Benin - Transport Sector Strategy

Document of The World Bank FOR OFFICIAL USE ONLY CONFIDENTIAL Report No 12098 BEN REPUBLIC OF BENIN TRANSPORT SECTOR STRATEGY March 15 1994 FILE COPY CONFIDENTIAL Infrastructure Operations Division Report No 12098 BEN Occidental and Central Africa Department T___y __py,_e_OS_ZE_C_ Africa Region L 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 ABBREVIATIONS AGDSD Agence de gestion de la dimension sociale du développement (Agency for Management of Social Dimensions of Development) AGETUR Agence d'Exécution des Travaux Urbains (Urban Works Agency) ASECNA Agence pour la sécurité de la navigation aérienne en Afrique et à Madagascar (Agency for Air Navigation Safety in Africa and Madagascar) BGR Bureau de gestion du réseau (Road Management Office) BIC Bénéfice industriel et commerciel (industry and trade tax) CARDER Centre d'action régionale et de développement rural (Regional Action and Rural Development Center) CCIB Chambre de commerce et d'industrie du Bénin (Benin Chamber of Commerce and Industry) CFD Caisse française de developpement (French grant aid) COBENAM Compagnie Béninoise de navigation maritime (Benin Maritime Navigation Company) COTECNA Import Inspection Company CNBF Centre national des bureaux de frêt (National Freight Offices Center) CNCB Conseil national des chargeurs du Bénin (National Dockers Council) CNPR Conseil national de prévention routière (Road Safety Counci) CPC Cellule de programmation et de coordination (Programming and Coordination Unit) DAC Direction de l'aéronautique civil (Civil Aviation Department) DROA Direction des routes et ouvrages d'art (Roads and Works Department) DDT Direction des transports terrestres (Land Transport Directorate) DET Direction des études techniques, MTPT (Directorate of Technical studies) DVU Direction des voiries urbaines (Urban Roads Department) DMTP Direction du matériel des Travaux Publics, MTPT (Directorate of Public Works Equipment) FR Fonds routier (Road Fund) HDM Highway Design Model KfW Kredit füir Wiederaufbau (German bilaterial aid) MDR Ministère de développement rural (Ministry of Rural Development) MEUH Ministère de l'Environnement, de l'urbanisme et de l'habitat (MInistry of Environment, Urban Development and Housing) MP Ministère du Plan (Planning Ministry) MTPT Ministère des Travaux Publics et Transport (Ministry of Public Works and Transport) OCBN Organisation Commune Bénin Niger (Benin-Niger Railway) PAC Port Autonome de Cotonou (Benin Port Authority) PIP Programme d'investissements publics (Public Investment Program) SAL Structural Adjustnent Lending SERC Service des études routières et du contrôle (Road Studies and Supervision Unit) SOBEMAP Société Béninoise de manutention portuaire (Benin Stevedoring Company) SONACOP Société nationale de commercialisation des produits petroliers (Petroleum Marketing Company) SONAPRA Société Nationale pour la promotion agricole (Agriculture Promotion Company) SONAR Société nationale d'assurance et de réassurance (National Insurance Company) SRDR Services des routes de désserte rurale (Rural Feeder Roads Unit) SROAs Services régionaux des routes et ouvrages d'art (Regional Road Units) S/RER Sous-direction de l'entretien routier (Road Maintenance Bureau) SYNTROB Syndicat des transporteurs routiers béninois (Benin Road Carriers Union) TRP Transport Rehabilitation Project UNACOB Union nationale des conducteurs béninois (National Truckers Union) UNATRAB Union nationale des transporteurs routiers béninois (National Road Carriers Union) US$ = CFAF 275 REPUBLIC OF BENIN TRANSPORT SECTOR STRATEGY CONTENTS Part I: Recommendations A . Introduction ......................................... 1 Purpose and Structure of This Report . . . . . . . . . . . . . . . . . . . . . 1 B. Context and Rationale ................................... 2 Recent Transport reforms ............................ 2 Country Strategy .................................. 3 Sector Strategy Rationale ............................ 4 C. Sector Objectives, Issues and Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 4 Sector Strategy Objectives ............................ 4 Sectorwide Issues and Priorities . . . . . . . . . . . . . . . . . . . . . . . . 5 Impact of Devaluation on Sector Policy . . . . . . . . . . . . . . . . . . . . 9 D. Issues and Recommended Strategy by Subsectors . . . . . . . . . . . . . . . . . 12 Road Sector .................................... 12 Road Transport Sector ............................. 14 Port and Maritime Subsector ......................... 16 Rail Subsector .................................. 17 Airport Subsector ................................ 18 Appendix: Matrix of Policy Measures and Actions ................ 21 Part II: Analysis A . Introduction ........................................ 27 Purpose and Structure of This Report ..................... 27 B. Country Background ................................... 28 Economic Situation and Country Strategy .................. 28 The Role of the InformalSector ....................... 31 This report is based on the findings of World Bank missions which visited Benin in March/April 1993 and December 1993. The March/April 1993 mission team included Mr. Bernard Peccoud, Mission Leader, Mr. Hedi Larbi, Transport Engineer, and Mr. Jean-Luc Aka-Adjo, Financial Analyst of AFlIN, Mr. Henri Poupart-Lafarge, Operations Assistant, AFTES; and the following consultants: Messrs. J.P. Tarroux, Transport Economist, L. Cosyn and De Issac, Highway Engineers, and E.B. Ahouanmenou, Human Resource Specialist. Ms. Suzanne Snell was responsible for editing. ii Contents C. Sector Background ......................................... 33 Transport Network Structure .............................. 33 Intermodal Competition ................................. 33 Current Transport Demand and Traffic Forecasts . . . . . . . . . . . . . . . . . 34 Comparative Advantage of the Benin Corridor . . . . . . . . . . . . . . . . . . . 37 Public and PrivateActors ................................ 39 Public Finance andlovestment ............................. 40 Environmental and Poverty Links ........................... 42 D . Road Subsector ......... ................................. 43 Road Infrastructure .................................... 43 Road Maintenance Priorities .............................. 45 Road MaintenanceFinancing .............................. 47 Road Investment Priorities ............................... 50 Road Investment Financing ............................... 53 Rural Roads ........................................ 54 M unicipal Roads ..................................... 57 Overall Subsector Management ............................ 58 Road Maintenance Management ............................ 60 Heavy Equipment Management ............................ 63 Private Sector Involvement ............................... 64 E. Road TransportSubsector ..................................... 66 Vehicle Fleet ....................................... 66 Road Freight Carriers .................................. 67 Road Freight Facilitation ................................ 68 Road Freight Tariffs andCosts ............................ 69 Interurban PassengerCarriers ............................. 70 Urban Transport ..................................... 71 Road Safety ........................................ 72 Economic Impact of Road Transport Sector . . . . . . . . . . . . . . . . . . . . . 74 Financial and Fiscal Situation ............................. 74 Professional Organizations ............................... 77 F. Port and Maritime Subsector ................................... 78 Port Infrastructure .................................... 78 Port Operations ...................................... 80 Freight Handling Operations .............................. 81 Financial Status of Port Authority ........................... 83 Financial Situation of Freight Handling Company ................. 86 Maritime Transport Operations ............................ 88 Financial Performance of Navigation Company ................... 89 Financial Performance of Dockers Council ..................... 92 G. Railway Subsector ......................................... 93 Infrastructure andOperations.............................. 93 Financial Status of Railway Company ........................ 96 H. Air Transport Subsector ...................................... 99 Airport Infrastructure .................................. 99 Air Transport Operations ............................... 100 iii Contents ANNEX TABLES A Benin: Total Freight Import-Export Volumes, 1965-1992 .................. 103 B Benin: International Air Traffic, Cotonou Airport, 1981-1991 ............... 104 C Benin: Financial Status of Transport Sector Public Entities, 1991 ............. 105 D Benin: Government's Proposed Five-Year Transport Sector Program (1993-97) . . . . 106 E Benin: Road Fund, Income by Source, Estimate and Actual, 1987-1992 ......... 107 F Benin: Road Fund, Expenditure by Category, Budget and Actual, 1987-1993 ..... 108 MAPS A Benin: Administrative Divisions and Population Density .................. 109 B Benin: Road Traffic, 1992 ....................................110 IBRD 25467 Benin Transport Infrastructure iv Contents REPUBLIC OF BENIN TRANSPORT SECTOR STRATEGY Eiecutive Summary i. Benin's transport sector plays a leading role in the country's economy and an important regional role as well. Trade, transport, and related services produce roughly a third of Benin's GDP, about the same share as does agriculture, and Benin acts as one of a few competing corridors serving landlocked countries in West Africa's interior. Thus the efficient functioning of the sector has an impact far beyond facilitating agricultural development in Benin. ii. The emergence of a new political and economic environment in Benin in the early 1990s created an opportunity to pursue and extend reforms in the transport sector which were initiated following the previous sector strategy review in 1984. This report proposes a revised and updated transport sector strategy based on assessments of gains made over the last decade and on current fiscal and financial analysis. It.identifies the main institutional, fiscal, operational and management issues, makes recommendations, and presents an action program for the next five years for the sector as a whole and for each subsector individually (maritime, road, road transport, rail and air). This strategy, which has yet to be adapted to take into account expected changes in costs and transport activities, will also help the country to support recent external adjustment resulting from the devaluation of the CFAF. iii. The three top priorities of the proposed new transport sector strategy are threefold: (a) REGIONAL COMPETITIVENESS. The competitiveness of Benin as a transit corridor must be improved in the short run by allowing road and rail modes to pursue their comparative modal advantages, by streamlining administrative requirements (including administrative procedures and monitoring procedures at the port and on the highways) and by improving freight handling operations and transport facilitation (including measures to reduce port zone congestion). Maintaining a competitive position over the long run will further require: (i) protection of the highly informal structure of road transport from excessive regulation, while making it easier for experienced operators to graduate to the formal sector through access to financing and management training; (ii) continued withdrawal of public entities from transport operations, including further subcontracting of maintenance works to private enterprises, and (iii) quality improvements in road transport through reform of vehicle inspection procedures, in the driving skills of urban passenger carriers and freight transport operators, and in traffic safety. (b) MAINTENANCE AS FIRST PRIORITY. Better use of existing infrastructure, including both rural and urban roads, through maintenance and traffic and safety management, must be the overall first priority. In order to generate the funds required for infrastructure maintenance, Road Fund resources must be increased, through earmarked toll charges from all paved roads and additional subsidy if necessary. Financing and executing of maintenance for municipal roads and of a portion of the rural network will be transferred to local entities, while the Road Fund will be limited to financing the routine maintenance of the network under MTPT's responsibility. New investment in transport infrastructure must be severely restricted, with rehabilitation of Cotonou's main roads and of the Cotonou-Pofto Novo highway at the top of the list. iv. Part I summarizes overall sector priorities and specific issues and recommendations in each subsector. A matrix of policy measures and actions is presented as an appendix to Part I. In Part II, a section situating the transport sector in the context of the country's economic setting is followed by individual sections presenting the analysis for each subsector. Network maps and tables on investment, finances and traffic are given in an annex to Part II. REPUBLIC OF BENIN TRANSPORT SECTOR STRATEGY PART I: RECOMMENDATIONS A. Introduction PURPOSE AND STRUCTURE OF THIS REPORT 1. Benin's prosperity depends heavily on trade and transport. As one of several competing corridors linking the Sahel to the sea, Benin needs an efficient transport sector in order to maintain its competitiveness as a corridor, and also to assure good domestic supply responsiveness, especially in agricultural production. Investment in infrastructure had created adequate networks prior to. the 1984 Transport Sector Strategy; since then, liberalization and privatization of transport activities has resolved many of the institutional issues raised in the 1984 TSS report. The emergence of a new political and economic environment since 1990 justifies a new look at Benin's transport strategy, focussing primarily on facilitation, fiscal/financial, and capacity building issues. 2. This report was prepared jointly by the Ministry of Public Works and Transport (MTPT) and the World Bank during the implementation of an ongoing Transport Sector Project. Government organized an internal workshop in March 1993 and a follow-up, three-day user and donor conference in November 1993 to agree on the new transport strategy. Comprehensive discussions with Government are continuing, with Bank visits in December 1993 and March 1994. The latter visit coincided with the distribution of the Green Cover version of this report and covered the impacts on the transport strategy of the January CFAF devaluation. 3. Part I of the report presents the rationale and the priorities of the proposed strategy for the transport sector, including the possible consequences of the devaluation, and summarizes the strategies for each of the five subsectors (road, road transport, port and maritime, rail and air). It provides recommendations addressing major institutional, fiscal, operational and managerial issues in the Ministry (MTPT) and in the sector's five public enterprises. Part I is organized in four sections and a policy matrix. Following the introduction which is Section Part I: Recommendations 2 A, Section B covers the rational for the sector strategy and its links with country strategy. Section C covers sector objectives, issues and priorities. Section D is the summary of subsector strategies. The main issues, objectives, actions already taken and to be taken, and monitoring actions are summarized in a Policy Matrix at the end of Part I. 4. Part II of the report provides a detailed technical analysis in support of the overall strategy and the subsector strategies. Following the introduction which is Section A, Section B and C provide details concerning country and sector background respectively. Sections D - H provide details concerning the road, road transport, port and maritime, rail and air subsectors respectively. Maps showing the network structure, population densities, and road traffic, and annex tables showing port and air traffic volumes, financial status of parastatals, Government's investment proposals, and Road Fund income and expenditures are included at the end of Part II. B. Context and Rationale RECENT TRANSPORT REFORMS 5. The last Bank-supported transport sector strategy review was carried out in 1984. It laid the groundwork for a number of improvements in the sector, and led to the appraisal of the Transport Rehabilitation Project (TRP). The Transport Rehabilitation Project (TRP), implemented beginning in 1989 with financing from the Bank and other donors, has involved (a) rehabilitation of port infrastructure, (b) rehabilitation of the main road network, (c) formulation of institutional and organizational reforms aimed at improving routine road maintenance, (d) improvement of port management, and (e) reform of government-controlled maritime and road transport operators. French bilateral donor agencies have been involved in railway and airport activities over the same period. 6. During the 1989-91 period, the following important improvements were made in the transport sector: (a) the Compagnie Bgninoise de navigation maritime (COBENAM), or Benin Maritime Navigation Company, relinquished its commercial activities; (b) the Centre national des bureaux de fret (CNBF), or National Freight Offices Center, was dismantled; (c) transit trade liberalization became effective; (d) regional passenger transport companies were privatized; and (e) a substantial portion of road maintenance activities has been transferred to medium and small-scale local private enterprises at substantial cost savings. During this period, two generic issues that will have a positive impact on the transport sector were also addressed: the elimination of two.. monopolies, the Socit6 nationale de commercialisation des produits pitroliers (SONACOP), or Republic of Benin: Transport Sector Strategy 3 National Petroleum Marketing Company, for petroleum products' import and distribution, and that of the Sociti Nationale d'assurance et de r6assurance (SONAR), or National Insurance Company, for insurance operations. 7. However, political turmoil, economic collapse, strikes, and numerous management changes have resulted in implementation delays, a slower than expected pace of reform, and poor coordination of initiatives within Government ministries and among donors. Some transport sector reforms initiated under the TRP have received additional support under the SAL II, and are expected to be completed at the same time as the SAL. At the same time that they slowed the pace, political changes that occurred in 1990 also created new opportunities to pursue and deepen reforms in the transport sector, and to reinforce its ability to meet economic challenges. These opportunities are reflected in studies carried out in 1992 by the Ministry of Public Works and Transport (MTPT) studies, which were completed in April 1993. On the basis of these studies, Government finalized its transport strategy, which was presented to donors at the Round Table meeting of October 1993 and is reflected in this document. COUNTRY STRATEGY 8. The main features of the current country strategy, being elaborated under the ongoing Country Economic Memorandum study, are directed at promoting movement towards a more sound macroeconomic framework, and the enhancement of the State's institutional and policy role in creating a favorable environment for private investment. Benin's strategic objectives address generic constraints to development which apply across all sectors, namely: (a) regional competitiveness: a relative lack of competitiveness in production, which limits the profitability of productive investments and of export growth; (b) investment policy: a low level of investment and continuing inefficiencies in public investment; (c) expenditure policy: a structure of public expenditures favoring payroll over maintenance and other types of operating expenditures; (d) fiscal policy: a low level of domestic saving and limited financial intermediation; (e) private sector: remaining disincentives to the expansion of private sector economic activities; (f) capacity building: inadequate human resource management, and a still substantial and relatively inefficient public sector; and (g) environmental and poverty aspects: widespread soil erosion and the vulnerability of low-income groups require attention if any economic growth strategy is to be sustainable in the long run (see also Country Background, Part II, para. 5 ff). Part I: Recommendations 4 SECTOR STRATEGY RATIONALE 9. Benin's transport sector is a major contributor to national income. It promotes medium- and small-scale enterprises and generates unskilled employment through labor-intensive works. Efficient transport costs will also play a major role in achieving the goal of agricultural growth. The magnitude of transport's contribution is a function of the sector's competitiveness in the transit trade market and of the regional environment which influences the distribution of traffic among competing corridors (C6te d'Ivoire, Togo, Benin, and Nigeria). Despite the fact that Benin's transport infrastructure is well adapted to demand and that improvements have been achieved under the Transport Rehabilitation Project, it still faces problems, in particular, in facilitation and maintenance funding, which weaken its ability to compete against the other corridors and to adjust to the highly fluctuating character of regional demand for international transport (see Sector Background, Part II, para. 18 ff). It is important, therefore, that transport sector issues be sharpened and that an adequate sector development plan be developed to meet the challenges in the areas of agriculture-related transport and international transit. Such a strategy, which is presented in this document, will provide the foundation for a sound transport maintenance and investment program for the remainder of the decade. C. Sector Objectives, Issues and Priorities SECTOR STRATEGY OBJECTIVES 10. The overall objectives of the transport strategy are directly related to the generic country issues indicated above (para. 8). The transport sector objectives are as follows: (a) to increase the competitiveness of Benin's transport sector in general and of its transit corridor in particular through open modal competition; (b) to improve Government's capacity for planning, programming, and managing transport sector investments; (c) to boost the allocation of resources to infrastructure maintenance; (d) to boost the recovery of infrastructure user charges; (e) to expand private sector participation in public works and maximize its impact on the creation of jobs for unskilled labor; (f) to build capacity in sector institutions and optimize human resource utilization, and (f) to protect the environment and improve road safety conditions. Republic of Benin: Transport Sector Strategy 5 SEClORWIDE ISSUES AND PRIORITIES 11. The dominant sectorwide issues dealt with in this report are presented below in order of priority. They are organized according to the main themes echoed in both the transport sector strategy objectives and the generic country issues (paras. 8 and 10). 12. Regional Competitiveness. In order to retain Benin's current competitive advantage in transit trade (see Part H, para. 29 ff), particular attention should be paid to improve (a) the coordination of port operations and (b) the efficiency of customs and port handling operations. On the roads, (c) adequate traffic and safety regulations must be enforced, while at the same time reducing unnecessary regulatory constraints. Other measures required for corridor competitiveness involve (d) clarifying liability for losses in transit and streamlining administrative procedures, (e) liberalizing competition between rail and road and restricting OCBN operations to profitable areas, and (f) encouraging operator competition through professional associations and consumer advocacy. To improve agriculture's competitiveness, rural roads need to be rehabilitated and transport costs reduced, through better routine road maintenance and better coordination between the Ministries of Transport and Agriculture. 13. Expenditure Policy and Funding Sources. Major investment should be eschewed in favor of better management of existing infrastructure, additions of low standard but effective improvements such as gravelled platforms in the port, improvements to existing main earth roads, and intensification of routine road maintenance. In fact, maintenance should be given the highest priority to make sure that road infrastructure is maintained and road investments produce the expected economic benefits (see Part II, para. 49). Maintenance budgets should increase, especially in the road subsector, despite constraints on Government operating budget to meet the IMF's economic targets. To meet road maintenance needs, road maintenance expenditures should increase by around CFAF 2 billion (US$7.3 million) per year on average. This would be financed partly through Road Fund restructuring, which would result in savings of around CFAF 500 million (US$1.8 million) annually. The remaining CFAF 1.5 billion (US$5.5 million) would be financed by income from equipment rental, additional income from better cost recovery, municipal resource mobilization and infrastructure financing in urban areas, community participation for rural roads, and additional budgetary allocations. 14. In particular, periodic maintenance of earth roads under MTPT, theoretically funded under the Road Fund, should be transferred to the PIP until Road Fund income reaches a level adequate to cover it. External Part I. Recommendations 6 financing would be required temporarily until more sustainable mechanisms for additional financing are established. This will take time, and transitional arrangements should be made with the IMF to allow Government to allocate the necessary resources to maintenance (see Part II, para. 52). In any case, this is likely to result in increases in the operating budget, for which the adjustment program has fixed a target ceiling. Government would need to further reduce public expenditure in other sectors to compensate for this increase. 15. Fiscal Policy. Measures required to improve the fiscal performance of the transport sector should include (a) extension of tolls to all roads along with reduction in unnecessary regulatory constraints on road transport, (b) improved management of the Road Fund and reduction of the wage bill required to manage it, (c) financing of urban roads under municipal budgets and of rural roads through community participation (see Part H, para. 55), (d) improved collection of customs fees through better coordination of port operations and better monitoring of vehicle imports (see Part H, para. 139), (e) progressive reduction and suspension of rail transport subsidies (see Part II, para. 170), and (f) introduction of self-financing principles in the air transport subsector (see Part II, para. 180). 16. Investment Policy. To achieve an overall rate of growth higher than 4%, all public investment should be carefully targeted (see Part H, para. 41).- Mechanisms for the selection of priority investments across transport subsectors are being established under a rolling three-year program, adjusted on an annual basis. Investments will be selected on the basis of rigorous economic criteria. They will focus on improving the competitiveness of the agricultural sector and of Benin's transit corridor. The competitiveness of the cotton subsector and the development of food crops require a network of secondary and rural roads. Priority must be given to roads in areas with a proven production capacity and which can be connected to the main network at the lowest cost, adopting the lowest technical standards consistent with actual transport demand. 17. With regard to transit competitiveness, investments for capacity extension of the trunk network should be selected according to overall trends and not linked to temporary circumstances, while allowing for the absorption of occasional peaks. The most competitive transport mode should be supported through adequate investments. Specifically, the port of Cotonou, the railway to Niger, and the international trunk roads play a key role in both cases. The main access roads and thoroughfares of Cotonou and the Cotonou-Porto Novo road, which are also major international links, are presently saturated. Once investments can be programmed to bring these sections up to standard, Benin's infrastructure capacity will by and large be sufficient to handle projected transport demand increases through the early part of the next century. Any other investments should be postponed and subject to rigorous economic analysis before they are included in the three-year rolling program. Further improvements in sector competitiveness Republic of Benin: Transport Sector Strategy 7 should then be pursued through improvement of transport operations, transit facilitation and infrastructure maintenance. 18. Private Sector Development. Informal operators carrying freight and urban transport and importing used cars should be protected from excessive regulation, and access to the public works market by small entrepreneurs should be facilitated through more transparent procurement and improved contract management. The freight handling market should be opened to private sector participation, and participation in COBENAM capital should be opened to private investors. Heavy equipment management, air transport operations, and highway toll collection operations should be privatized, and road maintenance by force account should be reduced. 19. The importance of protecting the informal sector from undue interference needs to be stressed (see Part II, para. 13 ff). The informal sector currently pays a leading role in Benin's economy in general and in the road transport subsector in particular, giving it a comparative regional advantage in both transit and internal freight and in urban passenger transport. It is both much more adaptable to highly fluctuating demand and cheaper, while also creating many jobs for the urban poverty group. On the other hand, since the informal sector does not participate in user cost recovery and avoids paying most taxes and customs, it undercuts sector financial viability. In addition, the ubiquity of informal activities further reduces the already weak capacity of Government staff to enforce environmental, safety and traffic regulations. Even if the informal transport sector should be protected from new regulations, it should be provided with incentives and opportunities to improve skill levels which will eventually lead to its progressive formalization, including full participation in infrastructure cost recovery. To this end, cost recovery should be improved now, in areas where taxes are the easiest to collect and control. Establishment of road tolls would ensure fair user cost recovery and allow for progressive implementation of user taxes related to axle loads. A reduction in regulatory constraints would also favor a gradual evolution of informal to formal operations, but at the same time, enforcement of the relevant regulations must be enhanced. 20. Capacity Building. A sustainable transport policy requires mobilization of existing competence in the public sector, starting with ministerial units restricting their focus to sector management. In particular, DROA needs to focus on road maintenance management. Incentives also need to be created for civil servants to perform their official duties. In the private sector, skill levels need to be improved and operator qualifications upgraded (see Part II, para. 77 ff). 21. Environmental Protection. In order for the transport sector to support the country's environmental strategy and the related action plan, the transport sector Part I: Recommendations 8 needs to develop its own environmental action plan and environmental guidelines, in line with the EAP. The objective is not only to mitigate the negative impacts of transport activities but also to promote environmental protection. Transport activities can play a positive role and can contribute to sustainable trends in environmental improvement. Road construction and rehabilitation is one of the key elements for the development of isolated areas. Thus, new road investment and programming should be consistent with the country's environmental strategy. Better road maintenance programming, financing and execution is required to sustain such a favorable impact. In particular, rural road programming needs to be closely coordinated with other environmental actions and take into account the potential reduction of rural poverty and the environmental impact of agricultural development in each area. The transport sector can also contribute to the implementation of the national EAP by improving water management and using road infrastructure as a vehicle for improving drainage and irrigation (see Part II, para. 42). 22. Poverty Alleviation. To support the country's poverty alleviation objectives, the transport strategy aims (a) to reduce the cost of transport overall, (b) improve access to landlocked areas in particular, and (c) support operations which create job opportunities in both formal and informal sectors (see Part II, para. 43). Rehabilitation and improvement of rural roads do not in themselves guarantee the development of agricultural activities, but competitive agricultural production cannot occur without reliable roads which are kept in fair condition. However, in many cases, the only economic justification for building roads is based on the value of increase of production capacity. Therefore, the strategy for rural roads rehabilitation should be based on a progressive improvement of the network, provided that the population served demonstrates its interest, through its involvement in road works and maintenance, and that effective production is generated by the road. 23. In urban areas, the privatization and liberalization of transport operations has already provided many job opportunities to the staff laid off from civil service jobs, such as mototaxi operations (see Part II, para. 107) and handling customs processing of goods in the port (see Part II, para. 126). This has led to a reduction of the vulnerability of the operators during a period of depressed formal sector employment. Any potential economic benefits resulting from the "formalization" of the informal sector would be reduced by the cost of higher urban unemployment. The transport strategy also aims to increase the share of road maintenance to be carried out by small enterprises using low-skill workers. It emphasizes preventive road maintenance instead of periodic rehabilitation, which should result in a fivefold increase in routine maintenance in both urban and rural areas. Routine maintenance can be split out into small contracts, making it easier for small entrepreneurs without much capital or advanced skills. Routine Republic of Benin: Transport Sector Strategy 9 maintenance allows the use of labor-based methods which creates jobs accessible to unskilled labor. Such labor-intensive methods have already being developed in Benin through contracts with small enterprises who hire workers along the roads. This gives rural residents the opportunity to earn extra income and increase their standard of living. It has been demonstrated also through the operations of AGETUR, the executing agency for urban works, that the combination of adequately designed contracts and adequate procurement methods is sufficient to expand the market for works by existing small local enterprises which use unskilled labor (see Part I, para. 88). IMPACT OF DEVALUATION ON SECTOR POLICY 24. A devaluation of the CFAF by 50% occurred on January 12, 1994. The current version of the transport strategy (March 1994 Green Cover) is based on the situation prior to devaluation. At the present moment, price changes remain erratic and customers are confused by the devaluation; very short-term changes in relative prices will depend on a number of factors: changes in the real value of the Naira, the degree of convertibility of the CFAF, the effectiveness of any price controls which may be implemented, and the outcome of the early stages of market adjustment in both Benin and Nigeria. In the near term, the decrease in the value of the CFAF is expected to have a negative impact on transit trade with the landlocked countries and on the informal market with Nigeria, and a positive impact on the competitiveness of the Benin corridor. The drop in import flows to all CFAF countries and the fall in transit trade of imported goods going to Niger and Burkina Faso will decrease freight traffic volumes in the port of Cotonou, before the expected longer-term increase in local production and exports can compensate. Imports from Nigeria will become less competitive, including petroleum products and spare parts, thus discouraging both legal and fraudulent imports. The informal sector which depends on fraudulent Nigerian fuel and parts will lose ground, triggering a temporary drop in informal earnings and employment until new trade opportunities are identified; these could be encouraged by further devaluation of the Naira or by stiffer Nigerian enforcement of trade regulations. The price of transport via Benin to those holding non-CFAF currencies could decrease slightly, reinforcing the competitiveness of the Benin corridor vis-a-vis the Togo corridor. 25. In an intermediate timeframe relating to vehicle lifetimes and replacement requirements, Beninese transport operators will experience a substantial increase in their CFAF costs: around 70% of vehicle-related costs, excluding fuel, is in foreign exchange, and the devaluation thus will increase these transport costs by at least 35% (around 45 % taking into account the expected 30% inflation in local costs). This increase will be incorporated into the cost of all agricultural products at the marketplace, absorbing a part of any Part I: Recommendations 10 additional agricultural earnings. The cost of SONAPRA operations from the producer to the port will increase by around 15%, resulting in an increase in the cost of cotton at the port of Cotonou of about 5%. The impact on the cost of food crops will be much greater, since the transport content of these is higher than for cotton. 26. In the longer term, the devaluation should generate economic growth, which in turn should compensate for the short-term decrease in transport demand, and should bring new opportunities. For example, it is expected that the substantial increase in the price of new imported cars will boost the demand for used cars in all CFAF countries, a business in which Benin has proved its efficacity. Demand for products which gain significant added value in Benin, such as used cars, will also be improved throughout the region, including Nigeria. The new terms of trade will improve the international competitiveness of domestic production, such as cotton, and will boost domestic demand for goods which can substitute for no-longer-cheap imports, including food crops. Reductions in the cost of production in Benin will allow Beninese agricultural and manufactured products to compete with Nigerian ones in the regional market. The simultaneous increase in incoming freight (imports) and decrease in outgoing freight (export) will bring transport flows, hitherto heavily imbalanced in favor of imports, into better balance, and this should decrease transport costs. Overall, if Benin can succeed in seizing the opportunities created by the devaluation, the initial increase in transport costs could be offset by stronger demand trends. 27. Until the longer term trends become clear, short-term and intermediate changes in transport demand are not expected to require major changes in the transport strategy as a whole or in the overall long-term expenditures strategy, which favors maintenance over investment. On the other hand, immediate support of transport activities whose growth will be stimulated by the devaluation, and of measures to facilitate quick adaptation of transport to changed market conditions, could help to ensure that negative short- and medium-term impacts do not overwhelm the positive long-term potential for new growth. The most important of such measures involve quick action to (a) fill the road maintenance gap, (b) improve port and road facilitation, (c) put in place specific port infrastructure and rural road investments, and (d) create new job opportunities. These are discussed in turn below. 28. Mitigation of Transport Cost Increases through Road Maintenance. Improved competitiveness of Benin's cotton on world markets would be enhanced by a reduction in transport costs, and reductions in transport costs for both cotton and food crops could be obtained by improving the level of service on the roads through better maintenance. Filling the maintenance gap could reduce transport costs on the earth network by as much as 50%, largely compensating the 35 % to Republic of Benin: Transport Sector Strategy 11 45% increase in the cost of transport resulting from the devaluation. Maintenance expenditures should thus be given the highest priority. Road maintenance allocations should increase according to the recommendation of the transport strategy, and rural road maintenance should be organized and financed during the next campaign. However, attempting to boost Road -Fund revenues for maintenance by raising charges to operators through tolls could be awkward at this time, when other costs are also increasing. The increase in maintenance expenditures should be sought through the national budget, and the recommended transfer of periodic maintenance from the Road Fund to the PIP should be expedited. 29. Retaining Competitiveness through Facilitation Measures. Measures aimed at improving the competitiveness of the Beninese corridor should be accelerated to compensate for the loss in Benin's former comparative advantage in transit trade based on overvaluation of the CFAF. Though less than satisfactory, transport facilitation in Benin is currently much better than in Nigeria, giving Benin a comparative advantage despite higher costs. Still, increases in the cost differential in CFAF terms will reduce this advantage, as the benefits from better facilitation in Benin may not always continue to compensate for higher costs. Benin's competitiveness vis-a-vis the Togolese corridor, where facilitation is more efficient than in Benin, could also decrease to the extent that transport costs increase relatively more in Benin than in Togo, because of the increase in the cost of Nigerian fuel on which Benin operators have depended. 30. Impact on Investment Priorities. Activities whose growth will be stimulated by the devaluation should be supported, and a boom in some economic activities could favor bringing forward some investments, for example, accelerating rural road rehabilitation and reorganizing port facilities. The port would have to anticipate some infrastructure additions to facilitate cotton exports, and further extension or upgrading of rural roads could be needed to meet additional demand for transport of cotton or food crops. This would be also a good time to go ahead with the creation of the recommended dedicated vehicle yard where used cars and trucks could be repaired while allowing better monitoring of the quality of used car imports and better vehicle safety inspection. 31. Employment Generation and Capacity Building. The Transport Sector could help to create new jobs in order to compensate for the reduction of informal sector activities and employment due to higher fuel costs. Road maintenance activities by private enterprises could quickly create local jobs, as some maintenance works are labor intensive and thus require less foreign exchange and are more efficient in terms of employment creation than new investments. At the same time, Government should consider encouraging local industries, such as car repair and other activities associated with second hand car imports, in order to Part I: Recommendations 12 take advantage of the reduction in the relative cost of local labor. And major investments included in the PIP, such as accesses and thoroughfares in Cotonou and the new Cotonou-Porto Novo road, are also expected to create thousands of jobs; however, maximizing the impact of investment expenditures requires strengthening absorptive capacity, since only 33% of the transport investments planned in the 1993 PIP could be implemented. There is a risk that currently programmed investments will not be fully implemented during 1994, as the civil servants could be demotivated because of the negative impact of the devaluation on their standard of living. The Government should take urgent measures such as TA and external support, in addition to its long-term capacity building strategy, to increase the very weak absorptive capacity. Specific measures should be taken to compensate and motivate them, in addition to long-term capacity building measures. The Government should implement the staff incentive system in road maintenance and investment activities which have been recommended by the Bank since the appraisal of the ongoing transport project. Incentive awards should be based on real and measurable achievements in implementing the investment projects and the road maintenance program. D. Issues and Recommended Strategy by Subsector ROAD SUBSECTOR 32. The road subsector faces a major fiscal issue. Road Fund resources in 1992 amounting to around 19% of total revenues collected from vehicle taxation (see Part II, para. 38). Road Fund shortfalls have prevailed for years, despite a doubling of fuel tax proceeds allocated to it in 1985. In spite of this increase, the fuel tax allocation dropped from 51 % of the Road Fund total in 1990 to 25% in 1992 because of the dramatic increase in fraudulent fuel imports from Nigeria see Part II, para. 51). In addition, only CFAF 620 million (US$2.3 million) a year on average were actually allocated to road maintenance works, compared to the CFAF 1.2 billion (US$4.4 million) collected (see Part II, para. 114). As a result, funds actually allocated to maintenance works in 1992 represented only some 18% of the needs for routine and periodic maintenance on the MTPT network (3,425 kam), and 35% of the funds which will be needed for routine maintenance in 1993 (see Part II, para. 52). 33. Because road maintenance is neglected, Government continues to favor the rehabilitation of a limited number of itineraries while the remaining network remains in poor condition. Infrastructure assets, evaluated at CFA billion 250 (151 for the paved. network), continue to depreciate, and costly periodic rehabilitation increases the cost of their preservation. Fifty percent of the earth classified network, 28% of paved roads, and 80% of rural roads are in poor Republic of Benin: Transport Sector Strategy 13 condition. Even that part of the network which remains satisfactory is extremely vulnerable due to the backlog of periodic maintenance works, in particular regravelling (see Part II, para. 46-47). 34. The recommended strategy aims at: (a) improving MTPT's ability in programming investment and maintenance; (b) reforming funds collection procedures for road maintenance; (c) allocating responsibility for management and financing of maintenance of rural and urban networks to local communities and municipalities; (d) reducing MTPT's involvement in productive activities and increasing private sector participation in road maintenance operations; (e) enhancing human resource management and staff skills, especially in the areas of programming, road management and contract management; and (f) developing local private sector enterprises to enable them to progressively take over road maintenance activities. (a) The Road Fund should be reorganized to enable it to collect enough resources to ensure adequate financing of routine maintenance. Required measures include: (i) extending the toll system to the entire paved network, and entrusting toll collections to private firms, which will increase toll collections from the current CFAF 200 million (US$0.7 million) annually to about CFAF 1.5 billion (US$5.5 million) a year, in order to increase revenues intended for maintenance to FCFA 3.3 billion per year, thereby filling the current gap of around CFAF 2 billion (US$7.3 million) a year; (ii) limiting Road Fund interventions to the financing of routine maintenance of MTPT-managed networks and of operating expenses directly related to maintenance management, including transfer of investment, counterpart outlays of CFAF 1.1 billion (US$4 million) per year, and periodic maintenance to the national investment budget, and transfer of debt service of CFAF 180 million (US$0.7 million) a year to the operating budget; and (iii) staff restructuring which will save around CFAF 200 million (US$0.7 million) a year (see Part II, para. 55). (b) An investment program covering five years will be established. Subject to the actual execution of maintenance for all rehabilitated roads, around CFAF 45 billion (US$164 million) could be allocated to new investment. Road maintenance will require a total of CFAF 16.4 billion (US$59.6 million) over the next five years, or CFAF 3.3 billion (US$12 million) annually on average. This program will be updated every year by adjusting the total amount of sector expenditures to the macroeconomic situation and adding new works only when they are justified. It will be broken down Part I. Recommendations 14 into successive phases of execution, defined in agreement with the involved donors during annual meetings. Government would undertake only investments which are included this program (see Part II, para. 41). (c) First priority in investment will be given to the improvement of accesses and thoroughfares within the city of Coteolou and of the saturated Cotonou-Porto Novo road section. Further extension of road capacity will likely concern two roads which carry more than 300 vehicles per day: Akpo-Adjohoun in the south of the country and Bohicon-Kpedekpo. While paving of the Natitingou-Porga and the Savalou-Djougou sections may still be among Government's top priorities they are not justified on the basis of traffic carried and must therefore be postponed (see Part II, para. 56-58). (d) Methods of financing investment and maintenance of the rural and urban networks should be reviewed and improved. MTPT could remain in charge of investment and maintenance on the rural network at an expenditure level justified from an economic viewpoint. The remainder of the network should then be maintained by the nearby local communities. Municipal road maintenance should be transferred to the municipalities which should provide financing from revenues collected by the Ministry of Finance from urban areas (see Part II, para. 67-70. (e) The extent of force account activities must be reduced and works subcontracting must be extended (see Part H, para. 85). MTPT should also disengage itself from heavy equipment management (see Part II, para. 87). Development of private sector capacity to carry out public works should be promoted by facilitating private enterprises' access to public contracts, and reinforcing their productive capacity (see Part II, para. 91). (f) For successful implementation of such a strategy, MTPT should optimize the deployment of existing staff competence and reinforce skill levels within the framework of its priority actions. MTPT should proceed with a reduction and redeployment of its staff to meet actual management requirements and to allow for adaption to the progressive privatization of road maintenance operations (see Part II, para. 75-78). Republic of Benin: Transport Sector Strategy 15 RoAD TRANSPORT SUBSECTOR 35. The tax regime for the road transport subsector is complex. Revenues from these various taxes and fees amounted to nearly 3.7 billion in 1990 and 3.9 billion in 1991, with 1992 estimated at 5.1 billion. In order to survive in a competitive market, carriers have resorted to fraud which allows them to reduce operating costs to very low levels. The gap in tax collection was estimated to be as much as CFA 7.5 billion in 1992. Most of the gap is due to fraudulent fuel imports which represent roughly 80% of total fuel consumption (see Part II, para. 114 ff). 36. Under the pressure of the strong informal sector competition, freight transport operators with potential for joining the formal sector have very little, if any, room to develop (see Part II, para. 12 ff). The weak financial and poor regulatory environment does not encourage informal operators to move into the formal sector (see Part II, para. 98). 37. The regulatory environment reduces sector productivity without increising respect for regulations. Transit traffic toward neighboring countries is hindered by cumbersome customs procedures in Benin and Niger. Twenty-three custom or police checkpoints have been counted on the Cotonou-Border of Niger route, resulting in an additional cost amounting to 20% to 30% of transport costs, and adding up to an estimated FCFA 2 billion per year on this route alone (see Part II, para. 100-101). 38. Although few road safety statistics are available, it seems that Benin is not doing well in this area. In Cotonou, the situation is further aggravated by the presence of a considerable two-wheeler fleet coexisting with cars and trucks on an ill-adapted road network. About 70% of the thoroughfare traffic is made up of two-wheelers and their numbers reach up to 105,000 per day on certain routes (see Part II, para. 110). 39. Data on road transport activities are incomplete and unreliable (see Part II, para. 82). 40. The subsector strategy has four specific objectives: (a) increase sector competitiveness through facilitation of road transport and increased operator competence; (b) improve road safety and service quality by improved functioning of the used vehicles market; (c) improve performance of urban motorcycle taxis by improving infrastructure and traffic management; and (d) encourage transport operators to move progressively from the informal sector to the formal sector through a better professional environment and a more efficient training system. To achieve these objectives, a series of actions is recommended, some of which Part I. Recommendations 16 could be implemented in the short term, while others require a review of specific organizational aspects and are more appropriate for the medium-term. (a) The full liberalization of transport activities must be made official (see Part II, paras. 36, 126-port, 160-road/rail). (b) Improvement of operators' professional skills should be sought through existing, but revitalized, trade associations which could act as vectors for training and assisting transport operators. Promotion of the best performers could encourage and qualify them to progressively grow into formal sector status, which would give them access to financial markets (see Part II, para. 119). (c) Pressure from urban passenger transport users in Cotonou should be encouraged to stimulate fierce competition in performance among the professional associations(see Part II, para 117). While this is the best way to improve passenger safety, further safety measures should also be introduced and enforced in this area (see Part II, para. 112). (d) Since trade traffic plays a major role in the economy, improving regulation of commercial trade movements in close coordination with Niger is a priority. Moreover, it is necessary to eliminate unnecessary road checkpoints (see Part I, para. 101). (e) Better road safety requires institutional measures aiming at improving existing regulations and statistics through institutional support from road safety agencies and road transport associations (see Part II, paras. 112, 119). (f) Reliable accident statistics and reports should enable the administration to better target priority road improvement works. A program to correct high accident locations and dedicated two-wheeler lanes should be created within the framework of a traffic plan for Cotonou. To achieve sustainable results, however, measures should also be taken to reduce the number of hazardous vehicles (see Part II, paras. 110, 112). (g) Efficient data collection and processing needs to be developed. Within the priority scope of improvements are: freight transport (by DTT within MTPT), origin and destination surveys (by BGR within MTPT), vehicle importation and registration (by DTT within MTPT), and traffic accident data, by the Conseil national Republic of Benin: Transport Sector Strategy 17 de privention routibre (CNPR), in collaboration with police services and MTPT (see Part II, para. 82). PORT AND MARTIME SUBSECTOR 41. Administrative and commercial activities on the port grounds create congestion and safety problems. The port has been transformed into a large regional market for second hand vehicles of all sorts, and the massive importation of such vehicles is a major contributor to port congestion (see Part II, para. 121 ff). Handling efficiency of industrial bulk shipments and of containers is low (around 50% less efficient than Dakar). The poor performance of SOBEMAP and administrative delays explain this situation (see Part II, para. 130). 42. Definition of accountability for goods is not clear and affects reliability of customs documents (see Part II, para. 132). As in the rest of the region, implementation of the 40/40/20 rule probably has an adverse impact on Benin's competitiveness (see Part H, para. 148). 43. Port administrative procedures take longer than they need to, and longer than in competing ports. The main reasons are delays in supplying and inputting manifests, slow invoicing, slow inspecting of goods, and slow customs processing (see Part II, para. 128). 44. The strategy in this subsector should aim at improving port operations with a view to enhancing competitiveness of agriculture and of the transit corridor. New investment should be restricted to the minimum necessary to handle basic traffic levels while still allowing an adequate response to peak traffic. Current infrastructure is adequate to handle up to 2 million tons which will be sufficient at least for the next five years. (a) The port area should be exclusively reserved for port activities. In particular, the imported vehicles yard and the common invoicing center should be moved outside the port domain (see Part II, para. 123). (b) SOBEMAP operations should be improved. Benin should also consider subcontracting of port handling whenever poor performance by SOBEMAP or sudden increase in traffic create port congestion. While a partial and progressive liberalization would be desirable, a simple transfer of SOBEMAP's monopoly to the private sector is to be avoided (see Part II, para. 131). Part I. Recommendations 18 (c) Administrative processing delays should be reduced (see Part II, para. 129). (d) Responsibilities along the transport chain should be clarified and the liberalization of the insurance system completed (see Part II, para. 133). (e) COBENAM and CNCB roles and activities need to be reviewed in fight of regional developments (see Part II, para. 149). RAIL SUBSECTOR 45. OCBN's monopoly is economically inefficient and not enforced (see Part II, para. 159). Logistic organization is deficient and leads to loss of time and technical saturation, weakening OCBN's ability to compete with road operators (see Part II, para. 158). OCBN continues to carry products for which it is not competitive, in particular passenger travel (see Part II, para. 160). 46. OCBN should concentrate on reducing its operating costs and abandoning non-profitable loads in order to compete against road operators. (a) New investment and heavy maintenance will need to be kept to a strict minimum required to respond to demand in areas where OCBN retains a competitive advantage (see Part II, para. 171). (b) Competition between rail and road should be fully liberalized (see Part II, para. 159). (c) Improvement of OCBN's tecnnical and management performance could enhance its competitiveness (see Part II, para. 158). (d) OCBN should refocus its operations in the areas where it has a clear comparative advantage (see Part II, para. 161). (e) To address the expected 30% reduction in rail traffic resulting from the completion of the final sections of the Cotonou-Niamey road to be paved, OCBN must reduce overhead operating costs to avoid annual deficits which could reach CFAF 1 billion (US$3.6 million)(see Part II, paras. 160, 162, 167, 170). Republic of Benin: Transport Sector Strategy 19 AIRPORT SUBSECTOR 47. ASECNA's financial management lacks transparency and accountability. This hampers user cost recovery and impedes sound subsector management (see Part II, para. 179). Airport infrastructure is deteriorated and outdated. The poor condition of Cotonou airport runway requires urgent periodic maintenance. Its current condition could result in short-term safety problems (see Part II, para. 175). DAC's capacity to manage the subsector is weak (see Vol. II, para. 181). 48. The strategy for the air subsector should aim at improving sector management and user cost recovery, and rehabilitating existing infrastructure. (a) An autonomous entity for managing airport operations should be established. The Cotonou airport should generate enough revenues to cover operating and maintenance expenses for the whole sector, including the domestic airports, and to ensure debt service for the financing of the upgrading program (see Vol. II, para. 180). (b) Cotonou and other domestic airport infrastructure should be rehabilitated and upgraded only where necessary to meet actual demand. Investment should be limited to the strict minimum necessary to meet demand and should be self-financed (see Part II, para. 176). (c) Regulations should be revised and DAC strengthened to allow MTPT to manage the sector and supervise operations entrusted to the autonomous entity (see Part II, para. 181). Part I: Recommendations 20 REPUBLIC OF BENIN TRANSPORT SECTOR STRATEGY MATRIX OF POLICY MEASURES AND ACTIONS POLICY AREA/ISSUE OBJECTIVES ACTIONS ALREADY TAKEN ACTIONS TO BE TAKEN MONITORING ACTIONS AND AND UNDER PREPARATION TIMING TRANSPORT SECTORIMANAGEMENT, FISCAL POLICY AND COST RECOVERY Imbalance Between Restore balance between Tentative priority program Establish Priority Program, for Finalize Priority Program by project Investment and Maintenance investment and maintenance, . Intermodal prioritization each sector and for sector as a appraisal restrict new investment to the Definition of technical standards whole Update program annually and hold minimum. . Establish updating process donors meeting Poor Donor Coordination Consistent donor sector Involvement of donors during Donor annual round table . Hold meetings on schedule positions and activities. strategy preparation Donor round table on strategy (October 1993) Inadequate Cost Recovery Recover user costs in each . Study on toll roads . Extend tolls to all paved network . Implement tolls and subcontracting transport subsector. . Study on autonomous air agency . Improve custom tax collection on . Create autonomous air transport agency imported cars . Implement oversight of used car Earmark air fees for air sector imports POLICY AREA/ISSUEJECTIVES ACTIONS ALREADY TAKEN ACTIONS TO BE TAKEN MONITORING ACTIONS POLCYARA/SSE FoAND UNDER PREPARATION IIAND TIMING 4 PORT AND MARITIME SUBSECTOR/PORT MANAGEMENT AND FACILITATION Port Congestion and Safety Reserve the port area ESCALE software installation Implement port area access control Creation of access card system Problems exclusively for port Move commercial activities outside port area . Construction of used car yard activities. . Move administrative procedures outside port area Transfer of billing center Low Productivity of Make SOBEMAP SOBEMAP equipment renewal Improve equipment management and utilization . Full connection to ESCALE Handling Operations operations competitive. . SOBEMAP rented equipment using ESCALE software . Plan d'entreprise . Begin equipment renewal program . Contract award for equipment . Contract out equipment maintenance maintenance . Set up responsive management system based on . Revision of SOBEMAP statutes private sector management priciples . Eventual sub-contracting of port handling . Eventual full liberalization of portion of handling Slow Administrative Reduce administrative . Ships and merchandise data . Use ESCALE for manifest capturing, codification . Full connection of SOBEMAP Procedures processing delays. connected to ESCALE software streamlining, and network linkage with customs and customs with ESCALE . Manifest submission required prior and SOBEMAP . Reoganization of custom to unloading . Introduction of a penalty for late manifest deposit services . Technical audit and perfonnance . Increase number of customs staff and assign them . Construction of office space for diagnostic of COTECNA to priority tasks and locations billing center underway . Establish automatic system for customs . Completion of study of custom justification of manifests procedures . Regroup SOBEMAP billing operations . Study feasibility of extending opening of sealed shipments at destination. Overlapping Liability/ Clarify responsibility . Decision taken to privatize . Liberalize insurance market . Liberalization decree Accountability for Goods for goods loss & SONAR . Transfer SOBEMAP warehouse management to . Modify regulation regarding damage at each step of consignees responsabilities the transport chain. . Streamline storage grace periods and tariffs of . Harmonization of storage billing various operators to avoid dilution of regulation among operators. responsibility. 40/40/20 Rule Inefficient Review COBENAM . Opening of COBENAM's capital . Redefine COBENAM and CNCB functions. . Issuing of study report and Detrimental to and CNCB roles and . Regional discussion Competitiveness activities. POLICY AREA/ISSUE OBJECTIVES ACTIONS ALREADY TAKEN ACTIONS TO BE TAKEN MONITORING ACTIONS AND AND UNDER PREPARATION TIMING ROAD SIUBSECTOR/MANAGEMENT AND MAINTENANCE Inadequate Road Fund Collections Restore balance between Tentative investment and Prepare pluriannual program Draft program matching with investment and maintenance, maintenance program including maintenance macro framework Inadequate Road Maintenance finance road maintenance from . Increase in subsidy to Road Fund . Extend toll collection to the . Road maintenance budget at Allocations Road Fund, and set tolls at an . Road maintenance reorganized entire paved network adequate level adequate level. . Earmark tolls for maintenance . Awarding of contract for toll . Limit FR use to the financing of collection routine maintenance of MTPT . Effective transfer of investment, networks and to maintenance- periodic maintenance and related operating expenses overhead expenditures . Transfer investment, periodic maintenance and operating expenses to other budgets N . Entrust the collection of tollroad fees to private entities. DROA Overstaffing Adequate implementation of road . Staff inventory . Reduction of road maintenance . Payroll cuts maintenance program. . Reorganization of road by force account . Contract awards for road Inefficient Force Account maintenance execution Increased privatization of road maintenance Operations maintenance execution . Layoff of redundant and incompetent staff . Redeployement of staff according to assessed needs Cumbersome Centralized Road Match road maintenance program . Reorganization of programming . Extend BOR responsibilities and . Reorganizaion of BGR and Maintenance Programming to needs and user demand. and supervision improve efficiency efficiency improvements . Progressive decentralization of . Decentralization of data Inadequate BGR data collection programming collection and updating mechanism . Annual updating of rolling . Establishement of mechanisms program for rolling program updating Inadequate Financial Means and Provide adequate maintenance of Modification of technical Review road classification Decree for new road Capacity for Maintaining Rural rehabilitated rural network and of standards for rural roads Transfer management and classification and Urban Roads urban roads Support of urban maintenance maintenance of some rural roads Establishment of community under Urban Project to local communities participation mechanisms Local community contribution . Effective transfer of to investment financing to municipalities . Municipal road maintenance program . Financing mechanisms for urban maintenance through municipalities Inadequate Technical Capacity Mobilize existing competence and . Nomination of competent staff . Redefine functions Reorganization of existing improve skill levels to match . Establish production oriented entities needs of strategy implementation. incentive system . . Definition of comprehensive . Establish human resource training and support program management system . Establishment of incentive . Establish rolling program for system training and external support . Subcontracting of tasks to . Improve training mechanisms private consultant Financial and Administrative Privatization of manual . Adapt bidding documents and . Draft sample bidding documents Constraints to Private Sector maintenance contract size . Line of credit for equipment Development . Privatization of 50% of . Facilitate equipment access purchase rehabilitation works . Support private contractors . Draft contract for equipment . Offer stable market renting by DMTP . Limit on road maintenance by force account of FCFA 600 M per year DMTP Lack of Competence and Improve equipment availability Renting system . Subcontract equipment . Contract award for equipment Autonomy . Accounting system maintenance maintenance . Progessive privatization Action plan towards privatization of equipment management POLICY AREA/ISSUE OBJECTIVES ACTIONS ALREADY TAKEN ACTIONS TO BE TAKEN MONITORING ACTIONS AND AND UNDER PREPARATION TIMING ROAD TRANSPORT SUBsECTOR/TRANSIT TRANSPORT FACILITATION AND ROAD SAFETY Lack of Capacity Development by Improve informal operators' Registration of all motorcycle Improve operators professional Creation of training program by Informal Sector Freight Transport competence and encourage them taxis by municipalities skills through trade associations associations Operators to move progressively into the Create synergy among various Mechanism of support to private formal sector associations operators . Give operators access to financial Creation of a transport user markets observatory . Encourage consumer advocacy Transit Traffic Slowed at Borders Increase sector competitiveness Eliminate unnecessary regulation Creation of Comitt des and Subector Productivity through facilitation of road Establish transit documentation Transport Terrestres" Hindered by Cumbersome transport acceptable in both countries Decree for complete Customs Procedures and Monitor facilitation through liberalization of the subsector Excessive Regulation Comiti des transports terrestres High Apparent Accident Rates Improve road safety Measures aiming at improving Institutional support from road statistics safety agencies and road Poor Road Safety Statistics Improve highway code transport associations . Driver training through official Completion of highway code drivers' school study . Improve police services Training program for police . Enforce axle-load limitations Supervise drivers' school . Correct high accident locations Civil works to correct high . Create dedicated two-wheeler accident locations routes in Cotonou Poor Condition of Used Vehicles Improve service quality through a Monitor second-hand vehicle Create a yard for used car Imported from Europe more efficient used vehicles imports market including repairs market . Improve efficiency of auto repair activities services Inspect all vehicles prior to registration . Create trade associations' safety seal . Create training program for vehicle mechanics and traders Incomplete and Unreliable Data . Improve data collection and Improvement of data collection on Road Transport processing by MTFT's DT and system Activities BGR, vehicle importation and Introduction of data processing registration by DTT, and traffic Link sector data collection and accident data collection by the processing with sector Conseil national de privention programming routi4re POLICY AREA/ISSUE OBJECTIVES ACTIONS ALREADY TAKEN ACTIONS TO BE TAKEN MONITORING ACTIONS AND I AND UNDER PREPARATION I I TIMING RAIL SUBSECTOR/COMPETITIVENESS AND MANAGEMENT Economically Inefficient OCBN Liberalization of competition Monopoly not actually enforced Fully repeal OCBN's monopoly Negociate new contract-plan Monopoly between rail and road Study on truck pool Liberalize road subsector Introduce competitive system transport operations for road transport operations Deficient Logistic Organization Improve operations management Rehabilitation of infrastructure Create a system of request for Introduction of effective and equipment proposals at time of train management tools Support from CFD formation in Cotonou station Introduction of effective . Reduce trip duration communication system . Reduce truck waiting time in Assignment of greater Cotonou institutional autonomy to the . Streamline transfer in Parakou Parakou agency . Improve and streamline cotion transport channels Non-competitive OCBN Transport OCBN to focus on profitable . Improvements in financial and . Adopt standard commercial . Restructuring of passenger of Specific Products activities commercial management business practices (regressive operations Elimination of non-profitable pricing systems, etc.) . Staff redeployment operations . Rationalize OCBN's physical and Creation of dynamic commercial human resources unit . Reduce overheads .Dismisal of excess staff Budgetting in accordance with real traffic forecasts AIR SUBSECTORIMANAGEMENT AND MAINTENANCE Lack of Transparency and Establish an autonomous Study financed by CFD . Study fiscal and financial aspects Signing of a concession contract Accountability in ASECNA management structure for airport . Study institutional aspects Financial Management operations . Prepare draft contract . Find operator Deteriorated and Outdated Airport Rehabilitate Cotonou and domestic Study financed by CFD . Establish rehabiliation and . Infrastructure rehabiliation Infrastructure airports maintenance program . Identify financing options Weak DAC Supervision Improve DAC's efficiency . Define responsibilities . Adequate staffing . Study staffing needs . Implementation of subsector monitoring system REPUBLIC OF BENIN TRANSPORT SECTOR STRATEGY PART II: ANALYSIS A. Introduction PURPOSE AND STRUCTURE OF THIS REPORT 1. Benin's prosperity depends heavily on trade and transport. As one of several competing corridors linking the Sahel to the sea, Benin needs an efficient transport sector in order to maintain its competitiveness as a corridor, and also to assure good domestic supply responsiveness, especially in agricultural production. Investment in infrastructure had created adequate networks prior to the 1984 Transport Sector Strategy; since then, liberalization and privatization of transport activities has resolved many of the institutional issues raised in the 1984 TSS report. The emergence of a new political and economic environment since 1990 justifies a new look at Benin's transport strategy, focussing primarily on facilitation, fiscal/financial, and capacity building issues. 2. This report was prepared jointly by the Ministry of Public Works and Transport (MTPT) and the World Bank during the implementation of an ongoing Transport Sector Project. Government organized an internal workshop in March 1993 and a follow-up, three-day user and donor conference in November 1993 to agree on the new transport strategy. Comprehensive discussions with Government are continuing, with Bank visits in December 1993 and March 1994. The latter visit coincided with the distribution of the Green Cover version of this report and covered the impacts on the transport strategy of the January CFAF devaluation. 3. Part I of the report presents the rationale and the priorities of the proposed strategy for the transport sector and summarizes the strategies for each of the five subsectors (road, road transport, port and maritime, rail and air). It provides recommendations addressing major institutional, fiscal, operational and managerial issues in the Ministry (MTPT) and in the sector's five public enterprises. Part I is organized in four sections and a policy matrix. Following the introduction which is Section A, Section B covers the rational for the sector strategy and its links with country strategy. Section C covers sector objectives, issues and priorities. Section D is the summary of subsector strategies. The main issues, objectives, actions already taken and to be taken, and monitoring actions are summarized in a Policy Matrix at the end of Part I. 4. Part H of the report provides a detailed technical analysis in support of the overall strategy and the subsector strategies. Following the introduction which is Section A, Section B and C provide details concerning country and sector background respectively. Sections D - H provide details concerning the road, road transport, port and maritime, rail and air subsectors respectively. Maps showing the network structure, population densities, and road traffic, and annex tables showing port and air traffic volumes, financial status of parastatals, Government's investment proposals, and Road Fund income and expenditures are included at the end of Part II. B. Country Background EcoNoMIC SITUATION AND COUNTRY STRATEGY 5. Benin covers an area of about 112,600 km2 and has a population of about 4 million inhabitants. According to human development indexes used by UNDP, Benin is one of the ten least developed countries in the world. Malnutrition affects 18% of the population, primary school enrollment is only 47% and illiteracy is 77% overall. The core poverty group, defined as those with annual incomes at or below the minimum required to cover expenditure for a minimum food intake (CFAF 25,000 or US$91) amounts to 10% of the population; the total poverty group, which includes the core poverty group plus those with enough for some reasonable non-food expenditures (CFAF 36,000 per annum), amounts to 15% of the population. However, since poverty depends on seasonal factors, rates of poverty are much higher at certain times of year. Also residents in the North tend to be poorer, because the cost of living is higher due to long distances and seasonal scarcities. 6. Average per capita GNP is currently US$385 at 1990 prices, close to early 1980 figures in real terms. In 1992, GDP per capita was about US$410, based on the then current exchange rates (US$1 = CFAF 265). Total GDP amounted to CFAF 574 billion (US$2,087 million) in 1992. Total GDP has increased at an average annual rate of 1.6% during the period 1985-1991, albeit with wide fluctuations (downturn in 1987 and 1989, but growth of 3.2% in 1990 and estimated at 4.1% in 1993, due to an investment rate of 12.6% since 1990). 7. Major economic sector shares of the GDP, in 1985 and in 1991, and of employment, in 1991, are given in the table below. The tertiary sector contributed 50.2% of the GDP in 1991 and is thus the largest sector of the economy, ranking second only in employment. The tertiary sector's share in the economy may actually be much larger than indicated by official figures, since these figures omit the large volume of informal sector activities (see para. 11 ff below). According to official statistics, transport represents 14.4% of tertiary sector activities and Republic of Benin: Transport Sector Strategy 29 trade for 34% of this sector, while merchant and non-merchant services amount respectively to 22% and 20% and taxes and duties on imports to 10%. Thus transport accounts for 7 % of GDP, about the same as in 1978, and trade and merchant services, which depend on transport, account for fully a quarter of GDP. Structure of GDP, 1985 and 1991 % of GDP % of Sector jobs 1985 1991 1991 Primary 35 37 61 Secondary 18 13 9 Tertiary 48 so 30 8. The economic situation has improved noticeably since 1989, as a result of the implementation of a Structural Adjustment Program. The SAL program has redefined the role of the public sector and is facilitating its disengagement from. production activities and improving its capabilities in planning and programming, while laying the groundwork for private sector development. The following table shows some of the results achieved in major areas of the program. Indicators of SAL Results, 1989 - 1993 Results Indicators 1989 1991 1992 1993 * Total debt/GDP 53.9% 46.7% 47.9% 48.2% * National saving rate 4.7% 4.7% 4% 4.5% * Budgetary revenue rate 9.4% 11.5% 12.1% 12.6% * Overall deficit/GDP 10.6% 7.2% 7.8% 7.1% * Export/GDP rate 20.5% 24.0% 23.4% 23.3% * Import/GDP rate 31.3% 34.6% 32.5% 33.3% . Civil service salaries as a % of total revenues 68.4% 60.6% 56.2% 48.7% * Number of public sector 40 25 enterprises 30 Part II. Analysis 9. Despite progress made in restoring per capita growth under the structural adjustment program since 1990, the Beninese economy remains fragile. Private investment and employment opportunities continue to be limited, economic activity is heavily dependent on difficulties in neighboring countries, and prospects in agriculture and industry are clouded by the overvaluation of the real exchange rate. A second structural adjustment plan covering the period 1992-1995 was adopted in 1992. Its objectives are: (a) to accelerate economic growth; (b) to balance external accounts; (c) to protect vulnerable groups affected by economic adjustment and to reduce poverty; (d) to rehabilitate social and physical infrastructure; and (e) to promote human resource development and transfer state run production operations to private operators. The anticipated adjustment measures concern: (a) fiscal reform; (b) reform of economic management procedures and the establishment of control mechanisms; (c) rationalization of public expenditures and civil service reform; (d) improvement of public investment efficiency; (e) restructuring of public enterprises; (f) financial system reform; and (g) reform and deregulation of external trade. 10. On the basis of the SAL II macroeconomic scenario based on 3.2% annual population growth, GDP is expected to reach CFAF 672.5 billion (US$2,445 million) in 1995. The agricultural sector is expected to provide a major opportunity for economic growth, provided that its competitiveness can be restored through corrections to the real exchange rate. The tertiary sector, essentially trading, which is closely intertwined with the transport sector, also offers a major opportunity for growth. Over the period, the GDP should progress at an average rate of 4.1 % per year, based on an average annual investment rate of 14.4% and an annual marginal rate of return on assets of 28%. The tertiary sector should grow at an annual rate of 4.4% to reach 50.8% of the national economy in 1995. It is also anticipated that national per capita income would increase by 1.8% per year during the period. 11. The SAL plan is expected to have a positive impact on the structure of investment. The public sector share of investment, including investment in public enterprises, should be reduced from 58% in 1992 to 53% in 1995. Gross fixed capital formation should increase, in constant terms, from CFAF 45.5 billion (US$165 million) to CFAF 56.3 billion (US$205 million). Amounts budgeted in the public investment program (PIP) are expected to remain stable at around CFAF 66 billion (US$240 million) in 1993 and 1994. The actual execution rate estimated for the 1993 PIP as a whole is 45% (33% for transport and communications infrastructure), compared to 42% in 1992. The objective for the public sector investment rate is about 8.2%, roughly double the present level, whereas that of the overall economy would progress from 14.6% to 16.7% as a result of private investment. The PIP is expected to reach CFAF 69 billion Republic of Benin: Transport Sector Strategy 31 (US$251 million) in 1995, including 20% for operating costs. This would effectively leave from CFAF 46.4 billion (US$169 million) net to CFAF 55.2 billion (US$201 million) net in the PIP. These latter figures match, indeed, the corresponding amounts of gross fixed capital formation mentioned for the public sector and indicate consistency between the PIP and SAL. 12. During the SAL II period, Benin will also be implementing and Environmental Action Plan (EAP) in order to assure the sustainability of economic growth strategy. The EAP, which provides a diagnosis, an environmental strategy and an action plan, was approved by the Ministers' Council on June 16, 1993. It also reviews the role of each sector in the environment and the main issues in each climatic zone. The main problems highlighted in this document are the reduction of plant cover, the spread of all forms of erosion, a general reduction in water quality, and uncontrolled urban growth. These problems impose economic costs of the order of 3% to 5% of GDP. Among the institutional factors which contribute to environmental deterioration are a lack of transparency and poor enforcement of regulations and a lack of policy and strategy regarding expansion of urban infrastructure and services. In both urban and rural areas, a lack of infrastructure, poor infrastructure management, and poverty are also factors which encourage environmental deterioration. The action plan focuses on education, land management, natural resources management, improvement of living conditions in rural and urban areas, and improvements in the institutional framework. THE ROLE OF THE INFORMAL SECTOR 13. The importance of the informal sector in Benin's economy as a whole, and in the tertiary and transport sectors in particular, is such that it requires special attention. In fact, informal sector activities dominate the economy. This stems from a certain overlapping of the economies of Benin and its neighbor Nigeria, with trade by far exceeding levels declared in formal commercial transactions between the two countries. On the one hand, illegal trade of sensitive imported products, banned by Nigeria until 1992, represented about 25% of transit goods traffic through Cotonou. These lucrative activities are a specialty of the informal sector as they are outside the legal framework and require quick adaptation to changing circumstances. On the other hand, there was a rapid development in imports of used vehicles into Benin, spurred by strong demand in neighboring countries and interest in expanding the market for cheaper Nigerian spare parts. Furthermore, the wide spread in the real exchange rates of the Nigerian Naira and the CFA Franc has been a strong incentive for informal sector development. Likewise, fuel costs are ten times lower in Nigeria than in Benin, so that 80% of Benin's consumption is fraudulently imported. Such trade activities are risky, 32 Part H. Analysis however, and their volume is highly sensitive to legislative and exchange rate modifications that may occur in Benin, Nigeria, or Togo. 14. The extent of informal sector dominance is difficult to document accurately but inclusion of its contribution would involve substantial revisions in the economic picture. Nearly two-thirds of the Beninese population is involved in trade and related activities, and most of this is unregulated. Specific examples indicating the importance of informal sector activities have been documented by specialists, including the following: about 80% of fuel products are fraudulently imported from Nigeria; around 15,000 people are involved in the market for illegal oil products alone; 200 "tontines" or member-run savings and loan associations act as informal bankers; there are around 4,500 non-official foreign exchange agents; only one third of Nigerian currency transactions are handled by the Central Bank; around 140,000 people are practicing small-scale activities in service areas; the annual turnover of informal operators in the areas of retail distribution, urban transport and restaurants in Cotonou alone is estimated to be as high as CFAF 150 billion (US$545 million) annually. These activities are widely scattered and involve essentially individual operators. According to Beninese informal sector specialists the growth of the informal sector has been encouraged not only by the specific character of demand, but also by the high level of corruption within the civil service responsible for enforcing regulation. Using bribes to evade the otherwise powerful Beninese administration, informal trade operators still manage to pay lower informal "fees" related to regulatory control. 15. The flexibility and quick supply response characteristic of the informal sector give the Beninese economy, in particular its transport sector, a major comparative advantage, but this also generates certain problems. On the one hand, operators from the informal sector are small, quick to adjust to changing circumstances and fluctuations in demand, and have access to illegal imports. They are therefore able to offer much lower prices. However, informal sector operators are almost always non-professionals who offer poor quality service. Nor do they participate in cost recovery since they avoid taxes of any kind along with social security. Thus a large number of economic actors fail to participate in the official economy, and escape from any control, supervision or monitoring. 16. Despite these problems, Government is neither willing nor able to intervene, so entrenched is the power of the informal sector in Benin's economic culture. Virtually every civil servant is directly or indirectly involved in an informal business. In addition, the pervasiveness of informal operations offers anyone the opportunity to start a business with a small loan from the informal banking system. Becoming an informal operator is an integral part of the "Beninese dream". Any attempt to curtail informal activities would result in an Republic of Benin: Transport Sector Strategy 33 increase in unemployment and social frustration. It would also place a de facto monopoly in informal activities in the hands of a few civil servants with power to shut down non-compliant formal operators. This is why there were riots in 1992 at the Nigerian border, when Customs agents cracked down on fraudulent fuel imports. Government is still willing to create incentives to bring informal operators into the formal sector. But fiscal and legal incentives will have little effect without a dramatic change in the complicity of regulation enforcement personnel. And too stringent enforcement of regulation or incentives could have the undesired effect of pushing the formal sector towards more informal activity. C. Sector Background TRANSPORT NETWORK STRUCTURE 17. The country's shape takes the form of an elongated corridor 800 km long and 300 km wide. The anchor of this north-south axis is the port of Cotonou and its backbone is the Cotonou-Malanville road, a 790 km, two-lane paved road, parallelled for about half of its length by the Cotonou-Parakou metric rail line (see IBRD Map 25467). Road transport is centered around the port of Cotonou, located on the country's south coast. From Parakou, a two-lane gravel road which is scheduled to be paved by the end of 1995, branches off to the west towards the border with Burkina Faso. These main roads allow for the outflow of cotton from the main production centers to the port. Two other main east-west roads, a coastal road from Lom6 to Lagos, and another located about 150 km north of Cotonou through Bohicon, are the main links to Nigeria and Togo. The feeder road network radiates around the urban centers, and connect to this main axis in a branchlike pattern. The density of this network varies with population (see Map A) and soil fertility, and is therefore higher in the south near Cotonou, decreasing gradually in the north. INTERMODAL COMPETITION 18. For reasons of cost and availability, road transport is the dominant mode. Virtually all passengers (93%) and 73% of goods were carried by road in 1992, the remaining traffic being handled by the railway. Air transport is limited by the small size of the country. The north-south Cotonou-Parakou rail line is faced with competition from the road all along its entire 450 km. The east-west rail line parallelling the coastline from Cotonou to Pobe to the east and Cotonou to Segboroue to the west was closed in the mid-1980's because it could not compete with road. About half of freight traffic to and from Niger is transported by rail and half by road. The following table shows the respective shares of road and rail transport in 1991. 34 Part II: Analysis Rail-Road Modal Split for Freight and Passenger Traffic, 1991 Rail Transport Road Transport Total Freight Transport (T/km) 162 million 486 million 643 million Passenger Transport (p/km) 63 million 1,886 million 1949 million 19. Until specific product-by-product cost comparisons of road vs. rail transport on the Cotonou-Parakou line become available, arguments abound on both sides of the debate concerning the future viability of the rail line. The outcome will hinge on cost and facility. Certainly given current low-cost alternatives of informal sector trucking, the rail line cannot compete for most goods passing through Benin. Also, railroad engineering rules of thumb indicate that it is usually not economically viable to construct and operate a line less than 600 km in length; but the Cotonou-Parakou line is only 450 km long. However, multimodal containers in transit for Niger cannot currently be carried by road, and it would involve less effort to make substantial improvements in the length of transit time for this type of freight through special arrangements with customs and border authorities for container trains, than it would to effect comparable. improvements for truck transit traffic. A decrease in transit time from five to three days could in fact attract transit traffic currently passing through Togo en route to Burkina Faso. It is possible that specialization of OCBN in such profitable freight traffic could bring in sufficient revenue to cover operating cost and debt service, including provision for maintenance and renewal of rail and rolling stock. CURRENT TRANSPORT DEMAND AND TRAFFIC FORECASTS 20. The transport sector is organized to meet three principal aspects of demand: domestic cotton exports, transit traffic and trade with neighboring countries and internal trade between towns and rural areas. The primary sector represents 40% of GDP, and agricultural products, especially cotton, make up the bulk of export transport demand. Agricultural exports consist essentially of 180,000 tons of cotton out of a total of some 250,000 tons of exports (1992). The bulk of cotton is produced in the north, some in the center of the country and some in the south. It is generally transported by road, but part of that produced in the area around Parakou is transported by rail to Cotonou. In 1991, revenues from cotton transport amounted to 6% of total turnover of the Office des chemins defer du Benin et du Niger (OCBN), the railway company, but 80% of turnover from southbound traffic. Republic of Benin: Transport Sector Strategy 35 21. Transit Traffic. Transit traffic is the second largest category of freight transport demand. About 15% of all road traffic in vehlkm terms is international in nature; half of this is traffic going to or from the port, and the other half is passing through Benin (origin and destination outside the country). In 1991, 15%, 3% and 2.5% of imports through the port of Cotonou were officially destined for Niger, Nigeria and Burkina Faso, respectively. Transit demand is subject to considerable variation as a function of the cost of transport but also in response to unpredictable political and economic situations, import regulations and port operations. The table in Annex A shows traffic fluctuations registered in the port of Cotonou statistics between 1979 and 1992, demonstrating the volatility of demand. Niger is the primary user of Benin's corridor, followed by Burkina Faso and Nigeria. In -1991, 60% of Niger's import and export traffic was carried over the Benin corridor, compared to 16% through Nigeria, 14% through Togo, and 10% through other countries.. 22. Benin's transit role for landlocked Burkina Faso has increased in recent years at the expense of the traditional Ivorian and Togolese corridors. Total transit traffic to and from Burkina Faso currently represents 350,000 tons annually, of which 290,000 currently go by way of the Ivorian corridor. Most of the remaining 60,000 tons usually goes by way of Togo, and over the 1985-1989 period, Burkinabe transit traffic passing through Cotonou's averaged a mere 3,000 tons annually. But this rose to 50,000 tons in 1991 following the collapse of commercial activity in the port of Lomd, Togo, and the transfer of traffic from the Togolese to the Beninese corridor. Benin is also a transit route for Togo and Nigeria. While officially recorded transit traffic to and from Nigeria through Benin was only 34,000 tons in 1991, it is likely that the actual volume has been as high as 300,000 tons. Sudden surges of this magnitude in the volume of port traffic officially recorded as destined for Benin, coincide with economic and regulatory changes in Nigeria which would have the effect of making it cheaper to bring goods through Benin. 23. Import Traffic. Northbound import traffic represents only 8% of total traffic since 1988, and as a result, freight transport is characterized by an imbalance between northbound and southbound traffic volumes. The result of this is a generally low load factor for trucks which often deadhead empty. The rate of loading averaged 54%, which is comparable to the rate observed in similar African countries. OCBN's financial situation also reflects this traffic pattern, with markedly imbalanced revenues between southbound and northbound operations, which represent respectively 8% and 92% of its income. 24. Internal Traffic. Domestic freight transport demand, which constitutes 85 % of all traffic in veh/km terms, involves essentially agricultural products. In the absence of final results from the origin/destination survey, the estimates that 36 Part II. Analysis may be ventured lack sufficient reliability for detailed analysis; data is available for a limited number of products, and for these it is possible to assign traffic flows on specific itineraries. This can be done for cotton, for example, for which distribution routes and quantities may be calculated. Once the results of the O/D surveys currently underway become available, the complete picture of domestic goods flow within Benin will emerge. These surveys will most likely confirm that local trade is more concentrated in the coastal areas where population density is also higher (see Map A). 25. Road Traffic. Between 1987 and 1992, road traffic has registered an overall increase of 14% on paved roads and 6% on earth roads. Such strong growth is the result of both the recent political and economic changes which have occurred in Benin, and the increase of trade transit since 1991 at the expense of the Togo corridor. Growth is clearly more significant for passengers than for goods (respectively 17% and 2% on paved roads, 9% and 3% on earth roads). Factors arising from economic growth since 1989, including the reestablishment of banking operations and massive imports of used vehicles, have generated an increase in personal mobility. On the basis of economic projections in neighboring countries, demographic growth, and anticipated economic growth in Benin, the following annual road traffic increases are expected for the period: (a) 8.2% for passengers and 5% for goods on the paved roads; and (b) 3.1 % for passengers and 1.7% for goods on the earth roads. Current road traffic levels are shown in Map B. 26. Urban Passenger Traffic. Passenger transport demand in Benin's cities has not yet been studied even in a cursory fashion. However, an extrapolation based on the average daily earnings collected by taxis and mototaxis (also called zemidjans) leads to an estimate of 390,000 trips per weekday within Cotonou. The modal split is dominated by mototaxis which carry 81 % of trip demand satisfied. For all shared modes, average mobility is 0.6 trips per resident. This is a relatively high trip rate, close to or even slightly higher than that observed in African cities having relatively well-developed bus networks. This is due to the strength of supply, particularly from the informal sector, and the high level of commercial activity in Cotonou. 27. Port Traffic. Traffic through the port of Cotonou is not likely to exceed the port's 2 million T saturation point prior to the year 2000. Annual port traffic is characterized by wide annual variations (see Annex Table A). Since 1975 annual port traffic volumes peaked in 1979 at 1.5 million T in response to overflow from the saturation of the port of Lagos, and in 1983 at 1.75 million T due to the virtual shutdown of the port of Lom& because of the political situation in Togo. During the same period, traffic fell to less than 1 million T one year out of four as a result of constraints arising within Benin, or because of Republic of Benin: Transpoil Sector Strategy 37 improvements in the performance of neighboring ports. Traffic levels are thus very volatile, and then shift easily from one port to another because most seaborne traffic on the West African coast is handled by a single shipping line. It is reasonable to expect a sustained traffic volume of around 1.3 million T through the port of Cotonou, with a continuation of windfall benefits linked to regional economic conditions. If traffic were to grow at the same rate as that projected for the economy as a whole (4%), it would reach about 1:5 million T by 1998; the port should still be prepared to deal with peak annual traffic levels up to its 2 million T capacity. 28. Air Traffic. Demand for air travel has exceeded 1985 levels following a substantial drop prior to 1988. In 1985 air traffic was 104,000 passengers compared to 187,000 in 1988, and reached 244,000 in 1992 (see Annex Table B). Average growth between 1989 and 1992 works out to about 6% per annum. Assuming a favorable political and economic environment both domestically and externally, bolstered by the revival experienced since 1989, air traffic should continue to grow at fairly high rates until 1995 and then stabilize. Traffic forecasts indicate a level of about 280,000 passengers and 3,500 T of freight by the year 2000. Most traffic is actually generated externally (international travel), and domestic demand for air travel is quite low due to the failure of domestic air carriers in recent years and due to the short travel distances which do not really justify much sustained internal demand for air travel. Benin is not a major tourist destination; what regional tourism does arrive, originates from Nigeria and Togo and relies mainly on the road network. COMPARATIVE ADVANTAGE OF THE BENIN CORRIDOR 29. Compared to its competitors, Benin has unquestionable advantages in the transit trade to and from the Sahel. These are rooted in its geographical position, its trading traditions, and its economic situation. Benin occupies a geographically strategic position, sandwiched between Nigeria on the east and the former French colonies on the west. This position allows Beninese traders to deal directly with the huge Nigerian market, whose entrepreneurial and deregulated nature generates much broader opportunities than those of Benin's French speaking neighbors, which are much more regulated and state controlled. This position also gives Benin the opportunity to play the intermediary between its western neighbors and Nigeria. Lax enforcement of custom regulations between Benin and Nigeria, access to Nigeria's low-cost markets and the ubiquity of informal operations results in low transport costs, allowing Benin to compete against Togo for Sahel transit trade in spite of facilitation difficulties. And the low level of safety and serious facilitation problems which prevail in Nigeria prevent Nigeria itself from efficiently competing with Benin for such trade, despite Nigeria's even lower transport costs. The following table shows the cost indices (Benin = 100) of the 38 Pan II: Analysis three competing corridors for transport to Niamey (Niger). The index for Benin is based on cost data covering only formal sector operations; inclusion of informal sector operations would increase the cost differences. Formal Sector Transport Cost Differentials for the Niger Transit Trade via Benin, Togo and Nigeria Type of Corridor freight. Benin Togo Nigeria General Cargo 100 103 85 Containers 100 112 64 (20 ft eq. units) 30. Benin's regional and international trading traditions date back at least to the era of slave trade, which enriched the precolonial kingdoms of Dahomey from the 16th century. With the passing of the slave trade, Benin continued to participate actively in commodity trading by the colonial power and developed its current specialization in serving its landlocked Sahelian neighbors. High rates of school attendance in the colonial period created an educated elite which was dispersed through French West Africa until its repatriation following the end of the colonial era in 1960, earning Benin a reputation as a regional source of skilled labor. 31. Every opportunity arising from political or economic change has been seized upon to reinforce Benin's role as the corridor of choice between Nigeria and its western neighbors and the preferred intermediary as well. With independence, transit trade with Nigeria blossomed through traditional links between kindred coastal peoples. Benin benefitted heavily from the Biafra war at the end of the 1960s, during which Benin became the corridor for Nigerian agriculture exports; from the first oil shock of 1973, which led to a boom in transit trade with Nigeria; from the Nigerian ban on imports of flour, rice and corn prior to 1991, which encouraged illicit transit trade with Nigeria; and from the devaluation of the Naira by around 1,500% since 1984, which increased Nigerian demand for CFAF and for trade with other CFAF countries through Benin. Benin also benefitted from economic growth in Togo and Niger resulting from phosphate and uranium discoveries, and more recently from the collapse of the Togolese economy due to political problems. The dramatic increase in used car imports to Benin is the result of the recession in West Africa which led to a boom in the demand for cheaper vehicles throughout the region-- and Benin was the first to seize the day. Republic of Benin: Transport Sector Strategy 39 32. Thus, Benin has had over 200 years to gain a mature capacity for transit trade. However, Benin's current competitiveness in transport operations could be dramatically altered by changes in CFAF parity, if unaccompanied by facilitation improvements. For the time being, transport costs via Benin are lower than via Togo, since the Beninese informal sector takes advantage of the over-evaluation in both legal and illegal trade systems with Nigeria. However the facility of transport operations via Togo is known to be much more reliable and smoother than via Benin, and the price advantage of the Benin corridor must remain high in order to assure competitiveness. The suppression of the free convertibility of the CFAF imposed in 1993 and further changes in CFAF parity will tend to equalize terms of trade across CFAF countries vis-a-vis Nigeria (including Togo and Benin) and can be expected to alter the structure of demand and supply for transport services. Should Benin fail to improve its competitiveness in terms of facilitation, Benin will progressively lose its comparative advantage vis-a-vis the Togolese corridor. PUBLIC AND PRIVATE AcToRs 33. Five ministries are involved in the transport sector, directly or indirectly, as well as five State owned companies. The liberalization of the transport sector started in 1984 and, since then, public entities have progressively withdrawn from production activities. The Ministry of Public Works and Transport (MTPT) is in charge of planning, programming and managing transport investment, road construction, and maintenance on the national and rural network; Ministry of Environment, Urban Development and Housing (MEHU) is in charge of these operations for the urban network. The Ministry of Rural development (MDR) is involved in rural road rehabilitation and construction through various donor financed projects. The Ministry of Planning is managing a project with a rural road component, and is in charge of final planning of investment in all sectors through the preparation of the Public Investment Program (PIP). The Ministry of Finance provides counterpart funds for projects and road maintenance funds through subsidies to the Road Fund. 34. The railway, OCBN, and the maritime navigation company, COBENAM, are jointly owned by Benin and the Governments of Niger and Algeria, respectively. The port authority (PAC), still under Government ownership, is in charge of port operations and coordination, and contracts out other activities not directly related to its primary function such as maintenance and security. State- owned SOBEMAP holds a monopoly on port handling; another parastatal (CNCB) coordinates national sea freight carriers and supports them through training and assistance. All other port operations (transit, consignment) are fully privatized, as are road freight transport and passenger transport 40 Part II: Analysis 35. Most transport operations are carried out by the informal sector. At one end of the spectrum are the totally formal, state-run companies which operate the port, goods handling and the railway, and private companies owned by foreign partners (mainly transit and new car dealers). Freight transport for the railway and for the cotton company (SONAPRA) are carried out by private companies close to the formal sector, but the rest of freight transport is mainly informal. Port operations other than handling are officially supposed to be carried out by formal companies but in fact, part of these operations are subcontracted to informal operators. Road maintenance is carried out partly by force account but increasingly since 1988 under contracts to private enterprises. Urban and interurban passenger transport is fully informal, although operators are now registered by the municipalities. Finally, the used car market is completely informal. 36. Because most transport activities have already been liberalized and privatized since 1985, further changes may be slower. Both toll collection on the roads and airport management are about to be subcontracted to private operators, and the share of road maintenance works executed by private enterprises is increasing. Only rail transport, port freight handling and port coordination are run by monopolistic public enterprises, and one public shipping company continues to exist despite the fact that it owns no ship. Privatization of these companies may be problematic since they are owned jointly by Benin and foreign countries. Furthermore, rail operations are no longer profitable at all, given the length of the rail line, and in the face of fierce competitive pressure from the informal road transport sector, so attracting a private investor to purchase the rail system is also problematic. 37. The freight handling parastatal is being supported by French CFD which has financed its restructuring, but full privatization of this activity is unlikely to be supported in the course of the restructuring. For one thing, the market for freight handling is small and is likely to attract only firms interested in acquiring a monopolistic position in shipping and freight handling on the West African coast. But Government is concerned by the risk of having a private company in control of this activity for the various corridors which would introduce some vulnerability in one of the most dynamic segments of its economy. Therefore only partial subcontracting of freight handling operations is being considered under the restructuring. PUBLIC FINANCE AND INVESTMENT 38. Sector Impact on Public Finance. The financial situation of the transport sector in 1991 shows overall results which are satisfactory, despite a temporary deficit for the sector's public enterprises (see table below). The deficit of these Republic of Benin: Transport Sector Strategy 41 enterprises, taken as a group, amounts to CFAF 1.6 billion (US$5.8 million), but most of this is due to PAC's situation which involves making up for inadequate earlier depreciation allowance (see section on PAC below, paras. 135 ff). PAC should regain a positive net result in 1994 or 1995, bringing the transport public enterprises as a group out of deficit. The road sector generated in 1992 CFAF 5.1 billion (US$ 18.5 million) in fiscal revenues (see section on road transport below, para. 114 ff), of which only CFAF 559 (US$2 million) were, allocated to road maintenance, leaving a surplus of CFAF 4.5 billion (US$16.4 million). Had the required amounts been allocated to road maintenance (about CFAF 3 billion or US$11 million total; see section on road maintenance below, para. 49 ff), there would still have been about a CFAF 2 billion (US$7.3 million) revenue surplus. And because collections performance for the road sector has been on the order of 40%, leaving CFAF 7.5 billions (US$27.3 million) uncollected (see para. 115 below), full collection of road-related revenues would have raised the surplus, net of adequate road maintenance expenditure, to CFAF 9.4 billion (US$34.2 million). The table below summarizes the impact of the transport sector on public finance (see also Annex C). The table does not include the airport sector which does not seem to have generated a deficit. Financial and Fiscal Status of the Transport Sector in 1992 (in CFAF millions) Public Enterprises Rd. Sector Sub- SOBE- COBE- CNCB Maint. Total total OCBN PAC MAP NAM Surplus/Deficit 4,508 2,874 -1,634 -253 -2,860 1,141 139 301 Maintenance Shortfall 2,586 2,586 - - - - - - Surplus/Deficit incl. Shortfall 1,922 288 -1,634 - - - - Surplus/Deficit Assuming Full Tax Collection 9,442 7,808 -1,634 - - - 39. Public Investment. The financial package for investment in all transport modes, including urban infrastructure, could amount to CFAF 55 billion or US$200 million (1992 prices) over the 1993-1997 period, or 65 billion in current CFAF or US$236 million (PIP expenditure consistent with SAL; see para. 11 above). Transport and urban infrastructure's share represented 18% of the PIP in 1992, and this could rise to 21 % in 1995. Transport sector allocations of CFAF 9 billion in 1993, 10.6 billion in 1994, and 12.5 billion in 1995 would be 42 Part II: Analyss consistent with the overall economic framework. This scenario implies increases in transport sector investments of 17% per annum in nominal terms and 11 % in real terms (annual inflation rate is 5%). However, investing in transport at these levels would result in a major increase in debt service. Indeed, on the basis of ongoing loans alone, transport-related debt service for ongoing loans would increase from CFAF 1.2 billion (US$4.4 million) in 1989 to 3.2 (US$11.6 million) in 1996. 40. Government's tentative program covering all transport subsectors totals CFAF 77 billion or US$280 million (see Annex D), which is a fifth higher than even the CFAF 55 billion (US$200 million) package consistent with the SAL strategy, and therefore it needs to be revised. A priority program will have to be drawn up including only carefully selected investments, and very stringent criteria should be applied in this investment selection process, with top priority going to roads linked to economic growth. Raising the ceiling above the CFAF 55 billion level could be envisaged only if the transport sector is given the highest priority among all sectors. Investments that have a limited impact on the balance of payments should be either self-financed or funded by grants or specific credits. 41. A rolling investment program covering several years will be established on the basis of the overall financing capacity for the sector and should be kept up to date. Updating of this program would consist in adjusting the total amount of sector expenditures to the macroeconomic situation, including the addition of new works when they are justified. A core program should be established which includes all investment and maintenance operations in all subsectors. This program should include only operations which are economically justified, and priority rankings should be established on the basis of rates of return and sector strategy. It should be broken down into successive phases of execution, defined in agreement with the involved donors during annual meetings. The Government would be committed not to undertake any other investments than those included in each agreed phase. Each new phase should include first the non-executed items of the preceding phase, that is to say that no new investment would take place as long as maintenance operations include in previous phases has not been completed. Such a program would allow for a better balance between new investment and maintenance, in keeping with macroeconomic forecasts, and would aim at maintaining the existing infrastructure as the overall first priority. ENVIRONMENTAL AND POVERTY LINKS 42. The Environmental Action Plan identifies several areas in which the transport sector has a potentially negative environmental impact. Road transport, however energy-intensive and costly in terms of safety, is the only transport mode available in the middle-term. Soil erosion and risk of flooding are the main types Republic of Benin: Transport Sector Strategy 43 of damage resulting from road works. Road construction and maintenance can often exacerbate natural erosion and flood conditions, or at the very least fail to contribute as much as they could to the correction of such conditions. Major improvements could be made in both the design and maintenance of roads and of drainage structures to reduce such negative environmental impacts, and environmental criteria are now being developed to this end. Improvements in Cotonou's infrastructure could also reduce traffic congestion and air pollution, and improve urban safety conditions, and these are being addressed under an Urban Rehabilitation Project. Finally, the port of Cotonou may also be a source of pollution, however at this time there is no capacity for monitoring this, nor means to correct such pollution, if it proves serious. 43. The transport sector is also implicated in the reduction of poverty. Two of the factors underlying the high rate of poverty in Benin could be substantially alleviated through transport sector measures: difficulty of access to potentially productive rural areas, and the high rate of unemployment. The poor condition of rural transport infrastructure reduces access to inputs and markets, thereby reducing income potential.. Seasonal variability in access worsens the factors underlying seasonal poverty in rural areas, and uncertainty of access increases the vulnerability of the rural population as a whole. In urban areas, especially. Cotonou, unemployment is a major problem, due to a lack of job opportunities in the modern sector and to the restructuring of the public sector under the Structural Adjustment Program. About 30% of the population is unemployed and 18% of those currently employed earn less than CFAF 10,000 per month. Unemployment not only contributes to poverty, but also creates a possible threat to political stability. Employment generation is being promoted under the Urban Rehabilitation Project in Cotonou-Porto Novo. D. Road Subsector ROAD INFRASTRUCrURE 44. Network Structure. The total length of the road network is around 15,500 km. It consists of 3,425 km of classified roads (including interstate highways and primary urban roads), 10,350 km of rural roads and around 1,800 km of municipal roads (secondary and tertiary roads in urban areas). The role of Benin as a transit corridor is apparent in its network classification: international roads represent 64%, or 2,178 km, of the classified network. The classified network (3,425 kIn) includes the international roads which are the links with neighboring countries (2,178 kam) and national roads which serve the main cities (1,247 kIn). This network consists of 1,195 km of paved roads (35% of paved roads) and 2,230 km of earth roads. Most of the paved roads (87%) are 44 Part II: Analysis international roads. The table which follows shows the respective lengths of each network. Road Network Lengths Length (km) Network Paved Earth Feeder Total Classified Network' Interstate 1,034 1,144 - 2,178 National 161 1,086 - 1,247 Subtotal, Classified 1,195 2,230 - 3,425 Rural Network - 2,630 7,827 10,457 Municipal Network 100 1,700 1,800 (secondary and tertiary) TOTAL, ALL NETWORKS 1,295 6,560 7,827 15,682 ' About 20 km of the classified network are primary roads within Cotonou. 45. Traffic Volumes. The paved network carries road traffic volumes of 250 vehicles/day and 95% carry volumes over 300 vehicles/day. About 8% of the earth network (150 krm) carries volumes over 250 vehicles/day, which normally corresponds to a rate of return to paving investment on the order of 12%. Traffic on paved roads (that is, 35% of the classified network) represents some 89% of total vehicle-kin (traffic totalled 740 million vehicle-km in 1992). The three routes, Cotonou-Border of Niger, Cotonou-Porto Novo, and Cotonou-Border of Togo (33% of the classified network) together account for 68% of total traffic. Traffic volumes on the classified earth network are everywhere higher than 20 vehicles/day, and 40% of this network carries over 100 vehicles/day. Agricultural crop demand and production, higher in the South, generates higher traffic on the classified network as well as on the rural network in the southern part of the country. 46. Network Conditions. Conditions on Benin's main road network have improved but the rural and municipal networks are very heavily deteriorated. This results in high operating costs on rural roads which especially impact on agricultural products, and in the persistence of isolated areas. The condition of the classified network is acceptable. The table below gives a breakdown according to road characteristics and conditions. The paved network is fairly well managed despite the fact that lack of routine maintenance results in more frequent periodic maintenance or rehabilitation. Conservation of the existing paved network is a clear priority of Government. The rehabilitation of the 28% of the paved network Republic of Benin: Transport Sector Strategy 45 in poor condition is either currently ongoing or appears in the first priority investments. Condition of the Classified Network Classified Network Good Fair Poor Paved 13% 59% 28% Earth 10% 40% 50% 47. Earth roads in good or fair condition (50%) are passable all year round, while roads in bad condition are passable only with difficulty (poor condition), or not passable at all (very poor condition), during the rainy season. The rehabilitation of the priority earth network under the Transport Infrastructure Rehabilitation and Maintenance Project succeeded in stabilizing conditions on the roads which were rehabilitated; those remaining in poor or very poor condition are not heavily travelled. Good maintenance programming since rehabilitation has focussed on the rehabilitated earth roads, and scarce resources available for road maintenance were programmed and allocated in such a way as to maintain the overall earth network at a constant, if low, level of service. Responsiveness was increased so that maintenance teams are able to intervene quickly as soon as problems arise. As a result, more than three years after the rehabilitation of roads carrying up to 200 vehicles a day, the rehabilitated earth sections remain in fair condition, and traffic interruptions, which had frequently occurred before, now occur only on rare occasions. This is remarkable considering the lack of funding for road maintenance and a technical strategy which favors cheap rehabilitation through spot improvement. However, even that part of the earth network which remains satisfactory is extremely vulnerable due to the backlog of periodic maintenance works, in particularly regravelling. ROAD MAINTENANCE PRIORTIES 48. Although three-quarters of paved classified roads and half of earth classified roads are currently in fair to good condition, it is critical to understand that the valiant but limited past maintenance effort on the earth network cannot continue to compensate for the decision to opt for low standards of rehabilitation (equivalent to spot improvements) which was the optimum strategy at the time (see para. 59 below). Had earth roads been rehabilitated to good rather than fair levels, at costs roughly four times those actually spent, lapses in maintenance could be forgiven, for a while. As it stands, earth roads now in fair condition are continually at risk of slipping to poor. But investing more in periodic rehabilitation alone, while sacrificing timely and adequate routine maintenance is not a viable medium-term strategy. Not only is it much more costly, even at low standards, but it can cover only a limited portion of the network. An efficient 46 ParY II: Analysis road maintenance program, in contrast, has a major and immediate impact on road conditions over the network as a whole, at a fraction of the cost. Vehicle operating costs on a well-maintained earth road, for example, are as much as 70% lower than on the same road without maintenance. 49. A major imbalance between investment outlays and rehabilitation and maintenance has characterized Government expenditures in the past. From 1987 to 1991, CFAF 23 billion (US$83.6 million) were allocated to road investment and CFAF 4.8 billion (US$17.5 million) to road maintenance, while adequate maintenance of the MTPT-managed network would have required about CFAF 14 billion (US$51 million), according to the 1985 appraisal of the ongoing transport project. The ratio of road maintenance to road investment has been about 20% over the 1987-1991 period, compared to the 36% implied by forward planning for the next five years. There is no doubt that the objective of improving transport competitiveness implies a clear prioritization of maintenance versus investment. This means ensuring full coverage with routine and periodic maintenance, in particular, periodic regravelling of critical points as soon as they appear. This will require roughly CFAF 3 billion (US$11 million) annually: CFAF 1.3 billion (US$4.7 million) for routine maintenance financed out of the Road Fund, and CFAF 1.6 billion (US$5.8 million) for periodic maintenance financed under the PIP. 50. On the basis of current network characteristics and the above investment program, the annual amount to be allocated for routine maintenance should be an average CFAF 1,642 million (US$6 million), of which CFAF 370 million (US$1.3 million) for the paved network, CFAF 750 million (US$2.7 million) for the classified earth network, and CFAF 180 million (US$0.7 million) for the rural network. Reductions in the cost of routine maintenance of CFAF 340 million (US$1.2 million) could be realized by limiting the level of service on the second priority national network roads (1,177 km of earth roads carrying less than 100 vehicles per day) until additional resources are secured (savings of CFAF 120 million), and by requiring part of rural road maintenance to be financed through locally mobilized resources (savings of CFAF 220 million). The routine maintenance budget could thus be reduced to about CFAF 1.3 billion (US$4.7 million) annually, as shown below. Republic of Benin: 7)ansporl Sector Strategy 47 Routine Maintenance Program Description 1993 1994 1995 1996 1997 Totals Average Paved Roads 444 343 317 345 377 1,826 Classified Earth Roads 865 865 865 865 865 4,325 Rural Roads 286 348 412 475 539 2,060 Total Needed 1,595 1,556 1,594 1,685 1,781 8,211 1,642 Potential Reductions 252 310 352 352 435 1,701 340' Reduced Totals 1,343 1,246 1,242 1,333 1,346 6,510 1,302 CFAF 220 million transferred to local communities and CFAF 120 million by reduction of service level on 1,177 kn of low traffic roads. ROAD MAINTENANCE FINANCING 51. Road Fund Revenue Shortfalls. The Fonds routier (FR), or Road Fund, collects earmarked resources intended for the routine maintenance of the entire classified and rural networks, both in principle under MTPT, and for periodic maintenance of the earth road network. It was established in 1984 as an entity independent from the nation Treasury, to secure resources for (i) routine maintenance over the entire MTPT network and (ii) periodic maintenance on the MTPT earth network (4- to 12-year cycle; periodic maintenance on MTPT's paved network, which has a 15-year cycle, has always been included in the PIP). Road Fund shortfalls have prevailed for years, despite a doubling of fuel tax proceeds allocated to it in 1985. In spite of this increase, the fuel tax allocation dropped from 51 % of the Road Fund total in 1990 to 25% in 1992 because of the dramatic increase in fraudulent fuel imports from Nigeria. Fuel tax and vehicle registration allocations (28% of total Road Fund resources or CFAF 290 million in 1992) are supplemented with tolls (21 % of total resources), Government subsidies, amounting in 1992 to 27% of the total, and a variety of minor fees and taxes (port truck tax and equipment rental fees, for example) accounting for the remaining 24% (see table para. 114 below and Annex E). Total Road Fund resources amounted to about CFAF 1 billion (US$3.6 million) a year over the last five years. This represented only about 30% of the total needs of the network under MTPT, as discussed below. 52. Shortfall in Maintenance Allocations. Apart from the shortfall in revenue, there is also a shortfall in the level of funds actually made available for maintenance works. Routine road maintenance financed by the Road Fund should cover the entire classified network, including Cotonou's accesses and thoroughfares, and roads of the rural network bearing enough traffic to justify it. All periodic maintenance should be financed by the PIP, before any new 48 Part II: Analysis investment is made. In actual fact, the portion of FR resources allocated to road maintenance is only 60% of its collected revenues since 1987 (see table below and details in Annex F). In 1992, funds actually allocated to maintenance represented only some 18% of needs for FR-funded routine and periodic maintenance. Should allocations for 1993 remain the same, this will represent only 35% of routine maintenance needed in 1993 and around 17% of overall maintenance needs including the rural network. In order to reduce the maintenance backlog from 83 % to 65%, the strategy presented in this document proposes limiting Road Fund financing to routine maintenance alone and transferring periodic maintenance on the earth network to the PIP. Revenues, Expenses and Requirements for Road Maintenance (in CFAF millions) Year 1987 1988 1989 1990 1991 Sub-Total 1992 Total Average 07/91 07/92 Revenues: Fuel Taxes 517 653 442 537 246 265 Subsidy 282 191 214 204 198 288 Tolls 133 155 147 159 195 216 Other 40 42 65 61 194 173 Arrears 361 562 65 87 71 109 Total 1,333 1,603 933 1,048 904 5,821 1,051 6,872 1,145 Expenses: Overheads 97 95 116 124 125 143 700 116 Investments 187 93 51 62 138 192 723 120 Debts Service 77 108 118 111 166 177 757 126 Road Main- tenance and 763 551 617 606 629 559 3,725 621 works Total 1,124 847 901 902 1,059 4,833 1,071 5,904 984 Average Maintenance Needs: (Appraisal 1985) Routine 1,404 1,736 1,986 2,046 2,107 2,170 Periodic (earth roads) 776 833 893 918 946 975 Total Needs 2,180 2,569 2,879 2,964 3,053 13,645 3,145 16,790 2,798 Repubhc of Benin: Transport Sector Strategy 49 53. One reason for these shortfalls is that FR resources have not been restricted to maintenance of the classified and rural network as is specified in its statutes. Investments, counterpart funds, and debt service for some investment projects have been financed out of the FR, diverting 25% of its resources, and overheads not entirely related to road maintenance absorbed 12% of its outlays in 1992. The remaining funds actually allocated to road maintenance are not used only for the purpose of maintaining the network under MTPT's responsibility, as planned in the annual program. They are also used to finance road maintenance activities on the urban network, which is the responsibility of MEHU. Also, until 1992 the FR collected directly, earmarked funds from gasoline taxes and vehicle registration, but in 1992, at the IMF's request, collection of all earmarked funds coming from general taxation reverted to the Treasury; these funds were then to be allocated to the designated recipient. Thus, the Road Fund has lost some of its autonomy and is permitted to collect directly, only user fees, which are essentially road tolls. Thus measures are required both to eliminate improper expenditures and increase Road Fund income, as well as to ensure that designated funds are actually made available from the Treasury. 54. Financing Alternatives. As discussed and agreed by the Bank and Government, the required urgent revenue sources for the Road Fund fall basically into three categories: direct budget subsidy, toll revenues and fuel tax revenues. Subsidy would be the easiest way to proceed, however, it is difficult to mobilize Government funds for road maintenance at a time when Government is seeking to reduce overall operating costs. Toll revenues are the best short-term source: experience with toll collections has actually been quite good in Benin, unlike in other countries in the region, and it is also the best fiscal tool to recover user costs from informal sector operators in the short run. Toll collections have steadily increased from CFAF 133 million (US$0.5 million) in 1987 to CFAF 213 million (US$0.8 million) in 1992, and this on only two bridges. Fuel taxes are the best long-term source, at least in theory. Fuel tax already generates the highest amounts, though this tax is collected on only about 20% of all fuel consumed. The reason for this is that gasoline (petrol) costs CFAF 30/liter in Nigeria compared to CFAF 170/liter if purchased legally in Benin (December 1993). To the extent that the relative currency exchange rates encourage a shift in the market away from illicit subsidized Nigerian sources towards legal taxed domestic sources, fuel tax receipts will increase. However, large price differentials will continue to exist even after the market has adjusted to exchange rate shifts, as long as Nigeria continues to subsidize fuel prices. It would be unrealistic to expect that any change in fraudulent imports could entirely fill the financing gap. The most that can be expected would be a shift away from Nigerian fuel to taxed fuel on the order of 25%; this would double the amount on which fuel tax is paid, bringing in roughly an additional CFAF 250 million (US$0.9 million) a year. 50 Part II. Analysis 55. The FR should focus on measures to increase its overall resources and on eliminating inappropriate expenditures so as to focus on ensuring adequate financing of routine maintenance. In order of priority, the following six changes are required: (a) Limit FR intervention exclusively to the financing of routine maintenance and operating expenses related to maintenance management. The reimbursement by Government of debts related the to Mono and Sazu6 bridges, and transfer of the counterpart funds thus released, would immediately allow allocation of an additional CFAF 250 million (US$0.9 million) more to road maintenance (see para. 53 ). (b) Transfer all periodic maintenance, which follows a seven-year cycle on average, to the investment budget and include it in the PIP, and continue to finance the gap in periodic maintenance under the PIP until the resources of the Road Fund reach the required level of CFAF 3.3 billion (US$12 million) a year (see para. 52). (c) Restructure Road Fund staff, which will result in an increased allocation of around CFAF 200 million (US$0.7 million) to road maintenance works. (d) Limit the level of service on the second priority national network roads (1,177 km of earth roads carrying less than 100 vehicles per day in order to reduce road maintenance expenditures by around CFAF 120 million (US$0.4 million) until additional resources are secured (see para. 49) (e) Transfer road maintenance financing for the municipal (non-primary roads in urban areas) network to the municipalities, and transfer a portion of road maintenance on the rehabilitated rural road network to local communities, reducing maintenance expenditures by around CFAF 220 million (US$0.8 million) per year (see para. 72). (f) Improve the current toll collection system, by subcontracting, and progressively extend it to the entire paved network. Government is about to subcontract the toll collection on several bridges which currently bring in around CFAF 200 millions (US$0.7 million)- annually and this collection method should gradually be extended to cover the paved network. Extending the toll to the Cotonou-Malanville, Parakou-Natitingou and Cotonou-Porto Novo roads, as soon as they are improved, would generate around CFAF 1 billion (tJS$3.6 million) annually by 1998. Republic of Benin: Transport Sector Strategy 51 ROAD INVESTMENT PRIORTIES 56. Paving Investment Priorities. So far, Benin has made the right decisions concerning paving priorities. Roads linking into Niger's network, the coastal link with Nigeria, and the Togo connection are all paved. Paving of the Parkou- Natitingou section (217 km) linking into Burkina Faso will soon be carried out. Once this link is complete, all sections of the road leading to Ouagadougou will be paved, with the exception of the Natitingou-Porga-border section (114 kIn). This program should include works required to increase access and thoroughfare capacity within Cotonou and to upgrade the Cotonou-Porto Novo road. Further extension of road capacity is likely to cover two roads which carry more than 300 vehicles per day: Akpo-Adjohoun in the South of the country, and Bohicon- Kpedekpo, a section of a main East-West route. 57. Works required to increase access and thoroughfare (primary highway) capacity within Cotonou and to upgrade the Cotonou-Port Novo road are also a paving priority, including dedicated or separate lanes for two-wheeled vehicles (70% of traffic). The rapid growth of traffic as a whole and of the proportion of two-wheeled vehicles in particular has led to a major increase in congestion on the main roads under MTPT responsibility, and there is a need to increase their carrying capacity. Close coordination between MTPT and the municipality is required to guarantee that such primary road investments actually result in improved urban traffic flow (see para. 110 on safety and para. 71 on municipal roads). 58. Paving of Natitingou-Porga and the Savalou-Djougou sections has been among Government's top priorities, and this investment will be justified once traffic levels have increased. Paving these sections would certainly consolidate Benin's position in the competition with the Togolese and Nigerian corridors to capture Burkinabe transit traffic, and would reduce the distance from Cotonou to Djougou on paved roads by around 150 kam. However there is little hope that the trans-Ivorian portion of Burkinabe transit traffic could be captured by Benin since the Benin corridor's competitiveness versus C6te d'Ivoire is jeopardized by poor port and road facilitation. Cutrent traffic on these road sections and even the most optimistic traffic forecasts do not justify their paving over the next five years, yielding ERRs of 4.5 to 6.5%. Moreover, the cost of paving these two sections would be around CFA 26 billions, or 1.6 times higher than the entire tentative five-year interurban network investment program. With good maintenance, the existing earth roads on these two sections will allow for Benin to carry its appropriate share of Burkinabe transit traffic until the turn of the century. 59. Earth Road Rehabilitation Priorities: Cost Reduction Lessons from The Transport Rehabilitation Project. The priority network as defined in 1985 52 Part II. Analysis included all earth roads carrying more than 50 vehicles a day, amounting at that time to 2,650 km of classified and rural roads. At that time, a program was prepared to rehabilitate 595 km of earth roads in the priority network which were then in poor or very poor condition, bringing them up to good condition at average unit costs of CFAF 4.3 million/km or US$16,000 (CFAF 5.9 million/km for rehabilitation and CFAF 1.8 million/km for regravelling). The program was to be financed with assistance from the Bank Group under the Transport Infrastructure Rehabilitation and Maintenance Project, appraised in 1985. 60. However, because of political turmoil including widespread strikes, the responsible ministry (MTPT) was unable to begin the program until 1990, nor was it able adequately to finance road maintenance in the interim. By 1990, many other priority sections which had been in good or fair condition in 1985 had become barely passable, if at all. Furthermore, due to longer project duration, the cost of ongoing TA under the project was absorbing more financing than planned; also emergency repairs to roads damaged by the 1991 flood needed to be financed under the project. As a result, the total available for road works was squeezed to CFAF 1.2 billion (US$4.4 million) from the CFAF 2.2 billion (US$8 million) originally planned. This reduced budget would have paid for only 325 km to be rehabilitated. Rather than reducing the length of roads to be rehabilitated, Government chose instead to reduce rehabilitation standards from good to fair, to switch to a more pragmatic and flexible way of setting standards for specific work sites, and to achieve major cost savings by putting the force account unit in direct competition with the private sector. Under a new type of contract, Government required the supervision team to establish the technical design by sections of 10 km immediately prior to the startup of works, rather than on a preestablished detailed engineering design. 61. To reduce unit costs for the type of rehabilitation works required, which had historically averaged about CFAF 3 million/km (US$11,000) for these standards when carried out by force account, the Road Works Director adopted a negotiating strategy using the leverage of lower private sector costs. The first step was to request bids for half of the works from private enterprises and the other half from the force account unit. The private sector bids came in at about CFAF 1.6 million/km (US$6,000); the force account unit's at CFAF 2-2.5 million/km (US$7,000-9,000). At this point all the parties involved-- the Road Works Director, his Minister, and the Bank supervision missions-- informed the force account unit that its bids were too high; they would have to do better if they were going to participate. The unit responded to the challenge. In fact their actual unit costs, measured under close supervision, came out at about CFAF 1.4 million (US$5,090)-- less than half their historical average. Allowing for shadow costing of labor and equipment depreciation, this works out to just about the same as the private sector's unit costs: CFAF 1.6 million/lan. These dramatic Republic of Benin: Transport Sector Strategy 53 reductions in the average unit costs from CFAF 5.9 (US$21,000) to CFAF 1.6 million (US$5,800) per kam allowed the program to be extended to cover a total of 780 kam, or 60% of the priority network and 30% of all earth roads: the 595 km originally targeted plus an additional 185 km which had deteriorated in the meantime. Improvement works were focussed on the critical points where traffic was habitually blocked during the rainy season, due to deteriorated drainage structures, flooded sections and mud spots. 62. The result of rehabilitating this 780 km was restoration of traffic flow on about a third of the worst earth roads in the priority network, so that road conditions are now fair to good on 1,115 km (50%) of the 2,230 km of earth roads in the 1985 priority network. They will remain so provided only that routine and periodic maintenance is executing in a timely fashion. The other half (1,115 km) are already impassable or about to become so; of this, one 135-km section is scheduled to be paved in 1995 (Parakou-Natitingou) and 315 km are urgently in need of rehabilitation. The remaining 650 km of priority earth roads can be restored to fair condition with regravelling. ROAD INVESTMENT FINANCING 63. Level of Investments in the Subsector. A tentative road investment program for 1993 to 1997 has been established by Government consisting of CFAF 16.6 billion (US$60 million) for new paving, CFAF 21.4 billion for rehabilitation, and CFAF 17.5 billion for urban roads, taking into account actual resource mobilization capacity for road maintenance and PIP financing capacity (see table below). This tentative road investment program totals CFA 55.5 billion, which is 18% higher than the amount for all transport subsectors which would be consistent with the macroeconomic framework (see para. 39 above). The tentative program must therefore be downsized by reducing technical standards or postponing some investments. The investment ceiling for the road subsector could also be increased by reducing investment in other transport subsectors. However, the overall investment program should include all high priority works needed to improve transport competitiveness. Improvements in absorptive capacity in the transport sector could allow for an increase in the PIP allocation to road investment in future years. However, no further rehabilitation or construction should be undertaken until roughly CFAF 3 billion (US$11 million) annually can be mobilized for road maintenance (CFAF 1.3 billion for routine maintenance 54 Part H. Analysis financed out of the Road Fund, and CFAF 1.6 billion for periodic maintenance financed under the PIP. Investment and Periodic Maintenance Program (in CFAF million) Description 1993 1994 1995 1996 1997 Totals Average INTERURBAN ROADS Construction: Paved Roads 2,834 4,005 4,496 3,815 1,475 16,625 Rehabilitation: Paved Roads 442 2,863 4,282 6,565 2,870 17,002 Earth Roads 202 202 202 202 202 1,010 Rural Roads 1,604 1,155 665 3,424 Subtotal, Rehab 2,248 4,220 5,149 6,676 3,072 21,365 Periodic Maintenance: Paved Roads 37 119 795 1,379 1,715 4,045 809 Earth Roads 581 443 354 480 255 2,012 40 Rural Roads 309 361 412 464 516 2,062 412 Subtotal, PM 927 923 1,561 2,323 2,486 8,220 1,644 TOTAL INTERURBAN 6,009 9,148 11,206 12,814 7,033 46,210 URBAN ROADS 2,305 3,264 5,584 4,112 2,270 17,535 TOTAL URBAN 2,305 3,264 5,584 4,112 2,270 17,535 GRAND TOTAL 8,314 12,412 16,790 16,926 9,303 63,745 RURAL ROADS 64. Rural Roads. The rural network of 10,350 km includes 2,630 km of rehabilitated earth roads, and 7,657 km of feeder roads, which are sometimes little more than tracks. Rehabilitation of around 1,261 km more is ongoing and, as a result, by the end of 1995 around 4,000 km of the rural network will have been rehabilitated. The use of inappropriately high rehabilitation standards for this network in the past has resulted in high unit costs for rehabilitation. Since 1991, MTPT has adopted a technical strategy which allows for tailoring of technical standards to fit the actual needs of each section in future projects. The quality of the rehabilitated rural network is generally acceptable but is deteriorating very Republic of Benin: Transport Sector Strategy 55 rapidly for lack of maintenance. The remainder of the network is interrupted all or part of the year and presents a major barrier to rural access. 65. The Minist&re du Developpement rural (MDR), or Ministry of Rural Development, and various other entities active in the agricultural area have been involved in rural road construction and management. Until 1992, the Regional Action and Rural Development Centers (Centres d'action regionale et de developpement rural or CARDERs), which are MDR's local branches, have, among other activities, created and rehabilitated many rural roads. The Government has decided that CARDERs will progressively relinquish their production activities and, following their reorientation towards programming and management, they will no longer build rural roads. The. production unit of the CARDER of the Atlantic region was privatized in 1992 and other units will follow. The role of the CARDERs in feeder roads management will henceforth be limited to data collection and technical assistance to local communities involved in rural road construction and maintenance. 66. Government has neither the financial means nor the technical capacity to meet the increasing needs for rural roads. Agricultural development requires the improvement and extension of the rural network. FR financial capacity is already strained with the maintenance of the 3,425 km of the classified network. It will certainly not, in the medium term, be in a position to finance the maintenance of the 2,693 km of already rehabilitated rural roads, even less so, roads to be built under future programs, 1,300 km of which are already committed. The necessary development of the network and its inescapable maintenance needs are not currently met by MTPT, and this has already opened the way to intervention by other entities without any coordination. For example, KfW has now decided to finance routine and periodic maintenance of the Atlantic rural tracks network, and SONAPRA has initiated urgent intervention on the cotton network. The same issue is facing the urban network. 67. Methods of financing investment and maintenance on the rural network should be reviewed. MTPT could remain in charge of investment and maintenance on the rural network at an expenditure level justified from a vehicle operating cost viewpoint. A classification of the rural network portions to be taken over by MTPT could thus be established, and the intervention level per traffic class defined. The remaining portions of the network should then be maintained by the concerned local communities. Government could contribute to the financing of the upgrading of existing rural roads, the construction of new ones and periodic maintenance in conjunction with local communities, up to a level justified by economic benefits and subject to obtaining community guarantees on their commitment to participate in both investment and future maintenance. Government assistance for routine maintenance of rural roads should 56 Part II. Analysis be limited to helping with local programming, financial packages, and maintenance organization. 68. Criteria for financing maintenance of rural roads and mechanisms of carrying out maintenance need to be revised. This task is included in study which began in March 1994. The first step required is to reassess the definition and extent of the priority network; this is expected to include some feeder roads which carry traffic justifying their full maintenance by Government based on vehicle operating costs alone. On sections which will remain part of the rural network where investment and maintenance are justified on the basis of other economic criteria such as proven agricultural productive capacity, MTPT should take over management of all maintenance and investment and therefore should be actively involved in all stages of maintenance and investment for these roads. Final service levels (poor/fair/good) could be defined according to traffic class or the value of proven agricultural productive capacity. 69. On other sections where intervention is not justified on economic grounds but where social considerations apply, as in specific food security or poverty problem areas including geographically isolated areas where agricultural productive capacity is unproven but where better access to enclave areas would facilitate village integration into regional economies, mechanisms are needed for defining local priorities with local participation, and for providing financing from local sources for both maintenance and investment. This task is also part of the study mentioned above. The findings of the study in respect of all these issues are to be presented to local government entities at the village and town level, to economic actors such as farmers' associations and agroindustrial representatives, and to deconcentrated administrative units in a series of local seminars to be organized during 1994. 70. Without wishing to anticipate the results of the study, the selection of rural roads to be maintained could be proposed by local committees, subject to the technical assessment, verification and approval of MTPT. Local financing for routine maintenance could involve funds from local governments (prefectures, subprefectures, municipalities); these could be matched with funds set aside in the Road Fund. Local community members would be allowed to chose among a number of ways to contribute: monetary contributions to a local road maintenance fund, monetary contribution coupled with eligibility to be hired to work on road crews, or a contribution in kind. It has been demonstrated in the context of a food security pilot operation carried out beginning in 1990 with IDA assistance, that rehabilitation of feeder roads had obviously beneficial impacts on nutritional status in isolated areas, and that communities were very motivated to organize for such minor road works, but the study needs to assess the sustainability of these responses. Republic of Benin: Transport Sector Strategy 57 MUNICIPAL ROADS 71. Municipal Roads. The municipal network is estimated at around 1,800 km of which 770 km are in Cotonou. Roughly 80% of the municipal network is composed of tertiary roads and 20% of the secondary roads. Most of the secondary and tertiary networks are unpaved and in very poor. condition. These conditions render city driving very difficult, especially within Cotonou. Improvements to a very small part of this network are currently underway. The primary transport network of Cotonou is part of the classified network under MTPT (urban network), while the municipalities, in the main cities, and the Minist&re de l'Environnement, de l'Urbanisme et de l'Habitat (MEUH), or Ministry of Environment, Urban Development and Housing, in the smaller cities and towns, are theoretically responsible for the rest of the roads located in cities and towns. However, MEUH and the municipalities lack the technical capacity and the funds to maintain the municipal network, and continue to rely on MTPT for emergency repairs when municipal roads become impassable. Since the cities represent a major political.challenge, the Government is obliged to take care of this network in case of emergency, further reducing the pool of funds available for the primary urban network under MTPT (see para 57 above - urban road. paving). 72. For these reasons, workable arrangements need to be put in place so that the municipalities can in fact execute, finance and manage the secondary and tertiary road networks within their boundaries. Maintaining all 1,800 km of the municipal network throughout the country would cost around CFA 2 billion, which is twice the current total Road Fund resources. For Cotonou alone, maintaining the secondary network would require about CFAF 400 million (US$1.5 million) annually. Local tax collections have dramatically increased over the past years (around CFAF 1.2 billion was collected in Cotonou alone in 1993), but poor financial management and poor definition of priorities has prevented these funds from being used for road maintenance. A minimum of CFAF 400 million per year should be allocated by Cotonou municipality for municipal road maintenance. Funding for this maintenance should come from the Ministry of Finance, which currently collects around CFAF 1.2 billion (US$4.4 million) annually of local taxes within Cotonou, supposedly reserved for investment and maintenance within Cotonou. In addition, the municipality should take over responsibility for traffic management in the urban area. Close coordination between MTPT and the municipality is required to guarantee that the investments for accesses and thoroughfares actually result in an improvement in urban traffic flow. 58 Pat Ih: Analysis OVERALL SUBSECTOR MANAGEMENT 73. The Ministre des travaux publics et des transports (MTPT), or Ministry of Public Works and Transport, is composed of a Cellule de programmation et de coordination (CPC), or programming and coordinating unit, which prepares transport sector investment planning and programming proposals for submission to MinPlan, a Direction des routes et ouvrages d'art (DROA), or Roads and Works Department, and a Direction du matiriel des travaux publics (DMTP) or Public Works Equipment Department. DMTP leases to DROA the necessary equipment to carry out its force account operations. DROA is in charge of implementing the investment programs of the Ministry of Planning, and of programming and executing road network maintenance. New investment and rehabilitation and periodic maintenance of all paved roads have long been contracted to private enterprises, and since 1990, this arrangement is also being applied to works on priority earth roads. 74. Government should continue to focus its efforts on sector planning, programming and management, and continue its disengagement from actual works execution activities. MTPT should continue to improve road maintenance operations by: (a) continuing its disengagement from production activities in this area; (b) disengaging from the management of heavy equipment; (c) reinforcing its contract management capacity in the areas of investment and maintenance. The various units' roles in these activities should be clearly defined to avoid any duplication of effort. CPC should be in charge of coordinating sector and subsector programming activities, and the role of the different departments in the area of programming also needs to be reviewed and better defined. The Ministre du Plan (MP),, or Ministry of Planning, should be closely involved in programming, in order to ensure that road subsector operations are coordinated with those of the other economic sectors and consistent with financing capacities. 75. MTPT is well-managed, but overextended, overstaffed and underachieving. Narrowing its focus and increasing its absorptive capacity are the top institutional priorities in the road subsector. Political changes in 1990 brought very capable new Ministers and Department Directors into the Ministry, but line management and staff competence and dedication remain weak. Both ministers who have held the post since 1990 have focussed their energies on the definition of a pragmatic and implementable strategy which is reflected in this document, and on better management of available human resources. The first of these ministers appointed competent and dedicated managers to the posts of Directeur de Cabinet and head of DROA. These managers achieved reforms in road maintenance which had been in the planning stage for years and whose implementation was a necessary condition for efficient road maintenance Republic of Benin: Transport Sector Strategy 59 operations. DROA was put in charge of regional road maintenance and works teams which had previously been controlled by regional directorates, thereby making possible dramatic reductions in road maintenance and works unit costs by applying nationwide technical standards and cost control. Cost reductions were also made possible, by contracting out about half of periodic and rehabilitation works for the earth network, previously carried out by force account. This has freed staff to concentrate on work programming and management. 76. Since his appointment in 1992, the current Minister has taken as his first priority a major reduction in force and an increase in absorptive capacity, using as his foundation the skills of the top managers appointed by his predecessor. Despite the improvements in efficiency under his predecessor, implementation capacity is still very limited. Even though all investment works are contracted out, the execution rate for infrastructure works in the 1993 PIP, mostly transport, is expected to be only 33% (see para. 11 on sector investment). And despite increases in road maintenance efficiency, DROA's annual implementation capacity is still less than half that required-- around CFAF 200 million (US$0.7 million) of rehabilitation and CFAF 600 million (US$2.2 million) of routine maintenance for earth roads, compared to needs of CFAF 815 millions (US$3 million) and CFAF 1,300 (US$4.7 million) respectively. A streamlined staff is expected to perform with greater accountability and efficiency (see para. 84 below for details on DROA operations). 77. MTPT's directors have also begun to identify training needs and organize training sessions, based on careful diagnosis of weak performance areas. For example, two training operations have started up which focus on procurement and contract management, and on the design and monitoring of drainage structures, two areas where MTPT has faced major problems. These operations will be used to identify, first, which staff are dedicated and trainable, and then, depending on the existing level of competence, which tasks should be assigned to staff and which should be contracted out to external consultants. Short-term external support intervention has also been initiated on an a la carte basis, to cope with bunching problems and to compensate for specific skill shortfalls. This policy of contracting out tasks forces the civil servant staff to deliver, or face the risk of seeing their jobs contracted out from under them. 78. MTPT should continue to optimize the use of existing skills and reinforce skill levels as one of its priority actions. On the basis of a detailed inventory of available skills and of the job descriptions related to the priority functions required to implement its overall strategy, MTPT should proceed with the reduction and redeployment of its staff. A motivation system linked to productivity indicators of each activity should be established. Training and external assistance should be centered on the actual missions of MTPT and the 60 Pan II Analysis recognized needs as shown by the performance indicators of its various activities, such as the PIP execution rate. Technical assistance should be closely linked to training, and primarily sought from local or regional experts. Particularly strong efforts should be made in the area of management of the investment and maintenance contracts. A flexible and responsive human resource management system, covering both MTPT and private sector actors, should also be established. The existing vocational training center should be reformed and energized, and its activities should be concentrated in core training for investment and maintenance programming and management, using locally available expertise. ROAD MAINTENANCE MANAGEMENT 79. Since the February 1992 reorganization of MTPT, DROA is the only authority responsible for the maintenance of the whole network (interstate, national and rural) through six regional services, the Services r9gionaux des routes et ouvrages d'art (SROA), under the Sous-direction de l'entretien routier (S/RER), or sub-directorate of road maintenance of DROA. SROAs are in charge of preparing maintenance programs, carrying out minor rehabilitation works and periodic and routine maintenance operations, and monitoring maintenance works undertaken under contract and by force account. For executing force account works, DROA has four mechanized rehabilitation or periodic maintenance teams. Force account operations employ 851 persons, of whom 431 are regular and 420 temporary staff; administrative tasks are performed by 14% of this personnel. 80. DROA also includes a number of other offices. The Bureau de gestion du r9seau (BGR), or road management office is responsible for collecting and processing the network status and traffic data, which are supposed serve as the basis for the preparation of investment and maintenance programs by CPC and DROA. DROA also includes a Service des 9tudes routires et du contr6le (SERC), a road study and supervision unit, which manages studies, requests quotations, and supervises works on the interstate and national networks. Another unit, the Service des routes de desserte rurale (SRDR), or rural roads service, has the same functions for the rural network. Also within DROA is the Direction des 9tudes techniques (DET), or directorate of technical studies, which is entitled to carry out any study related to the road sector at DROA's request. 81. Road maintenance programming remains centralized and cumbersome. The current system was established when DROA was reorganized in 1992. The new programming and monitoring system represents major progress when compared with the earlier procedures. It allows needs to be met according to budgetary constraints, and greater respect for work program plans. In 1992 and 1993 DROA was able to maintain the cheaply rehabilitated network in good or fair condition. Maintenance programming has been a very difficult and laborious process as Republic of Benin: Transport Sector Strategy 61 available budgets have generally been far lower than needs (see para 52 above). Indeed, further decentralization would be difficult to do, as long as the means provided are insufficient to meet even basic requirements, and while available skills at the regional level are limited. As a result, current programming remains centralized at the level of DROA, which also manages quarterly program adjustments. The requirement for quarterly updating at the central level can be cumbersome because of the amount of paperwork involved, and can lead to inadequate programming, since DROA lacks accurate and updated information on the road situation, and has no way to collect user complaints in real time. 82. Efficient collection and processing of data required for road subsector management is in need of improvement. Falling within the priority scope are: data on freight transport (by DTT in MTPT), origin and destination surveys (by BGR in MTPT), vehicle importation and registration (by DTT in MTPT), and traffic accident data by the Road Safety Council (Conseil national de privention routire or CNPR), in collaboration with police services and MTPT. Data on road transport activities have been incomplete and unreliable in the past; the National Freight Offices Center (Centre national des bureaux de fret or CNBF), formerly in charge of issuing waybills, has been liquidated, and MTPT's DTT is now in charge of collecting freight transport data, for which methods and procedures need to be improved. 83. BGR is not able to collect and update all the data for which it is responsible ih a timely and accurate manner. Origin and destination surveys are not systematically organized and their results are sometimes unreliable as are those of the few accident surveys. Maintenance and investment program preparation are not supported with adequate data. Traffic survey and road condition reviews are carried out at the central level and do not involve decentralized bodies. This does not allow for monitoring of changes resulting from shifting user demand or actual road conditions. Because of the lack of accurate data, road conditions as determined by BGR do not represent the real situation of the network, and HDM outputs are not reliable for programming. Collection of data relating to maintenance and programming activities, should be progressively decentralized in order to involve insofar as possible, users and local authorities. In addition, BGR has no responsibility for data collection on the rural network. The data related to this network are collected by SRDR without coordination, and the resulting programs are not consistent. For instance, the cost of rehabilitation of rural roads under ongoing projects is four times higher than the cost of rehabilitation of classified network roads. Lack of coordination between the rural and classified has been highlighted in Attocora in 1990, as KfW refused to finance rural roads rehabilitation because these roads were not connected to any passable main road. To resolve these problems, BGR should expand its activities to cover the whole network which will be subject to State 62 Part II Analysis intervention for investment or maintenance. It should be capable of processing this information to provide the factual basis for the preparation of investment and maintenance programs. 84. DROA is overstaffed due to duplication of responsibilities and featherbedding. The 1992 reorganization of DROA brought noticeable progress by eliminating duplications in responsibility between DROA and the former regional directorates. But a clear definition of responsibilities is still lacking. Duplications remain in the areas of administrative management as well as in road maintenance management. For instance, each service has its own administrative and accounting unit; SRER and SRDR perform the same type of activity. This increases overheads without improving management capacity, since many staff occupying desks in the duplicated services lack the necessary skills to efficiently perform their tasks. As for road maintenance execution, staffing is theoretically adequate to execute an annual program of around CFA 2 billion, compared to the CFAF 600 million (US$2.2 million) actually available. However, existing levels of competence are barely adequate to manage the current level of operations. Road maintenance personnel includes numerous aged and disabled workers unable to execute any work or lacking the necessary skills. An initial review carried out by FR found that, out of the 716 staff financed by FR, around 400 could be laid. off without hampering the capacity of DROA to execute its road maintenance program. 85. Most force account teams generally operate with inadequate levels of skills and dedication. Routine maintenance of the paved network and mechanized maintenance of earth roads used to be carried out entirely by force account teams under the authority of DROA. In recent years, DROA grouped all the most competent works into a few teams which were able to perform efficiently in carrying out road rehabilitation under the ongoing transport project, and in the maintenance of the rehabilitated network. But these teams can only carry out some of the operations, and despite renewal of maintenance equipment for paved roads in 1987, the technical competence and motivation of line personnel are not enough to guarantee acceptable maintenance quality, and the organization and working methods of the force account system remain important constraints to good quality work performance and timely execution. As a result, despite the improvement in road maintenance quality since 1991, the regularity and the quality of routine maintenance on paved roads are very deficient, and mechanized routine maintenance operations may sometimes still actually destabilize the road platform or obstruct the drainage system. For example, the Cotonou-Porto Novo road, Benin's main highway, had no maintenance from 1987 to 1992. Force account teams intervened on this road in 1992, but their repairs lasted but a few weeks, and a massive remedial campaign has had to be contracted out. Republic of Benin: Transport Sector Strategy 63 HEAVY EQUIPMENT MANAGEMENT 86. Until 1991, equipment management was ensured by an entity under DROA's authority. In line with overall sector strategy, Government is seeking to transform the agency in charge of equipment management into an autonomous entity which would become the owner of the equipment in the long term. This transformation was the subject of a 1990 study which recommended the creation of a mixed enterprise. As a first step, the Government, taking into account political and social opposition to such a project, has decided to transform the existing service du matiriel into a directorate equipped with a commercial accounting system. Since its creation in 1991, DMTP operates as an equipment leasing company, in charge of managing and maintaining civil works equipment owned by Government. In 1991, its turnover reached CFAF 660 billion (US$2.4 million), of which 15% originated from private firms. This evolution has generated a greater transparency of the DMTP operations and an awareness by staff of the changes required in operating. 87. DMTP does not have the necessary competence or sufficient autonomy to perform its functions. DMTP recently installed a commercial accounting system, began renting its equipment to private sector operators and to DROA on a mostly commercial basis, and began trying to manage its operations as a private company. However, DMTP is still subject to rigid public sector financial management regulations, although some shortcuts have successfully been created, such as the opening of a commercial account by DMTP to speed up payments. Amortisation of equipment is only partially covered by rental fees because rental fees paid by DROA do not include amortization, and therefore it is not expected that DMTP will be able to finance new equipment. Traditional administrative difficulties continue to plague DMTP in the area of spare parts procurement and personnel management: administrative regulations lead to delays in purchasing and to difficulties in making necessary staff reductions, neither of which is compatible with a commercially viable operation. Its workshop staff lack the skills required to perform efficiently their tasks. As DMTP remains an administrative entity fully managed by Government, which after all owns the equipment, it is still considered as a public service which can be and is requisitioned for public sector use with only partial compensation, resulting in a substantial loss of fees. For all these reasons, DMTP cannot not freely respond to the market and cannot meet the demand for equipment rental in a timely manner nor ensure an adequate rate of equipment availability. 64 Part II. Analysis PRIVATE SECTOR INVOLVEMENT 88. Two autonomous agencies are in charge of contracting out public works on behalf of central and local governments. One is the Agence d'excution des travaux urbains (AGETUR), or executing agency for urban works. It is a private non-governmental entity specialized in contract management for pavement works on the Cotonou municipal network. AGETUR has adopted cobblestone pavements as its standard; this technique, which requires low levels of technical skills, promotes the development of local construction industries and generates large numbers of jobs. Since its inception in 1990, AGETUR has implemented, under various financing sources, 74,000 m2 of pavement (about 7 km), has awarded 80 contracts to 40 small and medium local enterprises, and has generated 170,000 days of employment for a moderately skilled work force. The second agency is the Agence de gestion de la dimension sociale du d6veloppement (AGDSD), or agency for management of the social dimension of development. Established in 1992, AGDSD manages the implementation of works financed under SAL ancillary projects. Its activities cover various sectors, including health and education, in particular the rehabilitation of health centers and schools, and the road sector. AGDSD has, indeed, launched a rehabilitation program of about 60 km of rural roads selected on the basis of social criteria. 89. The civil works private sector has grown dramatically since 1990. This growth has been fueled by the establishment of AGETUR and funds availability for the rehabilitation of Cotonou's municipal network, by the privatization of a portion of rehabilitation works on the earth road network, and by the creation of AGDSD. Some 800 contractors (construction and public works) have been identified in Cotonou and Porto Novo. Many of these belong to the informal sector, as 90% of them are not listed on the trade register and 93 % are not involved with social security. More than 80% of these enterprises have less than five permanent employees, and more than half of them are run by managers who lack even a primary school certificate. Some 38 firms constitute the most formal part of the sector and have demonstrated their willingness and capacity to meet public works demand. Privatization of network maintenance operations by MTPT on its networks was started in 1988. From 1988 until 1992, 50% of the minor rehabilitation operations (drainage structure repairs and spot rehabilitation) have been executed under contract. Privatization of routine maintenance was started in 1991. Nevertheless, privatization in this area is rather limited; it will cover 40% of manual maintenance operations and only 14% of routine maintenance expenses for 1993. A contract for a mechanized routine maintenance pilot operation has been awarded in 1993, as a test. Republic of Benin: Transpo?Y Sector Strategy 65 90. Contracting with private enterprises for maintenance operations is hindered by financial and administrative constraints and by the enterprises' limited technical and financial ability. Contracting out of road maintenance was started in 1988. As already mentioned, about 40 civil works contractors are adequately structured to bid and execute public works. Only a small number, however, have the necessary size and organization to intervene outside of their city base. In fact, five of these enterprises are capable of executing mechanized road maintenance, as their financial and technical management skills are very limited. Even if the privatization strategy of road maintenance is firmly rooted in the asserted will of the MTPT leadership, promotion of private enterprises is still hampered by: (a) weakness of the recently restructured financial sector and its inability or reluctance to provide sufficient working capital or equipment loans; (b) passive opposition by DMTP to execute the terms of equipment leasing contracts due to this entity's poor equipment management capability and to resistance from civil servants to the privatization of road maintenance operations; (c) slow procurement; and (d) slow decisions in management of contracts. The slowness of tender procedures and payments constitute the main handicap, since the financial capacity of contracted enterprises is limited. The uncertainty of future markets does not allow enterprises to plan their development. These factors weaken local enterprises' capacity to bid and make a profit. 91. The development of private sector capacity to participate in public works should be promoted by facilitating private enterprises' access to this market and reinforcing their ability to perform. Accelerated procedures and streamlining of regulations should be the main elements in this area. Contract size and technical standards should be set to enable small and medium-sized firms to compete. Government should also help to set up a mechanism for training and assistance in technical and financial management for small contractors. MTPT should offer a stable road maintenance market, over several years, which should include all manual maintenance works, drainage works and rehabilitation works on all networks under its responsibility. Periodic maintenance, which requires a greater intervention capacity than that offered by the two force account mechanized teams, should be contracted to private enterprises, and indeed, these works are the easiest ones to subcontract. The overall amount of periodic and routine maintenance works carried out under force account would thus be limited to around CFAF 600 billion. State owned public works equipment should be made available for lease to small and medium-sized private enterprises under efficient and reasonable terms. Furthermore, procurement regulations and contract management should enable small and medium-sized enterprises to bid and contract according to their skill levels. Part II: Analysis E. Road Transport Subsector VEHICLE FLEET 92. Benin has an estimated vehicle fleet of 31,250 units. No reliable data are available and the fleet of vehicles has been evaluated on the basis of vehicle imports and estimated petroleum product consumption. The fleet includes approximately 25,000 light vehicles and 6,250 trucks and vans. In addition there are plenty of cycles and motorcycles. In the city of Cotonou alone, there are an estimated 60,000 two-wheelers, of which 30% are used for public transport in the city (see para. 107 on zemidjans). Overall, the automobile fleet consists of aging vehicles provided by a very dynamic second-hand market. Benin is becoming a regional center for used vehicle imports from Europe, essentially Belgium. The number of imported used vehicles has dramatically increased from 3,500 in 1988 to 40,000 in 1992. More than 75% of the vehicles are older than 15 years, and only 9% have less than 10 years of age. Light vehicles are generally timeworn and the effective moving fleet is no more than 70% of the total fleet. The situation is similar for the taxi motorcycles which are second-hand imports either from Nigeria or Japan. A very active market has developed in this area and many vehicles are re-exported into countries of the subregion which ban used vehicle imports. The vehicles' condition is generally poor; few of them meet minimal safety requirements. Their overall condition is nevertheless significantly better than in other countries where used vehicles are also imported from the same sources. 93. A complete automobile trading network has developed in Cotonou, which is mostly part of the informal sector, and generates a fairly large number of jobs. The marketing and technical inspection of vehicles is organized in low-cost workshops, as is the subsequent maintenance. Such a low-cost repair industry is evidently fostered by the possibility for fraudulently importing spare parts, either concealed inside incoming vehicles, or from Nigeria. Moreover, the fleets of light and heavy vehicles and motorcycles are fairly homogeneous, and this leads to a further repair cost reduction through "cannibalization". The existence of such a well-developed market is an incentive for the increased utilization of second-hand vehicles. In addition to reduced transport costs which enhances Benin's comparative advantage, the local economic impacts are far greater than in the case of importing new vehicles. Operating costs of used vehicles include a larger proportion of repair costs, which generate jobs, and a smaller proportion of amortization, paid out in foreign currencies. Republic of Benin: Transport Sector Strategy 67 ROAD FREIGHT CARRIERS 94. In Benin, the freight transport industry has three unusual characteristics: (a) there are no big formal transport companies; custom is widely shared between numerous small entities; (b) transport vehicles are exclusively second-hand vehicles supplied by the Cotonou automobile market, which is on the verge of becoming a real regional market; and, for these reasons, (c) road transport rates are very competitive, which enables Benin to maintain the competitiveness of its corridor vis-a-vis the Togo and Nigeria routes. On the other hand, transport activities in Benin are hindered by: (a) constraints resulting from restrictive practices in regulation enforcement: (b) road safety problems; and (c) a lack of professionalism in operator performance, and weak trade organizations, which weakens operational continuity and leads to low quality of service. Improvements in road transport sector productivity can be pursued by simplifying administrative procedures, reducing the financial impact of road inspections which can amount to 25% of transport cost, and by raising professional standards of operators. 95. Access to the road carrier industry is, in fact, completely liberalized. For freight transport, vehicle property title and proof of payment of the annual license fee to the Direction des transports terrestres (DTT), or Land Transport Directorate, are often the only required documents. Entry to the passenger transportation industry is also relatively easy. The vehicle owner must obtain a permit from the urban district authority against presentation of the property title, and the driver has to obtain his driver's license. Carriers are supposed to be insured and to hold a traffic license but, in practice, regulations are little respected. The numerous road controls and the related hidden levies they impose, even if the trucker is perfectly honest, detract from conformity to regulations. The low level of insurance reliability under the monopoly of Socigtg nationale d'assurance et de riassurance monopoly, has the same dissuasive effect. Lack of regulation enforcement eases access to the profession. 96. Easy access means that most operators in the field practice according to informal sector rules, seeking to minimize costs and prices at the expense of quality. Thus in Benin road freight transport is characterized by a proliferation of informal small operators. In fact, no inventory has ever been attempted, and the various existing sources (authorizations, licenses, etc.) which could provide an estimate of the number of transport vehicles are notoriously deficient. Surveys have shown, however, that some 300 to 400 freight carriers operate at least one vehicle, and that about fifteen of these, or fewer than 5%, have reached the fringes of formal sector operations. The latter have generally been engaged for more than 15 years in the trade, and operate fleets of 10 to 50. heavy trucks. 68 Pan I.* Analysis 97. Most of the organized supply of freight transportation, that is the near- formal sector operators, is concentrated in the country's northern districts, especially in Parakou, where the demand for long-distance quality service is fairly stable (SONAPRA cotton transport and freight transport from the rail terminal to Niger for the OCBN account). In the south, on the contrary, most transport demand consists of short range trips (50-100 kam) around Cotonou. This transport submarket usually tolerates average quality and reliability and is thus, satisfied within the scope of the informal sector. In addition, this transport segment is subjected to very wide annual traffic fluctuations that only the informal sector, with its low capital requirements and small-size entities, can respond to, quickly adapting to the variable part of the demand. 98. Under the pressure of strong informal sector competition, the freight transport operators of the near-formal sector have very little, if any, room to evolve into fully formal operators. Free access to the industry and low-cost second-hand vehicles attract numerous investors seeking immediate rewards to their investment. Since few realistically assess the costs of transport operations and the profitability of their enterprises, they soon find themselves in a precarious financial situation. This is why numerous transport operators appear on the market, only to disappear just as quickly. The lack of professionalism in a fast- evolving trade does not guarantee quality service. Competition is thus limited to fares, and acts as an incentive for fraudulent activities. The pervasive generalization of fraud becomes a pretext for widespread non-application of regulations, and the lack of regulation enforcement further eases access to the profession. Transport operators should be encouraged to move progressively from the informal sector into the formal sector through a better professional environment and a more efficient driver training system. Service quality improvements also require a more regularized used vehicles market by establishing a dedicated vehicle import yard and improving vehicle repair and safety inspection arrangements (see paras. 110 on safety and 123 on port). ROAD FREIGHT FACILITATION 99. Increasing sector competitiveness through facilitation of road transport is a major objective of the sector strategy and improvement of operators' competence. Transit traffic toward neighboring countries is hindered by cumbersome customs procedures in Benin and Niger. Transit documentation established at the Cotonou departure point is not valid in Niger, and vice versa. As a result, a new set of documents must be established at the border and this requires a new inspection of the load by customs officials. It seems that custom services rely on this procedure to force some foreign carriers into unloading their goods and have them transferred to national truckers. In addition, Niger customs demand that the freight be escorted from the border to Niamey, at a cost of Republic of Benin: Transport Sector Strategy 69 CFAF 20,000 (US$73) per load, which is charged to the carrier. Such administrative absurdities are not limited to the border points, but are common all over the country. 100. This kind of regulatory environment reduces sector productivity without increasing respect for regulations. Twenty-three custom or police control points have been counted on the Cotonou-Border of Niger route (that is, one every 40 km on average). These checkpoints increase transportation time and cost significantly and in fact serve only to systematically impose a levy under the pretext of inspection. On this itinerary, it is estimated that these controls cost some CFAF 80,000 (US$290) per trip, which represents on average 20% to 30% of the transport costs, and adds up to an estimated CFAF 2 billion (US$7.3 million) per year on this route alone. Since this kind of levy has become systematic and is in no way related to the carrier's respect for regulations, its impact on those wishing to be honest is dissuasive. Moreover, custom controls have no effect on contraband of fuels, used vehicles, or spare parts (while compulsory import controls are effectively bypassed by importers), nor on highway code enforcement. 101. Since trade traffic plays a.major role in the economy, improving trade traffic regulation in close coordination with Niger is a priority. It is essential to obtain some reasonable implementation of international regulations, especially the establishment of transit documentation accepted in both countries and the free access of Benin truckers to Niger. Moreover, it is necessary to eliminate the useless practice of road checkpoints. A Comitg des transports terrestres or Land Transport Committee, should be created with the following objectives: (a) to ensure a complete liberalization of the sector and open competition among operators; (b) to propose regulations and other organizational measures for the sector; and (c) to study the competitiveness of road and rail transport. Such a committee should be established on the same basis as the existing technical and operational committee (Comiti technique et op6rationnel) and should work in close collaboration with the entities in charge of administrative facilitation of the port of Cotonou. The effective liberalization of transport activities being an essential condition of transport competitiveness for Benin, the committee should have an official status. The further liberalization of transport activities requires: (a) official abolition of the single Government-set tariff, which, for that matter, is not enforced anyway; and (b) official abolition of the OCBN rail monopoly on the Niger route. Publication of standard vehicle operating costs would allow road freight carriers to base their tariffs on reliable data. The elimination of the tariff constraints and the complete liberalization of freight and passenger transport should, however, be accompanied by measures aiming at improving the operators' professional skills (see also para. 119 below). 70 Part II: Analysis ROAD FREIGHT TARIFFS AND CoSTS 102. Actual transport tariffs are variable and can be three times lower than the indicative prices established in 1963 by the MTPT. This last updating set road freight rates at the level of CFAF 30/T/km (US$0.11) and has not since been updated. In practice, tariffs are negotiated on a case by case basis and are well below the official level. As an indication, they are CFAF 10-15/t.km (US$0.04- 0.06) for the Cotonou area, CFAF 18-25/T/km for SONAPRA cotton, and CFAF 23/T/km for the Parakou-Niger route (OCBN pool). These very low tariffs are made possible, in spite of low annual mileage, by utilizing low-cost second-hand trucks. Tariffs also reflect the structure of supply, with significant differences emerging from intense competition between the informal and near formal sectors. 103. The cost of freight transport in Benin and the cost of passenger travel in Cotonou are much lower than in other countries of the region. The cost of freight transport averages CFAF 20/T/km (US$0.07) and can be as low as 10 CFAF/T/km, compared to CFAF 36/T/km (US$0.13) in Cameroon. The cost of passenger travel is half that of urban passenger bus travel in other major regional cities. This situation stems from very stiff competition among the many small informal operators, widespread use of second-hand vehicles, use of two-wheeled vehicles for urban travel, but also from widespread fraud. 104. Operating cost estimates for vehicles of different ages confirms that the present fleet mix is providing transportation at a very low cost. Considering the excess of supply over demand, the average annual mileage of transport vehicles is about 25,000 kam, whereas full-time utilization would bring this average mileage up to 100,000 km per year. Taking into account the low cost of repairs, which is only possible on second-hand vehicles, it appears that: (a) utilizing a second-hand vehicle is always more economical than operating a new vehicle as long as the annual mileage is less than 80,000 kam; (b) the net cost of transportation, without overheads, varies between CFAF 16 and CFAF 19 per T/km for a 30-ton truck on the formal fringe under average operating conditions; (c) if the fuel used is fraudulently imported, the net cost will be CFAF 14-16 per T/km, that is a 12% reduction; and (d) average transport cost for a truck in the formal sector, using official market fuel, and bearing a 20% overhead, ranges from CFAF 17.5 to CFAF 19 per T/km. The accuracy of these figures is confirmed by the tariff practices of the informal and near-formal operators. INTERURBAN PASSENGER CARRIERS 105. After the liquidation of the regional transport companies, the private sector sought to respond to the demand for interurban transport services. Following the example of freight transport services, passenger carriers usually operate five Republic of Benin: Transport Sector Strategy 71 vehicles at most. Such fragmentation of the industry is an incentive for informal sector participation. Interurban passenger road transport is ensured by shared-ride taxis and minibuses. Tariffs vary from CFAF 6 to 8 per km. The interurban taxi fleet is essentially made up of midsize automobiles (mostly Peugeot 504 sedans or wagons), plus a few vans and covered pickup trucks seating eight to ten passengers (also utilized in rural transport), and some 14-to-20-seat minibuses that operate on the main north-south and international routes. At the end of 1992, the fleet included between 550 and 650 taxis, vans and covered. pickups and around 100 minibuses. Although this fleet is comprised exclusively of second- hand vehicles, their condition is definitely better than that of urban taxis. Contrary to other countries of the subregion, transport by large capacity buses has not been developed in Benin. The failure of large regional companies which have operated such large vehicles in the past, poor road conditions, and unavoidable delays to fill the vehicles to capacity are among the main reasons proposed by most interviewees. In addition, the fact that an important supply of low-capacity vehicles is available on the second-hand market, as well as the fact that most smaller vehicles use gasoline which is easier to procure fraudulently than diesel- oil, are also decisive factors. URBAN TRANSPORT 106. In Benin's cities, urban transport is entirely provided by the informal private sector. The major problem is the high risk of accidents resulting mainly from poor adaptation of infrastructure to two-wheeler traffic, and from a complete absence of traffic management. Urban transport in Cotonou consists of some 100 private taxis, 1,400 shared-ride taxis, and over 15,000 motorcycle taxis. The two taxi modes answer to the needs of different market segments. Urban auto taxis meet a more specific demand: small groups traveling together, persons with large or heavy luggage, pregnant women or sick people, etc. It is the motorcycle taxis that are really typical of Benin, and they carry more than 80% of the passengers. The total number of motorcycle taxis is not well known. The last count of authorizations issued leads to an estimate of some 16,000 to 18,000 units. About 74% of them ply the streets of Cotonou, but they also operate in secondary centers such as Porto-Novo (2,500) and Parakou (500). 107. Motorcycle taxis, popularly known as zemidjan, are small motorcycles, equipped with a 50-90 cc motor and a tandem saddle. The passenger rides on the back seat to the final destination, without having to walk at all. The fare is officially CFAF 100 (US$0.4), but drivers tend to adjust this tariff according to distance, demand and baggage load. They offer important advantages when compared to traditional urban transport systems: (a) their costs are half those of organized bus companies, and are entirely covered by fares; (b) they are usually faster than automobiles, because they do not stop until they reach their 72 Part II: Analysis, destination, they are less affected by traffic congestion, and they are well adapted to the much deteriorated conditions of some streets and to the narrowed width of some pavements during the biennial flood seasons in Cotonou; (c) they offer personalized door-to-door service; and (d) they create seven times more jobs than do traditional transport systems. 108. Since 1970, passenger transportation by zemidjan has grown dramatically. The first two-wheeled taxis, which were actually just bicycles, appeared in the streets of Porto-Novo in the early 1970s. Then in 1982-1983, the Porto-Novo zemidjans became motorized, thanks to small motorcycle and moped imports from Nigeria. The phenomenon spread slowly to all urban centers in the country without any accompanying regulations. In 1984, however, as a result of their increasing number, the authorities prohibited their commercial use as taxis. Zemidjan operations revived in 1986-1987, when relatively cheap used Japanese motorcycles began to be imported on a fairly large scale, first in Porto-Novo and subsequently all over the country. In 1991-1992, this successful development and the flood of job-seeking, laid-off civil servants intensified the demand for motorcycle imports, and the number of zemidjans in operation in all urban areas increased dramatically. Recent years have seen massive imports of small, used Japanese motorcycles (Yamaha and Suzuki). The spread of motorcycle taxis entailed a reduction of the number of auto taxis in operation from 5,000 in the mid-1980s to 1,500 in 1992. In view of the extent of the phenomenon, national and local authorities were obliged to recognize the economic and social role of this new mode. 109. A decree regulating access to zemidjan operation at the urban district level was promulgated in November 1992 but never systematically enforced. The only requirements that are currently enforced are the compulsory presentation of a motorcycle property title and the payment of a CFAF 300 (US$1.1) license fee. No other provision of the decree is adhered to, and many zemidjans currently operate with no vehicle registration, no driver's license, and no helmet protection. Motorcycles are not insured and neither are the passengers. The monthly fee of CFAF 1,000 (US$3.6) per motorcycle taxi, to be collected by the urban district, has never been enforced. For the Cotonou urban district alone, this represented a loss of income estimated at some CFAF 144 million (US$0.5 million) for 1992. ROAD SAFETY 110. Although few road safety statistics are available, it seems that Benin is not doing well in this area. In 1985, the number of accident victims was 22 per 100,000 inhabitants. This was one of the highest figures for Africa, especially considering the low ratio of vehicles per capita. This situation has probably deteriorated since 1985 as a result of the steep increase in traffic and of the wide- Republic of Benin: Transport Sector Strategy 73 spread use of second-hand vehicles. The two existing technical inspection centers are inefficient. Many vehicles are in very poor condition, and the risk generated by this situation is compounded by general vehicle overloading. In order to reduce the number of hazardous vehicles, second-hand vehicle imports need to be better regulated and the efficiency of the auto repair sector improved. Creation and organization of a separate yard for used car repair, inspection and marketing would achieve these results (see para. 123 on port infrastructure). Government could also consider requiring inspection in the originating country to prevent the importation of poor quality vehicles. If the performance of COTECNA is such that its intervention does not hamper facilitation, Government should submit all imported vehicles for its inspection. Trade associations, by awarding some sort of seal of quality to their affiliates, could also have a beneficial impact on vehicle safety standards. The professional associations could also undertake training and education activities for automobile experts, mechanics, and traders (see para. 119). Overall, these actions could serve as an incentive for gradually developing a safe, well-organized, and formal (or at least tax-paying) road transport sector without compromising Benin's comparative advantage. 111. In Cotonou, the preponderance of worn-out vehicles slows down the flow of traffic, creating traffic congestion and air pollution. There are currently a total of two safety control units in Benin which manage to function. As a result, there is currently no effective traffic or safety control. The situation is further aggravated by the presence of a considerable two-wheeler fleet sharing the streets with cars and trucks on an ill-adapted road network. About 70% of the thoroughfare traffic is made up of cycles, and their number reaches up to 105,000 per day on certain routes. These circumstances lead to a very high rate of zemidjan accidents, which creates a bad image for this transportation mode that could threaten its survival. Questioning the zemidjan system is made all the easier by the unreliability of accident data collecting and processing. 112. Safer road travel requires targeted works, regulatory revisions, driver training, and better enforcement. A program to correct high accident locations should be established to cut down on repeated accidents at specific network points, and this program should be integrated into the priority road works program. In Cotonou, sustainable results will also require works to facilitate mototaxi circulation through improvements to infrastructure and traffic management: dedicated or separated two-wheeler lanes should be created within the framework of a comprehensive traffic plan which takes the two-wheeled transport mode into account. Improvement of existing regulations and statistics will required institutional support to road safety agencies and road transport associations. It will first be necessary, however, to revitalize these institutions. The highway code should be improved and adapted to the operating context in Benin. Training through an official driver's school is a very efficient means of 74 Part II: Analysis dissemination of the rules contained in the highway code. The positive impact of such measures does not preclude the necessity of tightening enforcement by police services of road safety rules; special attention should be given to respecting axle- load limitations. ECONOMIC IMPACT OF ROAD TRANSPORT SUBSECTOR 113. Widespread informal sector operations, the utilization of second-hand vehicles, and urban passenger transport by zemidjan have a very positive impact on employment levels and foreign exchange expenditures. Urban transport by zemidjan produces an estimated annual turnover of CFAF 15 billion (US$55 million) and generates some 20,000 jobs, including maintenance activities. On the basis of the ratios of the Guinea Transport Company, urban passenger transport utilizing heavier vehicles would produce CFAF 30 billion (US$109 million) in annual turnover (i.e., double that of zemidjans) and create 3,000 jobs (i.e., seven times fewer). The total turnover of the freight transport industry in Benin can be evaluated between CFAF 40 and 60 billion (US$145-218 million) per year, and it provides some 15,000 jobs. The actual impact of the general use of second- hand vehicles could not be assessed, but it can be ventured that a fleet of new heavy trucks operating in the formal sector would reduce by half the number of jobs created, and would drive up transport costs 20% to 100%. In addition to the negative economic consequences stemming from poor road safety, however, this domination of used vehicles in a largely informal sector prevents proper recovery of road infrastructure user costs. FINANCIAL AND FISCAL SITUATION 114. The tax regime for the road transport subsector is complex. There are 19 separate taxes and fees, of which five apply to vehicle ownership and 14 to vehicle use. Revenues from these various taxes and fees amounted to nearly CFAF 3.7 billion (US$13.4 million) in 1990 and 3.9 billion in 1991. The 1991 fiscal restructuring has brought an 34% increase in revenues from 1991 to 1992, brought about essentially by a boom in vehicle imports. Thus, the total amount for 1992 has been estimated at around CFAF 5 billion (US$18.2 million). Import taxes and various general taxes such as the income tax, value added tax, cooperation tax and road tax are general rather than specific taxes. Other taxes which may be considered specific and allocable to the road sector represent 52% of revenues, that is CFAF 2.6 billion (US$9.5 million) in 1992. The table below shows road-related fiscal revenues for FY 1990, 1991 and 1992, and revenue which could be considered as specific to road transport in 1992. It indicates the range of revenues and the breakdown between revenues generated by the sector and those which can be considered sector-specific. In actual fact, many activities within the transport sector are not covered by the tax system. Republic of Benin: Transport Sector Strategy 75 Road Related Fiscal Revenues, 1990-1992 (in CFAF million) 1992 Tax Types 1990 1991 Total % Specific specific 1. OWNING A VEHICLE: (est.) * Vehicle, spare part and tire import taxes 366.1 1,229.1 1,971.0 0% 0 * License, registration and control taxes 10.0 32.5 43.0 100% 43.0 * Revenue stamps 10.5 20.0 26.0 100% 2.0 * Insurance tax 98.0 117.4 130.4 100% 130.4 * Circulation tax on motor vehicles 286.3 470.8 456.0 100% 456.0 Sub-Total 770.9 1,869.8 2,626.4 2.OPERATING A VEHICLE: * Fuel import single tax 513.0 * Customs stamps on fuel 72.0 *User tax on fuel 1,176.3 853.3 1,155.6 100% 1,155.6 * Structural adjustment tax on fuel 304.2 219.0 297.0 100% 297.0 * Special amortization tax on fuel 101.7 12.8 * Road tax on fuel 5.9 4.9 2.6 0% 0 * Guarantee fund tax on fuel 0.3 0.3 * Fiscal duty on fuel 441.0 170.0 0% 0 * V.A.T. on fuel 284.8 0% 0 * Regional cooperation tax on fuel 4.6 17.4 10.5 0% 0 * Road Fund tax on fuel (1) 536.7 245.8 265.0 100% 265.0 * Weighbridge tax 15.3 12.4 14.3 100% 14.3 * Porto-Novo toll bridge 2.5 2.6 100% 2.6 * Mono-Sazue toll bridges 159.0 192.7 213.7 100% 213.7 * Circulation tax (1) 0.5 16.7 24.2 100% 24.2 Sub-Total 2,889.5 2,018.8 2,440.3 Total Revenues 3,660.4 3,888.6 5,066.7 52% 2627.8 (1) These revenues, still to be collected by Treasury, are supposed to be earmarked for the Road Fund. Table Source: J. P. Tarroux 76 Par II. Analysis 115. Collections performance is weak and the uncollected amounts may be estimated at around than CFAF 7.5 billion (US$27 million) a year (60% of the total amount), of which 5.5 billion in sector-specific taxes. In order to survive in a competitive market carriers have resorted to fraud, which allows them to reduce operating costs to very low levels. Most of this fraud relates to fuel imports. Massive illegal importation of gasoline from Nigeria has become common since 1987 following the devaluation of the Naira. Subsidized 1992 retail price levels in Nigeria were equivalent to CFAF 14 for gas-oil and CFAF 17 for gasoline, compared to CFAF 135 and 170 respectively within Benin (gasoline costs CFAF 90 even without tax). The purchase price of illegal gasoline is about CFAF 50 at the Nigerian border and CFAF 80 in Cotonou. Given this kind of price spread, there is no way illegal sale can be controlled, and even a fourfold increase in Nigerian fuel prices will not reverse the incentives. The result is that roughly 75% of superfuel is illegally imported, 80% of gasoline, and 40% of gas-oil. Judging from the volume of gasoline sold legally by SONACOP in 1985 (110,000 m3) and from the increase in the number of vehicles per km covered from. 1985 to 1992, gasoline consumption in 1992 is on the order of 182,710 m3. In fact only about half of SONACOP sales were subject to indirect tax (62,000 m3), amounting to just 62% of the volume sold in 1985 and 34% of the estimated volume consumed. On this basis, the estimated share of consumption for each type of fuel which is fraudulently imported are: 75 % for superfuel, 84% for gasoline, and 35% for gas-oil. The uncollected amount of fuel tax is estimated at CFAF 6.2 billion (US$8.6 million) a year. 116. Fraud is also widespread in the area of vehicle importation. The establishment of COTECNA has led to a substantial improvement in collections of customs duties with rates of recovery having increased by 25%. COTECNA's involvement however is restricted to import lots valued at over CFAF 1,500,000 (US$5,500) per shipment. In order to avoid this restriction, importers simply divide up their shipments into lots falling below the minimum value. They take advantage of the regulation by understating the value of the vehicles and by loading them up with spare parts which they do not declare. It may be estimated that the shortfall lost to Government coffers amounts to CFAF 1.5 billion (US$5.5 million). Improvements linked to COTECNA's creation thus do not apply to second-hand vehicles. There is in fact no fiscal measure which can possible deal with this problem in any meaningful way. On the basis of available data, the recovery rate for vehicle-based taxes other than fuel taxes is estimated at 50%, 75% at most for customs fees for vehicle imports. The uncollected amounts, given this poor performance, exceed the cost of road maintenance from the Road Fund by a factor of 1.8. The table below shows estimates of tax amounts uncollected in 1992. Republic of Benin: Transport Sector Strategy 77 Uncollected Road-Related Fiscal Revenues, 1992 (in CFAF million) 1992 Tax Types % Total Specific Uncollected Uncollected Uncollecte d 1. OWNING A VEHICLE: (estimate) . Import Tax 25% 657 0 . Other Tax 50% 621 621 Sub-Total 1,278 621 2.OPERATING A VEHICLE: * Fuel tax 79% 6,242 4,906 TOTAL REVENUES 60% 7,520 5,527 PROFESSIONAL ORGANIZATIONS 117. In addition to the failure of regulation enforcement, the trade associations' inefficiency is to be noted. Elections at Chambre de commerce et d'industrie du B9nin (CCIB), or Chamber of Commerce and Industry of Benin, have been stymied since 1990 by the carriers, who reject new admission conditions stipulating that any applicant must be in good standing with Government tax authorities. Currently, CCIB activities are limited to managing the Fonds du transit routier, or Road Transit Fund, which issues the TRIE books and other custom forms that represent its main revenue source (the state subsidy has not been paid since 1988). Budget surpluses in recent years have been invested in improvements to headquarter facilities. Two rival associations compete for representation of road freight carriers: UNATRAB (Union nationale des transporteurs routiers bininois) and SYNTROB (Syndicat des transporteurs routiers bininois). Membership is low in both associations, and the membership fees are generally considered as an additional source of levy without any obligation to provide member services. Neither Government nor the trade associations carries out monitoring functions. No carrier has a complete set of the documentation necessary to perform his trade or to operate his vehicle, nor are regulations regarding the vehicles' technical condition enforced. This leads to a lack of transport reliability, aggravated by the fact that fleet renewal is entirely dependant on second-hand truck imports. 118. Since 1977, urban and interurban passenger transport has been dominated by a single syndicate, the Union nationale des conducteurs b6ninois (UNACOB), or 78 Pat II. Analysis National Carriers Union. UNACOB has a network of district representations which support local offices. These local units are installed in road transport terminals which they manage. Road terminal administration is currently UNACOB's main activity and principal revenue source. Annual membership fees are, indeed, relatively low (CFAF 500 or US$1.8 per operator) and often not even collected, whereas road terminal parking and departing fees, set respectively at CFAF 100 and CFAF 200 to 300, are fairly lucrative sources of revenue for UNACOB. In 1992, UNACOB's revenues were in the range of CFAF 200 to 300 million (US$0.7-1.1 million), and were essentially used to cover operating expenses and staff salaries. It is to be noted, however, that UNACOB has also participated, albeit modestly, in the financing of some road terminal construction. It would seem that UNACOB is ready to increase its financial contribution to other similar projects, and to be involved in measures to promote sector efficiency, mainly in the area of driver training and education. The syndicate's efforts to obtain mitigation of road inspections and to convince employers to be more respectful of the drivers' rights have not been successful. This failure can likely be attributed to the close ties between UNACOB officials and the largest vehicle fleet owners, which dilutes the effort invested in lobbying for improvements, and to low levels of negotiating and management skills within UNACOB. 119. Improvement of operators' professional skills should be sought through existing, but revitalized, trade associations which could act as vectors for training and assisting transport operators. These associations could undertake training and education activities for automobile experts, mechanics, and traders. Such activities could greatly improve operator productivity and service quality without entailing any increase in transport costs. Agreement among the various entities on service quality and safety standards would enable the most efficient operators to prevail on the market on the basis of something other than fare levels. The best performing operators could then progressively grow into formal sector status,. which would give them access to financial markets. As for passenger transport, particularly in Cotonou, current consumer pressure should stimulate fierce competition between motivated professional associations. Specific safety measures should also be taken and enforced in this area. F. Port and Maritime Subsector PORT INFRASTRUCTURE 120. The port of Cotonou has a berthing capacity of around 2 millions tons, sufficient to meet demand over the next five years. Its present facilities consist of 12 berths (one for containers, one 1,300 m commercial quay, one roll-on/roll-off, six conventional berths, and three specialized berths), 160,000 m2 of platforms, 65,000 m2 of container platforms and 57,000 m2 of sheds. The quays' capacity is also estimated at 2 million tons, and the platform areas should also be sufficient to meet the demand for the next Republic of Benin: Transport Sector Strategy 79- five years, with possible adaptations to meet changes in the nature of freight or to facilitate handling. In 1992, total traffic through the port was 1,580,000 t. Traffic has varied around a mean of 1,163,000 T over the last decade, with an average annual variation of 15.5% around the mean, resulting mostly from fluctuations in imports of rice, flour and vehicles. Port traffic is also characterized by imbalances since exports represent on average only 7.5% of total traffic (see Annex Table A). 121. Encroachment of inappropriate administrative and commercial activities on the port grounds has created major congestion and safety problems. The proliferation of operators following liberalization has dramatically increased the number of persons claiming access to the port area. The lack of regulation means that operators are allowed to market used cars within the port area and puts PAC in a position where it is unable to control port access. The location of the common invoicing center inside the port area has aggravated the difficulty of personnel and vehicle surveillance. The port's operational productivity is adversely affected by the increase in congestion, and freight damages and losses are also on the rise. 122. PAC's tolerance of vehicle sales within the port area has created another major cause of port congestion. Platforms have been transformed into a regional marketplace for second hand vehicles of all sorts, which has expanded rapidly in the last few years; high national and regional demand for cheaper vehicles led to a 154% increase in the number of used vehicles imported between 1987 and 1992, reaching 40,000 vehicles a year. The port's surface area and layout proved inadequate to deal with the increase, and PAC has prepared a new staging area for second-hand vehicles within the port area which is expected to become operational in 1994. However this space too is likely to become saturated as soon as it was made available, and vehicle storage is progressively encroaching on the staging area for containers and right up to the edges of the quay. Some vehicles are in such poor shape that it takes a long time to unload them, and because they stay in the port until sold, their transit time is generally longer than that of other freight. 123. The port area should be exclusively reserved for port activities. Rigorous access control must be re-established within the port area, including compulsory wearing of access badges. This measure can only be effective if all activities which attract people but which do not need to be located in the port area are relocated elsewhere. In particular, the yard for imported vehicles and the common invoicing center should be moved outside the port domain. This would improve security and at the same time increase available yard areas within the port, thereby boosting productivity of operations currently hampered by port congestion and deferring the need for port extension. A new location should be found outside the port area, if necessary outside Cotonou, and provision should be made for vehicle safety inspection at the exit of the new vehicle yard. Arrangements must be made with Customs to allow the transfer of cars from the port to the new vehicle yard. Since the yard will be used as a market place where vehicles can be rehabilitated before going on the market, this yard should remain a tax free zone. This relocation would also provide an 80 Part II. Analysis opportunity to better organize the provision of repair activities associated with used car trading. 124. New investment should be restricted to the minimum necessary to handle basic traffic levels, while still allowing an adequate response to peak traffic. Current infrastructure is adequate to handle up to 2 million tons, compared to an average demand of about 1.3 million T a year over the last five years, providing that recommended port management improvements are actually implemented. Therefore no new investments should be assigned to PAC or SOBEMAP over the next five years without clearly demonstrated economic and financial justification. Rather PAC and SOBEMAP need to focus their attention and effort on upkeep of existing infrastructure and equipment. Expenditure priorities should be defined in the context of an enterprise plan for PAC and SOBEMAP being prepared (see paras. 135 and 141). PORT OPERATIONS 125. The Port autonome de Cotonou (PAC), or Benin Port Authority, is a public establishment responsible for port management. PAC has initiated the introduction of a computerized port operations and management system called ESCALE which can generate a single invoice for PAC, the stevedoring company (Soci&t b6ninoise de manutention portuaire, or SOBEMAP), and Customs. The module for shipping management has been completely operational since March 1993 and the module for freight since June 1993. System management has been entrusted to a private company which receives a two-part fee (retainer + tonnage). Most port formal port operators are system subscribers and consider that the system will lead to major improvements, if SOBEMAP and Customs also implement its use. 126. Port operations were liberalized between 1985 and 1991, except for the handling of ships and freight. These activities are respectively carried out by PAC and SOBEMAP, which are both State-owned and have been thoroughly restructured since 1987. Liberalization of other activities has attracted a large number of formal and informal operators, many of whom are former civil servants who were victims of reductions in force. These operators are subject to the oversight of the Ministry of Finance or professional organizations. There are 12 recognized forwarding and maritime agents, 30 recognized customs agents and 29 recognized handling agents. The number of informal operators is difficult to determine, but it seems very high: the professional organization claims to have 235 members, while only 30 companies are officially authorized to operate. The last remaining liberalization measure is the suppression of the monopoly of the insurance market held by the Socigtg nationale d'assurance (SONAR). Approved by the National Assembly in July 1992, this measure is slow to be implemented because of low level of Government commitment. Republic of Benin: Transport Sector Strategy 81 127. Tariffs have not been officially liberalized. All tariffs related to port operations.are set by the Government on the basis of proposals made by PAC and SOBEMAP. Since 1988, all tariff proposals and modifications have been ratified without modification. While in principle, all port operators are supposed to charge official prices, in practice the official rates are discounted by private operators. As a result of aggressive competition stemming from the proliferation of informal operators, the actual rates charged can be as much as 30% off the official tariffs. 128. Port administrative procedures take longer than they need to, and longer than in competing ports. The main reasons are: (a) delays in supplying manifests by the consignees and in the corrections subsequently required; (b) slowness of customs services and SOBEMAP in inputting the manifests; (c) slowness of SOBEMAP's invoicing system; (d) delays attributable to COTECNA, which is in charge of inspecting and verifying records of imported goods; and (e) delays caused by understaffed customs services, which are exacerbated by the practice of unloading containers in the port area for inspection. Slow port operations which result from administrative slowness contributes to lack of accountability of the various actors. Computerization of customs services and SOBEMAP operations have somewhat improved the situation, but procedures are not yet entirely streamlined. The adoption of ESCALE software is supposed to reduce processing time and improve the technical performance of operators. In the long term, this software could also help to resolve the inputting and invoicing problems of customs and SOBEMAP. 129. These administrative processing delays should be reduced. Installation of ESCALE software should be completed and its application directed at solving problems related to manifest data inputting, streamlining of codification, and network linkages with customs and SOBEMAP. A technical audit and performance diagnostic of COTECNA's operations should lead to identification of measures required to accelerate the vehicle inspection process. A number of other operational measures are also required: introduction of a penalty for late manifest deposits; increasing the number of customs staff and their concentration in certain locations; establishment of an automatic system for customs use in justifying goods manifests; and regrouping of SOBEMAP billing operations. The feasibility of postponing the opening of sealed shipments until they have reached their destinations should also be studied. FREIGHT HANDLING OPERATIONS 130. Productivity of handling operations is low. Handling of industrial bulk shipments and of containers (20% of total traffic), is respectively 50% and 43% less efficient than in the port of Dakar in terms of number of tons handled per hour. Low productivity results from low rates of availability of handling equipment from SOBEMAP; these in turn are due to slow maintenance workshop operations, poor repair quality, and cumbersome spare parts procurement procedures. A portion of the equipment is currently being renewed, and this may somewhat improve the situation, at least in the short term. 82 Part II. Analysis 131. SOBEMAP's operations should be improved. Equipment availability could be improved and downtime cut through the following measures: (a) improvements in equipment management and utilization through use of ESCALE software, (b) better planning for equipment renewal, and (c) better equipment maintenance using private workshops under contract. Benin should also consider subcontracting a portion of port handling, since introduction of competition with private operators would compel SOBEMAP to increase its productivity. Subcontracting should be introduced in such a way that private entrepreneurs are encouraged to invest, for example, in equipment to handle containers by a private shipping company in its own allocated zone. This will give PAC the option of purchasing services from such a company when port congestion due to poor performance by SOBEMAP or sudden traffic increases justify this step. The dramatic fluctuations in traffic levels, both at the level of specific product categories and overall, necessitate enormous flexibility in operating response and the adoption of quick decision- making. SOBEMAP needs urgently to abandon the traditional bureaucratic approach used up til now and put in its place a more responsive system based on private sector management. Plans should be made to begin liberalizing handling operations, beginning for instance with container handling in the container staging zone. Partial and progressive liberalization could preserve SOBEMAP's overall monopoly position and avoid the transfer of all operations to the private sector. 132. Accountability/liability for lost or damaged goods is not clearly assigned, and this affects reliability of customs documents. Lack of precision in this area makes it difficult to determine responsibility in cases of damaged or lost freight, opening the way to numerous litigations when the various operators' invoices are drawn up. Major points of contention occur (a) when goods are unloaded, because they are often processed before the bill of lading is handed over; (b) when goods are transferred into storage, where they are taken in charge by SOBEMAP but without transferring responsibility from the consignee; (c) when the customs checklist is prepared in the absence of the customs agent; (d) when the goods are transferred through fictitious warehouses, which avoids customs oversight; (e) when goods are collected without intervention by the consignee, though he still bears full responsibility; and (f) when penalties are applied differently by PAC, customs agents and SOBEMAP. 133. Assignment of responsibility/liability for goods damage and loss should be clarified at all points along the transport chain. The liberalization of the insurance system through the elimination of the SONAR monopoly should help to decrease damages and losses, and will oblige operators to clarify their positions. thereby also reducing transport costs. In addition, transferring the management of SOBEMAP warehouses to the consignees, and streamlining the complex system of storage grace periods and the tariff systems of the various operators should also reduce the current dilution of responsibilities. 134. Any further deterioration of service levels in the port could lead to erosion of the comparative overall advantage which has enabled Cotonou to compete with the Togolese Republic of Benin: Transport Sector Strategy 83 and Nigerian ports. Regional competitiveness of Cotonou's port is good, since PAC is able to attract transit traffic which could as well be handled by Nigerian or Togolese ports. A comparison of official tariffs indicates that freight-related tariffs are lower in Cotonou than in Lomd, while ship-related tariffs (entry and berthing fees) are lower in Lom6 that in Cotonou. Port operating costs in Cotonou are about the same as Lom6's and somewhat higher than those of Nigerian ports. However, competition between the port of Cotonou and Nigerian and Togolese ports is largely a function of quality of service factors rather than price. These include the safety of persons and goods in the port area and the length of port transit time. The combined effect of administrative delays can easily add several days to port transit time in Cotonou, and this reduces the competitiveness of Benin as a transit corridor. This is why Benin is seeking to consolidate its lower freight tariff advantage through measures to improve its port operations and management. SOBEMAP should also strive to reach a productivity level for freight handling at least equivalent to that of the best performing ports of the region. FINANCIAL STATUS OF PORT AUrHoRrry 135. PAC's financial status has improved markedly since 1987. The recent strengthening of its previously poor operating balance (net operating profit of CFAF 184 million or US$0.7 million in 1992) should be confirmed in the near future, provided operating costs are kept under control. The value added rate was 84% in 1992, which implies a very substantial improvement in management performance. A major staff restructuring was carried out at the end of 1991, together with the a full privatization of operations which are not directly related to port operation. As non-operating costs are due to significantly decrease starting in fiscal 1994, PAC should be able to achieve a sound and sustainable financial performance in the near future, provided that high activity levels are sustained (this has been the case in 1992 and in the first half of 1993), and that operating costs are kept under control. A development plan is being designed, with a view to a financial restructuring and the definition of a medium-term strategic plan. No new investments should be assigned to PAC in the medium term without clearly demonstrated financial and economic justification. Rather, PAC needs to keep its attention and effort focussed on efficient use of existing infrastructure and equipment. 136. Financial Performance. PAC has steadily and dramatically improved its net operating balance over the last four years (from CFAF-322 million in 1989 to CFAF+ 184 million in 1992), but the burden of non-operating charges from year to year is such that the company still experiences overall deficits. Over the 1988-1992 period, PAC accumulated net losses amounting to CFAF 7.5 billion (US$27.3 million), equivalent to 37% of sales revenues over the five-year period. These losses are mainly attributable to a slowdown in traffic during the recession of the 1980s, coupled with a reluctance to cut staff and to collect receivables during the same period. PAC's tolerance of unpaid bills on the part of public and private companies in financial difficulties led to substantial operating and non-operating provisions for bad receivables ( CFAF 1.8 billion in 1990, 375 million 84 Part II: Analysis in 1991, CFAF 632 million in 1992). In 1993, the receivable collection efforts have been reinforced and such provisions should decline. It is expected that the 1994 fiscal year will be the last showing large non-operating provisions for bad receivables. 137. Significant fluctuations in traffic (see para. 26 above) have subjected PAC to significant fluctuations in internally generated funds (CFAF +500 million in 1989; -2.1 billion in 1990; and -1 billion in 1991). Without reserves, PAC lacks cohtrol over its cash flows and has difficulty in taking a longer term approach to its activity. PAC's lack of financial flexibility is demonstrated by its inadequate working capital resources amounting to a negative CFAF 5.3 billion (US$19.3 million) in 1991, equivalent to almost 1.6 times annual sales revenues. This negative level of resources prevented PAC from servicing its large debt (CFAF 8.4 billion in debt arrears in 1991). In late 1992, these short-term debt arrears were converted to long-term through a rescheduling agreement with CAA and consequently, as at December 31, 1992, PAC had about CFAF 13.2 billion (US$48 million) in long term debt, more than three times its average annual sales revenue for the last five years. With a long term debt to total equity ratio of more than 1, the company's balance sheet is weakened and its financial flexibility further reduced. 138. Following the appointment of the new General Manager in 1991, PAC has begun implementing the organizational and strategic components of an overall restructuring effort: a 45% reduction in its work force and contracting out of operations not directly related to port operations. As a result, salary expenses decreased by half and productivity increased significantly. Strong cash flow for 1992 (CFAF 1.6 billion) also enabled PAC to resume the service of its long term obligations to its various creditors and tends to confirm a move towards improved financial performance. PAC: Income Statement, 1991 & 1992 (CFAF thousands) 1991 1992 Sales Revenues 3,959,548 4,115,392 Operating Expenses 3,982,395 3,930,608 Operating Results (22,847) 184,784 Non-Operating Results (995,389) (3,044,679) States Taxes 93,044 104,900 Net Income (1,111,281) (2,962,538) Republic of Benin: Transport Sector Strategy 85 PAC: Balance Sheet, 1992 (CFAF thousands) ASSETS LIABILITIES Current Assets 5,842,050 Current Liabilities 1,901,144 Fixed Assets 20,661,940 L-T Liabilities 13,660,783 Net Subsidies 2,369.417 Total Equity 8,572,646 Total Assets 26,503,990 Total Liab. & Equity 26,503,990 139. Financial Management. Prior to 1991, PAC management tended to acquiesce to ministerial pressure concerning staffing levels and other policies which inhibited its financial and managerial autonomy. In 1991, PAC's director was named Minister. He chose a capable successor as PAC's new Managing Director, restored the company's autonomy, and gave the new director a mandate to correct past flaws. Corrective steps have already been taken in the areas of accounts receivable and depreciation. In the past, accounts receivable had been run as a credit operation rather than as a mostly cash activity, and this had been amplified by an inappropriate accounts receivable collection policy which resulted in an accumulation of substantial provisions for bad receivables. The recently installed computerized systems for port operations management called ESCALE enables PAC to invoice its clients in real time. This not only solves the receivables management issue but also improves service levels by reducing the time spent at quay. In order to make up for inadequate past depreciation principles for existing fixed assets (percentage used for depreciation was lower than industry average), PAC made substantial non-operating accounting provisions over the 1991-93 period (CFAF 800 million in 1991, CFAF 3.2 billion in 1992). FY1993 was to be the last year when such large provisions would be required. 140. The new director was also aware that accounting staff had neither received adequate academic background nor had they been appropriately trained for their current professional occupations. They were thus not fully able to apply accounting principles consistently, leading to error-riddled financial statements and lengthy corrections by the audit every year. His remedy was to identify an adequately qualified accounting agent within the accounting department and send him for a year-long accounting/finance proficiency course in France, completed in the fall of 1993. This new financial officer will be able to begin adequate supervision and on-the-job training of accounting staff, and his terms of reference are being revised to give him more responsibilities in the Accounting & Finance Department. These will cover the need for particular attention to matching the 86 Part II: Analysis, technical capacities of staff members to their hierarchical position and terms of reference. 141. The absence of formal long term strategic and financial planning had in the past limited PAC's ability to develop and implement a meaningful medium and long term financial management strategy, and to align its day to day management activities with sound medium and long term objectives. Looking towards the future, therefore, in late 1993, PAC hired a financial specialist (short term consultant) to review. its position and produce a financial restructuring and business plan for the next ten fiscal years. Expenditure priorities will be defined, along with details for the reorganization of accounting and financial operations. This thorough document should enable PAC to restructure itself in order to produce a healthier balance sheet. Among the measures being studied, the consultant is examining the possibility of an equity injection to meet working capital requirements, and the appropriate matching of sources of funds to their uses. FINANCIAL SITUATION OF FREIGHT HANDLING COMPANY 142. SOBEMAP's financial situation remains sound following a CFD-supported finance restructuring starting in 1988, and its financial performance has been satisfactory over the 1988-92 period (net financial situation: CFAF-545 million in 1988, moving to CFAF-282 million, 64 million, 1.8 billion and 2.5 billion in 1989-1992). The value added ratio is 75%, and this taken together with the strong generation of internal funds implies very satisfactory performance. Working capital is at a high level (CFAF 2,500 M compared to requirements of CFAF 2,200 M), and the working capital ratio is 2.8. Cash flow is strongly positive as a result of the financial restructuring. Internal funds have increased markedly, thanks to CFD's CFAF 1,700 M grant (US$6.2 million). Since 1988 the company has cumulated net profits exceeding CFAF 1.7 billion (US$6.2 million), accounting for 10% of sales revenues for the same period. In 1992, the company earned a net profit amounting to CFAF 684 million (US$.5 million), compared to CFAF 84 million in 1991 (sales revenues rose only from CFAF 3.9 billion in 1991 to 4 billion in 1992). The company has a healthy financial standing characterized by a strong cash flow (CFAF 608 million or 31 % of total resources), a strong cash position (CFAF 1.2 billion or 63% of total sources), and a strong equity position (CFAF 2.5 billion or 50% of the balance sheet). 143. Despite this improvement in financial efficiency, overall operating productivity could be further improved. Equipment management and use should be improved through better planning for equipment renewal and more efficient equipment maintenance through subcontracting to private workshops. Port handling activities should also be subcontracted when sudden traffic increases Republic of Benin: Transport Sector Strategy 87 overwhelm SOBEMAP's capacity. The slowness and lack of transparency of SOBEMAP's billing and invoicing procedures has added days or months to merchandise paper processing time in the port-- in other words, SOBEMAP has often been unable to deliver its services on time. This has reduced SOBEMAP's and its clients' productivity and income, decreased the competitiveness of Benin as a transit corridor, and opened the door to disputes between the company and its commercial partners. Data processing and invoicing procedures and transparency should be improved through the use of the port operations management software, ESCALE. At the end of software tests currently underway, problems related to manifest data inputting, streamlining of codification, and linkages with other port users should be solved, thereby reducing delays. 144. Financial Restructuring. SOBEMAP benefited from a CFD-supported financial restructuring since 1988 which improved its financial situation and radically changed its financial structure. The 1991 subsidy was used to restructure SOBEMAP's equity and eliminate cross debts with the State and public companies and other short-term liabilities. Short-term liabilities were reduced from 67% of total liabilities in 1990 to 21 % in 1992, thereby increasing SOBEMAP's credibility toward its commercial partners. The two other main ingredients of the restructuring were a steady reduction in accounts receivable (short-term assets went from 61% of total assets in 1990 to 40% in 1992) and a steady increase in liquidity (cash went from 6% of total assets in 1990 to 33% in 1992). SOBEMAP:Income Statement (CFAF thousands) 1991 1992 Sales Revenues 3,950,822 4,078,540 Operating Expenses 2,989,530 2,830,937 Operating Results 961,292 1,247,603 Non-Operating Results (528,309) (105,914) State Taxes 349,178 457,534 Net Income (Loss) 83,803 684,153 88 Part II: Analysis SOBEMAP: Balance Sheet, 1992 (CFAF thousands) ASSETS LIABILITIES Current Assets 3,783,250 Current Liabilities 1,081,411 Fixed Assets 1,400,195 L-T Liabilities 1,569,813 Total Equity 2,532,221 Total Assets 5,183,445 Total Liab. & Equity 5,183,445 145. Financial Management. While the recent financial restructuring has considerably strengthened SOBEMAP's financial standing, there remains a need to reduce payroll costs and to prepare a long-term strategic and financial plan. Concerning payroll costs, the volume of port activity has fluctuated with traffic levels, while total SOBEMAP payroll has continued to rise even in years of lower activity levels. The downward stickiness of payroll expenses indicates a lack of appropriate personnel management, since payments to dockworkers should parallel activity levels and so should overall payroll expenses. It would appear that salary-related costs for permanent staff are still too high. Although the ratio of payroll to sales revenues has been reduced, from 37% in 1990 to 28% in 1991 and 34% in 1992, this has been chiefly because of increases in sales revenues; in absolute terms, payroll has continued to increase from about CFAF 900 million (US$3.3 million) in 1990 to CFAF 1.1 billion in 1991 and CFAF 1.3 billion in 1992. If management better monitors productivity, then salary expenses will decrease to a reasonable level and control over operating costs will be facilitated. 146. Lack of formal long-term strategic and financial plan reduces SOBEMAP's ability to develop and implement a meaningful medium and long- term financial management strategy which can drive its day to day financial management activities. No new investments should be assigned to SOBEMAP in the medium term without clearly demonstrated financial and economic justification. Rather, SOBEMAP needs to focus its attention and effort to upkeep the existing infrastructure and equipment sufficient to handle current and near future traffic levels. Expenditure priorities should be defined in a business plan based on the same traffic projections used in PAC's business plan under preparation. SOBEMAP is currently holding discussions with French aid with the objective of engaging a consultant to prepare such a plan under CFD financing. MARITIME TRANSPORT OPERATIONS 147. Freight distribution is managed by the Conseil national des chargeurs du Benin or National Dockers Council (CNCB). CNCB manages Benin's traffic share under the 40/40/20 rule, which gives the country of origin the right to make Republic of Benin: Transport Sector Strategy 89 shipping arrangements for 40% of freight, and the country of destination the rights to another 40%. Another state enterprise, the Compagnie bininoise de navigation maritime or Benin Maritime Navigation Company (COBENAM), jointly owned by Benin (51 %) and Algeria (49%), handles shipping but sold its only ship in 1990. Having relinquished all other commercial activities such as its travel agency in 1992, it continues to carry out shipping activities by making space reservations on foreign-ships. Its traffic share has fallen from 11% of general cargo in 1989 to 4% in 1991, but this decrease in activity level was not been accompanied by a. corresponding reduction in staffing. Though their activities are limited, COBENAM and CNCB provide Government with an important means of supervising maritime transport now that the port sector has been for the most part liberalized. 148. Implementation of the 40/40/20 rule has proven inefficient and appears to have led rather to a loss of competitiveness by African maritime companies. This rule has not promoted development of national carriers. Some carriers, including COBENAM, have actually been forced to sell their ships and find their role reduced to that of reservation agent. Consequently their very existence is now being challenged, along with that of national loading agencies like CNCB. This issue has important consequences for international shipping logistics and is now being studied at the regional level. A satisfactory solution could substantially contribute to improved competition, which also depends very much on the efficiency of port operations. 149. The roles and activities of COBENAM and CNCB need to be reviewed in light of regional developments. These two institutions are aware of this need. COBENAM is currently planning to invite private investors to purchase shares, and this should stimulate performance improvements and improve profitability. However, the continued existence of the 40/40/20 rule means a continuance of its privileged status, and any attempt to reconsider this rule could jeopardize the very existence of both COBENAM and CNCB. The role of these two entities needs to be redefined taking into account current developments in the regional and international context. No new investments are recommended for either CNCB or COBENAM until their future roles are clarified and self-financed investments can be identified. FINANCIAL PERFORMANCE OF NAVIGATION COMPANY 150. Financial Situation. COBENAM is going through a rough period characterized by limited expansion, lack of capacity to invest, and operating results insufficient to finance the small investments undertaken. Although operating expenses have remained fairly stable (CFAF 432 million in 1991 and 433 million in 1992), sales revenues have decreased 14% (608 million in 1991 90 Part II: Analysis' and 523 million in 1992). Thus, operating results have decreased 49% to CFAF 90 million (US$0.3 million). Internally generated funds are not sufficient to finance the investments necessary for the company's growth and that forces COBENAM to raise funds externally. Indeed, although the cash flow was positive in 1992 (CFAF 126 million), the working capital requirements grew faster than internally generated funds, thus further reducing funds available for capital investments. The only immediate recourse available is long-term borrowing, since current long term obligations and financial charges are very low. However, the precarious financial situation and the critical balance sheet considerably reduces its financial flexibility and credibility. 151. The current overall net financial situation is negative to the tune of about CFAF 1.2 billion (US$4.4 million), when accounting adjustments related to previous fiscal years are taken into account in order to give a true picture of the financial situation. These adjustments also reduce the net result for 1992 from an apparent net profit of CFAF 110 million (US$0.4 million) in sales revenues of CFAF 523 million (US$1.9 million), to an actual net deficit in excess of CFAF 2 billion (US$7.3 million). For example, although short term assets appearing in COBENAM's statements amount to CFAF 4.8 billion (US$17.5 million), the actual amount after the required accounting adjustments equals CFAF 2.5 billion. (US$9.1 million). Of this amount, a further CFAF 1.1 billion (US$4 million) provision should be set aside as reserves for unrecoverable debts. In the same way, COBENAM's short term financial strength (cash balance equivalent to CFAF 1.3 billion) is only apparent because more than CFAF 960 million (US$3.5 million) are frozen in two bankrupt banks (BBD & BCB). Thus, an additional CFAF 675 million (US$2.5 million),in reserves is recommended by the auditor after working sessions with the bankruptcy committee in charge of BBD/BCB, in order to offset anticipated losses. COBENAM: Income Statements, 1991 & 1992 (CFAF thousands) (before adjustments) 1991 1992 Sales Revenues 608,449 523,880 Operating Expenses 432,169 433,403 Operating Results 176,280 90,477 Non-Operating Results (48,304) 45,967 State Taxes 24,315 25,925 Net Income (Loss) 103,661 110,525 Republic of Benin: Transport Sector Strategy 91 COBENAM: Balance Sheet, 1992 (CFAF thousands) (before adjustments) ASSETS LIABILI TIES Current Assets 6,160,950 Current Liabilities 4,759,216 Fixed Assets 142,360 L-T Liabilities 363,161 Total Equity 1,180,933 Total Assets 6,303,310 Total Liab. & Equity 6,303,310 152. Financial Management. Due to the lack of financing sources, logistic equipment, and past inconsistent and unsafe financial management, strategic measures are required to restructure this company. The two shareholders (Algeria and Benin) have agreed on the principle of partial privatization. The next step is to discuss the future of the international maritime convention (40/40/20). If this agreement disappears, the future of maritime transport in Benin should be discussed and a determination made whether COBENAM will continue to exist. If so, then a thorough financial evaluation is required to demonstrate the attractiveness of investing funds in it, because the continuing exploitation of traffic rights by COBENAM will require an immediate injection of fresh funds to restore a positive balance and restructure the company. 153. As for possible future ownership structure, the two States should be retained as shareholders so as to maintain the traffic rights. The future financial structure should bring the States' equity stake below blocking minority in order to facilitate a complete private financial and strategic management. New strategic management arrangements should favor expansion of the shipping partnership to include other regional states, and the implementation of private sector management procedures. Agreement should be reached either to enter into a management contract or to privatize a substantial portion of the equity. Any privatization effort should promote the participation of private Beninese as well as private investors from the landlocked neighboring countries. Should the decision be for privatization, the company should proceed as soon as possible with the production of bidding documents for the privatization scheme. Needless to say, no new investments should be assigned to COBENAM in the near future until its new role (if any) and its new strategic and financial structure are clearly defined. 92 Part II: Analysis FINANCIAL PERFORMANCE OF DOCKERS CoUNCIL 154. Financial Performance. Over the 1988-1992 period, the financial situation of CNCB has consistently improved because of a dynamic and successful effort to diversify into non-port activities including multimodal container handling. Sales revenues increased from CFAF 171 million (US$0.6 million) in 1988 to CFAF 544 million (US$2 million) in 1992 and net profit rose from CFAF 21 million in 1988 to CFAF 185 million (US$.7 million) in 1992. The contribution through taxes of the Conseil to Government coffers has also increased from CFAF 13 million to CFAF 123 million (US$0.5 million). The remarkable financial performance of CNCB is characterized by strong cash flow (CFAF 101 million in 1990, 173 million in 1991, and 314 million in 1992), strong liquidity (cash balance was CFAF 140 million in 1990 and 291 million in 1992), and strong growth of working capital (from CFAF 295 million in 1990 to CFAF 502 million in 1992). Because of the consistently strong internal generation of funds, the company has not contracted any long term debt to finance its financial needs and therefore has maintained complete financial flexibility necessary to adjust rapidly to changing circumstances. Although about CFAF 23 million (US$0.08 million) are frozen in a bankrupt bank (BCB), CNCB still holds more than 40% of its total assets in cash or cash-ready assets. 155. The overall strategic and financial management of the company has been consistent with its growth objectives and despite the increase in activity levels, the company has maintained the same workforce and management slots. In order to maintain its sound financial performance, CNCB should postpone any new investments, even those which can be self-financed, until the completion of a regional study of.dockers' councils allows its role to be clearly confirmed or redefined. In the meantime, the company has plenty of internally generated resources to satisfy operating requirements. CNCB: Income Statements, 1992 & 1992 (CFAF thousands) 1991 1992 Sales Revenues 475,099 554,159 Operating Expenses 210,881 257,483 Operating Results 264,218 296,676 Non-Operating Results (2,251) 4,372 State Taxes 99,602 115,698 Net Income (Loss) 162,365 185,350 Republic of Benin: Transport Sector Strategy 93 CNCB: Balance Sheet, 1992 (CFAF thousands) ASSETS LIABILITIES Current Assets 491,526 Current Liabilities 61,039 Fixed Assets 175,924 L-T Liabilities Total Equity 606,411 Total Assets 667,450 Total Liab. & Equity 667,450 G. Railway Subsector INFRASTRUCTURE AND OPERATIONS 156. OCBN, which is a joint organization of Benin and Niger, is a commercial and industrial establishment set up in the early 1960s, when it wias awarded the monopoly of transport of transit freight from Cotonou to Niamey. While this monopoly has not yet been formally lifted, it has not been referred to in any official regulations since 1978. OCBN continues to carry freight between Niamey and Cotonou, using a single metric track between Cotonou and Parakou (438 kam) and an arrangement with a truck pool for the rest of the journey (Parakou- Malanville-Niamey). The Cotonou-Parakou.route is about half of its total existing track length; the east-west rail line parallelling the coastline from Cotonou to Pobe to the east and Cotonou to Segboroue to the west was closed in the mid- 1980's because it could not compete with road. OCBN has a capacity of 600,000 tons, well above the 340,000 tons average annual traffic forecast over the next five years. OCBN's equipment consists mainly of ten locomotives, available for freight trains, and three passenger railcars. In 1991, OCBN employed 1,862 persons (668 regular staff, 736 auxiliary staff and 488 part time workers), handled 380,000 tons of traffic and had a turnover of CFAF 6.5 billion (US$23.6 million). Ninety-two percent of the turnover and 75% of the tonnage are represented by northbound traffic (Cotonou-Niamey). 157. A truck pool operating between Parakou and the Niger border is controlled by OCBN. Road transport from Parakou to the border town of Malanville and then to Niamey is practically a one-way operation in favor of incoming imports; return road freight amounts to less than 1% of the traffic on this itinerary. OCBN's involvement in road transport from Parakou to the border is a fairly important part of its business, representing nearly 50% of the company's operating costs. Data concerning truck pool operations indicate that they are in financial equilibrium, payments to road transport operators for Parakou- 94 Part II: Analysis Malanville transport accounting for about 42% of costs, and receipts from clients for this carriage accounting for 42% of OCBN's income. 158. Logistic organization is deficient and leads to technical saturation, loss of time and loss of competitiveness. Transfer times in terminals are too long, for two main reasons: the slowness of OCBN, Customs, and SOBEMAP administrative procedures in Cotonou (three waiting days) and additional transshipment in Parakou (one to three days). Moreover, in spite of an overcapacity of 200,00(} tons (600,000 tons vs. 380,000 tons actually) the waiting times are long and the trains are irregular. Improvement of OCBN's management performance could enhance its competitiveness. Three measures should be taken: reduction of waiting time in Cotonou to the same time as for the road itinerary; streamlining of transfer operations in Parakou, notably by giving more institutional autonomy to the Parakou agency, so it can handle problems in real time; and improving and streamlining cotton transport channels, in order to increase efficiency on the southbound route. 159. OCBN's monopoly is economically inefficient and not enforced. OCBN charges higher tariffs on the Parakou-Mananville road section of the Niger transit itinerary (CFAF 19 to 25 per T/km vs. CFAF 17 to 19 per T/km by private road operators) and requires a total travel time three days longer. In 1991, the railway carried 10% of passengers and 54% of goods in transit through the corridor to Niger. Truckers circumvent OCBN's official monopoly by using fictitious warehouses. Along the Cotonou-Parakou route, freight traffic has been about evenly distributed between rail and road. Competition from road carriers is fierce, and the road share has already begun to increase since the 1993 paving of the Parakou-Malanville road. Enforcing an OCBN monopoly would thus penalize Benin vis-a-vis the competing corridors (Ghana, Nigeria and Togo), as no choice between road and rail itineraries to Niger would then be given to forwarding agents. Therefore, the following measures should be taken in the short term to liberalize competition between rail and road: repeal of the OCBN monopoly, liberalization of transport operations on the road section and creation of a system of selecting road transport operators for the Parakou-Malanville itinerary at the time of the formation of the trains in Cotonou, rather than waiting until freight arrives in Parakou, and reduction in trip duration by improving equipment management. 160. OCBN continues to carry products for which it is no longer competitive. For instance, the deficit in passenger traffic operations is evaluated at CFA 200 million per year. In fact passenger transport operations are cross-subsidized by revenues from goods transport, increasing their cost and reducing rail's competitiveness. In the absence of reliable cost accounting, there is no way to calculate the cost of rail transport by product or to determine which products are Republic of Benin: Transport Sector Strategy 95 being carried at a deficit. However, wide divergences of revenue per T/km reflect the existence of cross-subsidization: nearly a third of products carried yield unit revenue falling more than 30% above or below the average for all products (CFAF 23.5/T/km). Rates do not seem to be related to costs in any particular way. While unit costs are not well known for rail transport, they are completely lacking for road transport, since the way in which the truck pool operates, fails to provide OCBN with any information or supervision whatsoever concerning road operating costs. Thus it is not currently clear whether or not OCBN could become competitive with private operators outside the OCBN pool on the Parakou-Malanville segment of the Niger transit itinerary. The decision to pull out of unprofitable market segments should lead to a reduction in overhead costs, which account for nearly 50% of overall expenses. 161. OCBN charges an average of CFAF 24 per T/km for freight transport from Cotonou to Malanville. This price is broken down as follows: CFAF 19 to 25 per T/km, according to the type of freight car, for the rail part of the trip, and CFAF 26 per T/km for the road part. The trucking operators in the pool received CFAF 25 per T/km until recently, when the price was lowered to meet other road competition. There is an exception in pricing for petroleum products, for which the charge is CFAF 42 per T/km. In 1992, OCBN introduced a new pricing tool, the SICOF/GTI software, whose application should enable OCBN to refocus its activities. SICOF is a computing system to determine rail or rail +road tariffs, and GTI is a tariffs and sales management guide, based on SICOF. The system allows prices to be set on the basis of marginal costs, average costs (taking into account fixed costs) or of medium term costs (taking into account fixed costs and a part of marginal costs). The system has been installed to recently to have shown results, but it is expected that with the introduction of a cost accounting system it will enable OCBN to rationalize its tariff system so that it can actually manage its sales; to abandon deficit-creating activities and redeploy resources where it has a competitive advantage; to introduce sound commercial practices (regressive pricing systems, etc.); and to rationalize the company's physical and human resources. 162. Even so, such a refocussing will most likely not offset the expected 30% reduction in traffic carried resulting from the increased road competition. OCBN must therefore also find ways to reduce overhead operating costs if it is to avoid annual deficits which could reach CFAF 1 billion (US$3.7 million) if no such steps are taken. Closing of the coastal line and loss of traffic has been offset by a 15% reduction in payroll costs and a 65% reduction in various expenses between 1988 and 1992. However, staff levels are still too high and a further reduction of at least 25% will be required. More restrictive salary policies will also be required, given that actual average salaries are 1.8 times higher than the average salary of a truck driver. 96 Part II: Analysis 163. A draft contrat-plan for OCBN covering 1993-97 has been prepared and presented for signature to the Governments of Benin and Niger. The draft establishes a number of sound management principles, at least with regard to operating expenditures, by introducing a clear distinction between commercial activity, which will be required to evolve along the lines of private sector management, and public service activity, which should be covered by State funds up to the amount of the deficit incurred. At the expiration of this contrat-plan, the member states are committed to liquidating any deficit. FINANCIAL STATUS OF RAILWAY COMPANY 164. The financial status of OCBN has improved markedly since 1986. A financial restructuring took place in 1986, along with preparation of a plan for infrastructure rehabilitation. OCBN also benefitted in 1991 from cancellation of debt by France, in the context of financial restructuring. On this basis, accounts for 1991 and 1992 are in balance. Nonetheless, OCBN's financial situation is precarious. Since 1987, it has faced a continuous decline in its activities. The decline of OCBN's activities is characterized by a reduction, from 1987 to 1991, of 15% in the operating results, and a decrease of 14% in operating charges, resulting from a 30% decline in energy consumption over the same period. 165. Financial Restructuring. In March 1986, OCBN signed a first agreement with the French Government (through the Caisse Francaise de Developpement or CFD) to implement a program designed to restructure its finances and rehabilitate its infrastructure. The financial restructuring consisted mainly of a cash injection to balance arrears (CFAF 3.2 billion), a partial cancellation of BCB's penalty charges (CFAF 1.3 billion), the implementation of a three-year moratory agreement on account payable arrears (CFAF 900 million), and another cash injection to increase working capital (CFAF 400 million). This restructuring gave the company a healthier balance sheet. The company retired long-term debt exceeding CFAF 4.7 billion (US$17.1 million) in principal and 1.5 billion in interest, thereby significantly reducing its debt service (.4% of operating costs) and strengthening its working capital ratio (1.21). These strong figures reinforced the financial situation for fiscal 1992 and allowed for timely debt servicing. 166. Financial Performance. The net operating balance in 1992 is a deficit of CFAF 69 million (-1 % of sales revenues), a very poor performance compared to the previous fiscal year's CFAF 834 million (US$3 million) operating profit. The company suffered total losses of CFAF 253 million (US$0.9 million) in 1992, a significant decrease from the previous year's CFAF 3 billion (US$10.9 million) overall profit. The apparently good financial results of 1991 are the consequences of the financial restructuring and cash injections which took place that year. Although this restructuring achieved its objectives, in terms of providing OCBN Republic of Benin: Transport Sector Strategy 97 with a healthier balance sheet, the company's overall performance clearly demonstrates the current structural deficiencies of its operations. The company's sales revenues dropped 18% to CFAF 6.604 billion (US$24 million) while operating expenses fell only 8% to CFAF 6.673 billion (US$24.2 million). The working ratio has a tendency to decrease, the traffic actually handled by the company is below expectations and continuously decreasing, and the company has not yet identified the services where it has comparative advantage in terms of operating efficiency and profitability vis a vis road transport. 167. Thus in spite of the different financial restructurings and cash injections, OCBN's financial health remains precarious. Traffic is declining and some services are not profitable, as an efficient cost accounting system has yet to be installed. Indeed, since 1987, the company has experienced a continuous decline in its activities. The 1992 CFAF 253 million (US$0.9 million) overall deficit will further reduce the CFAF 1.8 billion (US$6.5 million) net situation, which was already restructured in 1991 from -1.2 billion CFAF in 1990. The situation will continue to deteriorate because of intensifying rail road competition as the full paving of the Cotonou-Malanville road nears completion. 168. To protect itself from the impact of a fully paved road from Cotonou to Malanville and the resulting expected 30% loss in rail traffic, the company has drawn up in its business plan, a list of freight categories which it should continue to move by rail in order to maintain its basic traffic level. Since there is still no cost accounting, the said list appears highly questionable, as it is aimed at keeping the current level of traffic instead of addressing the real issue of identifying services or products where rail carriage has a comparative advantage. This notion of earmarking rail freight categories is not consistent with the principle of open competition stated in the agreement's preamble. Still, it is likely that this provision will not prevent road operators from carrying freight in these same categories when OCBN is unable to move it at comparable cost and speed, thereby putting pressure on OCBN to improve its productivity despite the "protected" list. OCBN: Income Statements, 1991 & 1992 (CFAF thousands) 1991 1992 Sales Revenues 8,074,170 6,604,044 Operating Expenses 7,240,635 6,673,768 Operating Results 833,535 (69,724) Non-Operating Results 2,226,875 (184,086) Net Income (Loss) 3,060,410 (253,810) 98 Part II: Analysis OCBN: Balance Sheet, 1992 (CFAF thousands) ASSETS LIABILITIES Current Assets 2,456,443 Current Liabilities 2,605,535 Fixed Assets 39,525,252 L-T Liabilities 2,987,317 Equipment Subsidies 2,392,003 Total Equity 33,996,841 Total Assets 41,981,697 Total Liab. & Equity 41,981,697 169. Financial Management. In 1988, the company developed, in agreement with CFD, a business plan whose main objective was the installation of a computerized analytical cost accounting system and preparation of a management monitoring chart as a conditionality to the disbursement of CFAF 2.15 billion (US$7.8 million) for logistic equipment (CFAF 800 million), works on the track (CFAF 880 million) and assistance to management (CFAF 470 million). Assistance to management was to include strengthening accounting operations, developing a marketing strategy, computerization of management tools and redesigning the human resources management. The conditionalities to this restructuring were implemented in late 1990 (closing of lines, staff reductions and reorganization) and the program is now underway, with about half of the program implemented by mid-1993, but the results of these measures are not yet fully apparent. 170. In order to survive without repeated cash injections, OCBN needs to actually implement the improvements it has agreed to in its financial management. To begin with, further reductions are required in overhead operating costs. The company has experienced declining sales revenues and yet its operating costs have remained fairly stable. Abandoning certain activities would eliminate all expenditure in those areas (passenger cars, rail station infrastructure, etc.). More restrictive salary policies should be implemented as actual average salaries are 1.8 times higher than the average salary of a truck driver. The company also needs to finalize and install an analytical cost accounting system and establish a management monitoring chart with specific and detailed performance criteria, as agreed with CFD in 1988. A thorough financial analysis of the current performance for each activity and product should then be carried out, viable market opportunities identified and its comparative advantage in these areas should be determined. OCBN should then concentrate on developing these activities. Republic of Benin: Transport Sector Strategy 99 171. New investment and heavy maintenance will need to be kept to the strict minimum required to respond to demand in areas where OCBN retains a competitive advantage. This rule should be applied to equipment as well as infrastructure. Investments should only be considered if they are required to perform efficiently in competitive activities and are economically and financially justified and can be financed from internally generated funds. H. Air Transport Subsector AIRPORT INFRASTRUCTURE 172. Benin's potentially operable airline network has a spindle shape, following the country's geography, stretching over nearly 1,000 km and spreading out from Parakou toward the northern and eastern provinces. With the exception of Cotonou-Parakou, distances between the cities served are short, less than 300 km, and do not justify the utilization of fast aircraft. Up to now, planes having a maximum weight (MTOW) of 25 tons and short landing and take off capabilities are only authorized to land in daylight. 173. There is only one international airport in Benin, which is located in Cotonou. Annual traffic was 134,000 passengers in 1991, of which 83,000 in transit. Freight traffic has seriously declined since 1981-1982, when it reached close to 10,000 tons. It has stabilized since 1986, reaching in 1991 the level of 2,482 tons (1,615 tons of exports and 867 tons of imports). There is practically no domestic traffic within Benin. Freight traffic consists essentially of high value imported goods and exported fruits. In spite of its vigorous growth in the last years, civil aviation represents only a small percentage of the overall services offered by the transport sector in Benin. Air transport contributes less than 1 % of Benin GDP and is not a competitive alternative to road, rail and maritime transport, as a result of the revival of the reliability of the national road network and of the increasing importance of the port of Cotonou. 174. The main runway at Cotonou airport is 2,400 m long and 45 m wide and requires reinforcement now. Indeed, fatigue has caused numerous degradations (cracks, swellings, ruts, etc.) of the runway, taxiways, and parking areas. There are seven category C airports serving Parakou, Kandi, Natitingou, Save, Porga, Benbereke, and Djougou. These are equipped with laterite runways, but have no night landing lights. Runway lengths are: 1.200 m at Save, Natitingou, Djougou and Benbereke; 1.400 m at Kandi; 1.600 m at Parakou; and 2.500 m at Porga. 175. Infrastructure is deteriorated and outdated. The poor condition of the Cotonou airport runway requires urgent periodic maintenance. Its current 100 Part II: Analysis condition could result in very near-term safety problems. The air terminal building is outdated and on some points not in accordance with international safety regulation. The Benbereke, Djougou and Porga runways are currently out of use as a result of deferred maintenance. Infrastructure at other airports is in poor condition. 176. Cotonou and domestic airport infrastructure should be rehabilitated and upgraded only as necessary to meet actual demand. A study is currently underway to examine Cotonou airport management and runway rehabilitation. The study will provide by mid-1995 a basis for undertaking institutional reforms and infrastructure rehabilitation. It is expected that first priority will be given to the rehabilitation of the Cotonou runway. Other investments should be limited to the strict minimum necessary to meet the demand and should be self-financed. The Cotonou airport arrival hall and warehouses could usefully be enlarged, and the capacity of the passenger processing facilities expanded. Rehabilitation of other the domestic airports could follow, depending on the availability of financing out of Cotonou airport revenues. This rehabilitationn should be limited to the level required for traffic by small taxi aircraft. AIR TRANSPORT OPERATIONS 177. Cotonou airport hosts a total of nine airlines, of which eight are foreign (Aeroflot, Air Burkina, Air France, Camair, Ghana Airways, Nigeria Airways, Sabena and Sonita), and one, Air Afrique, is the de facto national company operating the international lines according to the Yaounde Treaty, to which Benin is a party. The international traffic is essentially carried by Air Afrique (32%), UTA (27%), Sabena (28%), and Aeroflot (13%). There is currently no locally based air company in operation, the last one, TEA, having suspended its activities in January 1993. Another Benin-based company, SNCI-Tours BIR, which had stopped operating in 1990, is presently trying to set up a West African subregional airline in partnership with other countries of the subregion (Burkina Faso, Mali, Niger and Togo). 178. Air transport activities are regulated by the Direction de l'a6ronautique civile (DAC), or Civil Aviation Directorate, part of MTPT, and are managed by the Agence pour la s9curit6 de la navigation adrienne en Afrique et & Madagascar (ASECNA), or Agency for Air Navigation Safety in Africa and Madagascar. DAC is in charge of organizing air traffic activities (airline registration, traffic rights negotiation, etc.), enforcing its regulations, and managing domestic airports, except the Parakou airport which is entrusted to ASECNA. The air transport subsector is entirely managed by ASECNA under contract; since 1988, it has collected and managed all subsector revenues and covered.DAC's operating costs. ASECNA has a contract with the Government of Benin to ensure air Republic of Benin: Transport Sector Strategy 101 navigation safety, carry out traffic and accident surveys, and manage day-to-day operations of the Cotonou and Parakou airports. These sectoral institutions employ 121 persons, as follows: ASECNA in Cotonou 35, Parakou 9, meteorological station 54, and DAC, 23 staff. 179. ASECNA's financial management lacks transparency and accountability. The contract with ASECNA does not contain any specific clause concerning financial responsibility, results to be achieved, or monitoring of activities. Financial resources generated by the Cotonou international airport (tourism tax of CFAF 2,500 per departing passenger) are collected by. ASECNA but are not earmarked for the sector, being absorbed into the general budget of ASECNA. A special account was established for investment financing. In spite of positive financial results achieved since 1990, the civil aviation sector required a state subsidy of CFAF 51 million .(US$0.2 million) in 1992 in order to maintain a positive balance in this special account. The fees in Benin are 15% higher than those of other countries in the subregion with similar traffic levels, and fee collections represent 96% of all revenues generated by air transport activity. As of December 31, 1992 the amount of unrecovered fees reached CFAF 913 million (US$3.3 million) on a billed total, by ASECNA-Dakar, of CFAF 1,873 million (US$6.8 million), of which CFAF 704 million (US$2.6 million) are in arrears from 1991. The quarterly billing period and the inefficiency of the recovery process translate into a sliding operating subsidy to the airlines and other operators. 180. An autonomous management structure for airport operations in Cotonou should be established. French donors are financing studies aimed at defining new institutional, financial and operational arrangements for air transport operations. The final results of these studies are expected to be available by mid-1994. ASECNA would continue to be responsible for air operations and meteorology, and these activities would be supported by a number of selected fees which would be collected directly. The Cotonou airport should generate enough revenues to cover operating and maintenance expenses for Cotonou airport and to ensure debt service for the financing of its upgrading program. A special tax of 2 francs CFA per liter of fuel, established in January 1993, would be enforced and the facilities- related charges would be increased in view of the envisaged expansion of facilities in Cotonou. Modernization of the Cotonou airport would also bring new revenues: advertisement fees, turnover taxes, and parking fees. Management of the secondary airports would remain under Government responsibility, including the financing of maintenance and investment. However, to improve efficiency, management of these airports should be subcontracted to the Cotonou Airport Authority. Any future income from tourism development taxes could be earmarked for airport maintenance. 102 Part II: Analysis 181. Supervision as provided by DAC and financed by ASECNA is weak. The December 27, 1963, decree regulating air operations is ill-adapted to the present situation. In fact, DAC lacks the necessary qualifications in some areas, and turns to ASECNA to solve civil aviation problems that fall within their province. The relevant regulations should be revised and DAC strengthened to allow MTPT to manage the sector and supervise operations entrusted to the new autonomous entity. A new Code de l'aviation civile, or Civil Aviation Code, should be drafted on the basis of current air sector forecasts and taking into account safety issues and the current political and economic environment. DAC, which could benefit from greater technical and financial supervision, would retain its status of Technical Directorate within the Ministry, and its operations would be funded from management franchise income. Its capacity should be increased through staff training aimed at adapting staff skills to match the qualifications required by the proposed institutional arrangements. AF1lN March 17, 1994 GC2.BEN 55 Annex A: Benin: Total Freight Import-Exporl Volumes, Port of Cotonou, 1965-1992 103 Années Importations' Exportations" Total 1965 247.327 104.079 351.406 1966 265.268 103.954 369.222 1967 289.801 157.216 447.017 1968 283.814 162.314 446.128 1969 374.868 170.632 545.500 1970 387.325 172.490 559.815 1971 413.016 194.938 607.954 1972 511.107 170.512 681.619 1973 545.738 142.109 687.847 1974 611.109 127.171 738.280 1975 647.225 108.083 755.308 1976 784.373 128.171 912.544 1977 973.219 73.408 1.046.627 1978 1.006.019 49.744 1.055.763 1979 1.441.077 61.176 1.502.253 1980 867.550 85.489 953.039 1981 1.110.842 55.196 1.166.038 1982 1.079.773 53.801 1.133.574 1983 736.093 64.488 800.581 1984 807.135 79.073 886.208 1985 1.059.074 107.576 1.166.650 1986 1.030.146 137.088 1.167.234 1987 1.096.742 172.683 1.269.425 1988 1.094.145 95.190 1.189.335 1989 736.369 123.058 889.427 1990 945.107 124.067 1.119.174 1991 1.337.198 148.587 1.485.785 1992 1.488.595 246.287 1.734.382 Les importations sont constituées notamment de vracs liquides (hydrocarbures), vracs solides linker, gypse, soufre, céréales et assimilés) et de marchandises diverses. ** Les exportations sont constituées notamment d'huiles végétales, arachides, tourteaux et de divers. source: Port Autonome de Cotonou ANNEES MOUVEMENTS PASSAGERS (NOMBRE) FRET (TONNES) POSTE (TONNES) COMMERCIAUX AUTRES DEPART ARRIVEE TOTAL TRANSIT TOTAL DEPART ARRIVEE TOTAL TOTAL GENERAL 1981 3.015 - 37.485 41.956 79.441 37.834 117.275 816.0 8736.0 9552.0 187.1 1982 2.986 436 40.143 33.407 93.550 51.538 145.088 1762.0 89150 10677.0 212.9 1983 3 398 3.716 48.303 48.280 96.583 66.359 162.942 815.0 5088.0 5903.0 212.0 1984 6.146 1.708 54.964 57.541 112.505 71.300 183.805 997.0 2711.0 3708.0 180.0 1985 6.940 1.736 67.548 67.089 134.637 69.482 204.119 791.0 2543.0 3334.0 215.0 1986 6.527 1.936 71.815 74.725 146.540 72.688 219.228 764.0 2036.0 2799.0 177.0 1987 4.865 1.363 65.084 68.776 133.860 74 844 208.704 801.1 1628.8 24299 139.3 1988 4.237 902 59.862 63.532 123.394 63.477 186.875 888.6 1528.6 2416.6 164.6 1989 3 832 1.709 61.745 61.586 123.331 84.413 207.794 1069.2 1W.2 2635.8 204.5 1990 3.353 2.727 63.473 66.699 127.172 93.071 220.243 1105.5 1490.7 2596.3 258.9 1991 3.389 2.604 67.196 67.129 134.325 83.312 217.637 770.6 1384.8 2155.4 275.9 Source : DA.C. ASECNA Annex C: Benin: Financial Status of Transport Sector Public Entities, 1991 105 (millions CFAF) OCBN PAC SOBEMAP COBENAM CNCB 1991 1992 1991 1992 1991 1992 1991 1992 1991 1992 Produits d'exploitation 7,419 6,572 3,959 4,115 3,950 4,078 608 523 462 533 Subvention d'exploitation 600 - - - - - - - - Frais de personnel 1,667 1,769 1,151 657 1,118 1,388 193 197 76 93 Frais financiers 31 28 372 146 .4 .1 - - - - Autres charges 4,562 3,769 1,261 1,150 1,013 1,109 190 197 104 124 Dot. amort. et prov. 925 1,075 1,197 1,977 858 332 20 15 17 18 Résultat d'exploitation 834 -69 -22 185 961 1,248 205 114 265 298 Résultat hors exploitation 2,227 -184 -955 -3045 -528 -107 -75 25 -2 3 Résultat net avant impôts 3,061 -253 -977 2,860 433 1,141 130 139 263 301 Résultat net après impôts 3,061 -253 - - 84 684 103 110 162 185 Valeur ajoutée 2,902 2,839 3,334 3,257 3,052 3,082 402 311 377 437 Marge brute d'autofinancement 3,986 833 86 -985 942 1,016 126 125 179 203 BILAN SIMPLIFIE Actifs circulants 4129 3,239 4,631 5,842 3,063 3,783 5,807 6,160 505 491 Immobilisations nettes 10,44 38,74 24,65 20,66 1,577 1,400 154 141 53 176 Total actif 14,57 41,98 29,28 26,50 4,640 5,183 5,961 6,301 558 667 Capitaux propres et réserves 5,588 32,40 17,92 17,92 2,331 2,331 649 649 120 250 Passif à court terme 1,770 1,098 10,47 1,901 868 1,081 4,845 4,733 114 61 Dettes à long terme 2,746 2,987 4,857 13,19 1,735 1,415 - 363 - - Reports à nouveau et résultat 1,825 1,591 - - -483 201 204 293 324 356 Subventions d'équipement 1,102 2,392 2,414 2,369 - - - - - - Provision pertes/charges 1,546 1,507 - 470 188 155 263 263 - - Total passif 14,57 4198 29,28 26,50 4,640 5,183 5,961 6,301 558 667 Source: Banque Mondiale Annex D: Benin: Government's Proposed Five-Year Transport Sector Program (1993-97) 106 SYNTHESE DU PROGRAMME SECTORIEL TRANSPORT (millions F.CFA.92) 1993 1994 1995 1996 1997 TOTAL INFRASTRUCTURES 9658 18193 18341 15548 6935 68675 (constructlon,réhabilitatlon) transport terrestre 8956 14957 16647 15448 6935 62943 maritime 610 900 182 0 0 1692 aérien 92 2336 1512 100 0 4040 INFRA. (entretien routes) 2224 2243 2877 3689 3906 14939 EOUIPEMENT,MATERIELS 1837 2480 1946 1355 1017 8635 Transport terrestre 1050 1110 900 700 550 4310 maritime 627 780 996 655 467 3525 aéren 160 590 50 0 0 800 MESURES D'ACCOMPAGNEMENT 675 1255 1275 905 695 4805 transport terrestre 450 620 550 420 370 2410 maritime 225 395 395 225 225 1465 aérien 0 240 330 260 100 930 TOTALINVESTISSEMENTS 14394 24171 24439 21497 12553 97054 dont FBCF(formation brute de capital fixe) 11495 20673 20287 16903 7952 77310 dont FBCF béninoise (avec 50% du ferroviaire) 10084 18413 19177 16200 7542 71416 NATURE DES RECETTES 1987 1988 1989 1990 1991 1991 Taxe sur Hydrocarb. 517.000 652.874 442.476 587.000 245.842 265.502 Taxe sur Prod. Agri. 0 0 1.000 2.000 0 0 Taxe de Voirie 0 0 8.624 32.362 132.405 101.884 Taxe sur Ponts Base 12.096 15.380 18.813 15.335 12.410 14.334 Taxe sur Pont P/N 0 0 0 O 2.533 2.630 Taxe de circulation 20.874 17.998 8.835 475 26.668 24.235 Taxe des Ponts N/S 123.797 154.918 146.915 159.000 192.792 213.710 Recettes diverses 4.533 9.000 23.776 11.465 8.127 2.440 Location Materiels 2.279 250 3.944 0 24.435 30.156 Contribution Etat 282.290 191.000 214.000 204.000 198.400 287.900 Recettes Ex. Ant. 361.418 562.000 65.146 86.741 70.878 108.089 TOTAL 1.333.387 1.603.420 932.729 1.048.378 904.420 1,050.880 Source: Direction du Fonds Routier XIIISTUfE DES TRAVI PUBLICS EU DE$ fIAKSPORTS DIRECMf01 DU FriS icofEi Estliations Le 19 Mars 1993 - alis#s au 31.12.91 En tillIers de F.CFA liercice 1987 Exerclce 1988 I xereice 1989 I xercice. 1990 E liercie 1991 Eercice 1992 Exercie 1993 .2 L. 1 3 1. L , L S --------------------- --------------------- --------------------- --------------------- -------.---.--- ----......--.----..-- ---------- ndgeik healIsl Bdgetå | lealis i Indgeti | lealsi | Budge I i lsie IBud91t4i 14alis budgit I lalis 11adget Rialisf ------- ----------------- ----------|-------- ---------- --------- ---------- ----------|----------|---------- ---------- ---------- -------- ---.----.-- --..---- -------- F FIAIS GERERA1I 167.431 96.907 157.000 95.198 119.100 116.047 17.561 113.660 191.307 115.133 146.098 141.166 149.140 Fournitures consoales 1 31.600 I 16.675 48.600 13.338 44.000 19.081. | 37.305 33.660 49.335 35.849 36.550 31.410 34.430 - Services cofsenums I 47.600 I 38.658 64.400 31.761 51.100 39.701 41.500 19.196 34.300 36.141 35.500 .33.363 353.910 Personnel Permanent 87.131 i 41.374 94.000 33.369 90.000 | 35.580 I 55.650 | 31.994 58.471 | 41.751 51.046 | 46.991 531.600 - CIP et CEIF tonii I50.000 530 43.000 11.661 5.131 11.138 35.000 11.536 15.000 15.000 i 26.600 II IfiilssENEif 312,815 | 187.024 336.269 92.565 123.435 i 50.776 547.090 61.590 141.517 1137.745 111.051 | 191.193 194.296 l- atiriel et @Cbiller 116.8153 166.500 238.915 61.624 58.515 ! 21.874 49.490 13.113 46.800 11.609 50.000 47.442 49.765 I- ravaur de Ulhabilitationa 61.000 I 870 | 41.104 11.635 i1.800 19.511 69,500 19.037 151.117 101.115 113.000 110.000 91.309 - lindes et contrbles 24.000 19.654 | 50.250 19.306 38.110 8 .31 16.100 19.340 36.990 13.011 46.051 34.851 51.231 13 E10v11SEE1T Dl DETTES 64.391 76.545 184.066 108.443 135.300 117.544 106.000 111.316 111.000 166.390 158.000 176.669 164.000 - Ponts Mono et Satu 35.000 1 38.053 105.000 106.443 163.500 76.941 174.000 111.316 111.000 114.891 158.000 116.669 164.000 - atres dettes 49.391 36.491 79.066 71.000 40.601 31.000 31.496 i4 10UE . EITilTjEI C0UMTII1.161.139 763.116 :1.659.130 551.099 1.16.865 656.513 969.323 605641 89.37b 629.359 630.851 559.207 740.964 . frals varlables :1.003.239 551.719 1.413.705 336.110 946.140 411.569 761.653 401.696 673.776 443.939 455.951 384.310 548,574 - Fourelteres consonne9s 316.172 194.089 369.439 116.096 191.613 171.413 179.773 141.014 183.500 114.307 100.515 101.799 535.610 - Services consomais 11.100 s.896 11.850 3.796 15.599| 6.117 11.911 13.407 54.435 17.616 76.711 49.139 119.139 - ,ocation de matriel 416.570 i 114.693 701.675 | 35.677 300.513 | 47.094 | 191.818 111.613 1 191.170 179,047 161.776 119.733 59.613 Personnel occaslonnel i 143.761 101.61 137.541 111.969 140.505 | 116.160 91.140 73.326 | 66.991 77.151 58.948 5.104 I, 70.560 I- onactionneent ds units 114.000 11.616 3a.0001 1.146 10.000 3.181 10.500 8.553 15.000 10.531 10.331 - Dépenses laprévues 19.615 19.610 30.000 1.941350.000 I 49.550 30.000 19.938 112.000 20.497 31.000 12.000 15.000 - ixercices anterleors 5.000 4.349 18.000 30.000 I 1.129 35.000 16.979 15.000 15.876 19.000 19.013 j8.000 - Entretien p1stes rurales 80.000 140.000 60.000: 7.660 10.010 Personnel Permanent 2537.900 21.407 215.423 1 212.989 316.615 103.944 107.670 203.943 165.400 105.400 174.900 174,867 191.390 MfOAL DES DEPENSES 11.625.777 1.113.601 -1.436.465 ' 847.405 1.753.000 900.860 .1.510.000 901.137 1.410.000 1.056.s77 11.148.000 15.070.935 .1.149.000 PonT les travaux de rebabilitation, dans il rubrique 'Investissements, , seule la contrepartie Béninlose & la charge du Fonds loutier est prise en coepte. Map A: Benin: Administrative Divisions and Population Density 109 AFRICA O R G O U /T A C C) R A - 50 - 100 25 • 50 -OUEME MONO .w msu "_ _ATLANTIOUE Atlantic Oceen l신 4 1• ) з• / б• J MAL1 �J N1GER % �''� � "�i: 2 _/.�.;(rJ � N 1 G Е R j викюrиt�. �'J�•-��� .� 1� ff Fnso .J `!� � ?� �1.�'F I � % д ��'�;�EN1N� \ t� �, � ! \. f N1GEB�A D'1vdRE ��ŭl + �/ 11• \.\ � Коппюпю°`\ ` / О \}` �г 3 11• -�_- \'��г�ю:о� ` /� В U R К 1 N А •) кого,м о"1. � / _ / /��` ,, �диwи� Г�,?� F/'1J� �r Водос о ёг4и 1 !OL W1NEA-` 7• ' ./� _� 1 GиМб \ /. 10АЮИ % Капмго° ," г• / / °Кеиа л_г�J,�.NOn�.!• / J oFWnouoo / ю g�� /� рΡ /� �� ^�\'о� "_ Апgаго 5л�о � 1 V� V Е 1С �/'1 ^ � � `BaN4oard D'вбои � •\ с� \ 6ъ�. � � �р . ьсдио6 oseo °ОибпЧо\ро, t � ,�� °teuoou �! р р� 5омого t I �r�. г о.,о I J� сь...оьо г� ВаНа у /S 5 0� па l Do•wri � совойпеи Топпоорое кб,м, i С r пв0 / в,и,.опоro l. � �г� � 1 ТдИGи�ЕТд , --� i В О R G О U I�' кеыi Те0ьеWпгоепа , � ____ окееогю � В.геме, f � ,� ° � r �•.i �^пр : рвг4еи Коиапд_ . � v.�_NATITINGO )/ , / '\ Когогоим г Р{ИеnУо ` ВвпЬ:.б ка1о4 '\ Тобг � I ВеиМепМ� •�• �•`..Fо�Воегб GwпоиSиФ �. io• � вьтi аго„ '1 10, � •'? и�пь� J Biro Вви и�оои •� Водjеидб '� °�гыб Г гDeTpe°а с,ак,а, В°;� � - ' О 1 i � �... .у 1 ; � ( .� Г` � 1 \ i Рдкдкои } •l yL вибге i е, 1 впи�iо г...•� --•�-•-'� Р• I ➢ ' оА� �� Tchoeoroo р � � TOGO р -._.._.._ . 1 i �..J..�..ti vелп к�iье � В Е N � N �../ о еапг: еМ•б° � TRANSPORT 1NFRASTRUПURE �i оiсьбкопюпо ид о � 1 Z О U �•� Е.ю"пВ. � SМТР Main Workshop I ре�� f ® SROA Headquorfers б. •� дV€ 1 � Repioлal Road Mainlenance Divisions е• 1+i SдУА�0UД lоге / т�ьегl� _ z1? 1 �ы�" " �=м� � fЬved Roads iaьoa�S одssд�гоим �г�, до,дs I � � Раоеьрпап -..-..-j ---- - Tnacks I .Ъ 1` �'�"'- Рl2�И9у9 � � о О Ш ` {• lпfвгпаl'югюl Airport I . 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