Cameroon - Transport Sector Technical Assistance Project

Dotoe: of The World Bank FOR OMCuL USE ONLY Reprt NO- P-6559-Cg MEMORANIDU AND RECONHENDATION OF THE PRESIDENT OF THE INT AEMONAL DEVELOPMN ASSOCIATION TO THE EIECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE AMUNT EQUIVALENT TO SDR 6.9 MILLION TO THE REPUBLIC OF CAMOON FOR A TRANSPORT SECTOR TECHCAL ASSISTANCE PROJECT MARCH 23, 1995  CURRENCY EQUIVALENTS (as of March 2, 1995) Currency Unit CFA Franc (CFAF) US$1 CFAF 515 CFAF I million = US$1,942 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ASECNA = Agence pour la Securite Adrienne en Afrique et de Madagascar (Air Safety Agency for Africa and Madagascar) BMZ = Bundesministerium fur Zusamnmenarboit (Gernan Ministry for Cooperation) CAMAIR = Cameroon Airlines CAMSHIP = Cameroon Shipping Lines CAMTAINER = Societe Nationale de Transport ct de Transit du Cameroun (Cameroon Container Transport and Freight Forwarder Company) CAR = Rdpublique Centrafricaine (Central African Republic) CAS = Country Assistance Strategy CFD = Caisse Francatse de D6veloppement (French Development Agency) CIF = Cost, Insurance, Frcight CNCC = Conseil National dcs Chargeurs du Camcroun (Shippcrs' Council) CNIC = Chantier Naval et Industricl du Cameroun (Camnroon Dockyard) CNPS = Caisse Nationalc de Pr6voyance Sociale (National Social Security Fund) DMN = Developing Maritime Nations DGTC = Direction Gdn6ralc des Grands Travaux du Camcroun (General Directorate for Large Works of Carncroon) DPO = Deferred Privatization Option ERC = Economic Recovery Crcdit ESOP = Employee Stock Ownership Program EU = European Union FAC = Fonds d'Aide ct de Cooperation (French Coopcmtion Fund) FOB = Free on Board FY = Fiscal Year GDP = Gross Domestic Product GOC = Government of Cameroon IBRD = International Bank for Reconstruction and Dcvclopment ICAO = International Civil Aviation Organization IDA = Intcrnational Developmcnt Association IMF = International Monetary Fund IRU = International Road Union LABOGENIE = Laboratoire National de Gdnie Civil (National Road Laboratory) MATGENIE = Pare National de Materiel de Genie Civil (Equipmcnt Pool) MC = Management Contract MINEFI = Ministcrc de l'Economie et des Finances (Ministry of Economy and Finance)  FOR OFPICIAL USE ONLY MINT = Ministre des Transports (Ministry of Transport) MINTP = Ministbre des Travaux Publics (Ministry of Public Works) OECF = Overseas Economic Cooperation Fund ONPC = Office National des Ports du Cameroun (Cameroon National Port Authority) PE = Public Enterprise PIP = Public Investtmnt Program PPF = Project Preparation Facility PSO = Public Servicc Obligation REER = Real Effective Exchange Ratc REGIFERCAM= Rie Nationale des Chemins de Fer du Cameroun (Cameroon Railways) SAC = Structural Adjustment Credit SAL = Structural Adjustment Loan SAP = Structural Adjustnent Program SAR = Staff Appraisal Report SME = Small and Medium Enterprise SNH = Soci6td Nationale:d'Hdrbearbures (Nadonal Oil Company) SNI = Soci6t6 Nationale d'Investisscment (State Holding Company) SOCAMAC = Socidte d'Am6nagement ct de Manutention du Cameroun (Port Handling Company of Cameroon) SOTUC = Soci6ti dc Transport Urbain du Cameroun (Urban Public Transport Company) SSATP = Sub-Saharan African Transport Policy Program TICU = Transport Incnninistcrial Coordination Unit TIR = Transit Intemnational Routier (International Road Transit) TIPAC = Trasit Intcr-Etats des Pays e I'Afrique Centmlc. (Central African Countrics Regional Transit) TSAC = Transport Sector Adjustmnt Credit TSP = Transport Sector Project UDEAC = Union Douanicrc ct Economiquc dc l'Afriquc Ccntraic (Central Africa Customs and Economic Union) UNCTAD = United Nations Confcrcnce on Trade and Devclopmcnt FISCAL YEAR July I -June 30  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Caneroon Implementing Agencies: Ministry of Economy and Finance Ministry of Public Works Ministry of Transport Transport Interministerial Coordination Unit Beneficiary: Not Applicable Poverty: Not Applicable Amount: SDR 6.9 million (US$ 10.2 million equivalent) Terns: Standard IDA tems with a naturity of 40 years Commitment Fee: 0.50% on undisbursed credit balances, beginning 60 days after signing, less any waivcr Onlending Terms: Not Applicablc Financing Plan: Sec Schedule A Net Present Value: Not Applicable Staf Appraisal Report: None Maps: IBRD No. 24837 and 24838 (Priority Road Network) IBRD No. 24029 (UDEAC Infiastructurc Communications Network)  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT TABLE OF CONTENTS Memorandum and Recomnmendation of the President ...........................................1;.,.,.,.,.,.,.,,.,,,,,,,,,,,.I Schedule A. Estimated Costs and Financing Plan ..9 Schedule B. Procurement Method and Disburscment ..................................... , 10 Schedule C. Timetable of Key Project Processing Events ........................................ ; 12 Schedule D. Status of Bank Group Operations in Camcroon ..................................................,. 13: Technical Annex ............................. ; -.,.;l.'.'. Section A. Detailed Project Description .......................... ......I.,. I. Country Background ....................... II. Transport Sector Issues ................... ;.-.-.4 -.1II. T ransport Sector Reform Program1 3................................ [V. Lcssons Leamed'and Stratcgy for IDA Assistanc to the Transport Sector in Cameroon...". 22 V. Project Dcscription ................ ; '.-.'.23 Section B. Project Costs and Administration ..27 '. Project Costs . ' 227 *I. Procurancnt ................ '-27 II[* ;. Disbursements.29............... 1V. isccounting and Auditing ................... ; 29 IV. Accounting and Audit.i. .g .......................................................................................................... 29 Scction C. Implementation and Monitoring .31 I. OrganizationandManagement .31 - : II. Implem entation Schedue ................... _.31' 3 - III. Reporting and Monitoring ................ 31 IV. Supervision Plan ........... . - .32 V. Mid-Termr Rcview ........... " 32-: *~~~ ;-  Schedule 1: Central Goyrnunen,t Operations and O.ther. Macro-economic Data ................................ 33 Schadule 2: Maritimc Transport Regulation ahd Development in sub-Saharan Africau Countries ..... 34 Schedule 3: Importance of Transport Sector Public Enterprises in the Overall Public Enterprise Sector .............. 37 Schedule 4: CAMAIR. A Company Profile ................................. .,.,.,.,,,,.,.38 Schedule 5: REGIFERCAM. A Company Profile . , 41 Schodule 6: SOTUC. A Company Profile . 43 Schedule 7: CAMSHIP. A Company Profile . 45 Schedule 8: CAMTAINER. A Company Profile ................................. 46 Schedule 9: ONPC. A Company Profilc . 47 Schedule 10: CNIC. A Company Profile ....9........................ , Schedule 11: MATGENIE. A ,Company Profile .......................... 52 Schedule 12: LABOGENIE. A Company Profil ...................................... - 53 Schedule 13: Road Maintenance Budget and Performance .....................4...................:.. 54 Schedule 14: Strategy, Timetable, and Key Financial Data for the Privatization of Air Services ....... 55 S hcdulc 15: Strategy, Timetable, and Key Financial Data for the Privatization of Rail Services ....... 64 Schcdule 16: Key Financial Data and Timetable for the Privatization of CAMSHIP and CAMTAINER ...................... 75 Schedule 17: Benefits Resulting from the Privatization of Transport Public Enterpriscs ..................... 79;= Schcdulc 18: Action Plan and Timetable for the Transit Component of the UDEAC Transport Reform Program .................................82 Schedule 19: linplementation Schedule of Transport Scetor Reforrm Program . ..................................... 83 Schedule 20. Expected Rcsults and Timing for Key Project Activities................................................. 85 Schedule 21. List of Project Activities and Procurement Procedures . 86 Schedule 22. Guidelines for Preparing Trining Activitics 8......................8............... ,. ; : 8 Schedule 23. Detailed Project Costs ........................... . : 89 Schedule 24. hIplementation Schedule ............................................. --90_ . r .....90 Schedule 25. Supervision Plan. ...................;:; ..91  MEMORANDUM AND RECOMMNDATION OF-THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF CAMEROON FOR A TRANSPORT SECTOR TECENICAL ASSISTANCE PROJECT 1. I submit for your approval the following memorandum and r on on a proposed development credit to the Republic of Cmeroon for SDR 6.9 million, the equivalant of US$10.2 mion, on stadard IDA tenms witi a murity of 40 year, to help finance a trasport sector tecbnical assistance project. 2. COUNTRY BACKGROUND. Unaddressed structural problcms in the country's economy have prevented Cameron fim reaching its development potential. Until 1985, Cameroon's economic growth averged 7 prcent per year, sustained by abundant nuau resources (tropical forests, petroleum, bauxite, naual gas, fertile agriculta land, and i largely.-favorable climate),; and favorible export prices for petroleum, cocoa-and coffe.. However, several structural problems developed during this period. The trdtonal growth sectors,. agriculture in particular, were nelected and their productivity declined. The multitude-of public enterprises cretd during this period were inefficient;and eventually became bankrupt while draining wg resources frorm the State budget. The banking sector praciced imprudent lending by. becoming overly depednt on- il revenues, and largeeent deposits. .''The investment in public infrastructure was not selected to respnd to ec priorties or. social needs and was not followed by proper m. The lang-term,debtmincreased firo less.than 201 percent of the Gross Domestic Product (GDP) in. 1976, to about50 percent in- 1992. In additio, 'Cameroon suffired fio m two major shocks. First, as a result of a sharp decline in.export prices.ofpetroleumrin 1986,1followed by declines.in cocoa and coffee export prices, the eternaml terms of trade.fall by moredtan 55 percent from 1985 to 1989. Second, de real effective .exhange rate, started to appreciate f the US dollar and Nigeian Naira depreciation in 1985-1986, and contdnued to appreciate as Cameroon's inflation te conisntly =reained abve the inflation rates of its main tding partners. .- 3. In 1988, the Govenmnt launched an adjustment program -withsupport fom the IMU and the' World Bank. However, the program was not-impiement consistently' and its main objectives were not attained. While some progress wasimade-in di ing ent interventi n the economy, ireduCing price controls on domestcally tradedgods, liftg a of quantiive rstrictions on imports, and rationalizing the incentives framewo,the. fn St problems of.6 teconomy remained unaddrcssed. As arsult exteal ceddecline, ex l and intmal imbalan worsened, and tb.e econmic and:fn situon didi ot improve. Tax revenues deteriorated, wbile totl" current expendres remained uchagd t g the prmnarr fiscal balance from a surplus -in 1989 toDadeficit of2 percetofGDP.m'1992,. ' - 4. A major :change .occurred in Januar 1994, whe Governmentof Cameron, along with its partner countriesin the .CFA zone, decided to adjustithe parity, of ftCFA Franc from C1AF 50 per Frech Franc (FF) to CFAFj.100 per FF.' To -talke advantage ofthe positive-effects of the'devaluon, te Govcnment, ith IMF and 'DA assistance,bega mpleg a program.of economic measures and structuralreforms. The program,nsuipported by .an.IMF.Standby and an IDA:Economic Recovey Credit (ERC, Cr. No. 2627-CM, Jume 10, 1994), covers three key areas: (a) reimsiong of the public sector and improved public resourcemana t (b)'inproving.the incentives fimnework for the productive sectors; and. (c) targtig of p ll measures. Inh coqunction with the effects of the devaluation, the program is expected to enid the recession and.reslti.' positive r.a growth. Real GDP growth- is pr~ted to average about 5' percent per annum fr,m' 1995/96. Pb se'ctor:ublic sector irrvestments cted to ~~* -' ' ! .'-,  recoer gradually fom 2.2 percent of GDP in 1992/93 to about 4 percent in 1996/97. Private investment is expected to rise frn 8.7 percent of GDP in 1992/93 to about 12413 percent in 1996/97. Public sector savings arc projected to turn around substantialy, as tax reform and expenditure control translatl into improved fiscal balanoes. 5. Redimsioning of the public sector and improving public resurce management would be achieved by privamzing/liqtNdating priority -public enterpnrses, improving performance of enterprises not yet undergoing privaizution, and implmnting a strategy to setle the domesic debt. The Declaration of Policy adopted by the Government in the context of the ERC emphasized the need for State retrenchment from commercial activities. In July 1994, the Goverment listed 15 public enterprise for privatization or liquidation including the national airline, the milways, the urban bus company, the national shipping line and the national containr transport and freight forwarder company. The Government is currently revising the institutional famework for Public Enterprise (PE) reform. The Ministry of Economy and Fince has been mandated to carry out this reform. The settement of Govenmet domestic debt is a priority for the econom y. Based on the prlhminay outcmes of an on-going analysis of the domestic debt, the Governmen doimec debt accounts for 75 percent of the total domestic public sector debt, which amounts to about USS4 billion and accounts for about 45 percent of the exta debt, 50 percet of GDP and six times the 1993-1994 budgetary receipts. The Govenment and IDA are currenty worldng on a revised definiton of the institutional framework for PE reform and on the strategy to settle the donestic debt. 6. TRANSP6RT SECTOR BACKGROUND AND ISMS. The trasport sector is managed by ftree Govemet institutions. TheMinistzy of Public Works (MT), with about 6,700 employees, -is responsible for road mainteaance. Th Mistry of Trnsport (MINT), with about 880 employees, intites and supervises transport regulations. MINT also oversees the Shippers' Council (CNCC), which controls the distribution of Cameroon's maritime traffic under the United Nations, Conference on Trade and Development's (UNCTAD) Code of Conduct, negotiateslner confene tariffs, and reps Cam onian shippers' interests. The Dirtorte of Large Works of Cameroon (DGTC), with about 150 emnloyees, reports to the Prime Ministry. It prepares and ses large works,- including roads, and procures contrcts above about US$100,000 equivalent -for: ministries, and about US$365,000 for PEs. The contry procment review carried out by IDA in 1993 qualified the local procurement procedures as critically deficient because of little trnsparency in bid evaluation and award of contacts, rulting in long procurent processing and high costs. IDA and the Govenmt of C agreed-on a revised draft national procurement code in Decmber 1994. 7. The transport sector contains nine PEs. Seven PEs are unde the jurisdiction of MINT: CA MA .R (Cammroon Airlines), with about 1,600 employees; REGIFERGC: (Rigre Natonale des Chemins de Fer), with about 4,000 employees, operating about 1,000 kon of riilways; SOTUC (Societi des Transports Urbains du Cameroun), with about 1,050 employees, operating bus lines in Yaound6 and Douala; CAMSHIP (CamemOon Shipping Lines), ith about 280- employees, including 80 saiors; cArTA'NER (Socid Nationale de Transport et de Transit du Cameroun), with about 200 employees; OAZC (Office National des Ports du Cameroun), with about 1,000 employees, managing Cameroon's main port at Douala and three secondary ports, with most port operations conactd out to p orae ors, and CNIC (Chanher Naval et Industrfel du Cameroun), with about 130 employees, opeatig a diy-d Two PE s - PEs fall under the jurisdiction of MNTP: MATGENZE (Parc National de Materiel de Gedne Civil), with. about 400 employees, an equipment pool for road mintenance; and L4BOGEAYE (Laboratoire National de Genie Civil), with about 530 employees, which cantrls te norms and standards of road and building constuction, and caries out research. 2  8. In the past, weak management and insdtutions have aused the transport sector to have a negativu impact on the ovcrall economy. MINT and MINTP lack technical and managerial competoncm Ministerial interfekncc with public enterprises' managanent has limited their autonomy and hampered thoir performance. Priority has been given to oversized investments without consideration to economic justification and recurrent costs. Customs procedures are cumbersome and penalize transit traffic to and from Chad and the Central African Republic. As a result of weak management, transport infriastructure has lacked maintenance, and loss-mading PEs have drained scarce State resourou. The road network is rapidly deteriorating and insufficient dredging impedes the access of large ships to Douala, the main port of Cameroon: In 1993, dircct subsidies to cover transport PEs' deficit amounted to US$55 m-illion, equivalent to 8 percent of the State revenues. About US$240 million of subsidies had been allocated to tansport sector PEs between FY90 and FY92, of which 84 percent to CAMAIR. The total domestic debt for the nine sector PEs is estimated at US$230 million as of 1994. This accounts for about 24 percent of the total debt of the 34 major PEs in Cameroon, 6 percent of the total domestic public sector-debt and 3 percent of the gross domestic product. Seven of 'the nine PEs are technically bankrupt. The consequences for the economy are high transport costs, nmning down of existing assets, and lack of resources for investment. Roadtransport costs, transport costs for irnational trade, and port tariff are excessively high. The road network and railway tracks need costly-rehabilitation. 9. TRANSPORT SECTOR REFORM PROGRAM. Since 1990, the Govermnet has undertaken to reform the-tansport sector. Progress, :erratic and slow at. first, has accelerated recently, and is overall satisfactory. In the earlier phase, supported under the IBRD's Structural Adjustment, Loan (SAL, Ln. No. 3089-CMI June 1989), top-level commitment was insufficient, ande dfctive rcstucturing- did not take place. Since 1992, the pace of reform picked up. A perfonince contract was signed with the railway company which resulted in the disniissal of about 2,000 employees, contracting-out of some mainte works, and tariff autonomy. SOCAMAC, the national.stevedore, has been privatized. In October 1994, following the appointment of a new managementteam, MATGENIE was restuctured and 400 employees were dismissed, reducing the ,salary bill by 40 percent. In addition, salaries were cut' by 10 percent in January 1995. CAMSHI[P has been cally restructred and earned profits in FY94. Airport managenent was privatized in 1994. in order toDshift fiom carrying out road maintenance by force account to execution by contracts, the Government agreed to a new road mainteance policy in 1993. This policy is being tsed for earth road maintenance with European Union financing. In early 1995, Xt Goverment c,ontractedoutthemanagementof asecondary portto aprivateinvestor. OnFebruaiy22, 1995, SOTUC's General Assembly decided to liquidate the company:and all services have been stopped p the liquidation. This phase bas consolidatod a constituency for reform in the transport sector and has proved that results can be achieved and sustained. Yet, the importance of the sector in the economy and the current daunting magnitude of the issues call for scaling up the Government's effort 10o restore financil viability and to solve the sectoral policy and insitional issues, with a coordiatedW coherent set of actions on the domestic debt crisis. 10. The Government, with the support of donors involved in the transport sector has developed an overall transport sector reform program to complete the adjusment of the sector institutions and address the financial issues in the sector. The program seeks to enable the sector to resume its contribution to development instad of being a constraint to the country's economic growh It is aimed -at impmving mobiliation and allocation of resources, maintnance of transport infrastructuremand the oveiall efficiency of the sector. These objectives would be achieved tro Ste divestitur from transport operations, increased competition, more focused institutions to improve their ectivess, and an improved regulatory framework. The program would be implemented in thee phases over:a three-year perod. The first phase of the program would privafize or liquidate five major tansport PEs with most impact on the Treasury, i.e., the national airline, railways, shippig line, urban bus company and container trsport and freight 3  forwarder company. MsNTh rolo would be revised to focus on planing, reguation and policy. The regulatory famework for air, maidme and urban transport would be revised to develop competition and cntry of pri'ato operatori in the subsectors. The ubsequent r'aseu would downsize the port authority and implement an efficiency-driven organization for dredging execuion, reorganize road maintenance, and improve customs procedures for local and international trnsit, MINTP's role would be revised to shift from carrying out road maintenance by force account to management of road maintenance by contracts. The State would divest from MATGENME in parallol with the prgressive contrcting out of road maintenancc. Investment in the sector, with an initial focus on maintenance and rwhabilitaion, would resume once implementation of te reforms has begun. 11. LESSONS LEARND FROM PrVIOUS DANKIIDA INVOLVNM. XBlI) and IDA have financed six highway projects, three port projects, four rilway projects and two structural adjustment operations in Cameroon. Physical achievements of the transport projects lacked sustnability because of lack of disciplined managment; weak instittional. capacity and insufficient local financing: for their maintenance. This experience, and lessons from other countries, show that sustainable fran port sector dewlopment should be integrted with and based on a sustainable macroecnomic framework; as well as on a loqg-trm stategy with sector reform phased acding to priority of. issues. and local resource mobilization capacity. In the PE sector, results of pc'.formance contracts signed under the SAL were largely unsatisfkctory. This experience, and the deteriorating performce of PEs, justfy-a rmajor policy emphasis on State divestiturethrough pivatization or liquidation. Weak re*rm implementation in Cameroon also shows the need for strong, up-frbnt actions on adjnus-ent. 12. PROJECT OBnCvEs. Wth the assistance of the pr projectc the G rinmet intendsto: (a) launch the transport sector reform progamin, which would result in the creaion of a new private civil aviation company, private opertion of rail services, liquidation of the irban bus comipany, sale of public shaTes in CAMSHIP and CAMTAINER, stucturing of MINT and reform of-te rtguaory 3amework for air, urban, and maritime transport; and (b) continue preparation of the subsequent phases- ich would result in: (i) restructuring of MP; exection by contract of most of the road maintenance work program; and i nion of a pluri-anual programming systm; as well as .a sustainable finacing mechanism for road maitece; (ii) restructuring and down-sizing of the port aui; implentation of an efficidivm organization for dredging, and (iii) an improved customs framework overhaul of the customs comized information system; and imp ion ofa new intematonal transit system t13. PROJECT DESCRIPON. The project pmvides for consulants' services for lanching thef transport sector reform program (US$4.8 million): (a) preliminary analysis -for the' privatization of the airline, railway company, shipping company and for theliquidation of the urban bus compan (cuarried out with PPF financing); (b) prepaiation of a concession agrement to operate rail services; (c) prepation of a management contract, inluding deferred pfivation option to privatiz: national air services; (d) assistance to the sale of public shares in CAMSHIP and CAMTAD&ltR (e) services of the liquidator and assistane o- the monitong committee for the liquidation of the urban bus company, (f) financial audits of PEs to be pritized and study of legal obligations of these enterprises towards their crdiors, .of the type of guarantee provided by the Gore and of the amount owed by other-entities, -eiter public or privat, to these enterprises; (g) stdy to prepare MINT restructuring and (h) revision of the regulatory fiameworkfor urban, air and marime tpanort, including a study of regioal laogstc costs and seminars. In addition to ftese sectoral actes, the project wil prv sul ' servies to enee unit m. charge of overall privatization in the Ministry of Economy and Finance. .4  14. Th project will also provido assistance in the preparation of tho subsequnt phases of tho transport sector reform progrm (US$19.1 million): (a) ionsultants' services to prepare restructuring of, (i) NTP, to shift toward management of road mainteac by contract (on-going with PPF financing); (ii) tho port authority, to reduce xpnxditures and sepaato dredging oxecution from port management; (iii) MATOENIE and LABOGENIE (US$1.8 million); (b) assistance to implement a now intornational transit system including telecommunication equipment for tho transit system, and to improvo the customs procedures, as part of a medium-term comprehensive trnsit and customs reform being planned with French and EU aid (US$8.8 million); (c) establishnent of a simplified road taxation systew, (carried out with PPF financing); creation of a road fund; definition of a mechanism for financing rural road maintenance; creation of a road data bank; preparation of a mitigation plan to address environmental issues in road maintenance; establishment of a pluri Amual road maintec programming systn (on-going with PPF financing); services of a coordinator for all externally-financed road maintenance activities, the preparation of the invetment program in the sector and the annual road maintenance budgets; establishuent of a system to monitor bridge conditions; detailed ering studies of a prionty road mainmtance program; and creation of a road documentation unit (US$3.2 million); (d) ergineering study for the rehabilitation of ONPC's dredger; relocation study of the dry-dock; analysis of dredging mial (US$0.3 million); (e) feasibility studies of an on-going prioty progm of ivestmt for REGIFERCAM (US$0.3 million); (f) training or seminars on procurenent and supervision of road maineance works, on the procedures for the new iterational transit system, on the road maintance initiative (carried out with PPF financing), on the new secor policy, and on envirnentl consider in road mainteance (US$1.4 million); (g) preparation of a plan to improve road safety and institutional study of urban tasport (both carried out with PPF financing), continuation ofte comterization of vehicle certification and of the monitoring of trucks' load started under the Sixt Highway Project (Loan No. 2584-CM closed on October 30, 1993) (US$ 1.1 million); (h) local capacity building with a review of the capacity -of local consultants in transport and the estabhshmt, within the Transport tmTnisterial Coordinaon Unit, of a training program for young professionals (US$0.2 million); and (i) project audits, implementation of a project management system, vehicles, computers, support staff under contract with the Transport Interministerial Coordination Unit, and short-term exprts and training to sghen the unit (US$2.0 million). 15. PROJECT SUSTANABLY. Project sustainability depends on satisibetory implementation of the ransport sector reform prograL 4 detailed implentation schedule and timing targets have been established to monitor execution. With te project's assistance, the Government is ecpected to meet these tagts, which are prerequisites for fiurter IDA support planned in the short term through the proposed Transpont Sector Adjustment Credit (TSAC) and Transport Sector Project (TSP) under preparation (FY96). 16. PROJECT FINANCING. lhe project cost, including taxes, is esimated at US$23.9 milion. IDA would fEnance US$10.2 million, French Cooperation US$2.2 million, Europcan Union US$7.3 millioHn German Cooperation USS0.5 million The Government would bear the cost, estimated at US$3.7 million, of taxes and duties lvied on consuling servics and goods. The Goverment will also finan the salary of the four civil servants working i the T sport Interniiisterial Coordination Unit, estimated at an ammal US$ 16,000, and provide offices for the unit. In the curren budgetay situation, wher the Goverment is barely able to finance its civil servants, service the country's external debt and allocate scarce remaining resources to priority maintance, no other coaribution to the project;would be requested from the Govwermnxt. 17. PROJECT INPLRMENTATION. The M;isty of Economy and Finance will be responsible, for the pnivazaon/liqidation component of the project. The overall institional fiamework for privatization is beng revised as part of the preparation of a proposed Structual Adjustnt Credit (SAC, FY95), to 5  onsuro satisfactory implementation of this component. MINT and M1NWP Aill be rosponsible in teir subsoctors for preparing tho subsoquent phases of tho rform program, including investmento, in close collabortion with other interosted Govornmont agencies. The existing Transport Intministerial Coordination Unit, which hs diligently assistod the Government in tho preparation of tho reform progrmn, will continuo to assist MINT and MTNTP, and will administer the crodit under supervision of MINEFI. Almost all toclhnical assistance to be provided under tho proposed project is of a short-tcrm nature and ,i designed to strengffin national capacity to manago tio transport sector. Toechnical assistanco will not, thereforo, be long-torm substituto for local staff. 18. RATIONALM FOR IDA INVOLVEMENT. ThO project is consistent with the Country Assistance Strategy (CAS) discussed by the Board on June 16, 1994, in conjunvetion w.th tho ERC. Tho CAS focuses on three armas: (a) redimensioning, focusing and improving the public sector; (b) increasing productive capacity; and (c) strongly focused interventions to alleviate poverty. Tho project will help achievo the CAS's objectives by preparing: (a) the privatization/iquidation of transport PEs, and the restructuring of seetoral ministries; (b) liberalization of air, urban and maritimc transport, and privatization of road maintenancc and dredging execution, and (c) the use of labor-based methods in road maintanance. IDA's involvement in the privatization and liquidation process is also vital in ersuring fairness and transparency. While the preparation of the reform program would bc supported by the proposcd project, implemnation of the refomns would be supported by the proposed TSAC and TSP. Tlhe proposed project is part of te. Regional Program for Transport Policy Reform in the Customs Union of Cewtral African Countries (UDEAC), which IDA has supported since its inception, along with other donors. - 19. AGREED ACTIONS. During negotiations, the Goverment agreed to: (a) project objectives; O(b)' expected rcsults and tming for key project activities; (c) pm ent procedures, including standard times for prourm t steps; (d) disbursement, accounting, auditing and reporting dures; (e) detiled content of the project and implementation schedule; (fM outline of the Project Implementation Plan; (g) guidelines for preparing taining activides; and Qi) arrangements for evaluation of consultants' and counterparts' perfornance during project execution. Conditions for effeciiveness are: (a) signature of a pluniannual contract with an auditing firm acceptable to IDA for project audits; and (b) completion of the Project Impleimetation Plan. 20. ENvmONxzNTAL AsPECTS. The project's envronmental classification is C, as the project will only finance consulting services with no environmental impact. Enviromnental issues in the port sector have been studied. The project will include a study and a seminar on enviromnental issues in road * maintenance. Engmneerig studies will address enviromnental issues related to sector investments. 21. PRoGRAM OBJECTIVE CATEGORIES. Public Entprse Reform. and Private Sector Development. 22. PARTICIPATORY APPROACH. Most stakeholders in the transport secr have participated in the preparation of the transport sector reform program. Several sminars were organizd in the maritime, port, road transport and road nairntace subsectors to discuss policy reforms with private and public actors.- The proposed privatiaion/liquidalion of CAMAIR, REGIFERCAM and SOTUC-was discussed with the employees of tbese enterprises. 23. PROJECT BENEFrrs. By seDcting candidates tough a competitive bidding process, and by clearly defining objectives in their terms of ref ce, grater faimess and trnsparency can be expected from the use of financial advisors in the prparation and execution of the privatization program, as well as from the use of a liquidator for the urban bus company. Completion of the privaizatoniquidation 6 0-J - .  program would curb subsidics to PEs concerned. More efficient road maintenance, port authority restucturing, and improvement of transit and facilitation prepared under the project would reduce transport costs and improve the country's competitiveness. 24. RISKS. The risks are of: (a) delays in execution because of weak institutional capacity; (b) proceeding with studies ahead of effctive comrimitment to PE reform; and (c) lack of fairness and transparency in the privatization process. Decisions taken by the Govermment within the context of the ERC (to privatize/liquidate the priority transport PEs), the recent Government reorganization, which strengthens the institutions in charge of privatization, and the revision of the institutional fiamework for privatizaticn supported by the proposed SAC would mitigate these risks. Effective implementation in February 1995 of the Government's decision to stop SOTUC's services and Government agreement on terms of reference for critical activities supported by the project demonstrate Government's commitment. Clear indicators and detailed timetables have been defined to closely monitor the implementation of transport reform. The donor-supported integrted approach, whereby investment projects are undertaken after successful reform implementation, should impel the Govermnent to take actions to implement the reform according to the agreed timeable. Public advertising, carefilly designed procedures, audits, and the inputs of financial advisors would help reduce the risk of lack of fairness and transparency. 25. RlCOMMDATION. I am satisfied that the proposed Credit would comply with the Articles of Agrement of the Association and recommend that the Executive Directors approve it. Lewis T. Preston President by Sven Sandstrom Washington, D.C. March 23, 1995 Attachliments 7  Schedule A Page I of 1 REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT ESTIMATED COSTS AND FINANCING PLAN Estimated Project Costs (US$ million equivalent) Project Components Local Foreign Total Cost Foreign as Cost Cost % of total 1. Goods 0.2 0.9 1.2 81 2. Consultant Services and Studies (a) Support to Institutional Development 2.4 7.2 9.6 75 (b) Institutional Development Studies 0.3 1.1 1.4 75 (c) Policy Support 0.1 0.4 0.5 80 (d) Project Implementation and Preparation 1.7 2.8 4.5 62 Subtotal 71 3. Training and Seminars 0.4 1.1 1.5 72 4. Operating Costs 0.3 0.2 0.5 50 Base Costs 5.5 13.7 19.2 71 Physical Contingencies 0.1 0.3 0.4 75 Price Contingencies 0.4 0.2 0.6 70 TOTAL 6.0 14.2 20.2 * 70 cxcluding US$3.7 million of taxes and duties, and salarics of local counterparts. Note: Components may not add up to total because of rounding. Financing Plan (US$ million equivalent) Sources Local Forcign Total International Development Association (IDA) 3.7 6.5 10.2 European Union (EU) 1.6 5.7 7.3 Fonds d'Aide et de Coop6ration (FAC) 0.6 1.5 2.2 Bundesministerium fulr Zusammenarbeit (BMZ) 0.1 0.4 0.5 Sub-Total 6.0 14.2 20.2 Government * 3.7 0.0 3.7 TOTAL 9.7 -14.2 23.9 "consisting of US$3.7 million of taxes and dutics, and salarics of local counterparts. Note: Componcnts may not add up to total becausc of rounding. 9 a.  Schedule B Page I of 2 REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT PROCUREMENT METHOD AND DISBURSEMENTS A. Procurement Method (US$ million equivalent) Project Element Procurement Method Total LCB Other N.B.F. Cost 1. Goods 0.2 1.1"^ 1.3 (0.2) (0.2)10 2. Consultant Scrvices and Studies (a) Support to Institutional Development 2.8 6.8" 9.6 (2.8) (2.8) (b) Institutional Development Studies 0.1 0.4k 0.5 (0.1) (0.1) (c) Policy Support 0.1 0.2" 0.3 (0.1) (0.1) (d) Project Implernentation and Preparation 3.3 07/d 4.0 (3.3) (3.3) 3. Training and Seminars -0.8 0.7" 1.5 (0.8) (0.8) 4. Operating Costs 0.3 0. I, 0.4 (0.3) (0.3) 5. Refinancing of PPF - (a) Support to Institutional Developmcnt 0.3 0.3 (0.3) (0.3) (b) Institutional Development Studies 1.0 1.0 (1.0) (1.0) (c) Policy Support 0.2 0.2 (0.2) (0.2) (d) Project hnplemertation and Preparation 0.5 0.5 (0.5) (0.5) (e) Training and Seminars 0.0 0.0 (0.0) (0-0) (f) Operating Costs 0.1 0.1 (0.1) (0.1) 6. Unallocated 0.5 0.5 TOTAL 0.2 10.0 10.0 20.2 (0.2) (10.0) (10.2) Note: Figurcs in parenthcscs arc the rcsp&ctivc amounts financed by the IDA credit LCB is local bidding, and NBF is not-IDA financd. at Financod by EU and FAC. c/ Financed by FAC. bl Financed by EU. d/ Financed by FAC and Germany. ct Vchicles and computcrs. 10  Schedule B Page 2 of 2 REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT PROCUREMENT METHOD AND DISBURSEMENTS B. Disbursement by Category Category Amount of Crodit Pcrccnt of Expenditures to be (US$ million equivalent) Financed 1. Goods 0.2 100% of foreign expenditures 75% of local expenditures 2. Consultant Services and Studies (a) Support to Institutional Development 2.8 100% (b) Institutional Development Studies 0.1 100% (c) Policy Support 0.1 100% (d) Project Implementation and 3.3 100% Preparation 3. Training and Seminars 0.8 100% 4. Operating Costs 0.3 100% 5. Refunding of PPF 2.1 Amount duc 6. Unallocated 0.5 TOTAL 10.2 C. Estimated IDA Disbursement Schedule (US$ million equivalent) IDA Fiscal Year 1995 1996 1997 1998 Annual 1.5 6.7 1.8 0.2 Cumulative 1.5 8.2 10.0 -10.2 11~~~~~~~~~~~~~~~~~~~~~~~~~~~~  Sdhedule D Page of 4 REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT STATUS OF BANK GROUP OPERATIONS IN CAMEROON Summary Statement of Loam and IDA Credits (as of February 28, 1995) Amamt in USS million OCeR cancellatiou) Loan or Fiscal Borower Pmpose Bak MDA Undis- Closing Date Credit No. Year bursed Credits 30 Credits Closed 387.00 C26270 1994 CAM ERC 75.00 1.32 06/K0/9 C26840 1995 CAM Iith/Fert/AIDS Contr. D 43 06130tO1 118.00 44.32 43 Loanslosed 904.86 129120 1988 CAM Cowoa Rhab. 61.70 20.13 12/31/95 (R) L30140 1989 CAM Livestock SeckorDev. 21.00 7.62 06/30/95 L31850 1990 CAM Agiic. Ext Trainig 21.00 13.12 03131/97 L33880 1992 CAM Food Secuity 23.0 1.12 06 126.70- 59:05 TOTAL * 1,031.56 505.00 of which repaid 407.28 33.15 TOTAL heldby Bank 62428 471.85 &MDA Amount sold 8AS ofwhich repid 8AS-: Total undisbursed 103.37 * Total approved, repayments, and outstang balac represent both active and intive loans and redit. (R) indicates formaly revised Closing Date. The Net Approved and Bank Repayments are historicl values, all others are mret values. The sig;ing, effectiveness, and losing daes are based n the Loan, Deatnt offca dta and am not te frim the Task Bdget fiLe. 13  -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -. . Schedule'D Page 2 of 4 REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT STATUS OF BANK GROUP OPERATIONS IN CAMEROON List of Closed SALs and Secals Amount in US5 million (less cancdlation) Loan or Fiscal Bonwer Pmpose Bank IDA Undis- Closing Date Credit No. Year bursed C25760-CM 1994 cameroon SAC 50.00 0.00 06/3011994 C25761-CM 1994 Camermon SAC 51.00 0.00 03/24/1995 C26271-CM 1995 Cameroon ERC 32.80 0.00 12/2011995 L30890-CM 1989 Camemon SAL I 100.00 0.00 06/30/1994 (IL) Total 100.00 133.80 0.00 ; 14'.  Schedule D Page 3 of 4 REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT STATUS OF BANK PORTFOLIO The quality of the portfolio in Cameroon was poor until 1994, when it improved substantially as a result of the restrubturing exercise. The main objectives of the restructuing were to downsize projects which were too large, and to cancel those with insoluble implementation problems. Within the agricultural portfolio, the Livestock Development Project was downsized to concentrate on the eradication of the tsetse fly in the Central Highlands. The project component for feed manufacturers and pig and poultry manufacturers was canceled The Cocoa Rehabilitation Project is the only problem project in the portfolio. Its performance has not improved over the last year, despite attempts to restructure it. It has been rated higbly- unsatisfactory both- with regard to progress towards development objectives and implementation status. The Bank has informed the Government that no extension is envisaged of the Closing Date of June 30, 1995. Within the infrastrucure portfolio, the review of the projects indicated serious management problems, but it was decided to let the projects close on time during the course-of the year. In one of the projects, a significant resettement issue was ideified which the Government will have to resolve before new projects can be processed in the sector. All other projects in the active portfolio are rated satisfictory with respect. to development objectives and implementation status. 15:  Schedule D Page 4 of 4 REPUBLIC OF CAMEROON TRANSPORT SECTOR TICHNICAL ASSISTANCE PROJECT STATUS OF BANK GROUP OPERATIONS IN CAMEROON Summary of IFC Imvesb eb (u of February 28, 1995) Original amss Conmitnets USS miUion Fiscal Obligr Type ofBusuns L40an Equity Tot Year 1975 Bata Socidt6 Anonymne Camni aise Shoes 0.38 '0.38' 1976/78 SAPA Camero Palm Oil & Rubber 1.38 1.33' 1981 1979 Alumm Compogie C _ummise de Alumimnu Smlting 7.00 0.93 7.93 ArA numPediney-Ugine 1991 Soci&dkCamaunaisde Minoties FlourMiling 1.12 0;19 1.31' 1982 Soci6t Sucui&reda Cameroum SuW Plntation & 1.44 1.44' 19911982 So iecCameounai rdeVenec - Glass cta-. 1.70 0.10 1.80': 19831984 Socidi Agno-Pasi1ceDt Indstrielle dii Agrbusiness 0.69 .026 0.95' Canloun (AP.''-) 1985 Socit desPamemuies Palm Oil 1.98 0.56 2.54 Ia Ferme Suisw 1986/93 Cotonniarel dustrieLle du Cameroun Texiles 6.46 6.46 (CICAM. 1986 Socidt lidustrieLe Laidre du Dairy Products 2.28 0.57 2.95' Cameoun (SELAC) 1987 PrstgeBotigCo. aSoftDrink 2.73 0.30 3.03 1988 Sacit des Planmims Nouvles BananaPlmantt 1.91 0.36 2.27 duPenja (SPNP) 1992 Pacten Camune Co. Petroleum 60. 00b 60.00 1994 Soci&6 de Productio Food and agribusiness 1.01 1.01 1994 Unid TransportCam nstial seies t.11 1.11 Tota gros coamm b-mut 99.43 5.03 94.46 Lessrepayments and cancelations 52.14 3.54 55.68 Total coanmieuts now beld by IFC 3729 1.49 39.78 'Investmnft sold, cancele or w6ntte-of b InCludeS USS30.00 mioin ofpuicipation. 7 ''' ; 'S ,$,t d,,; $4< ,HD,;'s ,, ,f' ;16  ... .., , .. . ' *:. t .1 V .. . -.. z . 9 U -. :3.  X.~~~~~~~~~~~~~~~~~~~~~: ~~~~~~~~~~1* _ _ _ _ D w CHAD ]h. h. xwa ==. =, _ Iit. 6* ed _ o nWB* = iio&o- end undoiss m.es sis. IIES no *0 6 N AFRCM ~~~~pod of TM WmetfdBonknep, ~~CAMEROO asdmst~~~~~~~~ eraitencel TCHA _____ GAROO in bmayw2o oro1cmp 2m4.Io _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ZAIR FX R M E CAMEROON .i A PRIORITY ROAD NETWORK -.- PAVED ROADS Guar | PAVED ROADS: 0 SE[ECMEDTOWNS - FRMORl I 0 FROVINCE CALSA- - -0 iuom' t aRPK 2 MHONALCARM ) ! -0 IONY3 UNPkVED ROADS RIVERS N. ~- PRDOV4NE HOIUSDR[ES 7t . 9 NORD |CrE.. -aE' / I y REPUBLI 1:90~~~- : := 'iI i ' K -0' . EQUATOR ABON CONGOAL N . .e., .., i '~~~~~~~~ . 7 . , E~~~~~~~~~~~~- 0 . - - -EQUATORIA  J~~~~~~~~~~~~~yh f NIaER sl r _- FASO d, V } 2 NIGEM / 9 < < od Us ' d . Rd ] J F~ ~~~CENTRA[AIRICAN _ / ~~~~~~~REPUZUlC _ahd ow befrhg.d 7% ERO~~EOO - : x C" . ~ ~~~~~~~~~~~~~~~~ ...n b-E ,'[ b- ONO ZAUW -W~ M..,,-fl.-7-~~g~I GAB A*mm5 2 0 a a m 1it 1i0 i_ - EXTRWEM. . _ _ _ __ _ _ _ __ _ _ ___ . _ s . a e d a l us - 7 *_ NORzD s CAMEROON PRIORITY ROAD NETWORK EARTH ROADS EAi ROADS: o SiECfED IOWN S, - mPRORlY1 PFlUCECAPITAIS M2 NAIIGIA CARA' - RI'RIuW3 EAI OAD OUF OF PRIORIY NEIWOK - RFIL6 *!, n I ROAD , s _ li!D |NORD \ r ~ ~ ~ N ti NIGERIA *~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ e SLID- / j < i ,$ CENTRE / 'n~~iNRAL : ps Su CGUINEAE REPBLI  19D 24029 UDEAC REGIONAL POLICY REFORM PROGRAM TRANSPORT FACILITATION COMPONENT Infrastructure Communication Links ALGERIA LIBYA NIGER MAJOR ROADS NATIONAL CAMrGALS RAILROADS INTERNATIONAL BOUNDARES RIVERS 4 MAJOR PORTS November 1992