Aspects. 22 E. Economic Evaluation and Risks ........................ ... IV. _ RECOMMENDATION .27 The rportis basedon th findings of a projecenificaton mission to Angola in Ocobor 1991 conostgofMeM. blllU, B. BoArom, S. Karlson, Y.P. Kedia and IJ. RaOul, and an apprisalmission to Angola in Febva 1992 consisgotMon IJ. Raoul (Task Mang), B. Bostrom, S. Karson, Y.P. Kcia, Pb. de Narois, P. TaborZ6, and A. louron. Menu A. Garemd (Consukamt-FAC). and B. Persson (Consutant-SIDA) oonlributed to dt report and partiipa in the apprai mbson. Mesr. C. Alvarez, B. Chatelin and L. Thompson we the pea revewr hr the projeot. Mr. M. Blanc and Mr. P. Aguire. Sacaa are, respectively, the managing Division Chief and Diretr for the opmation. Ua. 0. Chutier provided sereal support for the prepartion of the project documnw. 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.  List of Amlexes 1. Program Cost 2. Road and Bridge Rehabilitation Component 3. Labor Promotion and Training (fI>) sub-component 4. Road Network, Traffic, Vehicle Fleet and Fuel Consumption 5.1 Railway Component 5.2 Draft Action Plan for the CFL 6.1 Port of Lobito Component 6.2 Draft Action Plan for the Port of Lobito 7. Outline TORs for Feasibility and Detailed Design Studies for Road Rehabilitation 8.1 Outlinte TOR for Road Transport Liberalization Study 8.2 Outline TORs for Intermodal Facilitation Studies 9. Key Project Indicators 10. Coordination, Monitoring and Reporting 11. Project Implementation Schedule 12. Supervision Plan 13. Environment Assessment and Mitigation Measures 14. Economic Evaluation 15. Donor Coordination 16. Transport Data 17. Selected Documents and Data Available in the Project File IBRD No. 23568 -R- Transport Map of Angola  (i) ANQLA MPORT EtCO-V13 PRtOJECT CRtEDr AN OlECT St Republic of Angola Bonefteiariem yfmistry of Plannng, Ministry of Public Wors and Ubn Development, Angola Highway Institute, Port of Lobito, Luands Railway, Ministry of Transport and Communications Aolunt: SDR 30 million (US$41 million equivalent) linns: Standard IDA terms, with 40-year mahtrity Co-Financing: Sweden (SIDA), France (CCCE), Denmark (DANIDA) arojec Obiectives: Ihe objectives are to: (1) preseve or restore srface access to large portions of the country by road and rail, and restore port operations to support economic activities; (2) promote transport sector employment, particularly by training small contractors in labor-intensive rad maintenance; (3) strengthe sectoral institutions, eqpecially to manage contracts for roatd works, and operate the CFL railway and the port of Lobito; and (4) support sectoal policy implementation. The project would have the following components: (1) AJoqdand bri4ggm2nen1 to facilitate the early reopening of the primary road network, aiming at the urgent rehabilitation and preservation of the paved-highway network, including: * repaL or replacement of about twenty five bridges, in strstegic locations on te main road network; * resurfacing or periodic maintenance, including rehabilitation of destroyed sectdons of about 700 lklometer of the most important paved roads to stop their further deterioration, which would requi cosdy rehabiitation to repair, * consultant services for supervision of woks; * detailed design studies for futer road rehabilitation; and * creation and operation of a training and contract _magement unit for labor-intensive road maintenance to promote small contractors and generate employment in road mantenac.  (ii) (2) co cop nst o tising of technical stance, and emergency repai ani provision of spa pauls and equipment for the port of Lobito to improve port orations and provide adeouate port eevices for a region wita high potential in agriculre. 3) A mleincluding institutional and finanial assistance to satisfy cureat demand and improve oprationl performaco and services. (4) An mstihutionad develoiment componet mincluding tanort studies, project coordination, and assistance for the impleman of acton plans to improve the performance of the commercial agencies benefiting from the project. I}enfits and Ridks The project would have considerable economic and social imnacts by providing basic tansport services to the regions with the highest agricultural potential, thus allowing populations who fied the war to retum to those areas; alleviating the need for later reconstton of the roads; decreasing the transport costs on major arteries, thus benefiting numi and urban poor, and inrsg employment in road minteace. Although envi tally benign, the project would help improve the roads' direct environmental impact through improved drainap and by removal of wrecks. TMh risks result from the govemment's limited capacity to provide local financing for the project, and weak institutiona capacity to manage the project. Unfamiliaity of project staff with Eunk. procedures, and a potentially unsable political eanvirment also could cause sigificant dela;. Technical assistance, the introduc.i of cost recovery meases, an eady stwrt in procurwma_. and use of contact to execute most of the project should reduce these risks. Proiee Cos The total cost is estimatd at the equivalent of &Sout US$64.9 million, witi, 77 percert-US$SO.1 m;ilion- in foreign exchange. The detiled cost estimatse in prices as of January 1992 are shown below.  PROJECT COST ESTIIATES ................ ....................... Cmittitsc of U.S. doLlars) 4..0 percn ta ..... Local Foreign Total Fore gn Total ............ ......................... ............ ..........................O-.-.--.............--.........=-Z----o---v--@v*Z*e* ROADS Road civtl mork 5.6 22.4 28.0 SOX 43.1X Bridge structures 0.6 2.4 3.0 60X 4.6X ridge work 2.2 0.5 2.7 17X 4.21 Sup rviion of work 0.8 2.5 3.4 751 5.2X Road studies 0.2 0.9 1.1 77X 1.71 Labor promotfon 1.2 1.0 2.2 461 3.41 Subtotal 10.7 29.6 40.4 7SX 62.11 St LUANDA RAILWAYS ........ ............. .......... - Track rehabilitation 0.1 1.5 1.6 64X 2.5X - other civfl works 0.2 0.2 0.4 38X 0.6X - Equfpit & apr. pa.ts 0.3 2.7 3.0 91X Cb) 4.61 - Tehnical Assistance 0.2 0.5 0.7 76X 1.1X Stbtotal 0.8 4.9 5.7 671 6.86 III PORT Of LOBITO .................. - civilt/lectr. Works 0.4 1.8 2.2 64X 3.4X - Equfpmt & spr. parts 0.0 2.2 2.2 100% 3.41 - desIgn/supervsfon 0.0 0.4 0.4 96X 0.6X - Technfcal Assistance 0.3 1.3 1.6 JO0 2.5X Subtotal 0.7 5.7 6.4 69X 9.91 IV 8TUDIES S COORDINATION ......................... Transport atte. s 0.3 0.8 1.1 731 1.7X Technical Assistance 0.1 0.2 0.3 601 0.5X Project Coordinatfon 0.0 0.7 0.7 1001 1.1X Subtotal 0.4 1.7 2.1 631 3.21 V PPF 0.0 0.3 0.3 100X O.S VI Total Sa. Cost 12.5 42.3 S4.9 771 84.51 .................. Physfcal contingencies 0.7 2.4 3.1 7tX 4.8% Price contingenles(s) 1.6 5.4 7.0 771 10.SX Total project cost 14.8 50.1 64.9 771 100.0X ..............-- .. -- .. . ....... . Co) Price ontingncies are based on estimated internationsl inflation over the life of the project. averoging 3.91 yearly as per recent IDA guidelines. (b) the local portion is for ballast Rm s due to roiding, figures may not total exoctly  (iv) rwnlg Pi" (US$ million) Percent Local Forefi Total Faa aipn Total IDA credit 0.2 40.8 41.0 99X 631 SIDA 0.0 3.3 3.3 100X 5X CCCE 0.0 3.0 3.0 100X 5X DANIDA 0.0 3.0 3.0 100X1 5S Goverrmnt of AngaoL 14.6 0.0 14.6 OX 221 Total Project 14.8 50.1 64.9 77X 100X Estimated Disbursenents (US$ million) -r3 FF94 FY95 FT96 Total Co flnancftg 4.7 2.1 0.4 9.4 IDA S.3 20.Z 9.3 1.6 41.0 Gove.vnment 3.3 7.4 3.3 0.6 14.6 Total 1U-7 33,0 14.6 2.6 64.9 Percent 231 511 23X 4X 100X IDA CuujLatlve 9.3 30.1 39.4 41.0 Percent of Total 231 73n 96X 1001 Economic Rate of Rehu4: About 30 perceat for components totling about 90 percent of the prject cost _i&a_: & iAngola-Transport Recovery Project, Report No 10520-ANG :AW. IBRD No. 23568 R  ANGOLA IRMEMRTREC0QMER IO.lECT I. B3I&QDfI N A. Counta Backgrund 1.01 Angola, one of the largest countries in sub-Saharan Africa, has an area of 1.2 million square kilometers and a population of 10.6 million, growing at 2.8 percent per year. With a GNP per capita estimated at US$620 (1989), Angola is wealthier than most sub-Saharan African countries 1/. Angola also has excellent long-term development potential because of fertile land and abundant mineral resources. Since Independence in 1975, however, the economy has become highly distorted by the mass exodus of skilled personnel, and by civil war with rationing and deficient economic policies. The oil industry, developed as an enclave, has grown rapidly and now represents about half of the GNP. By contrast, the non-oil sectors have performed poorly; growth has been negative and output is significantly less today than in the early 1970s. Manufacturing industries are crippled by a lack of raw materials, spare parts, and maintenance. Commerce is hurt by rationing, state ownership, and rigid government controls, but informal markets do flourish. Agricultural production and distribution have been severely curtailed by the civil war. Although Angola was an important net exporter of agricultural products before Independence, in recent years it has become increasingly dependent on food improrts and food aid to supply urban populations which have burgeoned because of the civil war. 1.02 War has been the dominant fact of life in Angola for decades. In 1991, however, there was- encouraging movement toward peace. On May 31, 1991, a peace agreement was signed by the two main rival parties. The comprehensive agreement set a detailed timetable for integration of the two armies into a national Angolan army, for the opening of the political system, and for the organization of multiparty elections at all levels of government before the end of 1992. So far, the process has been implemented well and respected by all sides. If successful, the peace and democratization process would substantially improve the prospects for better economic management-including the reallocation of a large share of public resources from military to development uses. 1.03 In 199 1, the government initiated a process of economic reform. The government implemented related reforms, focusing on the foreign exchange rate, public sector wages, and a reduction of consumer subsidies. The official exchange rate was devalued to a base rate of 180 New Kwanza per dollar, and in April 1992 to -a rate of NkzSS0. In addition, banks were authorized to buy and trade foreign currency at the free market rate-about Nkzl800 in April 1992. The government also discontinued ration cards for public employees-except the subsidized distribution system for the five basic goods. Other measures included an increase in the minimum salary and cuts in the personal income tax. Although it wiUl take time to assess the effects of these reforms on the enormous economic distortions, the measures are clearly important and in the right direction. 'All dollar amounts are current U.S. dollars  -2- 1.04 In addition to the wae-induced migration from the countryside in the east to the coastal cities in the west, and the large. loss of skilled Portuguese settlers at Independence, a state interventionism explains Angola's poor economic performance. State interventionism is evident In traditional transport functions, but also in activities such as trucking, driving schools and spare part distribution. Although some govermmental institutions need strengthening, a gradual government disengagement from many of these activities is desirable. Because the private sector already participates significantly in some of these activities, the immediate reform need is to avoid government preference for parastatals. More realistic exchange rates are beginning to resolve some of these constraints. For exLnple in trucking and internal air transport, about half of the goods and passengers already are carried by orivate operators. To manage the continued transition to plivate sector control, private sector expansion and the corresponding contraction of the public sector must be clearly linked. Improved infrastructure is a key to this process. 1.05 The population largely bec:-ise of the war, has left large parts of the main agricultural areas in the hinterland of the country, a situation that created severe population pressures in a few coastal ciies. This urban growth has been most dramatic in the relatively safe large cities along the coast. It is estimated that the population of Luanda, the capital city, tripled from 450,000 to 1.3 million from 1975 to 1985, and the Lobito-Benguela conurbation grew from about 200,000 at Independence to more than 800,000 today. Lobito and Benguela were separate cities a few years ago, but the war brought a proliferation of small communities around the citiesi and rapid, unplanned settlement in the low hills parallel to the coast. T'his urban settlement problem is another reason why adequate conditions-and communications-for resettlement in the interior need to be restored. 1.06 A recent economic review of Angola has defined the actions and priorities for economic recovery (Report No. 8906-ANG of June 29, 1990). Studies by the Southern Africa Transport and Communications Commission (SATCC) have further identified the problems of transport infrastructure. Needed infrastructure rehabilitation is a main concern; the task requires long lead times and careful preparation. B. Project Background 1.07 Angola's *ong-lasting civil strife destroyed much of its urban and transport infrastructure. Inadequate funding for maintenance and rehabilitation caused further damage. Controlled prices, ineffective cost recovery, and unclear institutional responsibilities-causing a loss of local technical arl managerial capacity-made the situation worse and decay and decapitalization are widespi-ad in the sector. Infrast .-ire inadequacies are now a major bottleneck to economic development and improvemic ae quality of life. Thus, restored capacity and projects to make infrastructure operatir ;-effective are urgentlv needed. 1.08 The adequacy and reliability of Angola's infrastructure-highways, ports, railways, and facilities in major population centerb-are fundamental to the country's economic recovery. Angola's earlier well-developed transport and urban infrastructure fostered the development of significant agricultural production and processing, and other industry and commerce. In addition to the destruction of transport infrastructure associated with civil war, large maintenance backlog has resulted from insufficient institutional capacity coupled with minimal physical and financial resources in the last fifteen years. Rehabilitation instead of  3 - outright reconstruction is still possible with a substantial cost advantage. Ihe cotuitry needs immediate help through sizable rehabilitation investments, organizational restructuring, human resource development, management and oparations improvement, and other related inputs. 1.09 The Bank's overall strategy is to support a rapid economic transition and help improve basic access to social services for most Angolans, while ensurL'ng that the country's environment is protected. This would be accomplished by striving for fisc 1 improvement and financial stabilization; promoting policies and programs to channel investments into econo aic growth and diversification and to improve social services; creatin,g an enabling environment for private investment, including the rehabilitation and reconstructlon of key infrastructure; and assisting human resource development and capacity building of essential institutions. Infrastructure-transport In particular-is a key to the early part of this restructuring. The road and rail systems are needed especially to help revive agricultural production, and allor a reduction in the need for imported food and a resumption of agricultural exports. There tu@ Bank is supporting a short-term emergency program for these systems for the next two to ee years, and preparing a long-term reconstruction phase of the five to eix years until the year 2000. 1.10 Infrastructure maintenance and reconstruction and the resumption of stalled transport operations have been made possible by the May 1991 peace agreement. Salvaging and rehabilitating the most important parts of the transport infrastructure to restore normal operations is clearly a high priority for Angola. These activities should begin as rapidly as possible, coordinated to make the best use of all potential resources. The Infrastructure Rehabilitation Engineering (IRE) project approved by the Board in July 1991 is helping Angola prepare a medium-term program of infrastructure rehabilitation. The IRE also helps with immediate improvement to the ports of Luanda and Namibe and their related railways. For the overall recovery process to be initiated over the entire country, it is now vital that immediate access be provided to other main productive areas. The proposed project is therefore needed to complement the IRE project for the sector's most urgent needs.  -4- U .. THE TRANSOT SCT A. 3 ransr SLvste.m 2.01 The present configuwation of Angola's basic infrastructure-though not its condition- has been unchangw4 since Independence. In 1975, the infrastructure was a comprehensive mix of rail, highway, air, and shipping. A distinctive, rail-port corridor system- northern, central and southern-supported by feeder road networks predominated. Additional highways provided basic north-south provincial links, and access to national borders. During the war, the air sector, which linked the key provincial cities, was dhe only dependable means of passenger and light-freight transit over much of the country, because of security risks. 2.02 In 1990, Angola's transport infrastructure comprised 75,000 kilometers (km) of roads and tracks, 2,500 km of railways, 6 ports, and 31 airports. An estimated 57,000 :ootor vehicles, 40 locomotives, 11 long-distance ships, and 10 short-haul vessels, and 21 &rcraft operated infrequently and inefficiently. The rail and port systems previously ran eastward from Lnanda to Malanje (a distance of 430 km) In the north; Lobito to Luau (1,350 km), on the Zairian border in the central heardand; and Namibe to Menongue (750 kin) in the south. Regions are linked to these corridors by 8,000 km of paved highway and 12,300 km of secondary roads, which-with the air services-provide the main means of north-south travel. Coastal shipping accounts for 180,000 tons of freight between the four main ports and has the potential for substantial growth. The Cabinda enclave is dominated by the oil industry and the non petroleum infrastructure is small. 2.03 Responsibility for the transport sector is shared by two ministries: the Ministry of Public Works and Urban Development (MINOPU) and the Ministry of Transport and Communications (MINTEC). Of these, the first ministry is responsible for the road infrastructure, while MINTEC has the responsibility for all other transport activities. MINTEC has directorates for railways, air transport, road transport, and ports and maritime transport. MINTEC is also responsible for the transport parastatals-20 trucking and bus companies, the agency for transport equipment and spare parts (Abamat), car and truck repair shops (Manautos) and driving schools (Condautos), four railways (of which one is largely privately owned), the three main ports, three shipping lines (Angonave, Cabotang, and Secil Maritima), and the national airline. 2.04 MINTEC's statistics show recent total freight traffic handled by parastatals amounting to about 2 million tons, with about another million tons moved by private operators. In 1990, the number of passengers carried was some 53 million, most of them-86%-by bus. In terms of passenger-km the situation was very different; bus services produced some 306 million passenger-km, rail transport 259.4 million passenger-km, while air transport contributed 990 million passenger-km. The total income for MINTEC-controlled transport operators in 1990 was an estimated Kz21,389 million (about US$356 million at the official exchange rate of Kz61) per U.S. dollar, but substantially less at parallel market rates of exchange). Of that total, 25 percent came from road services and 42 percene from air transport, with the remainder divided among the other modes. Most transport modes covered direct operating costs-with the major exception of the Caminho de Ferro de Benguela (CFB).  B. Road Infrastructure 2.05 Argola's highway infrastructure remains essentially unchanged in coverage since Independence, except for a 250-km stretch of new coastal road from Luanda to Sumbe. The civil war in subsequent years caused the departure of most of the skilled Portuguese highway personnel-and the continuing deterioration of the highway network. 2.06 Yet an efficient highway system is critical for Angola's economic recovery and further develcpment. The roads provide the basic economic, administrative, and strategic links between the national capital, the provincial capitals, ar. the municlpal centers. These roads also provide access to railroads, to port and airport facilities, and to international border crossings. 2.07 In 1990, Angola's main highway netwolk totalled about 20,300 km, of which 8,000 were paved, and 4,000 were surfaced with gravel. In that year, the highway system carried about two-thirds of the nation's cargo, and most short-haul passenger movements were by road. Known as the "National Basic Highway Network", these roads are the main responsibility of the Angola Higlway Institute (INEA), the new national highway agency created as of November 1990 under MINOPU. The structure of the new agency resembles that of the former autonomous highway commission of Angola which was abolished in 1975. For fifteen years, responsibility for highways shifted among several government departments and ministries. The civil war made the highways unmanageable. 2.08 INEA was created following a study by a Portuguese consulting firm retained by the Ministry of Construction (the previous Ministry of Public Works and Urban Development). INEA's staff consists of one graduate engineer, a technical specialist, an expatriate technician, nine engineers, a geologist, an economist, a lawyer, nine technicians, and nineteen administrative support staff from the existing staff of MINOPU and other government agencies and enterprises. 2.09 The study considering INEA's creation concluded that the new highway agency would need 2,570 employees to rehabilitate and mairn ain roads using its own staff. Most of them would be based in pl jvincial offices, with 150 in the Luar"a headquarters, and 280 in regional offices. The survey found that existing qualified candidates could fill only a small portion of the needed positions. This lack of qualified candidates was beyond the reach of a human resource development effort, so an alternative approach was needed. 2.10 INEA was created to manage the planning, design, construction, rehabilitation, and maintenance of Angola's highway network. The long-term goal is to become an autonomous organization, fully funded from user charges collected mostly through increased fuel taxation that the government is considering. Because policy makers also expect most highway maintenance and rehabilitation work to be performed by contract, INEA would not hire staff or buy equipment for in-house operations. Until the contracting industry develops sufficiently in Angola, however, INEA would have to contract with foreign contractors and the execution of some routine maintenance may be left to INEA's in-house labor and equipment. Ultimately, INEA's staff would consist only of engineers and other professionals, surveyors, laboratory technicians, and materials and construction inspectors.  -6 - 2.11 Given these operational constraints and objectives, the recently approved IRE project (para 1.10) provides for consultants to conduct a highway management study and prepare a highway rehabilitation and maintenance progr;am for the National Basic Highway Network. The project will also have INEA set up the departirents it requires. The consultants are to further identify ways that INEA can improve management and operations. Another objective will be to initiate a staff development program to train INEA personnel and staff of local road contractors. The IRE component for the National Basic Highway Network also envisions final design and preparation of tender documents for the complete reconstruction of high-priority road sections- estimated at about 700 km-to be identified in the above program (in addition to this proposed project). C. Railways and Ports 2.12 The railways and three main ports of Angola are all under MINTEC with a separate National Directorate for Railways and another for ports and maritime transport. The railway directorate is responsible for the two main railways fully owned by the government- Caminho de Ferro de Luanda (CFL), and Camninho de Ferro de Mocamedes (CFM and the state ownership of the Caminho de Ferro de Benguela (CFB). 2/ 3/ 2.13 The Lobito Transport Corridor. The port of Lobito serves central Angola- including more than one-third of the population-and is the only port with an international rail connection. Before Independence the port was one of the most important shipping terminals of south-central Africa. By 1973, port traffic exceeded 2.6 million tons, more than half of Angola's total shipping tonnage. Transshipment of minerals from Zaire and Zambia-especially copper, magnesium, zinc, and cobalt-was 60 percent of port traffic. 2.17 The CFB railway covers 1,336 Iam, and extends from the port of Lobito to Benguela, 33 km down the coast, then crosses the Angolan plateaus serving 99 market towns on the way to the mineral belts of Zaire and Zambia. Freight rail activity has been severely curtailed since Independence because of the civil war. The railway is closed to international traffic, and national traffic-mostly in Benguela province-has fallen by about 70 percent to some 230,000 tons per year. Only recentdy have trains been allowed to pass at very slow speeds on the 400 km of line from Lobito. Reactivation of the Lobito transport corridor is a major government objective, to provide immediate access to what used to be one of the most important areas for agriculture. IDA and other donors are actively helping to prepare an important rehabilitation program for the corridor. This program is now under study by foreign consultants financed by IDA under a separate PPF. Benguela-somewhat smaller than Lobito-is the provincial capital and has a small airport that serves the two cities. A recendy built military airport could serve international traffic if needed. 2.18 The Luanda transport corridor. This includes the port of Luanda and a 423-km railway line to Malanje (CFL). Since the war started in 1975, only in the last few months has 2 See Annex 5.1 3 See Annex 16 for a summary of the financial performance of railways and other MINTEC parastatals, and the main traffic flows for the railways and the three main ports-both for .1990.  -7 - somewhat regular rail service been established from Luanda to the inland teminal of the CFL. The main coffee-growing area of the province of Uige is north of this line and a cotton-producing area Is around Malanje. Tbe total export volume of coffee, cotton, and sisal from these areas exceeded 400,000 tons before Independence, but by 1590 had declined to some 75,000 tons. During 1991 the line became operati" nal in its entirety. Tariffs were increased and management reorganized. In 1992, the CFL is covering its costs for the first time since 1984, traffic of unit trains of containers has started and contracts already signed are straining the carrying capacity of today's CFL. 2.19 TDNaMibe trn=rt cgridr. This includes fhe port of Namube (formerly Mogamedes) and a 756-km railway mainline between the port and Menongue-of which only a 400-km section to Matala is now operating. This railway-still called Caminho de Ferro de Mocamedes (CFM)-carried several million tons of export iron ore to a special ore terminal (Sacomar) near Namibe. This terminal is not in use now, but could be reactivated relatively quicldy. CFM's current traffic is mostly products to or from the important agricultural area around Lubango-some 200 km from Namibe. D. Sector Ilsues and Strate 2.20 The transport sector faces several critical issues. Q) Sectoral institutions lack technical proficiency. Investment planning, budgeting and programming are weak across the sector and will be strengthened under the IRE; a three-year rolling public investment program for the transport sector and an annual work program for IEA will be prepared yearly by November 1 and submitted to IDA for its review, comments and agreement (para.4.01 vi); maintenance of infrastructure and equipment, operations, and enforcement of appropriate regulations (especially truck axle load regulations, see pam. 4.01 iii) are weak. (ii) The sector must contend with demands that far exceed its technical capacities and physical capacities including those which might be currently under-utilized. The needs for repair of infrastructure destroyed by the civil war are huge. These repairs which will, at best, take a decade to complete are hampered by land mines on roads, railway tracks, and bridge sites. De-mining of road surfaces and railway lines has taken place but will need to be thoroughly completed at all project sites before the proposed works are carried out (see paras 3.19 and 4.01 v). (iii) Cost recovery and resource mobilization are inadequate-fuel taxation is very limited-end price and incentive mechanisms are distorted. (iv) There is a lack of foreign exchange with which to purchase spare parts. (v) Regulations are restrictive, and property rights uncertain.  -8 - 2.21 The proposed strategy for the infrastructure recovery has the following elements, by order of priority: (i) removal of identified bottlenecks to economic activity, which should provide the quickest development response; (ii) deregulation and market liberalization, where appropriate; (iii) cost recovery and price or tariff decontrol to ensur' that investments are sustainable; (iv) mobilization of resources for the sector at levels con. dcdble with the current economic situation and prospects; (v) maintenance of existing infrastructure assets; (vi) recovery and eehabiitation of existing infrastructure in response to expansion of economic activity; (vii) control of excessive axle weight; and (viii) further expansion of existing capacity, if and when required. 2.22 The IRE and the proposed project together provide for in-depth study of these issues, and preparation of long-term strategies to address them. As a complement to IRE, and in addition to the project's physical investment component, the proposed project will provide for a first phase of institutional and poliLy improvement-which may take nearly ten years. The project will also implement axle weight control for which a proposal was agreed upon during negotiations (paras 4.01 iii and 4.02 i). The government has also prepared, and as a condition of effectiveness will sign, a Letter of Transgort Sector Policy (para 4.02 iii), containing general principles such as: (a) maintenance of newly rehabilitated infrastructure will be given first priority in the govermnent capital budget for the sector; (b) a larger share of civil works in the transport sector will be executed by private contractors; and (c) steps will be taken to liberalize and privatize the transport sector and in particular the road transport industry, and port cargo handling activities. E. Donor Experience in the Transport Sector 2.23 Because this proposed operation is only the second for the Angolan transport sector, MDA's experience is too limited to provide guidance. Transport projects have been or are being financed by European bilateral donors and the European Community but their experience, alike that of IDA is also limited. The main issue so far is that donors need to coordinate their efforts to ensure that the most urgent priorities get the highest attention, that programs are as consistent and as mutually supportive as possible, and that the burden on scarce personnel and institutional capacity is reasonable. Under the project, a mechanism will be put in place to ensure close donor coordination in the transport sector (Annex 15). F. Rai.'nale for IDA Involvement 2.24 The proposed project addresses one of Angola's highest priority needs - the rehabilitation of the country's battered infrastructure base - and is essential to the economy's recovery. It fits well into the Bank Group's strategy for the country, which stresses reconstruction. This project would ccmplement the on-going [RE project which was conceived prior to the peace agreement in 1991, which gave access to much larger parts of the country; it would strengthen existing institutions in the infrastructure sector and introduce basic principles of cost recovery. The Bank also has a unique catalytic role to play in assisting the government in the design, financing and implementation of this high priority recovery program. The project would thus enable the Bank to play an important coordinating role in the transport sector where donor interest is strong, but so far not well coordinated.  -9- M. 3M P R vEw " A. ProJect Concept and Comnition Prolect ObleStives 3.01 The Government of Angola prepared a transport recovery program-see Annex 1-to tackle the most urgent needs in the sector (para. 2.21), and requested help from the Bank and other donors to implement it. Consistent with the Bank's strategy for Angola (para. 1.09), and as a complement to the IRE Project (para. 1.10), the proposed project would provide financing to this program. The objectives of this program would be, first to preserve or restore surface access to large portions of the country by addressing the most urgent infrastructure rehabilitation and maintenance needs- to provide support to the resumption and continuation of economic activities by ensuring minimal functioning of road, rail, and port transport.operations, and to promote employment in the private sector through the development of small and medium enterprises using labor-intensive technologies in road maintenance. Second the program would help improve and develop an institutional framework for the sector-especially to manage main roads and operate railways and the port of Lobito. Third, the program would support the first phase of sectoral policy implementation, especially for cost recovery. 3.02 The road and bridge rehabilitation would help reopen the most important trunk roads-to complement initial actions financed by the government in the last few years. Most important, the effort would postpone any need for major reconstruction of the program roads. This would allow the government to direct scarce local and external resources to the rehabilitation of other essential infrastructure. As a result of the program, about 2,500 km of the main paved roads would be in good conditicn and an additional 't,5n km would be reopened to traffic. This component would help promote the private sector and develop employment in several ways. First contractors hired for road rehabilitation (paras. 3.05 ii, 3.17 and 3.19) are expected to subcontract labor-intensive-tasks such as the clearing of vegetation and erosion control, and routine maintenance-to small and medium local contractors, especially since they will have to maintain the roads during two years. Second, the program would train existing and potential small contractors in labor-intensive road maintenance works-enhancing their future opportunities as road contractors (para. 3.05 iv). And the program would initiate and give impetus to road maintenance practices under contract, which can generate permanent private-sector employment. 3.03 The port and rail components are to restore and operate-in the short- or medium- term-transport facilities on the two port-rail corridors of Luanda and Lobito (up to Kuito) as economically as possible. These facilities would provide minimal transport to the central plateaus which have the hig'iest agricultural potential. Project Description and Status 3.04 The proposed project covers the first phase of the program referred to in paras. 3.01-03, and has four components: road and bridge rehabilitation; Lobito Port rehabilitation; CFL railway rehabilitation; and studies, institutional development support, and project coordination. In total the program meets requirements of about US$149.2 million, of which the proposed project covers US$64.9 million. The difference consists of about US$84.3 million of second phase project items (mainly roads) and the CFB railway for which funding has not been assured  - 10 - yet. The CFB railway is intended to be financed under a separate project now under preparation, with funds provided by IDA under a PPF. 3.05 The road and bridge rehabilitat!on component provides for the early reopening of the main paved highway network (Annex 2) and would include: (i) Repair or replacement of about 25 strategically located bridges destroyed or damaged by the war (See Map 23568 R). The work includes repairs to existing bearing structures (piles and abutments), disposal of debris from the destroyed bridge parts, and in most cases, supply and erection of new metallic structures to replace destroyed bridge spans. In some cases, because of cost or technical constraints, the old bridge structure will be repaired. (ii) In a first phase, the resurfacing or periodic maintenance of about 700 km of the most important paved roads to prevent their destruction 4/. This includes clearing vegetation on the carriageway, shoulders, and ditches; repairing drainage structures and shoulders; patching pavement potholes and mine holes; repairing or reconstructing spots or short sections of pavement; treating the pavement with a systematic single or double surface dressing; and maintaining these roads over a two-year period after the resurfacing work is completed. (iii) Consulting services to supervise works described above and train the staff of the INEA in zontract management. The staff of INEA would participate in supervision. The corresponding consultants' services are estimated to be about 160 staff-months. Consultants would also provide detailed design studies for complete rehabilitation of an additional 600 km of roads. (iv) Support to a labor-intensive road works scheme by creating and operating a training unit in INEA for contract management of labor-intensive road maintenance works-initially clearing vegetation along roads rehabilitated by the project, and along the main roads in the city of Luanda (Annex 3). The main objectives would be to train and promote small and medium enterprises (SMEs) for road works, and generate employment in road maintenance. This subcomponent consists of technical assistance (three experts for three years) for training, promotion, and management; refurbishing of a training center in Caxito (90 km north of Luanda), including houses for experts and counterparts, lodging for trainees, and office space; provision of tools for the training brigades; and operation of the training center and brigades for three years. This subcomponent will be started early under financing from an advance under the Project Preparation Facility (PPF). Some SMEs are expected to be used as ' A second phase of resurfacing an additional 900 km of main road would also be implemented as part of the transport recovery program, depending on the timeliness of external funding.  subcontractors by large contractors for part of the resurfacing and maintenance works described above. Financing for other labor-intensive activities-in addition to the resurfacing and maintenance-is expected to be made available by domestic and other external sources, once the approach has demonstrate the merits of contracted-out labor intensive works. 3.06 The Lobito Port operations rehabilitation component aims to improve port operations and adequately provide port services for a region with high potential in agriculture (Annex 6.1). It consists of: (i) Institutional assistance for the port's operations and management in: administration and finance, operations and statistics, spare parts procurement, maintenance of equipment and infrastructure, and training. This assistance will help the Lobito port implement an action plan with appropriate performance targets (para. 4.01 ii and Annex 6.2); (ii) Provision of spare parts and of a limited amount of new equipment. (iii) Repair of the settlement of paved areas behind two berths, and of the electrical system, including consulting services for detailed designs, supervision of works, and maintenance training. 3.07 'Te railway rehabilitation con =one provides for emergency assistance to the CFL, pending the conclusion of IRE-financed feasibility studies and subsequent decisions on the long-term future of the railways (Annex 5.1). This component would include immediate assistance to einable the CFL to improve its services. Such assistance would be justified by the short term need for transport services, even if the railway was to be closed in the long term. Its help would include institutional assistance for transport operations to assist CFL in implementing an action plan based on performance targets, and track maintenance (two experts for one year each). The assistance also will provide for track rehabilitation including the provision of 10 km of rails, about 14,000 steel sleepers, and about 80,000 cubic meters of ballast and subsequent track maintenance works; rehabilitation of station and structures; and overhaul of rolling stock, including eighteen coaches, three main line locomotives, and twenty 4rop-sided wagons to be converted to container carriers. 3.08 The institutional assistance component will be part of a first phase of the institution building process in the road, port, and rail subsectors initiated under IRE. In addition to the assistance provided in the road, port, and rail components as described above (paras. 3.05- 3.07), with the objective of promoting well performing transport entities, the following taport studif (terms of reference in Annex 8) will be conducted: (i) A road transport privatization and liberalization study (nine staff- months); (ii) A study of intermodal transport facilitation, including the regulations for maritime transport, port institutions, customs operations, and the freight- forwarding and insurance industries (twenty-two staff-months).  - 12 - Technical assistance will also be provided to help the National Directorate of Merchant Shipping and Ports implement the port institution framework study's recommendations (twelve staff-months). A transport facilitation committee comprising representatives from the ministries concerned (finance and transport), government agencies (customs, central bank, transport parastatals), and private operators will be created to review and discuss the conditions and barriers for transport and trade, follow-up on the study's recommendations, and formulate recommendations to the government to transport and facilitate trade. 3.09 The pro3ect coordination component will provide one technical assistant to help the Ministry of Planning with overall project coordination (para. 3.13 and Annex 10). 3.10 The Transport Recovery Project components were conceived and prepared between September 1991 and April 1992 as follows: (i) The road and bridge rehabilitation components were identified in coordination with INEA and its Bulgarian technical assistance by four missions: one by the World Bank which visited about 800 km of roads in September-October 1991; one by a World Bank consultant who surveyed about 1,000 km of the road network in December 1991; one by two consultants from the Portuguese Economic Cooperation Agency (Instituto para a Cooperagao Economica-ICE) who surveyed most of the project roads in January-February 1992; and one by a bridge expert who surveyed the bridge sites in February-March 1992. Design was initiated by the above consultants and experts. For the road works, final design is to be caried out by the consultants to be hired for work supervision, based on the condition of the road shortly before work is started-as is usual for this type of road rehabilitation or periodic maintenance. For the bridges, the bridge expert who surveyed the sites conducted preliminary design, and consultants will be hired to complete designs for the bridges needing repair. (ii) The port component was identified in September-October 1991 by a World Bank mission, and its preparation was completed in February 1992 during the appraisal mission-in conjunction with the Port of Lobito Authority, which had-prepared a detailed investment plan. Detailed design of the civil work is to be carried out by consultants before the end of 1992. (iii) The component for the CFL was identified and completed during two World Bank missions in October 1991 and Febmary-March 1992, based on a detailed rehabilitation and investment plan prepared by the CFL management.  - 13 - B. Project Cost and Financing 3.11 The project cost is estimated at the equivalent of about US$64.9 million including physical (5 percent) and financial (11 percent) contingencies, with a foreign exchange cost of about US$50.1 million (77 percent), (tables 3.1-3.2). The foreign exchange cost will be financed by IDA (US$41 million), the Swedish International Development Agency-SIDA--(US$3.3 million, t, be administered by the Bank), the French Caisse Centrale de Cooperaton Econowmique-CCCE (US$3 million), and the Danish International Development Agency- DANIDA (US$3 million). 3.12 The government's contribution of US$14.6 million-not counting taxes-or about US$6 million in disbursements per year is to cover local expenditures. For the rail and port components these local expenditures will be refnanced from revenues generated by the agencies benefiting from the project. For the road component, local expenditures will be financed from revenues generated by a tax on fuel-at least US$15 million per year starting in 1993 (paras 4.01 i and 4.02 i). This amount was calculated as the minimum required for covering both local expenditures of the project and minimal maintenance of the main roads-about US$500 per kilometer per year. An action plan for cost recovery through road user charges has been prepared by the government and was agreed upon during negotiations. As a condition of credit effectiveness, the government will take appropriate measures to ensure a level of taxation on fuel of the equivalent of at least US$15 million per year. To ensure prompt availability of local funding the government will operate and maintain a project account to be managed by MINPLAN and replenished on a monthly basis at a level equivalent to US$1 million (para 4.01 xi).  Table 3.1 * PROJ COST Fi _ 14 ........... .................... 14 -- (.tLf1m of U.S. dWllars) 4...... .Percente ..... Local Foegn Total Forefgn Total t RCADS .- . ................. ,0 .............. . ....... . ......... Road civiL work 5.6 n.4 2.0 O 43.1X Bridge structures 0.6 2.4 3.0 80X 4.64 Bridge Work 2.2 0.5 2.7 17X 4.21 Spervision of work 0.8 2.5 3.4 751 5.2% Road studie 0.2 0.9 1.1 ?77 1.7X Laor otion 1.2 1.0 2.2 4.1 3.43 Subtotal 10.7 29.6 40.4 731 62.11 l WUANDA RAILWAYS .................. - Track rde liltation O.01 1.5 1.6 64S 2.51 - Other civil works 0.2 0.2 0.4 381 O.4X -Eqipmt & spr. prt 0.3 2.7 3.0 911 (b) 4.41 - Techncatl Assistanc 0.2 0.5 0.7 74 1.1X subtotal 0.8 4.9 5.7 8am 6.8X III PORT OF LOBITO .................. civfl/electr. Works 0.4 1.8 2.2 64X 3.41 - Equ1pnt * spr. parts 0.0 2.2 2.2 1001 3.41 = design/pervision 0.0 0.4 0.4 941 0.4X - Technical Assistance 0.3 1.3 1.6 601 2.5X Subtotal 0.7 5.7 6.4 S91 9.9X IV STUIES & OOROINATION ..................... Transport studies 0.3 0.W 1.1 735 1.71 Technical Assistance 0.1 0.2 0.3 8OX 0.5S Project Coordination 0.0 0.7 o.? 1o0x 1.1x Subtotal 0.4 1.7 2.1 63X 3.2X V PPF 0.0 0.3 0.3 1001 0.5x VI Total Sa" Cost 12.5 42.3 54.9 771 84.51 .................. PhysicaL contingencles 0.7 2.4 3.1 781 4.81 Price contingencies(s) 1.6 5.4 7.0 771 10.81 Total project cost I4.9 50.1 64.9 77X 100.01 ......................................................................................................... (a) Price continf .lces are based on esttatted international inflation over the lI fe of the project, averaging 3.91 yerwly a per recent IDA guidelfnes. (b) the local portion is for ballest -goo due to rounding, figures my not total exactly II  Table 3.2 * PROJECT FINACING PLW - 15 -* .................................. .. (mIltfors of U.S. dlltars) Percentage Contlngensi of total tncluded O0D MOA 0104 CCCE ANIDA ............................... ............................................... ...... ............. I ROAD/BRIDGE R tILITATION .............................. ...... Road cIt works 2S.0 43.13 33.6 6.? 24.3 2.6 r1dge structures 3.0 4.oX 3.6 0.7 2.9 Bridge Work 2.7 4.23 3.2 2.3 0.9 Superviston of work 3.4 5.2X 4.0 1.0 3.0 Roas Sudies 1.1 1.7X 1.3 0.3 1.0 Labor promotion 2.2 3.4X 2.6 1.3 0.6 0.7 SuTotat 40.6 62.1 . 48.5 123. 32.9 3.3 11 LUANDA RAILWAYS .................. ............................ - track rehabilitation 1.6 2.53 1.9 0.? 1.2 - Other civil works 0.4 0.63 0.5 0.3 0.2 - Equipiat & apr. parts 3.0 4.63 3.6 0.3 3.3 Technical Assfsta 0.7 1.1X 0.8 0.2 0.6 Sutotal 5.7 8.8X 6.9 i.5 5.4 III PORT OF LOBITO .................. c-ivil/.lectr. Works 2.2 3.4X 2.5 0.5 2.0 Equfpat & apr. parts 2.2 3.43 2.5 2.5 - dmsfgn/atpe olon 0.4 0.6X 0.5 0.1 0.1 0.3 - Tdehnical Assstne 1.6 2.53 1.8 0.3 0.3 0.5 0.7 Ubtotal 6.4 9.9X 7.2 q.8 0.4 3.0 3.0 IV STWIES & COORINATION ......................... ............................ Transport studies 1.1 1.73 1.1 1.1 Technical aslstanoe 0.3 0.5 0.3 0.3 Project Coordinatfon 0.7 1.13 0.7 0.7 Stotal 2.1 3.23 2.1 2.1 V PPF 0.3 0.5 0.3 0.3 Contingencies Physicat 3.1 4.8S Finaciatl 7.0 10.83 GRAND TOTAL 64.9 100.03 64.9 14.6 41.0 3.3 3.0 3.0 ......... ................ .6...................... ..... Reom sk to roidng, figure my not total usatly  - 16 - C. Project Superrision and Implementation Ptoject Coordination. Management. and Responsibilities 3.13 The Ministry of Planning (MINPLAN) will be responsible for the overall coordination of project implementation, with support from the implementation unit established under the IRE within its National Directorate of Investments (paras. 3. 15-18). This unit will be strengthened to cope with its new responsibilities (Annex 10). 3.14 Direct responsibility for overall project implementation rests with hMNOPU for the road and bridge rehabilitation component, including the training of SMEs In labor-intensive road maintenance works; and MINTEC for the port, rail, and transport study components. Each project component will be the responsibility of a component codinator. MINPLAN's National Directorate of Investments will be responsible for overall project coordination, and will chair a roiet s1tering cnmmittee already established under IRE. The committee includes the four component coordinators, as well as representatives designated by the Ministry of Finance and the Angolan Central Bank-and will meet twice a month to guide the execution of the project. Each component coordinator will develop six-month action plans and schedules for each component in coordination with the agencies concerned, submit them for review by the steering committee, and forward them to IDA for comments. 3.15 Inplementation agreements will be signed before the credit becomes effective (para 4.02 ii) These agreements will provide for delegations to individual component coordinators for technical management of a given component includes the authority to manage, monitor, arrange for audit and report en the execution of these components. As with the IRE, MINPLAN will delegate to the National Directorate of Investments responsibility for overall project coordination, monitoring, auditing, and the reporting of operational and financial performance to the government and IDA; such reporting will be done as agreed upon during negotiations-and included in the implementation agreements. The technical agencies-INEA for the road and bridge component, the Port of Lobito for the port component, and CFL for the rail component- will report to the project implementation unit about bidding preparation and processing, and contract monitoring through their respective component coordinator. 3.16 The project implementation unit established for the IRE will provide administrative support to the overall project coordinator and to the project steeing committee. Technical assistance in place for the IRE until December 1995 includes a general advisor, a training advisor, an administrative and financial advisor, and an environmental advisor. This team of experts is expected to help in the project implementation and overall coordination of the project. To facilitate coordination of-and provide guidance to-the transport agencies involved, one additional staff person-a traport expt-will be hired from the same consulting firm that provides the personnel for the IRE. The responsibilities and procedures of the project implementation unit, and the terms of reference for the transport expert were agreed upon during negotiations. The transport expert will be in place shortly after effectiveness. This expert will be responsible for coordinating and monitoring all of the projec, pardcularly compliance with component action plans and schedules, procurement monitoring, and technical assistance-and records and accounts in the individual components and for the overall project. He or she will establish reporting procedures and periodic auditing arrangements as agreed between the government and IDA.  - 17 - ProJect Implementatin 3. 17 The project will be implemented over three years beginning during the end of 1992 (see table 3.4 and Annex 11). All road rehabilitation will be done by experienced contractors under consultant supervision. Bridge structures, track materials, equipment and spare parts for the Port of Lobito will be provided on a CIF basis under supplier contracts. Transport on site and erection of bridge metallic structures will be done depending on the urgency, in part by Empresa lacional de Pontes-a construction parastatal which has acquired extensiva experience in bridge replacement while repairing a number of bridges destroyed during the war- under financing by the govermnent, and in part by contractors bired after international competitive bidding JICB)-in all cases under supervision by a project-financed consultant. The Completion Date for the project is December 31, 1995. 3.18 The Port of Lobito civil works will be carried out by experienced contractors supervised by consultants. Railway track rehabilitation will be executed by CFL maintenance crews supervised by project-financed consultants. These crews have experience in similar works, will later on carry out track maintenance, and will be financed entirely by the government. 3.19 Initiation of works at each project site will be subject to a prior de-mining operation to ensure the safety of work crews. The national de-mining program carried out by the Ministry of Defense has already covered the surface of main roads and railway tracks. An addi-tional de-mining program will be carried out under INEA's responsibility along the project roads and on bridge sites. Contracts of work, at each site, will be reviewed and will include a certification of completion of the mine removal program (para 4.01 v). 3.20 Contracts are expected to be ready for signature for road works and the supplying of bridge structures by the date of credit effectiveness. The procedures to recruit consultants to supervise these works and civil works under the railway component will be completed for the consultants to be in place before the works begin, and even help with bid evaluation, under financing from the Project Preparation Facility (PPF). This is a condition of disbursement for civil works (para 4.03). Certification of the legal ownership of land for the training center for road works (para 3.05) is also a condition of disbursement (para 4.03) for the civil works of the housing and office facilities for the training unit. Procurement 3.21 Procurement will be assured by each agency involved in project implementation with assistance from consultants and the central project implementation unit in MINPLAN (paras. 3.15-16). A Bank procurement seminar was held in Angola in September-October 1991 with attendance by staff from most of these agencies. Nearly all project procurement will be subject to prior IDA review. About ten contracts with a total aggregate value of US$45 million, including contingencies-representing 80 percent of the Bank-financed project procurement-will be awarded based on ICB, in accordance with the Bank's prourement guidelines. Whenever practical, contracts will be grouped in bid packages estimated to cost at least US$300,000 for goods and US$1 million for civil works to permit efficient procurement. Prior review of bid and contract documents will be required for all consulting service contracts and for equipment and work contracts above US$75,000. Annex 1 1 has a detailed implementation schedule.  -18- 3.22 Table 3.3 summarizes the project elements, their estimated costs, and procurement methods. Table 3.3 - PROPOSED PROCUREMENT ARRANGEMENTS .................. ............................... _. ....... . Cmtlifan ot U.S. dollars) .... ......-.-....--.-..........-. ........-.....-.....,....0.... _. ..... Procuroment Method : Percentage Total of Project Element lCB LCB Others N.B.F. cost Totat ,,,,,_.. 0 ............................-............... ............. 1. Works 1.1 Road & bridges conponent 36.9 0.0 36.9 (27.9) (27.9) 62.9X 1.2a Track rehabilitation 1.9 0.0 1.9 t1.2) t1.2) 2.8X 1.2b Other civil work for 0.5 0.0 0.5 railway conmonent (0.21(b) (0.2) 0.4X 1.3 Part eomponent 2.5 2.5 2. Labor Promotion 2.1 Buildings 0.6 0.6 (0.6) (0.6) 1.3X 2.2 Equlpments 0.2 0.2 tc) 0.4 (0.1) (O.1) (0.2) O.5X 2.3 Technical assistance 0.8 (a) 0.8 (0.6) (0.6) 1.4X 2.4 Operating expenditures 1.0 1.0 (salaries) 3. Materfals 3.1 Bridges strct. for road 3.6 3.6 (2.9) e2.9) 6.5X 3.2 Bridges strct. for rail 0.3 0.3 (0.3) (0.3) 0.7X 3.3 Supplies. equip.& sp. parts 2.3 1.0 3.3 for railway C2.0) (1.0)td) (3.0) 6.81 3.4 Equip.& sp. parts for port 2.5 2.5 4. Other consultancies 7.7 CO) 2.8 10.5 (7.2) (7.2) 16.21 S. PPF 0.3 Ca) 0.3 tO.3) (r.3) 0.7% ......... .................. ,__,..................,0.................... TotaL 45.0 1.2 10.0 8.7 64.9 (34.3) (O.8) (9.2) C44.3) 100.01 . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . ._. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... IC8 s Internatfonal Competitive Bfdding LCB : Local Competitive Bidding M.B.f. : Not Bank Financed Note t Figures in parentheses are the amounts financed by the IDA Credit end by the SIDA grant. (a) Services to be procured In accordance wfth World Bank Oufdeltnes s Use of Consultants by Uorld Dank Borrowers and by the World Bank as Executing Agency (b) Reconstruction of smtll bridges, embankment and station building. (c) Local shopping td) Limited lnternational bidding for locomotve, spare parts, as there are only a few wetl know supplters Raws: dua to rounding, figures may not total extly  - 19 - 3.23 Major civil works for rehabilitation or periodic maintenance of paved roads, including subsequent maintenance of the roads concerned over a two-year-period, and bridge reconstruction or repair work on these roads would be subject to ICB with prequalification. Road works would be sliced into two to three lots and bridge works in four to five lots-of which two may be incorporated in the road work lots-based on geographic location of work sites. After prequalification, potential bidders will be allowed to bid for one or n-ore lots. 3.24 Contracts for the supplies of IDA-financed bridge structures, spare parts, and equipment would be awarded after ICB, except for proprietary spare parts for locomotives supplied by only a few well known suppliers, which will be subject to limited international bidding up to a cumulative amount of US$1 million. The list of suppliers to be invited to bid will be agreed upon by the Bank. 3.25 Contracts of less than a cumulative cost of US$800,000 for minor repairs to bridges, embankments and buildings and the construction of housing and office facilities for the training unit; and less than a cumulative cost of US$100,000 for goods and tools-unlikely to attract foreign suppliers-may be awarded on the basis of competitive bidding and advertised locally, with the provision that foreign firms may bid and that the bidder may request a portion of paiement in foreign currency. These contracts will cover mainly repairs to railway bridges and embankments; railway stations, houses and office buildings; office equipment, furniture and furnishings, and cars for consultants; and hand tools for the training unit. In addition, local shopping for contracts under US$10,000 up to a total of US$100,000 will be allowed to purchase minor supplies for the training unit. Goods under ICB shall be exempted from pre-shipment price inspection by a third party inspection firm. 3.26 Consultants for detailed design, work supervision, and studies will be selected following the guidelines "Use of Consultants by World Bank Borrowers, and by the World Bank as Executing Agency" (August 1981) for contracts with consulting firms-using a short list of firms. Individuals may be retained for specific technical assistance assignments, such as the pilot training component for the promotion of labor-intensive road maintenance works. A procurement transport expert for project coordination will be hired from the firm which is already providing project coordination for the IRE (para. 3.16). 3.27 The agencies responsible for project implementation will use the Guidelines "Procurement under IBRD Loans and IDA Credits" (May 1992) and in particular, the Bank Sample Bidding Documents, Letters of Invitation and consultant contract. The contracts with payments in foreign currency extending over more than one year and all contracts with payments in local currency will contain a provision for price adjustment. 3.28 Civil works, parts and other supplies, and consulting services financed under parallel financing agreements by other donors would be procured under the procurement rules of those donors. 3.29 To collect and record procurement information the executing agency will prepare comprehensive quarterly reports to the Bank, indicating revised cost estimates for individual contracts and the total project, including best estimates of physical and price contingency allowances and physical execution and payments made; and revised timing of procurement  -20 - actions, including advertising, bidding, contract award, and completion time for individual contracts. The borrower also will provide a completion report within three months of the credit's Closing Date. Disbursements under IDA Credits 3.30 The proposed MlA credit would be disbursed on the following basis: (USS million) Am out Expenditures Category Allocated to be Financed Road and Bridge Rehabilitation Civil works 21.17 80X Goods 2.87 100l of foreign expenditures and 70X of local expenditures Consultants8 services 3.41 100X Lobito Port Operations Rehabifitation Goods 0.14 lOOX of foreign expenditures and 70X of Local expenditures Consultants0 services 0.55 lOOX 0.6s RaiLway Rehabilitation Civil works 1.23 80X Goods 2.73 lOOK of foreign exp nditures 70r of local expenditures Consultants services 5lOO 4.51 Institutional Support Consultants' services 0.82 lOOX Studies 1.37 lOOX PPF 0.30 Unallocated 5.86 Total 41.00 All disbursements will be fully documented. 3.31 To ensure prompt availability of project funds, the government will open a special account in U.S. dollars at a banking institudon acceptable to IDA. An initial deposit of US$1 million-about two months of project spending-will be made by IDA to fais special account when the credit becomes effective. The government will submit monthly requests for replenishing the fund. In addition, the government will establish a project account for counterpart funds. These disbursement arrangements were agreed to at negotiations. 3.32 The esdmated schedule of disbursements is based on the project implementation schedule-and includes a six-month delay from the end of the physical execution of the project and the last payment to allow for delays in determining price variations in contracts. This comparatively rapid schedule is justified by the fact that the components of this high-priority urgent rehabilitation project are simple and well defined; and that this will be carried out by contractors and consultants, and that the preparation of bid documentation is already well advanced. Angola does not yet have a disbursement profile. The Closing Date for the Credit is June 30, 1996.  -21 - Table 3.4 Estimated schedul of disburnement (USS million) Cumulated Percentaeo Date Per semester Disbursoment of cumulated June 1992 0.0 0.0 0% December 1992 0.5 0.5 1% June 1993 8.8 9.3 23% December 1993 10.3 19.6 48% Jun'. 1994 10.5 30.1 73% Deaember 1994 6.9 37.0 90% Juno 1995 2.4 39.4 96% December 1995 1.6 41.0 100% Closing date: June 30, 1996 Accountingy. Auditing. and Reporting Reauirements 3.33 Project accounts will be maintained by the National Directorate for Investments in MINPLAN-in accordance with generally accepted accounting principles-to record all project revenues expenditures, assets, and liabilities. Separate accounts will be kept for each component and will be available for inspection by IDA during project supervision. The executing agency will prepare quarterly reports on project progress covering accounting, budgetary, financial, physical, and costing aspects with contributions from the agencies involved in project execution (see Annex 10). Not later than three months from the end of each financial year, MINPLAN will prepare an annu.l report following the same format. MINPLAN will prepare a project completion report in a form satisfactory to IDA not later than six months after the project closing date. 3.34 The project accounts, including the special account, will be audited annually in accordance with international guidelines by independent auditors acceptable to IDA. The auditor's report together with the project accounts financial statements and management letters will be submitted to IDA not later than six months after the end of each fiscal year. 3.35 Every year, INEA will prepare a detailed road maintenance and rehabilitation work program for the following year-at the same time as the preparation of annual budgets. Project Supervision 3.36 The detailed supervision plan provides for a first-year detailed review among the government (MINPLAN, MINTEC and MINOPU), the agencies involved in project implementation, project co-donors, and IDA-to be carried out no later than one year after effectiveness (see para 4.01 vii), and to be coordinated with the mid-term review for the IRE (see Annex 12). This review will (1) monitor project implementation and performance of the ministries and agencies involved in project implementation, (2) monitor implementation of the action plans for the Port of Lobito and the CFL, (3) review and discuss the INEA proposed road program and budget for 1994, and the proposed three-year (1994-96) Public Investment Program for the transport sector to be prepared under the IRE, (4) discuss and agree on additional steps  -22 - required for improved cost recovery in the transport sector (5) discuss and agree on civil works to be carried out during the coming years of project implementation, taking into consideration the following criteria: actual and expected traffic; degree of road deterioration; and classification within the transport network; and (6) discuss and agree on an updated project financing plan, including all available cofinancing sources. The review will benefit from the results of the sectoral studies carried out under the IRE and may lead to revisions of the project components. derIdggos 3.37 A detailed timetable and schedule of physical works has been prepared for each major project component (see Annex 11). Key indicators have been identified for maintaining important project objectives and expected achievements (see Annex 9). D. Project-Related Environmental Issues 3.38 The proposed project is classified as a "B" project with some possible limited environmental effects. An enviromnental analysis was carried out with the assistance of a consultant for the road component during project preparation. Its findings were that, first, the project would have substantial positive social and environmental effects by providing better conditions on major transport routes that would benefit the rural and urban populations; by improving road drainage, which in turn would limit erosion; and by providing for the removal of war-caused wrecks left alongside the roads and on the sites of destroyed bridges. Second, the analysis recommended that attention be paid to the design and execution of civil works to alleviate the potential risk of disturbances caused to people and the natural environment. Effet on Prolect Desian 3.39 Environmental disturbances that might be caused by the civil works during-or as a direct consequence of--their execution will be addressed through appropriate work-detailed design, provisions in contract documents for work, and work supervision (Annex 13). Suitable safeguards will be incorporated into bid documents and contracts for works to minimize potential environmental damage caused by road works, especially regarding drainage facilities, risks of erosion, handling of quarries and borrow pits after construction, anti-erosion planting, handling of camps and workshops. On the other hand, the project may have a positive effect on the environment by repairing road and track draib age, currently in bad shape-particularly in erosion- sensitive areas. In other respects, the road and rail track rehabilitation will follow the existing alignments and will have little effect on current land use. E. Economic Evaluation and Risks 3.40 The rehabilitation of the transport infrastructure is a prerequisite to economic recovery in Angola. Direct economic benefits would be both reduced operating costs for transport, and the generation of traffic from local trade and farming.  - 23 - Benefidlarle 3.41 The overall project beneficiaries will be (1) a large proportion of the Angolan people who will have restored access to large are-s of the country, (ii) the agricultue-(staple and export)-and the inhabitants of major cities and semi-urban rural centers throughout the country who will enjoy the benefits of enhanced food security and cheaper food prices. Immediate direct beneficiaries of the project will be people-mostly unskilled-who will be hired to execute project works: (i) about 4,000 to 5,000 workers are expected to be employed by contractors over two years, and (ii) an additional 4,000 workers could be employed over the medium-to-long term by SMEs trained under the project. Economic Analysis 3.42 For all project components an overriding selection criterion is the immediate restoration of main transport links. 3.43 Road and bridge component. About 75 percent of project spending is for the road and bridge component. The road sections selected are both needed to restore a main transport link, and repairable within two to three years-thus saving the much higher cost of a later complete reconstruction. Some 1,400 km were identified, cost-benefit estimates conducted, and a set of first-priority road works proposed. lle benefits for these roads were lower vehicle operating costs and, in some cases, a saving in future reconstruction costs. The savings in vehicle operating costs were only based on the savings for heavy vehicles, a most conservative assumption. No savings for light vehicle traffic were included because of the difficulties of estimating this potential traffic (see Annex 14). 3.44 Periodic maintenance and rehabilitation of roads. The following project benefits have been quantified in calculations of the economic rate of return: (i) Lower vehicle operating costs for estimated traffic volumes after the rehabilitation and subsequent maintenance of project roads; and (ii) Savings in future rehabilitation costs through the prevention of excessive deterioration in road conditions. The economic rates of return for individual road sections range from 20 to 38 percent, with 31 percent for this project component. 3.45 Bridges. The following project benefits have been quantified in economic-rate-of- return calculations, mostly in combination: (i) The cost of additional vehicle operating costs to circumvent a bridge whenever possible; (ii) The cost of using improvised systems of ferry crossing whenever possible; and (iii) Lost value-added for the traffic that would not travel under any of the above arrangements.  -24 - Economic rates of return for individual road sections with one or several bridges range from 27 to 72 percent, with 45 percent for this project component. 3.46 Railway component. The CFL railway is facing serious constraints because of track conditions, and the limited availability of locomotives and rolling stock. A higher-cost alternative for customers is road transport, in part over unpaved roads that have been in disuse for a long time. For the evaluation of benefits, costs of alternative road transport for freight have been compared with direct-operating expenses for the railway for the years 1993 to 2001. On that basis the economic rate of return has been estimated at 18 percent. 3.47 Etm nQ. For the Port of Lobito three types of benefits have been identified. First are reductions of ship time in port-directly through improved service time, or indirectly through reduced waiting time. Second is the reduction in dwell time for containers. Third is the reduction in damage and cargo losses leading to lower insurance costs. Although this port is not seriously congested, a resumption of normal economic activities-even moderate traffic-will quickcly lead to ship delay times justifying improved cargo handling facilities. It is important not only to make better use of existinlg berths, but also to increase the capacity for container handling-to reduce freight and insurance rates. On the basis of ship time and container time alone, the economic rate of return is 17 percent. 3.48 Overall economic rate of return and risk analysis. The overall project economic rate of return is 30 percent, covering about 90% of the project cost. A risk analysis was conducted for individual project components to test the economic-rate-of-return sensitivity to construction costs, traffic growth rate, and induced traffic. Test results show that under worst-case assumptions, economic rates of return would decline to not less than 11 percent for any individual project component, or is still above an opportunity cost of capital of 10 percent. 3.49 Unguantified benefits. The above economic-rate-of-return estmates do not take into account additional benefits that cannot be conveniently quantified. Those benefits are increased production over and above the amounts that are implicit in a return to a normal level of traffic, lower food prices in urban centers, increased exports of agricultural produce, and increased basic services-health, extension, and education-in rural communities. Rural access to these services is presently limited by poor transport. Flngncial-Analysis 3.50 Financial accounting. Financial information is not available owing to weak financial management and record keeping which is essentially based on cash transactions. Inventories and actual depreciation are not currently kept up to date. Assets-when they are registered-at historical cost do not reflect current value. In most cases no balance sheet or funds- flow statements are available for past years. Ongoing studies under IRE include reviews of the existing institutional aspects including accounting and financial practices, and the resultant recommendations will be implemented under technical assistance and training programs included in the project and the proposed Lobito Port Transport System Rehabilitation Project currently under preparation.  -25 - 3.51 Financial Projections. Financial projections-based on a rigorous cost reduction and normalization of policies concerning operating expense-are intended to determine the actual revised tariffs expressed in U.S. dollars (see Annexes 5.1 and 6.1). The steps towards financial regularization, including the introduction of improvements in the accounting systems, the establishment of financial objectives, the achievement of financial targets and their deadlines are detailed in the above Annexes and are included in the action plans which were agreed upon during negotiations (Annexes 5.2 and 6.2). Project Sutainability 3.52 Cost recovery is a major goal of the project, and a major factor of project sustainability. Low tariff levels prevail in the transport sector-especially on the roads. Fuel taxation will be raised to take effect in 1993 to cover the cost of maintenance of main roads, and provide counterpart funding for the project's road component (para. 4.02 i). The problem is exacerbated mainly in the railway and port subsectors by the overvalued, artificial official exchange rate (para. 1.03). The issue of cost recovery has already been raised by the IRE, and decisions on tariff adjustments have already been made and implemented, initially by new tariffs in January 1992. The project proposes to address cost recovery systematically and permanently through a two-pronged strategy. The first is to implement rigorous cost-reductions and normalization of operating expenses with periodic and annual targets. These targets have been defined through both the action plans and financial covenants agreed upon during negotiations (paras 4.01 ii and 4.02 i and Annexes 5.2 and 6.2). These action plans will include-in addition to financial targets, performance improvements and staffing reductions. The second step is to implement cost accounting in U.S. dollars converted at the commercial fiuctuant kwanza rate of exchange. Tariffs would have to be reviewed as often as needed-determined by results of the periodic dollar cost-accounting system which includes appropriate steps for the effective accounting for inflation. 3.53 The project will be a first step in the development of a road maintenance capacity in Angola. Whereas the IRE will provide for the design of an overall framework for road management, the project will provide for an actual start-up of maintenance activities in two ways: firstly, experience will be acquired in road maintenance under contract, as maintenance of roads repaired under the project will be done by contractors over a two-year period after the repair work is completed. Secondly, small contractors will be trained in labor-based road maintenance, which will allow INEA to expand road maintenance to the rest of the m-ain road network over about three years. Most importantly, resources will be mobilized through an appropriate cost recovery mechanism to provide funding for road maintenance. Project Risks 3.54 The risks inherent in the project result from the government's limited capacity to ensure adequate local financing, and the Angola's transport agencies and ministries weak institutional capacity to manage the project-both of which could delay project implementation and thus lead to further deterioration of the transport infrastructure and services. Unfamiliarity of project staff with Bank procedures, and a potentially unstable political environment could also lead to significant delays. The project design reduces the potential consequences related to these risks. As for the counterpart funding issue, the government will provide fur the local costs only through a project account managed by MINUNLAN (para. 3.12), the larger part being for road  -26 - mantenance activities, and cost recovery mechanisms have been developed to help generate the resources needed. The government will improve collection under the fuel tax to cover Its counterpart funding of the road component and its annual contribution for road maintenance (para. 3.12). As for the weak institutional capacity, the bulk of project-financed road works will be carried out under contract and supervised by consultants, which will limit the resk associated with INEA's current institutional weakness.  -27 - IV. AGREEMENTS REACHED. CONDITIONS. AND RECOMMENDATIONS A. Agreements Reached at KNelations 4.01 During negodations, agreements were reached on: (i) An action plan for fuel taxation aimed to improve cost recovery of road use with the objective of ensuring collection of at least US$15 million per year starting in 1993 (para. 3.12); (ii) Action plans for operating the Port of Lobito and the CFL, including proposed performance objectives and tariff measures with initial implementation by January 1, 1993, including the cost of the proposed and future investments, through appropriate pricing of services; future steps including measures to be implemented on January 1, 1994 will await conclusion of studies carried out under the IRE, and will be specified following the mid-term review of the IRE and the first-year review of this project (Annexes 5.2, 6.2). (iii) Proposals to control truck axle loads, including control of vehicles at selected locations (para. 2.20 i and 2.22); (iv) Implementation agr,ements between MINPLAN and the ministries and agencies responsible for project execution (para. 3.15); and (v) In addition to the program already carried out by the Ministry of Defense, a program for mine removal will be designed and carried out under the responsibility of INEA on the project work sites prior to the beginning of the work on each site. (paras. 2.20 ii and 3.19). (vi) Submission of the INEA annual road work program and budget each year by November 1 before its adoption; and of a three-year Public Investment Program for the transport sector including all transport modes, by November 1, 1993, and yearly by November 1, thereafter to IDA for review, comments and agreement (para. 2.20 i); (vii) Organization of a first-year review not later than twelve months after effectiveness-either after or together with the IRE mid-term review-to (1) monitor project implementation and performance of the ministries and agencies involved in project implementation, (2) monitor implementation of the action plans for the Port of Lobito and the CFL, (3) review and discuss the INEA proposed road program and budget for 1994, and the proposed three-year (1994-96) Public Investment Program for the transport sector to be prepared under the IRE, (4) discuss and agree on additional steps required for improved cost recovery in the transport sector, (5) discuss and agree on civil works to be carried out during the upcoming years of project implementation taking into consideration the following criteria: actual and expected traffic; degree of road deterioration; and classification within the transport network;  - 28 - and (6) discuss and agree on an updated project financing plan, including all available cofinancing sources and discuss any corrective measures that might be needed concurrently by the Govermnent of Angola, IMA, and project co- donors (para. 3.36); (viii) Adoption of ICB rules for works, and provision of goods, and of international competitive selection for consultants as agreed upon at negotiations, including the use of the Guidelines 'Procurement under IBRD Loans and ]DA Credits" (May 1992) and 'Use of Consultants by World Bank Borrowers and by The World Bank as Executing Agency" (August 1991) and in particular Bank's Sample Bidding Documents, Letter of Invitation, and Consultant Contract (para. 3.27); (ix) Submission to IDA of quarterly progress reports no later than one month after the end of each quarter and annual reports no later than March 31 of the following year (para. 3.33). (x) Submission to IDA of the project accounts, financial statement, auditor reports, and management letter no later than six months after the end of each fiscal year (para. 3.34); (xi) Operation of a project account to channel the counterpart funding to be provided by the Government of Angola for the project implementation, initial deposit of the equivalent of US$1 million, and monthly replenishment (para 3.12); and (xii) Disbursement arrangements and operation of special and project accounts (paras. 3.12, 3.31 and 3.33). (xiii) Maintain, with fiunctions, respons;bilides, qualifications, experiences and terms of reference satisfactory to the Association, the staff responsible for Project Implementadon. B. Conditions of Credit Efetven 4.02 Conditions of effectiveness will be: (i) Compledon and approval of the measures regarding: (1) fuel taxation, (2) axle load control, and (3) action plans for the operation of the Port of Lobito and the CFL, including appropriate tariff measures (paras 3.12, 2.22 and 3.52); (id Completion and signing of the implementation agreements with the agencies and ministries involved in implementing the project (para. 3.15); and  -29 - (iii) Signing of the Letter of Transport Sector Policy by the government, including principles such as: (a) maintenance of newly rehabilitated inissucture will be given first priority in the government capital budget for the sector; O) a larger share of civil works in the transport sector will be executed by privae contractors; and (c) administrative and policy measures will be implemented to deregulate and privatize the transport sector, in particular the road transport industry (para 2.22). (iv) Opening of project account and initial deposit of US$1 million (para. 3.12). C. C-onditions of Disbursement 4.03 Before disbursements on civil works, the following will have occurred: (i) The hiring of consultants for completion of detailed engineering and work supervision (para. 3.20), and (ii) Certification of the legal ownership of land for the training center for road wores (para 3.20). D. RecommgndatTon 4.04 With the above agreements and conditions, the proposed project is suitable for an IDA credit to the Government of Angola of SDR 30 million (US$41 million), on standard IDA tenrs.  - 30 - AGOLA SANNEX 1 TRANSPORT RSCOVIRY PROJECT ............ .......................................... PRM CUST (iLltfon of U.S. dllters) ..................... PRt#t4 *---. ......................... .......... 3> .-...... ProJect (priority 1) ....-..... prtority 2 (a) Wlthout Canting. Other Total Conting. inctuded GOA IDA dnors Program I ROAD/BRIDGE REMABILITATION ................... ......................... _. Lot IA 10.3 12.4 2.4 8.3 1.6 12.4 Lot 1B 12.6 12.6 Lot 2 17.7 21.3 4.3 16.0 1.0 21.3 Lot 3A 9.9 9.9 Lot 3B 14.0 14.0 Lot 3C 13.9 13.9 Bridge structures 3.0 3.6 0.7 2.9 0.0 1.0 4.6 Bridge work 2.7 3.2 2.3. 0.9 0.0 3.2 Supervision of work 3.4 4.0 1.0 3.0 0.0 0.9 4.9 Roads studies 1.1 1.3 0.3 1.0 0.0 2.6 3.9 Labor promotfon 2.2 2.6 1.3 0.6 0.7 2.6 Subtotal 40.4 43.5 12.3 32.9 3.3 54.9 103.4 3I RAILWAYS ........... Luanda raflway CCFL) - Track rehabiLitation 1.6 1.9 0.7 1.2 0.0 0.5 2.4 - Other civil works 0.4 0.5 0.3 0.2 0.0 1.7 2.2 - Equipmt & spr. ports 3.0 3.6 0.3 3.3 0.0 3.6 - Technical assistance 0.7 0.8 0.2 0.6 0.0 0.8 Subtotal CFL 5.7 6.9 1.5 5.4 0.0 2.2 9.1 Bensuele railway (CFP) T Track rehabiltftatiwn 4.9 4.9 Other civfl works 4.0 4.0 - Equipt & spr. parts 9.0 9.0 - Technical assistance 4.4 4.4 Subtotal CFB 22.2 22.2 Uocamedes railway (CFN) 5 5.0 Subtotal s.7 6.9 1.5 5.4 0.0 29.4 36.3 III PORT OF LOBITO .................. ................... Lobito Port - civil/eLectr. Works 2.2 2.5 0.5 0.0 2.0 2.5 - Equipmt & spr. parts 2.2 2.5 0.0 2.5 2.5 - design/supervfsion 0.4 0.5 0.1 0.4 0.5 - TechnIcal assistance 1.6 1.8 0.3 0.3 1.2 1.8 Subtotal 6.4 7.2 0.8 0.4 6.0 7.2 IV STUDIES & COORDINATION .......... ................. ....... Transport studies 1.1 1.1 1.1 1.1 Technical Assistance 0.3 0.3 0.3 Project Coordination 0.7 0.7 0.7 0.7 Subtotal 2.1 2.1 2.1 2.1 V PPF 0.3 0.3 0.3 0.3 Contfngencies Physical 3.1 Financial 7.0 GRAND TOTAL 64 .9 64.9 14.6 41.0 9.3 84.3 149.2 (a) Program components will be*xecuted when financing becomes available. All priority 2 figure include contingenCie Rem: due to rounding, tigure my not total exactly  - 31 - Ann"L Page 1 of 4 TRANSPOR RECOV ELQ^CT Road and Bridge Rehabilitation Comgonen I. Condition ofthe Basic Paved Jload Networks Most paved roads are badly deteriorated, some completely destroyed, following years of maintenance neglect and war damage. Some roads that have had almost no traffic in the last few year because destroyed bridges prevented access to them - are still badly damaged by the climatic effects. Of roads that were built or rebuilt recently, some are in good condition and others are in poor or medium condition - in urgent need of petiodic mainenace and spot repairs. 'Me project is focused on the recently built or rebuilt roads. 2. A field survey was conducted from December 1991 to February 1992 on the roads being considered for the project. Road deterioration was categorized in four ways: 1. Pavement deformation because of settlement in or under the road foundation 2. Pavement surface deterioration mainly because of natural aging of the underlying surface - cracks, loss of aggregates - wear and tear to the pavement edge - some of the damage was caused by military tanks 3. Potholes and destruction of the base course of some of the foundation; this damage caused by the war - land mines - or by poor drainage 4. Large-scale destruction of pavement. 3. Using the broad categories listed above - and depending on the degree of deterioration on pavement, base, foundation, and shoulders - INEA classified the road sections as follows: OveS Conditio Good Resular Medium Poor Destoe Dieoration Qft Pavement 5s 10% 20% 50% 80% Base 1% %S% 10% 30% 50% Foundation 0% 2% S% 15% 30% Platform S% 20% 50% 60% 80% Roadsides S% 10% 1s% 30% S0% Average speed more 40-60 20-3S 10-20 S-10 permiuted(in kmn) than 80  - 32 - 322 Page 2 of 4 I. Project Selection Criteria for Road Sections 4. The main roads were classified according to traffic volume, using the most recent systematic traffic counts - 1970 traffic counts: (i) Road in good condition - rehabilitated, rebuilt, recently built - or subject to ongoing rehabilitation work; these roads are not included in the project. (ii) Road mostly in regular to medium condition - possibly with some sections in poor condition, and short sections destroyed - for which prompt periodic maintenance or spot repair would prevent further deterioration and a need for total reconstruction. Such roads that gave access to economically important regions were considered for the project. Among these roads, priority was given to those with the highest economic rate of return. And the rehabilitation of damaged bridges on these roads is given priority. (iii) Road with substantial portions in poor condition or destroyed and in need of reconstruction - first requiring feasibility and technical studies, which are likely to be begun in three to four years and provided through the IRE or under this project. (iv) Road that has relatively little potential traffic volumes or is inaccessible to heavy trucks in the near future. M. Selected Road Component 5. Using the above-described criteria, the road sections were identified according to fitness for the project (see table A2. 1), and grouped in 6 lots for the awarding of work contracts. Lots IA and 2 were selected in priority 1 for the project, given overall financial constraints, whereas lots 1B, 3A, 3B, and 3C (as a priority 2) are not part of the project. The government is expected to continue its search for financing for the remaining lots. IV. Selected Bridges to be Rebuilt or Repaired The bridges to be reconstructed or repaired were destroyed or unfit for regular traffic loads, located on the priority roads section identified in Section HI above and on other roads serving regions with strorg economic potential. Depending on the condition of the existing bridge, possible solutions are to (i) repair the existing structure, or (iH) reconstruct one, several, or all bridge spans - using new metal structures and, whenever possible, re-using existing foundations and piles or abutments. The list of bridges selected for repair or reconstruction and the proposed solutions is in table A2.2:  - 33 - Table A2.1 - ROADS SELECTED IN THE EMERGENCY PROGRM s g 3 of 4 ................................................ ---------------- Road Conditfon ------------- Good Regular Medful Poor Destroyed Lenth Cost (In kb) (In kn) (Cn km) Cin kn) CIn kn) Cfn km) (mIlflons of US) LOT IA UCUA - UIGE ................ IAI UCUA (CRUZ.c/EN225) - RIO DANGE 8 4 0 9 0 21 1.2 1A2 RIO DANGE - VISTA ALEGRE 0 0 7 14 28 3.2 1A3 VISTA ALEGRE - ALDEIA VICOSA 0 0 26 3 4 33 2.5 1A4 ALDEIA VICOSA - QUITEXE 0 0 21 3 2 26 1.8 lA5 QUITEXE - UIGE 0 10 24 4 3 41 2.6 TOTAL LOT IA EN 120 8 14 78 33 16 149 11.3 LOT 18 UIGE - LUCALA .......... .................... 131 UIGE - NEGAGE 0 15 17 4 3 39 1.8 TOTAL EN 220 0 15 17 4 3 39 1.8 132 NEGAGE - CAMABATELA 10 20 18 6 0 54 2.3 183 CAMABATELA - (CRUZ.c/EN225) BAMBO DE SONHE 10 10 12 3 0 35 1.4 TOTAL EN 140 20 30 30 9 0 89 3.8 1B4 BAMBOS DE SONHECCRUZ.c/EN225) SA-BA CAJU 6 12 20 2 2. 42 2.1 1B5 SAMBA CAJU - QUIANGONBE 5 8 25 2 2 42 2.2 136 OUIANGOMBE - LUCALA 0 9 10 5 0 24 1.2 TOTAL EN 320 11 29 55 9 4 108 5.5 TOTAL LOT 1B 31 74 102 22 7 236 11.1 LOT 2 DONDO - ALTO HAMA (EN 120) .... ....... ...... ................... ........... 2.1 DONDO - RIO MUCONGA 24 15 0 10 0 49 2.3 2.2 RIO MUCUNGA - RIO LONGA 17 12 0 8 4 41 2.5 2.3A RIO LONGA - RIO IULUEIGE 6 3 3 0 0 12 0.4 2.33 RIO MULUEIGE - QUIBALA 0 14 36 1 51 2.3 2.4 QUIBALA - RIO N'HIA 0 10 27 2 39 2.1 2.5 RIO N'HIA - SANTA ISABEL 0 10 20 6 36 2.6 2.6 SANTA ISABEL - RIO QUEVE 0 8 23 2 33 1.8 2.7 RIO QUEVE - ALTO HAMA 0 35 48 7 90 5.1 TOTAL LOT 2 47 107 157 19 21 351 19.0 LOT 3A ALTO HAMA - CULANGO ...... ....... ................ 3A2 BOCOIO - ALTO HAMA 98 55 5.5 10 2.5 171 6.7 3A1 CUHANGO - BOCOIO 6 27 6 6 45 2.0 TOTAL EN 250 104 82 11.5 16 2.5 216 8.8 LOT 38 CATCHINGO - KUITO .. ... .... ..... ..... 3B1 HUAMBO - VILA NOVA 2 a 18 5 15 48 4.0 332 VILA NOVA - CATCHIHNGO 0 5 5 6 6 22 1.9 TOTAL EN 352 2 13 23 11 21 70 5.8 R2 CATCHIHNGO - CHINGUAR 0 6 0 2 2 10 0.7 _4 CHINGUAR - CRUZAMENTO c/ENI 140 0 0 26 5 5 36 2.5 B5 CRUZAMENTO c/EN 140 - KUITO 0 8 0 0 20 28 3.4 TOTAL EN 140 0 14 26 7 27 74 6.6 TOTAL LOT 3B 2 27 49 18 48 144 12.4 LOT 3C KUITO - MENONGUE Cl CRUZAMENTO C/EN250 - CHIUNGUE 0 6 20 3 0 29 1.4 C2 CHIUNGUE - CACHINWGES 0 10 20 4 0 34 1.6 C3 CACHINGIJES - CHITEMBO 0 20 25 6 0 51 2.4 C4 CHITENBO - MBUE 0 30 35 8 0 73 3.3 CS HUMBUE - NEdONGUE 20 40 30 10 0 100 4.2 TOTAL LOT 3C 20 106 130 31 0 287 13.0  Table A2.2 - BRIUOES: REPAIR DESCRIPTIONS AND COSTS ....... ...................._........ lme Road Lot Span Concrete repair <---- Cost USM 000 ---. - Type of intervention proposed (meter) (cubic-meter) Struct. Transp. Work Rio Daawe EN 120 51 4 300 70 30 Reconstruction of one span Rio Qulongua EN 320 1B.5 28 12 Recovery of bridge-material from previous structure and reconstruction of one span Rio Nandwbeta EN 320 1B.5 24 12 130 22 20 Recovery of bridge-material from previous structure and recornstruction of one span Rio Cuso EN 320 1B.5 12 12 70 9 8 Recovery of bridge-material fran previous structure and reconstruction of one span Rio Cassuire EN 320 1B.5 15 12 90 12 10 Reconstruction of one span Rio Nucoso EN 120 3x13 12 330 50 40 Recovery of bridge-material fram previous structure and reconstruction of three spans Rio Nuchau EN 321 3x13 4 220 30 30 Recovery of bridge-material from previous structure and reconstruction of three spans Rio N'Brldege EN 210 2x15 80 800 110 90 Reconstruction of two spans Rio Nucongua EN 120 2.1 2x36 12 600 80 60 Reconstruction of two spans Rio Nuxixe EN 120 2.2 24 12 170 21 20 Reconstruction of one span Rio Nutuelge EN 120 2.3 15 12 90 13 10 Reconstruction of one span Rio Queve 7 EN 240 18 110 15 12 Reconstruction of one span Rio Calal EN 120 3x16+32 10 559 70 65 Reconstruction of four spans Rio Cuelei EN 140 3C.5 30 4 210 30 25 Recovery of bridge-material from previous structure and reconstruction of one span Rio Cuceque EN 140 3C.4 21 4 140 29 17 Recovery of bridge-material froa previous structure and reconstruction of one span Rio Cacuchi EN 140 3C.4 42 12 340 50 40 Reconstruction of one span Rio Culuvava EN 140 3C.4 6 12 35 5 3 Recovery of bridge-material from previous structure and reconstruction of one span Rio Cuanma EN 250 Cleaning of the bed of the river and reiabilitation of the ferry Rio Cuchi EN 250 38.4 30 12 210 30 25 Reconstruction of one span Rio Cutato EN 250 3B.4 39 12 330 40 40 Recovery of bridge-material froan previous structure and reconstruction of one span Rio Cassengue EN 250 3B.4 6 12 50 7 4 Recovery of bridge-material from previous structure and reconstruction of one span Rio Queve 2(Binda) EN 250 24+21 25 500 70 90 Reconstruction of two spans Rio Cuchem EN 250 2.7 21 12 140 20 20 Reconstruction of one span Rio Covua EN 120 2.7 Reconstruction of safety rail Rio Nhia EN 120 2.4 18+36 12 400 60 45 Reconstruction of two spans Rio Catofe EN 120 2.4 2x12 12 200 25 20 Reconstruction of two spans Rio Palembo EN 100 2x19 12 330 45 40 Recovery of bridge-material from previous structure and reconstruction of two spans Total cost (US$' 000) 635 913 7649' t so 0Q  - 35 - Annex 3 Page 1 of 6 ANGOLA hNSM QRMOVERY PRO1ECI Labor Promotion and Training fl= Sub-comuonent I. Backround The objectives of the project road component are to halt the deterioration of important portions of the primary road network and to conduct emergency repairs to ensure reliable access to these roads. For the long term, the IRE project a!ms to prepare a large-scale program of financial and institutional assistance that will enable MINOPU and INEA to rehabilitate the primary road network and maintain it in acceptable condition. One part of the project road component is to erect metal bridges and repair damaged bridges-thus providing reliable access to major arteries. These works will be executed by an experienced national parastatal firm (Empresa de Pontes), and by contractors hired internationally. 3. Other production targets are: (i) Clearing of vegetation on and along the roads (ii) Cleaning of ditches and other drainage structures (iii) Removal of vehicle carcasses remaining from the war (iv) Repair of drainage structures preventing access (v) Periodic maintenance and spot repairs of surface damage. Activities (i) and (ii) are suitable for immediate measures by labor-based brigades. Activities (iii) and (iv) require some mechanical input. Activity (v) requires substandal mechanical input. I. Project Conce 4. The benefits of using locally available resources - especially labor - in terms of foreign exchange savings, income distribution, and increased domestic value-added are well known and need no furtier analysis at this point. 5. A considerable part of the project road and railway work is suitable for-and may be restricted to-labor-based methods. However, at present the institutional framework, knowledge, and skills required to use large inputs of labor do not exist in Angola.  - 36 - Annex 3 Page 2 of 6 6. A demonstration and training project can ease the constraints on the use of local resources. Such project will demonstrate work on the roads, training of potential local contractors, training of supervisors of different levels, and training of administrators In appropriate accounting and administrative methods. The site of the training center will be Caxito in Bengo Province. The training will focus on appropriate technology, appropriate training, and "hands on" approaches. The staff of INEA will be trained in control, contract management, measurement, cost estimates, and cost accounting. 7. The creation of private small contracting firms requires substantial assistance uing start- up. Thus, as part of their training, contractors will receive help in getting organized, setting up .vork sites, and in arranging control systems and cost accounting functions. At a later stage, the contractors may need financial credit system for the purchase of tools and minor equipment. 8. The project has three components: (i) practical training and production; (ii) theoretical training; and (iii) promotion and support. m. Project Objectives and Descrigtion 9. The overall project objective is the dissemination and promotion of labor-based methods to achieve rapid-but still rational-employment of labor in road maintenance. 10. The objectives of practical training are to: (i) Produce as much work as efficiently as possible (ii) Provide hands-on demonstration of labor-based techniques (iii) Train personnel on-site (iv) Demonstrate administrative and control systems. 11. This component could quickly start works to stop the deterioration of the road network. To demonstrate and train, skilled staff and workers are needed. Although the overaU goal is to use contractors for the work and to keep salaried personnel to a minimum, wages and salaries will have to be paid for the personnel working at the training project. Task work and piece work wiUl be used as much as possible. 12. The objectives of the theoretical training are to: (i) Train potential contractors and public sector managers in labor-based management and control (ii) Train public sector staff in tendering and contracting procedures and in job supervision works (iii) Train supervisory personnel from all sectors in appropriate techniques.  - 37 - Annex 3 Page 3 of 6 13. The key concept in labor-based work is "appropriate technology". 7%e corresponding concept in training is 'appropriate knowledge". ITe training provided must be tailored to the exact needs of positions in the organization. Close coordination between the demonstration project and training Is essential. 14. Special care must be taken in the recruitment of trainees to avoid wasting scarce resources on non-trainable people. The national Bureau of Employment will assist in the selections. 15. The objectives of promotion and sunport are to: (i) Convince decision-makers that labor-based techniques are a competitive production alternative (ii) Increase use of labor-based methods (iii) Help local authorities and entrepreneurs in the start-up of labor-based work (iv) Coordinate with other labor-based activities. 16. One of the most difficult parts of a labor-based project is getting decision-makers to accept these techniques as viable alternatives to machinebased work. It is necessary to actively promote the use of labor through demonstrations, seminars, and video presentations. To alleviate public sector administrators'fear that such projects might prove too difficult, new initiatives should be supplemented with advice, report forms, accounting systems, payment systems, and supervision. To avoid duplication effort, donor and government-agency projects that have labor- based components could be coordinated joindy. 17. Funds may not at first be available from public sources except the project. One of the objectives is to train contractors to compete for contracts apart from the project. But, to ensure that trained contractors can get work, some contracting work will be financed as part of the project budget-directly or under subcontracts with the contractors recruited inturnationally. IV. Project Implementation and Issues 18. Because of the emergency nature of the project, serious institutional constraints should be overcome pragmatically. Particularly important is the timely payment of wages and contracts. The LPT will be developed within the INEA, and will be turned over to proper local authorities when-after three years-the needed competence has been developed. 19. The existing institutional capacity of the INEA and MINOPU does not permit rapid expansion into new areas. Relying on this existing structure would produce unacceptable results or even failure. The project thus must be connected to the highest possible levels - to the Director General of the INEA. 20. Because the capacity of local staff available to the project is limited, much of the required know-how must be provided by the expatriate technical assistance (three experts for three years  - 38 - Annex 3 Page 4 of 6 each, see para 3.05 Civ) of main report). The speed with which this help can be obtained is a key to project success. 21. The project will be implemented during three years. The project management shall be responsible for procurement. The INEA will be responsible for coordination of the LPT with other project components and activities. 22. Potential risks are a lack of high-level commitment to the LPI; a lack of mid-level administrative capacity resulting in delays of payments, slow procurement, and allocations; and a preference for building a large force of government employees instead of using contractors. V. Project Cost and Flnancing 23. The cost of the LPT component is estimated at $2.65 million - 48 percent of which is local, as shown in table A.3. 1. Table A.3.1 Detailed Cost of Labor Promotion (US$ '000) i GOA W2A 2 I. investment - Housing/Building 355 - Future (houses, offices) 205 - Office Equipment 80 -Cars 120 - Work Equipment/Tools/Spare Parts 190 Sub-total 950 190 380 380 H. Technical Assistance 750 150 300 300 Im. Operating Expend iturs (salaries) 950 950 TOTAL 2650 1290 680 680 24. External donors - IMA and SIDA - will fince the foreign portion and some of the local portion as follows: (i) technical assistance (3 experts for 2.5 to 3 years), including their housing; (ii) lodging and office facilities for the Caxito training center; (iii) furniture and office equipment; (iv) vehicles, equipment, tools, and spare parts for the taining brigades. The tools, office equipment, and other imported items needed to set up the organization and quickly start the road maintenance brigade wiUl be provided by IMA under a PPF advance. Other donor(s) may provide separate financing. The government will fimd most local costs, including salaries for local staff.  - 39 - Anex 3 Page 5 of 6 VI. Social and Environmental Iffect 25. Labor-based techniques in civil works put less stress on the environment than the use of equipment. Project promotion of the use of labor can contnbute an increased standard of living and give the population a sense of participation and responsibility for the work. Project plans call for erosion protection. 26. The training of skilled staff is an important input for the economy, given the current shortages of skilled staff. In addition to this, the LPT would directly contribute to the improvement of the road system - which will lead to direct savings in transport. VIII. E*esd Reslt 27. Training is the main objective of the LPT; a total of 200 persons will be trained to organize and supervise labor-based road maintenance contracts, as follows: Year 1, 40; Year 2, 40; and Year 3, 75 28. In addition to this, the LPT will attempt to contract or sub-contract for the scheduled project work or for other work as part of the demonstration. Expected physical output is as follows: vegetation encroachment cleared and ditches cleaned on 500 km of roads; and road surface patched on 150 kn of main roads. Table A.3,2: LPT Implementation Schedule  - 40 - Table A.3,2: LPT Implemeutation Schedule Arnex 3 Page 6 of 6 * tW9