Algeria - Second Railway Project

Document of The World Bank FOR OFFIC1AL USE ONLY Report NO. 13645 PROJECT COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND RAILWAY PROJECT (LOAN 2976-AL) OCTOBER 25, 1994 Infrastructure Operation Division Maghreb and Iran Department Middle East and North Africa Regional Office This document has a restricted distribution and may be used bv recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Year Algerian Dinar (DA) US$1.00 Equivalent 1987 (Appraisal) - 4.85 1988 - 5.92 1989 - 7.61 1990 - 8.96 1991 - 18.47 1992 - 21.84 1993 _ ACRONYMS AND ABBREVIATIONS BAD Banque Alg6rienne de Developpement BNA = Banque Nationale d'Algerie INFRAFER = Entreprise Nationale de Realisation d' Infrastructures Ferroviaires JEXIM = Japan EXIM Bank MOF = Ministere des Finances MOT = Ministere des Transports SNTF = Soci6te Nationale des Transports Ferroviaires SAR = Staff Appraisal Report SBD = Bank's Standard Bid Document RTRDA = Renewal of Track between Ramdane-Djamal and Annaba FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Winhlgon, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation October 25, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Algeria Second Railway Project (Loan 2976-AL) Attached is the Project Completion Report on Algeria - Second Railway Project (Loan 2976-AL) prepared by the Maghreb and Iran Department of the Middle East and North Africa Regional Office. It gives a disturbing account of project preparation, implementation and results. Part II which contains the Borrower's comments states that Part I is one-sided in attributing project failures to the Algerian managers. The Borrower insists that the assessment does not take into account other relevant factors. The US$143 million loan was approved in July 1988 and closed in February 1993, about two months after the original closing date. Only US$23.1 million were disbursed and the balance cancelled. The project was co-financed by the EXIM Bank of Japan to the amount of US$47 million; of this only US$8 milion were disbursed and the balance cancelled. T'he project aimed to upgrade railway infrastructure and to raise the quality of institutional management. Project components consisted of track renewal, track equipment, signalling, and institutional development. Only the procurement of track maintenance equipment was completed. Track rehabilitation was not even started. Bidding documents for signalling equipment were never fully completed. Proposals from consulting firms to technical assistance and studies were received but awards were not made. The outcome of the project is rated as unsatisfactory, its sustainability as unlikely and its institutional impact as negligible. An audit is planned. Attachement 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 vithout World Bank authorization.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND RAILWAY PROJECT (Loan 2976-AL) Table of Contents PaRe No. PREFACE ............................... . . . EXECUTIVE SUMMARY ........................... . ii PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . . . . . . . . . . .1 I. PROJECT IDENTITY .I..................... . . II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The Transport Sector and the Geographical Context . . . . . . . 2 Sector Development Objectives ................ . 3 III. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Implementation Experience ...... . .. . . .. . .. . . . 4 Project Components . . . . . . . . . . . . . . . . . . . . . . . 5 Project Implementation ........ ... .. ... .. .. . 6 Project Results ....................... . 7 Financial Performance ........ ... .. ... .. .. . 7 Economic Reevaluation . . . . . . . . . . . . . . . . . . . . . 9 Project Sustainability .................... . 10 Bank Performance ....................... . 10 Borrower Performance . . . . . . . . . I . I . . I . I . I I11 Project Documentation and Data .. ............... . 11 Cofinancing . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . . . . . . 13 PART III. A. PROJECT DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2. Related Bank loans and/or credits . . . . . . . . . . . . . 16 3. Project Timetable ....... .. . .. .. .. .. .. . 17 4. Loan Disbursements .................... . 17 Bi. PROJECT COSTS AND FINANCING .18 B2. PROJECT FINANCING .19 C. PROJECT RESULTS ..19 1. Direct Benefits . ----------119 2. Economic Impact . . . . . . . . . . . . . . . . . . . . . . 21 D. STATUS OF COVENANTS .22 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.  Table of Contents (Cont'd) Page No. E. USE OF BANK RESOURCES . 2323 1. Suary ......................... . 23 2. Staff input and Major Project Missions . . . . . . . . . . . 23 F. FINANCIAL PERFO&NCE STATIENTS ............... . 25 G. OPERATING PERFORMANCE STATEAENTS . . 27 27 ANNEX 1. TRACK RENEWAL ON RANDANE DJAMEL-ANNARA SECTION BRIEF SUMMARY OF THE CHRONOLOGY OF THIS PROJECT COMPONENT . . . 29 ANNEX 2. ECONOMIC REEVALUATION OF INVESTMENT IN MAINTENANCE EQUIPMENT . . 31 ANNEX 3. SNTF CO*ENTS ON THE SECOND RAILWAY PROJECT COMPLETION REPORT .34  PROJECT COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND RAILWAY PROJECT (LOAN 2976-AL) PREFACE This Project Completion Report (PCR) reflects the status of the Second Railway Project (Ln. 2976-AL) when the loan account was closed on February 28, 1993. about two months after the original closing date. Out of a loan of US$143 million. only US$ 23.14 m wer- disbursed and the remainder cancelled. The cofinancing loan of US$47 million granted by the EXI3 Bank of Japan was disbursed up to US$8 million and the rest cancelled. The last disbursement was made on July 31, 1993. This PCR (Preface, Evaluation Summary, Parts I & III) was jointly prepared by the Infrastructure Operations Division (EHTIN) of the Technical Department of EMEMA and SNTF, the Borrower (Part II). This report is based on information obtained from project files in ECA/HENA Information Services Unit, the SAR, the President's Report, Staff Supervision reports, and the working papers.  t  - ii - PROJECT COIPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND RAILWAY PROJECT (LOAN 2976-AL) EXECUTIVE SUMMARY Objectives 1. The project was designed to rehabilitate priority sections of the railway network, enhance managerial capabilities, improve financial performance, and rationalize the investment policy. Institution building under the project included setting up a planning cell, modernizing cost- accounting, introducing modern techniques of traffic control and man-power planning, and staff training. Main investments were for track rehabilitation and renewal, acquisition of track maintenance and phosphate handling equipment, and signalling and telecomunications. Implementation Experience 2. The project was approved by the Board in July 1988 but became effective in March 1990 only, due to delays incurred in signing of cofinancing arrangements with EXIM Bank of Japan (JEXIM). Project implementation was marred by frequent revisions of priorities (starting barely a month following Board approval, when an Algerian delegation came to Washington to request elimination of the phosphate handling equipment, reduction in the allocation for track renewal of the mineral line, together with a substantial increase in the signalling component), and recurrent deadlocks on procurement issues. Tenders were invited for the track rehabilitation component, but no agreement could be reached on awarding the contract to the lowest evaluated bidder. The bid documents for signalling and telecommunications component were never finalized. Proposals from consulting firms for the technical assistance and studies components were received, but no contract was awarded (para. 3.10). The project's performance turned out most disappointing, and the Borrower never complied with major loan covenants. 3. In November 1992, the Government of Algeria requested an extension of the loan closing date and permission to award the contract for track rehabilitation to a local parastatal. The Bank had made the extension of the loan closing date contingent upon the Borrower meeting by a December 19, 1992 deadline the following conditions: (a) correcting tariffs, (b) signing a performance contract with the Government, (c) complying with the audit requirements, and (d) hiring consultants for execution of studies on cost accounting and other key aspects of railway management. The Bank had also insisted on selecting the lowest evaluated bidder for the major track rehabilitation contract. In order to give the Government and the railways more time to fulfill the basic requirements for financial and operating improvements considered imperative for continuation of the project, the Bank agreed to postpone the loan closing date to February 28, 1993, and sent a mission to Algiers in early February to try to reach agreement on pending  -iii- issues. The mission failed to achieve its objective, and the loan was closed on schedule. Results 4. out of the six principal groups of project components, only the procurement of track maintenance equipment was completed. By closing date, only 16 percent of the loan had been disbursed and, overall, the project had limited impact on the railway operations. The institution building never took off. The attempt to put the national railway (SNTF) on a sound path of financial recovery foundered: by 1993, SNTF was virtually bankrupt and in need of financial restructuring to be able to continue its operations. Sustainabilitv 5. Progress achieved under the project is so minor that the question of its sustainability may look largely irrelevant. From a broader perspective, there appears to be not much hope for sustained development in the railway sub- sector for the moment. As long as SNTF operates in a highly regulated environment, and is not granted sufficient managerial autonomy under a performance contract with the Government ensuring, among other things, the right amount of compensations for providing loss-making public services when requested to do so, it will be unable to improve the financial performance and to fund infrastructure maintenance at the desired level. 6. Furthermore, rationalizing the investment program was an important project objective to be pursued through setting-up of a planning cell. This component took a slow start, and was eventually stalled by conflicting views between SNTF management and the Bank on the terms of reference of related consultancies. It follows that scarce resources are still misallocated to too many uneconomical investments which generate incremental operating costs, and aggravate SNTF's financial imbalances. Findings and Lessons Learned 7. Project performance may have been affected by the severe recession that beset the Algerian economy in late implementation years, although many of its failures are traceable to the following factors: (a) project ownership by the Borrower proved to be shallow by his procrastinating agreed actions toward institutional development through implementation, and defaulting on major loan covenants (para 3.22); (b) risks of project failure were not realistically assessed; the still fresh experience of the First Railway Project called for appraising a project much smaller in size and scope (para 3.22); (c) frequent changes of the management team would not have led to revision of priorities detrimental to the project's integrity, had it been rooted in a firm corporate plan (paras 3.6, 3.9, and 3.22);  - iv - (d) implementation arrangements should have been firmed up before project launch; the creation of a project cell halfway through project execution was a late and imperfect answer to poor coordination of the management team toward achieving project objectives (paras 3.9 and 3.25); (e) approval of bidding documents for major contracts prior to Board approval, and a mandatory use of Bank standard bidding documents through project execution would have spared many of the deadlocks on procurement issues (paras 3.11, 3.23, and 3.27); (f) the 1988 Convention was not an effective tool to free SNTF from undue interferences by the Government; conflicting objectives set for SNTF combined with the insufficient leadership and high turnover of its management team, strongly contributed to project failures; a Performance Contract guaranteeing sufficient managerial autonomy, inclusion of remedies in the Loan Agreement against undue changes in key personnel and project design, together with an agreement that the Bank would be entitled to request new commitments if they were found to be essential to meet project objectives, are important aspects to consider in future railway lending in Algeria (para 3.21 and 3.27); and (g) cofinanciers should be invited to participate actively in project negotiations (para 3.29).   PROJECT COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND RAILWAY PROJECT (LOAN 2976-AL) PART I Proiect Review From Bank's Perspective I. Prolect Identity Name: Second Railway Project Loan Number: 2976-AL RVP Unit: HENA Country: Algeria Sector: Transport Subsector: Railways  11. Background The Transport Sector and the Geographical Context 2.1 Algeria is a country of 2.4 m.sq.km which consists of three natural geographic zones: (i) a coastal strip that covers 4% of the country's territory but is home to 70% of its population and an equivalent proportion of the country's agricultural and industrial production; (ii) the high plateaux located some 150 kms inland, comprising 7% of the land and 22% of the population, and sustaining a low level of agricultural and economic activity; (iii) the southern territories, consisting of scattered oases in a desert, comprising 89% of the land with only 8% of the population. This extensive geographical spread makes transport a key factor in economic development. 2.2 Algeria's transport network (1992) provides good coverage of the centers of economic activity with 95,500 km of national and regional roads, 5,100 km of railways, 5,000 km of oil and gas pipelines, six major ports and 11 international airports. Road transport carried (in 1990) over 14 billion t-km p.a. or about 86% of total freight and about 38 billion pass-km p.a. or 93% of total passenger traffic. In sharp contrast, the railway carried (in 1990) 2.6 billion t-km or about 16% of the market and 1.6 billion pass-km, or 3.8%. 2.3 The transport sector requires considerable attention to make it an efficient instrument of development. Containerization and intermodalism made little progress. Infrastructure maintenance has been neglected, as a result of which rail tracks, roads and ports are generally in a poor condition. Transport services are mostly provided by parastatals which, in the case of railways, airlines and ports, enjoy total monopolies in their respective sub-sectors. There is a vast scope to improve transport efficiency by reducing the state's role in management and introducing more of private entrepreneurship and modern styles of management. 2.4 The railway (SNTF) consists of a main line running all along the coast in the East-West direction, with Algiers at the center, and several secondary lines running south to reach the second and third zones. The eastern segment of the line from Algiers to Annaba constituted the focus of attention of this project in terms of rehabilitation and modernization. The project design envisaged the western segment to be rehabilitated in future projects similar in scope and conception. 2.5 The SNTF is a public agency under the Ministry of Transport (MOT). The DG is a ministerial appointee who reports to a Board of Directors also appointed by the MOT. Though SNTF is officially an EPIC (entreprise publique a caractere industriel et commercial), the key decisions in regard to (i) tariffs, (ii) staffing, and (iii) the nature and scope of services to be provided are taken by the Government.' Admittedly, SNTF's management is free to make proposals, but the final decision is subject to socio-political considerations unrelated to commercial needs and market forces. This erosion of the commercial character of an EPIC appears to be an anomaly sanctioned by Algerian law, which considers an EPIC as an extension of the Government. As a consequence, SNTF is denied the 1/ The MOT acts in consultation with the MOF and Ministry of Labor etc. on questions which concern finance, labor, respectively.  -3- opportunity of engaging itself in a contrat-plan with the State, as the Government cannot contract with itself. 2.6 Railway operations are the victim of two inherent structural defects: (i) the network's design dating back to colonial times, and poorly adapted to modern trains; and (ii) the existence of two different gauges. Despite these handicaps, SNTF manages to carry heavy mineral traffic (phosphates and iron ore), of the order of 4 million ton per year. Sector Development Obiectives 2.7 Four main sectoral issues had been identified at project appraisal: (i) institutional coordination and overall planning (ii) sector management and operational efficiency; (iii) investment planning; and (iv) pricing and fiscal policy. An action plan was developed as an instrument for addressing these concerns. A National Transport Study (financed under the Fifth Highway project) was also launched. This study was expected to identify measures to strengthen SNTF's management including the planning function, as well as improve the efficiency of operations. Two significant actions were planned: preparation of 1990-94 railway development plan and the provision of technical assistance and training for feasibility studies and design work. The project proposed to raise management efficiency by setting up a modern cost accounting system and a management information system covering financial and operating data, launching studies for redefinition of staffing requirements by function and level, and preparation of career development, and providing management training. The investment plans were to be prioritized for rehabilitation and modernization of the existing network at the rate of 200 km per year. Investments on new lines were to be deferred in order to give a high priority to rehabilitation, catching up with arrears of maintenance and modernization of the existing lines, in particular, the Eastern Rocade (Algiers- Annaba).  - 4- III. The Project Obiectives 3.1 This project was designed as an integral part of the Bank's policy-based strategy to address the problems of the transport sector in Algeria. The project targeted four key areas of conspicuous weaknesses in the railway sub-sector: (i) rationalization of the investment program, with a strong orientation towards the rehabilitation of the network; (ii) financial restructuring of the railway, with a built-in focus on a new railway convention to address a package of financial issues: pricing, public service compensation, investment financing and the rationalization of depreciation policy; (iii) a set of institutional measures including a modern cost-accounting system, man-power planning, project planning and economic analysis and staff training. Implementation Experience 3.2 The implementation experience, in order to be meaningful, has to be viewed in the context of the First Railway Project (Ln 0996, US$49m). This project dragged on for 7.5 years. US$12.1 m were unutilized and cancelled. Five main lessons were learnt from this project: (i) even a modest project of US$49.Om took over 7 years to complete; (ii) major staff changes in SNTF resulted in project delays; (iii) lack of capable counterparts for consultants hampered the work of the latter; (iv) unclear financial responsibilities and chronic shortfalls in tariff revisions led to serious financial problems; and (v) little or no institutional improvement took place. The project was closed on December 31, 1982. The problems faced by the Second Railway project were similar in nature, but worse in severity. 3.3 The Second Railway Project (Loan 2976-AL, US$143m) project was presented to the Board on June 24, 1988, five and a half years after the closure of the previous one. It became effective on March 20, 1990 (reasons for this 21 month delay are discussed in para 3.28). SNTF was the implementing agency and the MOT the supervising agency. 3.4 In July 1988, immediately after Board presentation and 3 months after negotiations, a delegation of SNTF managers came to Washington requesting four significant changes in the project: (i) abandonment of the phosphate unloading equipment (US$ 1.5m); (ii) reduction in the allocation for the track renewal of the mineral line, El Hadjar to Souk Ahras (US$22.2m) by at least 50%2 (iii) transfer of track materials from Beni Mansour-El Gourzi section to RTRDA; and (iv) a substantial increase in the signalling component by some US $10-12m. These changes were the result of the senior SNTF staff in charge of this project changing their priorities and realizing they needed more signalling and less track renewal. The delegation had also brought the draft bidding document prepared by Austrian consultants for track renewal between Ramdane Djamel and Annaba, the largest component in this project. This document was found to be totally incompatible with the procurement rules, and in need of extensive revisions to make it conform to the Bank's SBD for works (para 3.7). These two problems within one month after Board presentation are symptomatic of the problems which beset this project. Every new director of a department found reasons to change what his predecessor had agreed upon. Bid documents, 2/ SNTF proposed to carry out "intensive maintenance" (entretien renforce) on this line as opposed to the more expensive renewal. The design and planning of the heavy maintenance program were prepared by a consultant and SNTF completed it using force account.  - 5 technical specifications, category allocations, even the source of financing for individual project components were subjected to frequent change (para 3.6). Project Components 3.5 The project components could be grouped under four main objective-oriented groups: (i) track renewal; (ii) track equipment; (iii) signalling; and (iv) institutional development. The project comprised six principal components: i) track rehabilitation/renewal, for a total of 371 knm; ii) signalling, and telecommunications modernization and the block system on two selected sections; iii) equipment for track maintenance, materials for operational support (informatics), and training equipment; iv) specialized unloading equipment for phosphates on the eastern mineral line; v) technical assistance for (a) establishment of a cost accounting system, (b) human resource planning and development, (c) investment analysis and planning, and (d) management information systems; and vi) training for SNTF staff including support for the Rouiba Railway Training Institute. 3.6 The conceptual justification for these investments rested on two principal underpinnings: (i) upgrading and modernizing the infrastructure for making railway operations safer, speedier, and more efficient; and (ii) raising the quality of institutional management, including its human resources component. Though these two fundamental thrusts had been agreed upon by the borrower as well as the MOT, SNTF requested the Bank for the changes in the project design (para. 3.4). This was primarily because project design was not rooted in a confirmed corporate plan laying down a coherent development strategy for the institution. The 1990-94 development plan underwent frequent changes which partly came as a result of the radical transformation of the macroeconomic framework that took place in those years, and the varying perception that successive management teams had of its implications on railways development. It was the single most important reason for which none of the contracts for technical assistance and studies could be awarded during the five years. The Bank had also sought guarantees on resolution of the phosphate handling problem using alternative resources before agreeing to reallocate loan amounts to alternative uses: they came too late to serve any purpose. 3.7 The project had been well prepared, but the complicated procurement of the track renewal works on the Ramdane Djamed-Annaba section (about 90 kms) was based on a bidding document prepared by an Austrian consultant. This document was unusable for Bank's ICB procurement. The finalization of a bidding document satisfactory to the Bank took nearly three years. (See Annex 1 for a summary account of delays and of their causes). 3.8 The project timing was right, for SNTF's traffic growth, traffic safety, and quality of service were being inhibited by the lack of viable infrastructure. The management was aware of these drawbacks  and convinced that the project benefits would enable SNTF to better face the competition. But SNTF could not convert this awareness into a focused commitment to a firm corporate plan, and time was lost in repeated attempts to bend the project to suit evolving opinions. 3.9 SNTF's management was aware of its responsibility as an executing agency. But in the beginning, all decisions were being made by a single manager, the Director of Planning, without involving the respective departmental directors. This problem was resolved when a project cell was created, but it did not have enough staff to manage the work load. The chairman of the cell had so many other functions that his day-to-day activities had precedence over the project needs. Several changes in Director General took place during implementation. Each new Director General changed some of the key departmental directors, and each change meant a new timetable, a new agenda, and new revisions of the technical features of the project. Suitable implementation arrangements should have been in place before project launch. Proiect Implementation 3.10 Significant variances: Out of the six principal groups of project components (para. 3.5), only the procurement of track maintenance equipment was completed. The track rehabilitation work on the RD-A section, the main project component, was not even started The bidding documents for signalling and telecommunications equipment, the second major component, were never fully completed. Proposals from consulting firms for all the technical assistance/studies were received, but awards were not made. Except for part of items (i) and (iii) para. 3.5, no other component was completed. 3.11 These variances were the result of several systemic factors: i) considerable divergence between SNTF's procurement practices and bid documents and those of the Bank. The officials were unable to agree on the required changes because their documents had the stamp of governmental authority; this impediment would not have hindered progress, if agreement had been reached at negotiations that the Bank's procurement guidelines and standard bid documents were to be followed; ii) SNTF's operations and management are overshadowed by the MOT; therefore, the implementing authority did not have any flexibility in project implementation, such as changing certain clauses in the bidding documents, and making decisions on contract awards (e.g. MOT constantly interfered and blocked the award of the Ramdane track renewal contract), tariff increases, or human resource planning. Though the overshadowing influence of the Government over the SNTF was known, the project designers had apparently no inkling of how deeply-rooted it actually was. iii) Frequent changes in Director General, which had a trickle down effect on the appointment of Directors and led to, inter alia, changing views on project components, and terms of reference for studies. iv) Every preparation and evaluation of bidding documents had to go through a committee of technicians (not managers), each member of which liked to "contribute" an "idea" with the intent to seek better "protection" of SNTF's interests. This complicated the decision process, making it very difficult for the other members to overrule the "ideas." Conformity to Bank guidelines could hardly prevail. SNTF's project cell did its very best  on every occasion to steer clear of these retarding influences, but its position in SNTF's hierarchy was so marginal that it could not play a leadership role in the implementation process. 3.12 Several Bank management and sector missions in 1992 and early 1993 had tried very hard to find reasonable solutions to SNTF's organizational, financial, procurement issues. The intractable stance taken by the Government did not allow to extend the loan closing date, as had been hoped by SNTF and its suppliers. This abrupt project ending bore adverse consequences on ongoing contracts. Inefficient contract management by the Borrower and cumbersome local procedures for issuance of bank guarantees had resulted in late implementation of Bank financed equipment contracts. Some were still at manufacturing stage by Loan Closing Date, as was the case for a major contract for locomotives which had only become effective in November 1992, nearly a year after the Bank had sent its no objection. Complaints were received by the Bank from suppliers realizing that the reliable source of financing that Loan 2976-AL provided them with, had been pulled out. After carefully examining the merits of the complaints, the Bank made a decision to disburse on an exceptional basis against invoices for works completed before February 28, 1993. About US$ 11.1 million have been disbursed between the Loan Closing Date and the July 30, 1993 final deadline set for disbursement. Project Results 3.13 The project achieved success only in its support to the track maintenance effort but it failed in most other counts, particularly in some of the institutional aspects. The promulgation of the Convention Ferroviaire, which established the principle of compensation to be paid by the State for public service obligations and infrastructure maintenance, was considered a success. However, SNTF still does not have (i) a cost accounting system to back up its claims for compensation from the Government, (ii) an efficient marketing strategy, because the cost accounting system does not exist, (iii) freedom for tariffs, because of strangulatory State control, (iv) autonomy in personnel management, because personnel policies, salary structure and even the appointment of the Director General are politically driven; (v) an acceptable project evaluation and investment planning cell; and (vi) a modern computerized management information system. These constraints, and the highly regulated environment in which it operates, make SNTF unable to maintain its infrastructure. Recently, foreign exchange constraints have deprived SNTF of spare parts for locomotive and rolling stock maintenance. The cumulative effect of these constraints is to render SNTF vulnerable to competitive pressures of the ongoing transport liberalization. Financial Performance 3.14 The project sought to improve financial management and to make the railways financially viable. By 1987, SNTF had accumulated deficits and debts to the point of illiquidity. Taking the view that the imprecision in the 1959 Convention as to the respective financial obligations of the Government and SNTF was the main source of problems, the Bank insisted that it be replaced upfront by a new convention which was approved by the Government in November 1987 and enacted by Decree of June 1988. The new convention, however, failed to establish a clear distinction between the commercial function of the railways and other functions, in the nature of public service, by which the Government would use SNTF to achieve broader socio-economic objectives. The latter kept growing without the Government's abiding by its commitment to compensate SNTF for corresponding costs. Despite the upfront financial restructuring that the Bank had also requested to recapitalize SNTF and reduce its indebtedness to manageable proportions, this failure to properly disentangle the railway and the Government produced  the same disastrous results as those that prevailed before project launch. By loan closing date, SNTF was again bankrupt with its future hinging on a new financial restructuring of unprecedented magnitude. 3.15 A comparison of actual versus forecast financial data (see Part III, F) shows the tremendous impact of local inflation on the railways finance. The SAR forecast used constant prices, assuming that tariffs would be revised as needed to neutralize inflation. Whereas working expenses measured in constant dinars were to remain unchanged at AD 1.56 billion from 1987 to 1991, a higher productivity compensating for costs generated by rising traffic (+2 percent annually for both passenger and freight), the actual data show them soaring to AD 3 billion in 1991 in current prices, mainly from local inflation (the price index rose by 66 percent during the period) and, to a much lesser extent, the failure to achieve any significant productivity gains. In sharp contrast to costs, actual traffic revenues in table I are shown to closely follow projection. The narrow path to financial recovery drawn at appraisal called for cumulative tariff increases of 60 percent in real terms until 1991, and 150 percent in current dinars given the actual inflation over the period, when SNTF was due to break even. Instead, the rail tariffs increased by just 60 percent between 1987 to 1991, meaning that the real value of fares and rates barely changed and that the expected tariff adjustment never took place. In 1991, the actual working ratio was 1.2 versus a projection of 0.75. 3.16 The preliminary figures released for 19923 point to a further deterioration of the railways finance, the working ratio rising to 1.6 despite tariff increases introduced in February 1992. The cumulative deficit incurred over 1988-92 exceeded AD 4 billion. By then, it became clear that SNTF's condition was unsustainable and the Government put it on the list of 22 critically imbalanced parastatals in need of financial restructuring. The Bank overdraft had reached AD 2.2 billion in early 1993, from AD 0.6 billion a year before. The long-and medium-term debt could not be serviced. By end of 1991, the debt outstanding amounted to AD 5.3 billion, and the short-term liabilities already included AD 3.5 billion of unpaid debt service. Measures of temporary relief were taken by the Government in early 1993, providing for freezing of the Bank overdraft, new credit facilities to finance working capital, and a AD 210 million subsidy. The tariff revision requested by the Bank to at least compensate for inflation was not accepted. SNTF and the Government both feared that higher tariffs would trigger traffic diversion to road and make things worse. The interim measures were to be complemented by in-depth financial restructuring based on conclusions and recommendations of consultants assigned to carrying out a technical and financial audit of the railways. Details on progress of the audit and on the financial restructuring plan (estimated to require as much as AD 6-8 billion compared to AD 2.2 under the 1987 financial restructuring), were unknown at the time this report was finalized. 3.17 The lesson to be drawn from such a disappointing performance is that SNTF cannot be financially viable unless its commercial function is properly insulated from interferences by the Government. The pervasive influence of "public service" obligations was felt in many ways: (a) there was a great reluctance to increase passenger fares out of social concerns, evidenced from the beginning as they were raised by only 5 % against the 20% average increase requested upfront by the Bank; (b) while inflation was running at 13% annually, SNTF had to wait for two years until February 1991 to get approval on higher tariffs; (c) SNTF had to carry the cost of excess staff to avoid aggravating the national unemployment problem; staffing was above 18,000 when 15,000 would have been enough as per SNTF's management own admission; (d) across sectors decisions made by the Government, irrespective of SNTF's absorption capacity, had a destabilizing impact on its finance, like the nationwide increase of 3/ More recent final data were requested from the borrower and will be incorporated if timely received.  salaries which boosted labor expenses from AD 1.8 billion in 1991 to AD 2.8 billion in 1992 (+55%); (e) the level of operations was maintained at all costs; it was clear that narrow gauge lines were a major source of financial deficit, and that a good third of freight stations and nearly 50% of passenger stations had too little traffic to be profitable4, but they remained open anyway; (f) decentralization had become the motto of Algerian policy, and SNTF underwent a thorough reorganization giving managerial autonomy to provincial units and multiplying the number of wholly-owned subsidiaries; the new corporate structure, ill conceived, loosened coordination of functions, relaxed financial discipline, and generated more staffing needs and overhead costs. 3.18 Three basic conditions of successful implementation were missing throughout the Second Railway Project: (a) a legal arrangement by which SNTF would essentially be assigned to pursue commercial objectives and to carry out limited "public services" on Government request and upon assurances that financial losses involved would be fully compensated; the 1988 Convention was flawed by the emphasis it placed on balancing development across provinces and helping people exert their "right" to transportation; (b) adequate financial management systems to properly measure the costs of specific services, thereby enabling them to charge Government for those services provided at its request; SNTF procrastination in recruitment of consultants to revamp its cost accounting system is hard to understand because it was only by producing hard data that they could back their claims for higher subsidies; the Government kept paying a fraction of costs that fell under its responsibility under the 1988 Convention: the subsidy was raised from AD 337 million in 1988 to AD 650 million in 1992 which, then, represented less than 40% of what SNTF had estimated as normal entitlements; (c) leadership by a strong railway management team, capable of resisting undue pressure by Government; instead, frequent changes at the top, definite weaknesses in personnel and financial management, and the failure to develop in-house expertise on economic subjects as had been targeted under the Project, in combination with a typical "civil service" culture, contributed substantially to deterioration of SNTF's finance. Economic Revaluation 3.19 More than 90% of investments carried out relate, in roughly equal shares, to routine track maintenance ("draisines" mainly) and to shunting locomotives. The SAR concentrated on the economic evaluation of other project items which were not implemented, giving few details on the calculation of ERRs for track maintenance equipment which was a minor component totalling no more than 10% of total project cost. The key assumption there was that, once rehabilitated, tracks could be maintained using more capital intensive techniques, resulting in net productivity gains. The lack of details and the fact that the case of yard locomotives had not been considered led to adopt a new approach to the economic revaluation of Bank financed investments. 3.20 For shunting locomotives, benefits to be derived from the investment come from substituting a specialized and more cost effective equipment to mainline locomotives, and from the favorable impact it has on the turnaround time of freight cars thereby increasing their productive use. The existing fleet includes 24 shunting locomotives more than 20-year old on average. They already had already a low availability rate of less than 60% in 1991, and produced no more than a fourth of total yard movements mostly performed by mainline locomotives. Regarding freight cars, insufficient shunting capacity was one 4/ 50 stations out of 185 had daily operations of less than 10 tons per day in 1986, according to the Etude Nationale des Transports, and 48% of passenger stations had daily revenues of less than AD 500 (in Volume III. Le Transport Ferroviaire, pp. 5-7 and 5-20)  -10- of many problems contributing to a rather slow turnaround time of more than 10 days for other than unit train services, and it is assumed that the new shunting locomotives will help improve performance marginally, and raise the average productivity of freight cars from about 250,000 ton kilometers per year at present to 262,500 ton kilometers (+5%). Based on these two assumptions, the ERR is estimated as 13% (detailed calculations are in Annex 2). 3.21 For "draisines," which are basically used to transport workers and materials to routine track maintenance sites, the benefits will come from reduction of idle time and, therefore, higher production per worker and per day. The some 40 "draisines" purchased under the project are to be deployed nationwide, and expected to cover a third of transport needs of all sectors constitutive of the maintenance organization. The more efficient transport of maintenance crews will reduce the number of hours needed to perform routine maintenance tasks such as grass and weed control, bush clearance, and partial reballasting. It is assumed that labor costs will decrease by 10% overall, a conservative estimate, from which gives an ERR of 17% is derived (detailed calculations are given in Annex). Proiect Sustainability 3.22 The poor performance under the First Railway Project (Ln 0996; US$49m) and the five lessons learnt have been explained (para. 3.2) provide a reflection on the difficult operating environment in Algeria. Major staff reorganization resulting in changes in key personnel was a problem then, and continues to be a problem. The lack of fiscal responsibilities (e.g. Government places a ceiling on tariffs but does not compensate SNTF for consequential losses, in spite of the agreement under the "Convention"), and chronic delays in tariff revisions still affect financial performance. SNTF is slow to recognize merit in policies and practices followed abroad. There is limited willingness to change the system and to adopt modifications suggested from outside, which makes it particularly vulnerable to Government interferences designed to serve objectives unrelated to SNTF's interests, such as balanced regional development, maintaining unprofitable rail services and overstaffing on socio-political grounds. These deficiencies were not evident during project appraisal and at negotiation stage, despite the warning signals given by the First Railway Project. Two essential components of the institution building targeted under the project, namely setting up an investment planning cell and promoting better manpower planning and human resource development, failed to materialize. Scarce resources remain misallocated to too many uneconomical projects which, in the end, will inflate operating costs and aggravate the railway financial condition. For the present, there appears to be not much hope for sustained development in the railway subsector. This precludes the possibility of another railway project in the near future, unless specific remedies (i) against inappropriate changes in key personnel and project design, (ii) against stifling of SNTF's management autonomy, which requires that a Contrat-Plan satisfactory to the Bank be signed and implemented, and (iii) for a vigorous application of the Bank's procurement procedures, are set in place. Bank Performance 3.23 The project was well prepared by the Bank. Implementation difficulties, however, show that the Borrower was not sufficiently involved at design stage and, at least for technical assistance, that project ownership on its side was too shallow. Furthermore, by not being rooted in pre-agreed and well articulated corporate plan, the project was more vulnerable to the shifting views of a succession of SNTF's management teams. In hindsight, the main comment on the preparation would be that the project should have been smaller in size and scope, given the history of an earlier failure and the country and institutional risks involved.  11- 3.24 Supervision was intensive and adequate, although procurement issues could at times have been handled more expeditiously. Growing frustration of having to deal with repetitive matters that showed limited progress in the Borrower's acceptance of Bank guidelines, may have been a factor. Late responses correspond to cases in which successive revisions of the bidding documents did not reflect the key changes agreed; often changes in phraseology were made after an adequate French text had been agreed upon and communicated, which necessitated very detailed verifications, renewed consultations within the Bank on purely textual amendments. The track rehabilitation and the telecommunications bidding documents, which went through several iterations of corrections and amendments because the Bank's amendments were not adopted scrupulously, are typical examples. These are lessons to be remembered for the future. Bidding documents for major contracts should be agreed upon before presentation of projects to the Board, and the use of standard bidding documents should be mandatory through project implementation. On a different subject, technical backstopping by the Bank was generally thorough, with rare exceptions like when the terms of reference approved for the cost accounting study and the railway traffic centralized management study were later found to partly duplicate. Finally, the Borrower never complied with major loan covenants (for instance, the project has never been audited), which should have led the Bank to take a tougher stance, including suspension of disbursement. Borrower Performance 3.25 Several institutional factors which had an impact on project performance have been mentioned earlier. The three most significant factors which militated against project success are: (i) the lack of management autonomy for SNTF, all key issues being controlled by the MOT; (ii) the SNTF's management commitment to the project becoming a function of the opinions of the manager currently in charge; and (iii) most importantly, the commitment of senior officials to the views of their superiors rather than to the project itself. 3.26 The Borrower showed limited adherence to Bank procurement rules, and displayed punctiliousness in the execution of contracts with foreign suppliers, as a result of which some payments, particularly final payments, were delayed and consignments were not cleared through the customs with normal expedition (eg: draisines). Until half-way through project execution when the project cell was established, studies and consultancy services included in the project were looked upon as unnecessary and unproductive. 3.27 In the dialogue during the project, it was clear that MOF had a better awareness of what the Bank expected and the project needed. But MOT did not share the same sensitivity. This was most evident during the last mission when they (i) refused to raise tariffs even to cover inflation till more studies had been undertaken and (ii) blocked the initiation of a Contrat Plan for purely legalistic reasons. The officials of SNTF would have gone ahead with those reforms, if they had had the autonomy to take a decision of their own in this regard. Project Documentation and Data 3.28 The loan agreements of future projects with SNTF should incorporate the main agreements listed in the Action Plan, particularly as regards (i) the top management team, (ii) financial and operating targets, and (iii) the use of the Bank for standard bidding documents. It should also add that the failure to fulfill some of the key covenants may require the Bank to ask for some complementary assurances from the Government in order to ensure continued project viability and institutional progress. Such a provision is expressly needed as the officials of the MOT took the view that asking for additional reforms  -12- like the Contrat Plan fell outside the purview of the loan agreement, hence the Bank had no right to ask for such measures. 3.29 The SAR had several useful elements which helped the implementation. In hindsight, strengthening of the procurement section would have been useful. Cofinancing 3.30 Cofinancing from the EXIM Bank of Japan (JEXIM) provided an addition of funds needed to fill the financing gap. Insufficient coordination between JEXIM and the Bank contributed to project launch delays. The three parties, SNTF, JEXIM and the Bank, had a very steep learning curve to traverse before divergent requirements of the three institutions could be met. JEXIM Bank consists of several constituent Banks, each one of whom asked for a separate loan guarantee from the Government which refused the request. The adoption of the French language was another bone of contention. The delay of 21 months was occasioned by these two and other similar reasons which can be traced to the lack of familiarity of the institutional imperatives. JEXIM should have been invited to take active part in the project negotiations and thereby all the three partners would have been clear about their cross- requirements.  -13- PROJECT COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SECOND RAILWAY PROJECT (LOAN 2976-AL) PART II SNTFs COMMENIS ON THE SECOND RAILWAY PROJECT COMPLETION REPORT5 The World Bank report draws the unabated conclusion that SNTF and the Ministry of Transport bear full responsibility for failure of the Second Railway project,while it fully exonerates the Bank. This perception ought to be mitigated, if not changed, in order to give a better and more balanced account of real facts. The following comments are presented by SNTF from that perspective. 1. Bank's Assessment of SNTFs Management To avoid fruitless polemics, SNTF abstains from responding to the Bank's allegations of mismanagement and, for the same reasons, does not pass any judgement on the Bank's management. 2. Project Implementation Amendments 1990-1994 These amendments were not due to a change of mind by SNTFs management but mainly to the evolution of the country's economic situation and the constraints it imposed on the enterprise. 3. Delays suffered by the Project Among the reasons given, it would seem sensible to mention the lack of coordination between the World Bank and EXIM Bank of Japan. VI/ By letter dated February 4, 1994, The Bank had requested preparation of part II by the Borrower. This text is an unofficial tranalation of the reply received by the Bank on April 4, 1994 (the French original is in Annex 3. More detailed coments. including updating of seo project data, were requested by the Bank in a fax dated April 25, 1994. At the ttle this PCR was issued. no anawer had been received.  -14 - Thus, following the loan agreement signature, it took more than a year to "negotiate" with Japan's SANWA Bank, which blocked the project launching. Another cause for delay was the Bank's slow answering to SNTF's correspondence. Changing a sentence, sometimes a word, entailed slippages by several months. 4. Amendments in the Project's contents The Bank's explanation for these amendments was that "each manager found reasons to change what his predecessor had agreed to." We feel there are more logical reasons than those given by the Bank. These reasons were given to the World Bank's management. We thought that by endorsing the requested amendments, the Bank had accepted the underlying rationale. Otherwise, the Bank would have done better firmly opposing these amendments, now considered unreasonable, rather than quoting them later as one of the basic reason for project's failure. 5. Studies which should have been launched The various studies planned under the project have not been launched. In this regard, it should be mentioned that, based on its review of the terms of reference of various studies, the project management unit, set up by SNTF in September 1991, found many overlappings and duplications. The terms of reference had, however, been studied and approved by the World Bank. As an example, the Rail Traffic Centralized Management project had called for a diagnosis of accounting systems, also to be carried out under the cost accounting study. The documents had to be revised to eliminate the duplications that the Bank had failed to detect. As regards the cost accounting study, it took the Bank many months to accept SNTF's choice of the foreign consulting firm, for reasons which have not been given.  - 15 - 6. Distrust towards foreign suppliers In the past years, SNTF has passed hundreds of contracts with foreign suppliers without feeling any "distrust" towards them. Strict enforcement of contractual obligations is logical commercial practice, and there was no proof that the foreign party cannot be trusted. On the other hand, SNTF perceived reluctance by some suppliers to use the World Bank's guidelines. One of them, the Austrian firm Plasser, even rejected the World Bank's standard contract. 7. Conclusion SNTF considers the Second Railway Project Completion Report as particularly one- sided in its assessment of the project failure causes which the report basically attributed to the Algerian managers involved in project implementation. SNTF repudiates such a view insofar as it does not take into consideration other more decisive factors.  -16- PROJECT COMPLETION REPORT DEMOCRATIC AND POCULAR REPUBLIC OF ALGERIA SECOD RAILIAY PROJECT (LOAN 2976-AL) PART III A. PROJECT DATA 1. General RVP Unit - MENA Sector = Infrastructure - Transport Subsector = Railways Borrower = SNTF Executing Agency SNTF Fiscal year of the Borrower = January 1 - December 31 2. Related Bank loans and/or credits Loan/Credit Title Purpose Approved Status Ln. 0996-AL First Railway Rehabilitation Closed Dec l ___________ Project 31, 1982 Ln. 2808-AL Fifth Highway ____ ___ ___ Project__ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _  - 17- 3. Project Timetable Item Date Planned Date Revised Date Actual Identification 01/12/87 Preparation __03/23/87 Appraisal Mission 09/30/87 09/30/87 Loan Negotiations 05/14/88 05/14/88 Board Approval 06/24/88 06/24/88 Loan Signature 12/31/88 08/30/89 Loan Effectiveness 03/29/90 Loan Closing 12/31/1992 02/28/1993 02/28/1993 Loan Completion 04/30/1993 05/31/1993 06/30/1993 4. Loan Disbursements  - 18- Cumulative Estimated and Actual Disbursements (US $ million) FY8 FY90 FY91 FY9 FY9 FY94 9 2 3 A. BANK i) Appraisal Estimates 46 96 121 134 143 0 ii) Actual 0 0 12 12 23 0 iii) Actual as a % of Estimate 0 0 10 9 16 0 B. EX-IM BANK JAPAN i) Appraisal Estimate 15 33 41 45 47 0 ii) Actual 0 0 0 4 2.0 2.0 iii) Actual as a % of Estimate 0 0 0 9 4 - Date of final disbursement: 08/19/1993 Bi. PROJECT COSTS AND FINANCING (in US dollar million) CATEGORY APPRAISAL ESTIMATE LATEST COMPLETI l_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ O N Local Foreign Total Local Foreign Total % 1. track rehabilitation 51.5 68.2 119.7 0 0 0 0 2. track renewal 60.0 147.2 207.2 0 0 0 0 3. Signalling and 12.6 24.5 37.1 0 0 0 0 teleco. equipment _ _ 4. Equipment for track 5.3 35.3 40.6 4.6(*) 30.9(*) 35.5(*) 87.4(*) maintenance 5. Phosphate handling equipment 1.0 2.1 3.1 0 0 0 0 6. Technical 16.3 6.4 22.7 0 0 0 0 assistance,training  19 - 7. Study tours T___0.6 0.6 0 0 0 0 TOTAL 1146.7 1 284.3 431.0 4.6 (*) 30.9 %35.5(*) 8 %) (*) The revised project costs were computed on the basis of contracts approved, cross-referenced with disbursement data. Detailed information on what they might have financed from their own budget was not communicated by SNTF. It follows that the above data is incomplete. The problem essentially relates to track renewal. Infrafer was renew the Beni Mansour-Setif-El Gourzi line (these works had been estimated at a total cost of US$132 million). The exact extent and final cost of works carried out by Infrafer are not known. Bank financed contracts were for track maintenance equipment. The local costs borne by SNTF have been estimated as 15 percent of the foreign costs of contracts financed by JEXIM and the Bank. B2. PROJECT FINANCING (US $ million) Source Planned Loan Revised Final IBRD 143,000,000 23,144,656.37 Cofinancing EXIM Japan 47,000,000 7,798,859 Government 241,000,000 not communicated Total 431,000,000 not communicated C. PROJECT RESULTS 1. Direct Benefits The project was intended to improve traffic conditions on the most trafficked lines. Without the project, the railway infrastructure would deteriorate to the point of disrupting traffic. Direct benefits assessed at appraisal were: - track rehabilitation and renewal: (a) reduction of track maintenance costs (without the project, the useful life of rail and sleepers would be shorter by about a third; more reballasting would be needed);  - 20 - (b) increased train speed and productivity, and lower maintenance costs for rolling stock (savings of AD 1840-1020 per train/hour); (c) increased traffic safety (reduction of derailings by 50%); - signalling and telecommunications: (a) increased safety and reduction of derailings; (b) higher productivity of the rolling stock; (c) labor costs savings due to increased automation; - track maintenance equipment: (a) routine mechanized maintenance to reduce costs by AD 30,000/km. (b) labor-intensive periodic maintenance to be 2.7 times more expensive than mechanized periodic maintenance.  - 21 - 2. Economic Impact Component IRR: Appraisal Estimate IRR: Actual - Rehabilitation of the Annaba- Ramdane Jamel track 18% not completed (88km) - Track renewal: Beni Mansour-Setif 24% not completed Setif-EI Gourzi 22% El Hadjar-Bouchegouf 22% Bouchegouf-Souk Ahras 27% - Signalling-Telecommunications 15% - Track maintenance equipment 30% 17% & 13% 3. Financial Impact Indicators: FY 1988 FY 1991 forecast actual forecast actual - working ratio 1.01 1.11 0.75 1.23 - operating ratio 1.21 1.28 1.0 1.27  - 22- D. STATUS OF COVENANTS Agreement Section Covenant Status Original Revised Description of Covenant Comment Type Fulfillment Fulfillment Date Date Loan: 3.03(a) F NC 12/01/89 - Not later than 10/01/89 Consultancy proposals Default employ consultants to obtained from consultancy design a cost accounting firms, but an award was system for railway never made. l__________ ___________ operations and tariffs. 3.03(b) F NC 12/31/90 07/93 Not later than 12/90, Not complied with. Default furnish the proposed cost accounting system and the timetable for implementation to Bank for its review. 5.02 F NC 12/90 12/93 The borrower shall for Reasons for non- Default each of its fiscal year compliance. (i) Default on after FY ending on the cost-accounting study. 12/90, take all steps to (ii) failure of the reach financial Government to pay equilibrium. compensation as agreed in the convention ferroviaire. (iii) Failure to revise tariffs adequately and in time. 5.01(b/ F. NC Audit of SNTF accounts SNTF requested the use of c) Default special accounts and project funds to pay for OEs: SNTF should external auditors. Even furnish related audit though this was agreed to reports no later than 9 in 1992, the auditor was months after the end of not selected until 12/92 by each fiscal year. SNTF.  23.. E. USE OF BANK RESOURCES 1. Summary Planned Final A. Through Appraisal 98.4 Through Board Presentation 107.2 Through Effectiveness Not relevant because of excessive delay in effectiveness. Supervision 72.0 T 94.0 2. Staff input and Maior Project Missions Activity Date Staff input in Composition Overall Problems staff-days in Project Status the field Identification/ Jan 87 15 E, Ec, F - - Preparation March 87 42 E, E, Ec, F, other specialists l Appraisal Sep/Oct 68 E, Ec, F - - 87 Post Appraisal Feb-Mar 5 E - - 88 Post Appraisal Mar- 3 E - - April 88 Supervision 1 10/31/88 28 E, Ec 1 Proc. Supervision 2 Feb. 89 4 specialist 1 - Supervision 3 March 89 40 E, Ec. 1 Proc. Supervision 4 Oct 89 15 E 1 Proc.; Fin. Supervision 5 Feb 90 3 E 1 Proc.; Fin. Supervision 6 April 90 3 F 1 Proc.; Fin. Supervision 7 July 90 8 F 1 Proc.; Fin.  24 - Activity Date Staff input in Composition Overall Problems staff-days in Project Status the field Supervision 8 Dec 90 13 E 2 Proc.; Fin. Supervision 9 Oct 91 10 F 3 Proc.; Fin.; Mgmt. Supervision 10 04/24/92 36 E, Ec, F 3 Proc.; Fin.; Mgmt; Trans. Policy Supervision 12 May 92 6 Project 3 Proc.; Fin.; Advisor, Mgmt; Trans. Division Chief Policy Supervision 13 Oct 93 24 E, F 4 Proc.; Fin.; Mgmt; Trans. Policy Supervision 14 Feb 93 24 E, F, Division 4 Proc.; Fin.; Chief Mgmt; Trans. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ P o lic y Note: A substantial part of supervision went to resolve procurement issues, which proved to be serious impediments preventing the start-up of field works; the Algerians were invited to send delegations to Washington as part of the supervision effort. There were three such missions, each of which consisted of three experts for about 10 days each.  25 F. FINANCIAL PERFORMANCE STATEMENTS SNTF SUMMARY INCOME STATEMENT: actual versus forecast over 1988-1992 1988 1989 1990 1991 1992 lorecast actual forecast actual forecast actual forecast actual provisional )perating revenue: traffic revenues 1432 1464 1602 1529 1810 1710 2041 2189 2512 other revenues 40 27 40 266 40 253 40 409 338 subsidies (tracks) 337 224 340 350 342 450 345 520 6so subtotal 1809 1715 1982 2145 2192 2413 2426 3118 3500 .Vorking expenses: labourcosts 1049 1137 1033 1444 101a 1s89 1018 1821 2805 materials. supplies 211 2t8 216 344 221 432 227 848 1019 other expenses 30 6 30 8 30 7 30 13 14 taxes 200 219 224 260 253 296 286 35s 31B sub total 1490 1651 1503 2056 1520 2423 1561 3036 4156 Depreciation 289 256 300 272 535 249 559 271 289 7otal operating expenses 1779 1907 1803 2328 2055 2672 2120 3307 4445 Interest 226 319 222 318 241 567 240 640 680 Exceplional items (net) subsidy 196 others 0 -302 0 252 0 350 0 -424 sub total 196 -302 0 252 0 350 0 -424 30 0 -813 -43 -249 -104 -476 66 -1253 NET INCOME BEFORE TAX 0 -813 -43 -249 -104 -476 33 -1253 -1595 NET INCOME AFTER TAX ,atios: - with subsidies working rstlo 0.82 0.96 0.76 0.96 0.69 1 0.64 0.97 1.19 operating ratio 0.98 1.11 0.91 1.09 0.94 1.11 0.87 1.06 1.27 -less subs,dies: working ratic 1.01 1.11 0.92 1.15 0.82 1.23 0.76 1.17 1.46 : operating ratio 1.21 1 28 1.1 1.3 1.t1 1.36 1.02 1.27 1.56 1Jotes on the 6tatement: actual financial deta are nunaiduted: the accounting treatment may not be fully consistent 8orm one year to another, their accuracy is uncerlain (the Financial restructuring plan dentified some accounting errors, and adjusted the FY91 lose to DA 1.8 billion. lepreciat,on is based on historical values: 'other revenues' may be wrongly taken as operating revenues. m \sylvie\sntl  -26 - SNTF SUMMARY BALANCE SHEET: actual versus forecast over 1988-1991 1988 1989 1990 1991 forecast actual forecast actual forecast actual forecast actual ASSETS Current assets Cash 215 98 240 173 272 47 306 60 Customers 399