Malawi - Northern Transport Corridor Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15608 IMPLEMENTATION COMPLETION REPORT MALAWI NORTHERN TRANSPORT CORRIDOR PROJECT (CREDIT 1879-MAI) May 6, 1996 Energy and Infrastructure Operations Division Southern Africa Department Africa Region 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. CURRENCY EQUIVALENT Currency Unit = Malawi Kwacha (MK) (as of November 1994) US$1.00= MK16.0 (at time of appraisal) US$1.00 = MK2.3 WEIGHTS AND MEASURES 1 foot (ft) 0.305 meters (m) I mile (mi) = 1.609 kilometer (km) I square mile (mi2) = 2.590 Square Kilometer (km2) 1 ton (t) 0.907 metric ton (m ton) GOVERNMENT OF MALAWI FISCAL YEAR April 1 - March 31 Abbreviations and Acronyms used DWT = Dead Weight Ton EDF = European Development Fund ERR = Economic Rate of Return GOM = Government of Malawi GOT = Government of Tanzania IDA = International Development Association ICR = Implementation Completion Report KfW = Kreditanstalt fuer Wiederaufbau LS = Lake Services MCC = Malawi Cargo Centers MCCL Malawi Cargo Centers Limited MOTC = Ministry of Transport and Communication MOW = Ministry of Works MR = Malawi Railways MRHC = Malawi Railway Holdings Company NTC = Northern Transport Corridor ODA = Overseas Development Administration PPF = Project Preparation Facility SAR = Staff Appraisal Report TAZARA = Tanzania - Zambia Railway Authority TEU = Twenty Foot Equivalent Unit (containers) THA = Tanzania Harbours Authority USAID = United States Agency for International Development MALAWI FOR OFFICIAL USE ONLY NORTHERN TRANSPORT CORRIDOR PROJECT (CREDIT 1879-MAI) IMPLEMENTATION COMPLETION REPORT Table of Contents Page No. PREFACE EVALUATION SUMMARY In tro d u ctio n ......................................................................................................................ii P roject O bjectives............................................................................................................ii Im plem entation Experience and Results....................................................................... iii Summary of Findings, Future Operations, and K ey Lessons learned ................................................................................................iv PART 1: PERFORMANCE ASSESSMENT FROM IDA PERSPECTIVE A . Evaluation of Project O bjectives............................................................................... B. A chievem ent of Project O bjectives...........................................................................3 C . M ajor F actors ............................................................................................................ 8 D . Project Sustainability ................................................................................................8 E . B ank's Perform ance ..................................................................................................9 F. B orrow er's Perform ance ...........................................................................................9 G . A ssessm ent of O utcom e..........................................................................................10 H . F uture O peration ..................................................................................................... 10 I. K ey L essons Learned .............................................................................................. 1 1 PART II: STATISTICAL TABLES Table I. Summary of Assessments Table 2. Related Bank Loans/Credits Table 3. Project Timetable Table 4. Loan/Credit Disbursements Table 5. Key Indicators for Project Implementation Table 6A. Project Costs Table 6B. Project Financing Table 7. Economic Re-Evaluation Table 8. Studies included in Project Table 9. Status of Legal Covenants Table 10A.Bank Resources: Staff Inputs Table 10B. Bank Resources: Missions Table I1. Traffic Through Different Corridors Table 12. Traffic Through Different Corridors (Graph) Annex I. Aide Memoire ICR mission Annex 2. Project Review from Cofinanciers perspective Map IBRD Nos.: 19421 & 19422 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. MALAWI NORTHERN TRANSPORT CORRIDOR PROJECT (CREDIT 1879-MAI) Preface This is the Implementation Completion Report (ICR) for the Northern Transport Corridor Project in Malawi, for which Credit 1879-MAI in the amount of SDR 11.1 million equivalent was approved by the Board on March 3, 1987 and made effective on June 7, 1988. The Credit was closed on June 30, 1994, as originally planned. Final disbursement took place on April 12, 1995, at which time a balance of SDR 713,824.97 was canceled. Cofinancing for the project was provided by GOM, EDF, KfW, ODA, USAID and The Netherlands. The ICR was prepared by Sture Karlsson, Task Manager, AF2EI, with the assistance of Aaron Adiv, Transport Economist/Consultant, and T. Iwama, Transport Planner, AF1EI, and reviewed by Jeffrey Racki, Division Chief, AF1El and Judith Edstrom and Jacomina de Regt, Operations Adviser and Acting Operations Advisor respectively, AFl. The borrower and cofinanciers were invited to review and comment on the ICR. No comments were received from the borrower, and comments provided by cofinanciers are annexed unedited to the ICR. Preparation of this ICR started during the Bank's final supervision/completion mission in April, 1994, and is mainly based on material in the project file. - ii - MALAWI NORTHERN TRANSPORT CORRIDOR PROJECT (CREDIT 1879-MAI) EVALUATION SUMMARY Introduction 1. Malawi is a land-locked nation which is dependent on a number of neighboring countries for access to the sea. Historically, the rail lines from Blantyre to the ports of Beira (640 km) and to Nacala (815 km) in Mozambique, handled over 90 percent of Malawi's external trade. The civil war in Mozambique interrupted this service. By December 1983 the line to Beira was closed and in July 1985 the line to Nacala closed as well. As an alternative, Malawi had to resort to a much longer trade route, mostly to the port of Durban, South Africa, via Zambia and Zimbabwe. The alternative southern routes, which included also more expensive road links, over a distance of 3,467 to 3,806 km via Lusaka, Zambia, put a strain on the Malawi economy. It was estimated that the total loss to the Malawi economy in 1984 was at least US$50 million, or 20 percent of the value of all exports. 2. Prior to 1984-1985, when the Northern Transport Corridor (NTC) Project was identified, the International Development Association (IDA) had financed five road construction and rehabilitation projects in Malawi. To create an alternative route, and reduce the transport cost due to the situation in Mozambique, the Government of Malawi (GOM) requested IDA and five bilateral donors to assist in the development and implementation of the NTC project. Project Objectives 3. The main objective of the project was to provide a shorter and more cost effective route to the Indian Ocean for Malawi imports and exports by improving the NTC and connecting southern Malawi with the Port of Dar-es-Salaam, Tanzania. Other objectives were to facilitate the expansion of regional trade, principally between Malawi and Tanzania; and to help develop the northern region of Malawi. 4. The NTC project was intended to expand the capacity and increase the efficiency of the northern outlet by taking advantage of existing natural and man-made facilities along this route. It was intended to integrate marine transport on Lake Malawi, which could provide a parallel north-south link over two-thirds of Malawi, and the TAZARA railways which could provide a rail link between Mbeya and Dar-es-Salaam in Tanzania (almost half of the total distance between Blantyre and Dar-es-Salaam). Thus, the project aimed at substituting much of the road transport by less costly modes. Cofinancing was provided by EDF, KfW, ODA, USAID, the Netherlands, and the GOM. - iii - 5. The project involved (a) road construction and rehabilitation totaling 298 km in Malawi and Tanzania; (b) construction of dry-cargo transshipment facilities (in Dar-es-Salaam and in Mbeya); (c) construction of fuel transshipment facilities (in Dar-es-Salaam and Mbeya); (d) provision of fuel hauling railway wagons and tank containers (Tanzania); (e) improvements of facilities and equipment for Lake Services, Malawi; (e) construction of a border post and weighbridge at Songwe, Malawi; (f) consultancy services; and (g) training of Malawian staff. Implementation Experience and Results 6. The NTC project has been evaluated in the historical context upon which it was conceived, when the Mozambique corridors were indefinitely closed, and the only outlet for Malawi external trade was through the long routes to South Africa, which at that time also was viewed with some risk. The project was designed as an alternative gateway for Malawi, to compete with the road/rail corridors to South Africa and the port of Durban. The NTC was neither designed, nor expected to compete with the shorter rail corridor to Nacala, and the road connection to Beira, which have been reopened since the implementation of the NTC. Instead it was expected to provide a secure alternative that would also be lower in cost, as long as the more direct alternatives remained closed. Given that the Mozambique corridors were expected to eventually re-open, to be successful the project was required to generate most of the projected benefits within the period during which the Mozambique routes were closed. Given this need to obtain results quickly, combined with the inherent complexity of the project, and the unpredictability of the opening of the Mozambique routes, the level of risk embodied in the project was extremely high. 7. The NTC did establish itself as a reliable and viable corridor, and an alternative for Malawi imports and exports. By 1993 NTC carried close to 20% of Malawi's external trade, and the corridor has become particularly important for fuel imports (fuel imports through the NTC has increased from 1 % in 1986 to around 40% in 1994). However, total traffic through the NTC in 1993 was just two-thirds of the level projected at the time of appraisal, partly due to the worsening economic situation in Malawi and the consequent decrease of imports and exports, and partly due to the re-opening of the shorter routes through Beira and Nacala earlier than expected, and the opening of the NTC later than expected. The projected traffic was also adversely affected due to the Lake Services component not having commenced operations, and thus costs were higher than would have been the case if the Lake Services had functioned as planned. As a result, the overall re-evaluated ERR was just 7%, significantly less than the 16% ERR envisaged in the SAR. Although sensitivity analysis were conducted at the planning stages, it would appear now that the degree of risk, especially with respect to timeliness of implementation, was not evaluated in sufficient depth. 8. The existence of an optional traffic corridor is an asset to Malawi's economy and international trade. The NTC has become a lever in route competition among others, and the multi-modal corridor system has for the years it has been operational proven to facilitate imports/exports, although part of the system (the lake component) still has not commenced operation. It is apparent that the main reason for the successful operation of the NTC lies with the Malawi Cargo Centres Limited (MCCL), which was created specifically to manage the assets of the facilities created, and to promote and market the use of the corridor. MCCL has put in place operational mechanisms in both Malawi and Tanzania for the through movement of cargo. Operation and maintenance of the corridor is warranted given the traffic volume, and it - iv - is anticipated that the NTC will continue to play an important role in Malawi's international trade. It should be noted that concurrently with the project, the North-South Road was being built with donor assistance. Better coordination, such as that offered under integrated sector operations, would have strengthened Government's ability to set priorities based on sound efficiency considerations, and make investment decisions accordingly. 9. The sustainability of the NTC is likely, more so because of the possible positive impact of many other on-going initiatives in the Transport Sector such as: (i) the road maintenance initiative; (ii) the formulation of a sound transport policy under the on-going Malawi Railway Restructuring Project (MRRP); and (iii) the restructuring and privatization of the Lake Services, also under the MRRP project. Summary of Findings, Future Operations, and Key Lessons Learned 10. The weakest link in the NTC, as identified already at the appraisal of the project, is the lake component stretching from Chipoka (South end of the Lake) to Chilumba (North end of the Lake). Despite heavy investment and upgrading of port and vessel facilities, hardly any traffic has been taken on the lake due to the fluctuation of the lake level and the failure to carry out required dredging in the two ports, although the need for dredging was identified at the outset of the project. This problem was partly resolved in mid 1995, when part of the dredging was carried out under Kfw and IDA funding, and it was anticipated that the new container vessel procured under the project would commence operation sometimes by the end of 1995, which did not materialize due to continuous dredging problems. The fuel vessel with the same draft as the container vessel, however, started its operation immediately after the dredging activities were completed. This was possible as the oil jetty is located at the outer end of Chipoka port, away from where the main dredging problems are encountered. 11. Due to the problems with Lake Services a restructuring and commercialization of LS has been included as a follow up project under a component of the Malawi Railways Restructuring Project, Credit 2696-MAI. It is intended that, after being registered as a separate company, LS's business activities would be split into separate result centers, and that decisions would be taken as appropriate for commercialization and privatization of these activities. 12. The construction of the MCC facilities in Dar es Salaam required resettlement of around 3,000 people that were living on the site selected for the cargo center, and demonstrated the difficulties associated with a loan to one country for a transborder project. As infrastructure improvements required for the new site selected could not be funded under the credit, ODA agreed to make funds available and to supervise this sub-component that was implemented by Dar es Salaam City Council. Concern had been expressed from the outset about the implementation capabilities of the City Council, but at the time, however, there was no obvious alternative. 13. The final result of the resettlement component is that compensation was properly paid to all house owners and squatters, but that only around 35 of the house owners applied to the Lands Office for a title at the new site. The new resettlement area at Yombo is still largely devoid of the planned infrastructure. One of the problems related to the implementation of the resettlement component (rated 3) has been the multiple organizations involved (two Governments, ODA, City Council, THA), and the unclear lines of responsibility between the different parties. Another problem was the lack of capacity, counterpart funding and general interest in the matter by the implementing agent, Dar es Salaam City Council. 14. The multi-modal corridor system has proven to be of great importance to facilitate imports/exports to Malawi, although part of the system (the lake component) still has not commenced operation as anticipated. It is apparent that the main reason for the successful operation of the NTC lies with the MCCL which has put in place operational mechanisms in both Malawi and Tanzania for the through movement of cargo. These include through tariff arrangements and operational agreements for a smooth transfer of Malawi cargo directly from the port to the MCC facilities. The creation of MCCL, with its ownership structure and the private sector involvement, has given MCCL access to expertise in freight forwarding, freight brokerage and transport services marketing, which is a key ingredient in ensuring a sustainable future operation of the NTC. 15. The key lesson learned for such a project, which had to reap most of its benefits in a short period of time, is that the project design should have been closely linked to the speed of implementation, i.e.:(i) the project should have been simplified to the extent possible; (ii) it should have left a great deal of flexibility for adjustments and modifications of components during the implementation phase; and (iii) the phasing of the many components and activities should have been more carefully analyzed at the planning stage of the project. It would also have been advantageous if MCCL had been established earlier in the process, and provided guidance in the overall design as well as implementation matters, and to initiate the marketing of the NTC system as early as possible to convince the export/import industry of the potential to channel traffic via the port of Dar es Salaam (which at the beginning of the project implementation was heavily congested and regarded as inefficient with high risk of damages and pilferage of cargo). 16. Other lessons learned include: (i) the ownership by and the division of responsibilities between implementing agencies (MOTC, MOW, MR, LS, MCCL) should have been more clearly defined, and dedicated full time staff should have been appointed by the agencies, rather than the use of busy in-line staff; (ii) the close coordination between GOM and donors during the identification and planning of the project should have been maintained during the implementation stage; (iii) on a large complex project like this it would have been advantageous to keep the responsibility for design and supervision to a minimum of consultants, with the GOM as the client for all contracts. Too many problems arose from lack of coordination among the different consultants engaged in the design and implementation of different components; and (iv) the concern expressed from the outset about the implementation capability of the Dar es Salaam City Council to implement the resettlement component should have been taken more seriously, and an arrangement should have been made with ODA and GOT on how to deal with a noncompliance by the implementing agent. Clear definitions on authority and responsibility of supervising agencies should also have been established. PART I: PERFORMANCE ASSESSMENT FROM IDA PERSPECTIVE Project Identity Name: Malawi, Northern Transport Corridor Project Credit number: 1879-MAl RVP unit: Africa, Southern Africa Department Infrastructure and Energy Division (AFIEI) Country: Malawi Sector: Transport Background 1. Malawi is a land-locked nation which is dependent on a number of neighboring countries for access to the sea. Historically, the rail lines from Blantyre to the ports of Beira (640 km) and to Nacala (815 km) in Mozambique, handled over 90 percent of Malawi's external trade. Due to the civil war in Mozambique the line to Beira was closed in December 1983 and in July 1985 the line to Nacala was closed as well. As an alternative, in 1984 Malawi had to resort to a much longer trade route, mostly to the port of Durban, South Africa, via Zambia and Zimbabwe. These alternative southern routes, (a distance of 3,500 to 3,800 kIn) were estimated to cost the Malawi economy at least an extra US$50 million per annum, or 20 percent of the value of all exports. 2. To shorten the travel distance to the sea, reduce transport costs, and reduce the dependency on a single outlet for its external trade, Malawi decided to develop the overland corridor to Dar-es-Salaam (1,789 km). In October 1984 Malawi opened a gravel road of limited capacity, connecting northern Malawi with the Tanzanian border, and from there to the port of Dar-es-Salaam. 3. The Northern Transport Corridor (NTC) project was intended to expand the capacity and increase the efficiency of the northern outlet by taking advantage of existing natural and man-made facilities along this route. It was intended to integrate marine transport on Lake Malawi, which could provide a parallel north-south link over two-thirds of Malawi, and the TAZARA railways which could provide a rail link between Mbeya and Dar-es-Salaam in Tanzania (almost half of the total distance between Blantyre and Dar-es-Salaam), thus substituting much of the road transport by less costly modes. A. Evaluation of Project Objectives 4. The main objective of the project was to provide a shorter and more cost effective route to the Indian Ocean for Malawi imports and exports, by improving the NTC and connecting southern Malawi with the Port of Dar-es-Salaam, Tanzania. Other objectives were to facilitate the expansion of regional trade, principally between Malawi and Tanzania and to help develop the northern region of Malawi. -2- 5. To assist in achieving the objectives, the project provided financial assistance to the Government of Malawi (GOM) to develop this alternative transport route through Tanzania. Co-financing was provided by EDF, KfW, ODA, USAID, the Netherlands, and the GOM. The main role of the Association was to finance the preparatory works required to develop the NTC concept, to finance road rehabilitation and border crossing facilities, to coordinate and supervise major parts of the project, and to finance consultancy services, technical assistance and training of Malawi staff. 6. The NTC-project consisted of eight major components: a) Road reconstruction and rehabilitation (US$52.16 million): Karonga, Malawi to Ibanda, Tanzania (65 km), Ibanda to Uyole, Tanzania, (98 km), and Salima to Balaka, Malawi (145 km), including the construction of Ngodzi Bridge; b) Construction of transshipment facilities in Tanzania for handling containerized traffic and break-bulk cargo (US$22.40 million): Cargo centers in Dar-es- Salaam and in Mbeya; and infrastructure improvements at a new site in Dar-es- Salaam for re-settlement of people (US$3.27 million). c) Construction of transshipment facilities in Tanzania for fuel handling (US$22.26 million): Fuel storage and handling facilities in Dar-es-Salaam and in Mbeya; d) Procurement of fuel hauling vehicles (US$2.14 million): rail fuel tank wagons to be used by TAZARA, and road tank containers to be used by Malawi transporters; e) Improvements of port facilities on Lake Malawi and acquisition of equipment for Lake Services (LS), (US$21.97 million): procurement of a new 750 DWT container vessel; construction of dry cargo and fuel handling facilities, and procurement of handling equipment at Chilumba and Chipoka, dredging at the ports of Chilumba and Chipoka; and upgrading of the ship yard at Monkey Bay in Malawi; f) Construction of border post and weigh bridge (US$0.53) in Songwe at the Karonga-Ibanda border crossing between Malawi and Tanzania; g) Consultancy services (US$15.62 million): technical assistance to the NTC in project coordination and establishment of the MCCL, technical assistance to LS, detailed engineering and design, and project supervision; h) Training of Malawi transport sector personnel. 7. The NTC was expected to achieve lower transport costs than its alternative southern routes, even though the NTC is designed to utilize different modes of transport (rail from Dar to Mbeya, road from Mbeya to Chilumba, lake from Chilumba port to Chipoka port, and road/rail from Chipoka to final destination). However, to achieve this objective the project design was complex, due to (i) the large number of sub-components (a complex multi-modal corridor including rail, road, and lake transport, seaport and dry-port facilities, and numerous -3- transshipments from mode to mode); (ii) the number of Borrower institutions (MOW, MOTC, MR, LS, MCCL); (iii) the number of different donors (six); and (iv) implementation in two countries (Malawi and Tanzania). This complexity put heavy demands on the Borrower and its agencies in terms of coordination and supervision of the different components. Under such constraints the objectives of the project, including its design and time table for implementation, might have been too ambitious. 8. The NTC project has been evaluated in the historical context upon which it was conceived, when the Mozambique corridors were indefinitely closed, and the only outlet for Malawi external trade was through the long routes to South Africa, which at that time also was viewed with some risk. The project was designed as an alternative gateway for Malawi, to compete with the road/rail corridors to South Africa and the port of Durban. The NTC was neither designed, nor expected to compete with the shorter rail corridor to Nacala, and the road connection to Beira, which have been reopened since the implementation of the NTC. Instead it was expected to provide a secure alternative that would also be lower in cost, as long as the more direct alternatives remained closed. Given that the Mozambique corridors were expected to eventually re-open, to be successful the project was required to generate most of the projected benefits within the period during which the Mozambique routes were closed. Given this need to obtain results quickly, combined with the inherent complexity of the project, and the unpredictability of the opening of the Mozambique routes, the level of risk embodied in the project was extremely high. 9. The secondary objectives of increasing regional trade and developing the Northern part of Malawi are by-products of the development of the corridor and not assessed as primary stand-alone objectives. B. Achievement of Project Objectives 10. Most of the physical project components required to meet the objectives of improving the NTC were completed, although with some delays (very significant in the case of Lake Services) and cost over-runs. The final project cost was US$140.75 million, an increase by 28% compared with the SAR estimate of US$110.09 million. (See Table 6A). A detailed description by component follows: 11. Karonga-Ibanda Road: Construction of this two-lane paved road (64.6 km) and five bridges between Malawi and Tanzania was financed by the EDF. All work was completed in 11/91. However, cracks have developed in the concrete deck slabs of the bridges. While these do not unduly compromise the structural integrity of the bridges, their service life will be reduced unless remedial works are undertaken. 12. Ibanda-Uyole Road: Rehabilitation of this two-lane paved road (89 km) in Tanzania was originally financed by the Dutch Government, with construction planned for early 1991 to early 1993. However, the project was suspended half way through due to shortage of funds. EFD finally provided additional funding, and the works resumed in 2/92 and were completed by the end of 1994 (an overall delay of around 1.5 years). 13. Salima-Balaka Road: Rehabilitation of this two-lane paved road (147.5 km), included an access road to the port of Chipoka (2.5 kin), was financed by KfW (65.5 km) and IDA (82 km). Implementation suffered from delays and cost overruns, mainly due to less than -4- satisfactory performance by the contractor. By the original estimated completion date of 12/90, the contractor had only completed around 40% of the KfW funded component, and 3% of the IDA financed section. After unsuccessful attempts by GOM, KfW and IDA to get the contractor to improve his performance, it was agreed GOM should to terminate the contract, and re-tender the remaining works. The contract was terminated with effect from 2/91. The new contractor commenced the works in 3/92, and completed the works satisfactorily on time by the end of 1993. The overall delay for these works was more than three years, and the cost increased 39% to US$23.0 million. The dispute with the original contractor has been referred to arbitration. A request was made by the GOM in early 1993 to include the re-construction of Ngodzi bridge, that was washed out during heavy flooding in March 1989. The Credit Agreement was subsequently amended to include this construction (total cost US$1.25 million), and the works were completed by mid June, 1994. 14. Construction of Border Post & Weigh Bridge: The border post ( US$ 0.53 million), financed by IDA, was completed towards the end of 1994. The Weigh Bridge, located at the border post, was installed as part of the Karonga--Songwe roads contract. 15. Civil Works at the ports of Chipoka and Chilumba: The works, financed by USAID, involved the construction of fuel handling and storage facilities, and of handling and storage facilities for dry cargo, including containers. Improvements to the infrastructure at the two ports (US$5.91 million), installation of gantry cranes (US$3.56 million), and diesel generators (US$0.39 million) were substantially completed, for Chipoka by 6/89 and Chilumba by 11/89. Both facilities were handed over to MOW/MOTC on 2/90, although supply of diesel generators were further delayed by around 5 months, which in turn led to a delay of commissioning of the gantry cranes. Both facilities were ready for operation by mid 1990, but have hardly been utilized due to problems related to dredging of the two ports (par. 18). 16. Monkey Bay Shipyard: The rehabilitation and upgrading of the shipyard was partly financed by USAID and included shipyard facilities and slipway winches (US$2.66 million). Equipment and tools (US$1.92 million) were financed by ODA. Completion of the shipyard facilities was delayed by about 6 months, ending on 2/90, mainly due to bad weather conditions and soil conditions for the slipway foundations, which deviated considerably from design conditions. The installation of 5 slipway winches, however, was delayed by more than 5 years. The original installation took place in 1990, although during a trial run the winches showed severe deficiencies and were not accepted. The supplier eventually agreed to replace the winches at no additional cost, and the installations were finally commissioned in the end of 1995. 17. Procurement of a New Container Vessel: KfW financed the procurement of a new container vessel (about US$7.33 million) for the LS to operate between Chipoka and Chilumba. The original idea was to procure a 600 ton pontoon vessel, suitable to carry the type of export/import traffic expected to move in volume on the lake, (including break-bulk cargo, containers and fuel). The cost of this pontoon was estimated at US$2.88 million in the SAR. The re-designed vessel supplied to LS has a loading capacity equivalent to 750 tons of cargo. The contract was awarded in September 1989, and the vessel delivered to LS 14 months later. The vessel has still not started its operation, mainly because of problems related to the dredging of the two ports (par. 18). -5- 18. Dredging: The main reason for the delays in commencing operation of the container vessel (par. 17) and the two upgraded ports at Chipoka and Chilumba (par. 15) has been related to insufficient water depth in the two ports. An IDA supervision mission in 1992 brought to light that the dredging of the two ports, as provided for at the outset of the project, had been almost neglected, and that the water depth was not sufficient for the new container vessel to call at the two ports. Ad-hoc efforts to carry out soundings and soil investigations were initiated immediately, but it took until early 1994 before required funds could be obtained for the works to be undertaken. KfW then agreed to fund dredging of Chipoka out of savings from the Salima-Balaka roads project, and IDA funds were, with the agreement by GOM, obtained from the Infrastructure I Credit (Cr. 2069-MAI). Dredging of Chipoka was carried out between 7/94 and 12/94 at a total cost of around US$132,000, and the works in Chilumba were carried out between 12/94 and 2/95 at a total cost of around US$66,000. LS was instrumental in assisting the contractor with support services (US$27,000) - mainly floating equipment such as a floating pontoon and a tug boat. Potential maintenance dredging in the future will be carried out by a small cutter suction dredger, recently provided under USAID funding, but it is uncertain if a recurrent budget is assured for the works. 19. Construction of cargo facilities in Dar-es-Salaam and Mbeya: The two cargo centers in Tanzania, (MCC), were designed to handle both dry cargo and fuel, and operate as independent units in each location. Construction of the dry-cargo centers in Dar-es-Salaam and Mbeya were funded by the ODA, while procurement of gantry cranes (for containers) and generators were funded by USAID. Some miscellaneous items for the dry cargo facilities, as well as the fuel facilities at the two sites were funded by KfW. The implementation of the works was more complicated than anticipated, mainly due to the many consultants/contractors involved. The construction works at the two sites commenced in mid-1989, and the two cargo centers were substantially completed by mid-1991, when fuel handling operations started on a small scale. After an initial operating period of the new facilities, it was found that several essential items (the major ones related to the electrical installations) had not been included in the original design of the facilities. A total of around 40 such items were identified by the end of 1993. KfW funded some of these items, particularly those concerning the fuel facilities at both Dar-es-Salaam and Mbeya. IDA funded the remaining items (mainly related to safety and security) from the Credit 1879-MAI and Credit 2069-MAI. All rectification and outstanding works were completed by the end of 1995. 20. Rail Tank Wagons and Road Tank Containers: The contract, financed by USAID, supplied twenty-two 60,000 liter rail fuel tank wagons (US$ 1.24 million), and thirty-three 16,000 liter road fuel tank containers (US$ 0.90 million). The rail wagons were accepted by Malawi Railways on 3/91, and transferred for use by TAZARA. The tank containers were handed over to the Malawi Petroleum Control Commission on 10/90. 21. Resettlement: The construction of MCC facility in Dar-es-Salaam required resettlement of around 3,000 people that were living on the site (Kurasini) selected for the cargo center. It was recognized at appraisal that appropriate resettlement provisions would need to be made for the squatters occupying the Kurasini site. The Tanzanian Government proposed a combination of cash compensation and land title at an alternative site in Dar-es-Salaam (Yombo Vituka). The Malawi Government agreed to fund the cash compensation, on the basis of valuations from the Dar-es-Salaam City Council, and land titles would be offered to the Kurasini house owners under the auspices of the Dar-es-Salaam City Council. -6- 22. A World Bank study carried out in May 1987 recommended that the Tanzanian proposal be accepted, but drew attention to potential drawbacks due to the remoteness of the new site, and particularly the lack of infrastructure at the Yombo site. As funds under the credit could not be used for infrastructure improvements, ODA subsequently agreed to make funds available to Tanzania for the provision of: (i) an access road, linking the site to the main Pugu Road; (ii) temporary supplies of potable water from shallow wells, pending extension of the piped supply; (iii) a dispensary; (iv) extension of power supply into the site; and (v) a market shelter. The proposed infrastructure improvements were deemed necessary to ensure the economic and social welfare of the resettled community, but it was also recognized that they would provide additional benefits to the existing population in the wider area. It was thought, too, that the provision of these improvements would contribute significantly to the satisfactory implementation of the resettlement program. 23. Concern had been expressed from the outset about the implementation capabilities of the Dar es Salaam City Council which was to be responsible for the implementation of this component. At the time, however, there was no obvious alternative vehicle or mechanism in place for such an activity, and it was hoped that provision of funds and liaison by project team members would enable the City Council to fulfill its role. However, when the Kurasini area was handed over to the contractor (end of March 1989) there was little evidence of the infrastructure being in place at Yombo, despite available funds and all effort of encouragement by the ODA funded consultant to get City Council to speed up their activities. Offers of land title had been made, although only some of 35 of the house owners had applied to the Lands Office for a title at the new site. 24. The final result of the resettlement component is that compensation was properly paid to all house owners and squatters at the Kurasini site, but that the new resettlement area at Yombo is still largely devoid of the planned infrastructure. Improvement of access to the site was partly completed, a few wells are operational, a dispensary has been constructed, but no electricity has been supplied to the area. One of the problems related to the implementation of the resettlement component has been the multiple organizations involved (two Governments, ODA, City Council, THA), and the unclear lines of responsibility. The major problem, however, was the lack of capacity, counterpart funding and general interest in the matter by the implementing agent, Dar es Salaam City Council. 25. Consultancy Services: The project included: (i) technical assistance for project coordination and financial control; (ii) technical assistance for LS in the fields of marketing, positioning and scheduling of vessels, port operations and maintenance, and vessel repairs; and (iii) detailed engineering, design and supervision of construction works and equipment procurement. The coordinator employed at the start of the project terminated his contract in 1991, and it took until November 1993 until GOM replaced the coordinator for the last seven months of the implementation phase. The lack of a full time coordinator for almost 3 years was a major reason for lack of progress in rectifying outstanding matters and coordination of the different components. The position of financial controller was successfully transferred to a Malawi counterpart in late 1993, but the transfer of knowledge from the TA attached to LS was negligible, partly because of MRs non-commitment to the project. The performance of the consultants engaged for site supervision of the different component were mixed (some did not represent the client well or were not under the control of GOM due to direct contracting by some donors). -7- 26. Training: Training for government staff in the transport sector (higher degrees in transport economics) met with a lot of problems, including the lack of identification of staff by both MOTC and MOW. The only training implemented was three months overseas training in preparation for the operations of the container vessel. Training negotiated for handling of containers was canceled as the new container vessel, essential for this training, couldn't enter the two ports. 27. Institutional Development: The project envisaged the establishment of MCCL as a commercial entity to manage, promote and market the NTC for both fuel and dry cargo through Dar-es-Salaam and Mbeya. MCCL was registered as a private company under the Companies Act, incorporated on February 23, 1990. Its shareholders are public and private. MCCL has launched several successful marketing drives on the Malawi side, including seminar discussions, press releases and advertisements. These initiatives have included high level Tanzania delegations to focus on various aspects of the corridor to the customer/shipper in Malawi. Experience after 4 years of operation indicates that this task has been achieved, and that MCCL has been instrumental and successful in facilitating smooth flow of cargo movements and making the NTC work. 28. The assets used by MCCL (cargo terminals in Dar-es-Salaam and Mbeya, rail wagons and other associated facilities) were supposed to be channeled to MCCL through Malawi Railway Holdings Company (MRHC) through a Lease Agreement. The Credit Agreement provided that MCCL should pay rental fees for the use of the MCC assets. These were set at least 5% per annum of the assets value, with a 3 year moratorium from start of operations. Due to the re-structuring of Malawi Railways and the non-operational status of MRHC, the assets are now directly leased to MCCL by GOM. The final lease agreement, laying down the terms of the lease and associated rental fees, has been discussed for several years. A draft proposal in substantial compliance with the objective of the covenant was eventually submitted to IDA for review in September, 1995. The draft was approved, and it is anticipated that the agreement will be concluded by the end of March 1996. 29. Environmental Impact: As predicted at the time of project appraisal, the project has had beneficial effects on the environment from the roads project, mainly through reduced dust and soil erosion from improved drainage works. As regards lake transport it was felt at the time of appraisal that increased shipping traffic on the lake might affect the environment. No adverse affect has been monitored because little incremental traffic has developed. The project provided funds for three ports to be equipped with oil spill equipment, each including a skimmer and oil booms. Selected staff from the three ports have been trained to operate the equipment. 30. Summary: By completing these physical components, the project achieved the goal of establishing an alternative route for imports/export to and from Malawi, via Dar-es-Salaam. This clearly reduced the economic dependency of Malawi on the southern routes, and, during the closure of the Mozambique corridors, until October 1992, provided a shorter more competitive alternative to the Malawi-Durban corridor. In response, during this period, traffic on the NTC increased. As shown in table 10, by 1990 the NTC carried 16% (116,475 tons) of Malawi's imports and 12% of Malawi's exports (23,856 tons). This represents an increase from about 6% of both imports and exports prior to the project (1987). By 1994 (the last year for which data is available), traffic through NTC amounted to 162,192 tons (22%) of imports and 13.562 tons (8%) of exports. The total traffic through the NTC system for 1994, however, -8- was only two thirds of the level projected in the SAR for the corridor. With regard to Malawi's total international traffic during the period 1990 to 1994, it can be seen (Table 11 and 12) that the NTC has kept, and even slightly increased, its share of the traffic (on average 15 to 19% respectively) despite the opening of shorter routes to Nacala and Beira. While the NTC can be expected to continue to carry a significant part of Malawi's imports and exports, it is likely that the increased competition created by the opening and improvements to the shorter routes through Beira and Nacala will result in a reduction of the current market share (around 20%) for the NTC. C. Major Factors 31. Factors not generally subject to government control, which created a gap between actual and expected outcome, included: (i) complicated project design and implementation (the NTC included many components, some of them of technical complexity, co-financed by six different donors with different administrative arrangements in programming activities, engaging consultants, contractors etc.); (ii) part of the project was implemented in Tanzania (problems related to land acquisition and re-settlement issues); (iii) traffic evolution; (iv) less than satisfactory performance by contractors (Salima-Balaka roads contract) and consultants (some of whom did not represent the client well or were not under the control of the client due to financing agreement); (v) shortage of funds (delays of roads project, rectification of numerous outstanding matters at the two MCCs, and dredging of the two ports); and (vi) reopening of Mozambique corridors. 32. Factors generally subject to government control, which contributed to the gap between actual and expected outcome, included lack of timely: (i) reorganization of Lake Services ( no commitment by MR to push for institutional, operational, and financial reforms); (ii) finalization of lease agreement for MCCL; (iii) replacement of the project coordinator; and (iv) lifting of the ban on imports of grain through Tanzania (lack of coordination between Ministries) earlier than in August 1992, which would have provided a more cost effective route for drought relief cargo to Malawi during 1990 - 1992 1/. D. Project Sustainability 33. The sustainability of the NTC is likely in the sense that it is likely to remain an outlet for traffic from Malawi. The multi-modal corridor system has already, before all components were completed, proven to be of great importance to facilitate imports/exports to Malawi, although part of the system (the lake component) still has not commenced operation as anticipated. It is apparent that the main reason for the successful operation of the NTC lies with the MCCL which has put in place operational mechanisms in both Malawi and Tanzania for the through movement of cargo. These include through tariff arrangements and operational agreements and procedures with TAZARA, THA and Customs Authority for the smooth If the ban had been lifted earlier, and the Port of Dar es Salaam, and the Northern Transport Corridor had been utilized for drought relief cargo to Malawi during 1990-1992, rather than channeling it via Durban in South Africa, it is estimated that around US$ 10.4 million could have been saved in transportation cost. The economic return (ERR) of the MCC (Dry Cargo) component would then have increased from 5.3% to 10.5%, and the ERR for the overall NTC project would have increased from 7% to 9%. -9- transfer of Malawi cargo directly from the port to the MCC facilities. A key aspect of these systems is the concept of direct delivery of cargo and the one-stop-shop service, enabling the transfer of cargo directly from ship's hook to MCC, Dar-es-Salaam, where all transit clearing services are provided. This arrangement means that MCCs in Tanzania have become dry ports for Malawi, to which Malawi cargo can be manifested by shipping lines. 34. The likely sustainability of investments in the Lake Component (upgrading of the ports and acquisition of a container vessel) is more uncertain and depends on the traffic LS can capture in the future. Restructuring and commercialization of LS is now part of the Malawi Railway Restructuring Project. 35. Since the completion of the NTC, the rail line to Nacala (815 km) has been reopened and the southern corridor to Durban has been shortened from over 3,500 km to 2,667 km (due to the opening of the road via Tete). The NTC, however, is still likely to remain viable and important for Malawi. First of all it is about 1,000 km shorter than the corridor to Durban (via Tete), and second and perhaps most importantly, it provides Malawi with an alternative outlet to the Dar es Salaam port and the regular shipping lines (East African Conference Lines) that have direct calls at this port. Given the past experience of being dependent on only one gateway to an international port, it is of strategic importance for Malawi to maintain several options for its imports and exports. E. Bank Performance 36. Identification: The project was identified in discussions between GOM and the Bank in 1984-1985, when the corridors through Mozambique were closed for Malawi exports and imports. A conceptual report "Transport Bottlenecks in Malawi's Access to the Indian Ocean" issued in late 1984, formed the basis for further preparations of the project. The Bank's performance in this area was satisfactory. 37. Appraisal: The Bank was also instrumental in coordinating discussions with bilateral donors for co-financing of the project. The Bank's assistance during this stage was satisfactory in terms of staff skill mix and continuity. 38. Implementation and Supervision: Over the implementation period from September 1988 through April 1994, the Bank's supervision effort amounted to 69.8 staff weeks, including 11 supervision missions, averaging 2 missions per year. Progress was satisfactory during the beginning of the project, but delays and problems started to appear rapidly after an initial period of 2-3 years. These implementation problems were not always adequately identified and assessed, and there was a lack of coordination on the part of the financing agencies to assist the GOM in addressing and resolving the problems. Over the implementation period from mid- 1992 to the closure of the project, however, the Bank's supervision effort increased substantially, but on balance its overall performance is rated as deficient. F. Borrower Performance 39. Preparation: GOM performance in project preparation was satisfactory, with a documented commitment to arrange for alternative transport routes to/from Malawi, and to implement the NTC. - 10 - 40. Implementation: GOM performance in implementation is closely linked to the degree of achievement of project objectives as discussed in section B. Several factors negatively affecting the project were subject to Government control, particularly the issue of replacement of the project coordinator, and appointment of full time staff to supervise and monitor the project. It should be mentioned, however, that the steering committee appointed was instrumental in identifying shortcomings and deficiencies. Despite the good progress at the start of the project, and the good progress over the last year of the implementation, the overall performance was deficient. 41. Compliance with major loan covenants and commitments was, however, less than satisfactory. The financial covenant for LS to restructure its passenger service operations with a view to eliminate all losses by no later than June 30, 1991 was never complied with, and the lease agreement between the GOM, MR and MCCL regarding financial and operational conditions for facilities created was not completed as agreed in the DCA (par. 28). G. Assessment of Outcome 42. The project was demanding for GOM to implement. Although the lake component has not yet started operation, it achieved its major physical objectives. Despite numerous factors that negatively affected the implementation, the project was substantially completed by the original closing date of the credit. However, the project faced a 28% cost overrun and significant delays. By 1993 traffic on the Corridor was just two thirds of that forecast at the time of appraisal, with shorter, more cost effective corridors back in operation. As a result, the overall re-evaluated ERR of the project is only 7%. For comparison, the ERR estimated by the SAR was 16% for a 6 year completion, and 21 % for a 3.5 year completion. Thus, although NTC has established itself as a reliable and viable corridor, and an alternative for Malawi's imports and exports at a time when the shorter routes through Mozambique remained closed, the economic analysis suggests that the gains achieved in lowering transport costs do not, with hind sight, justify the investments as made. 43. The weakest link in the NTC, as identified already at the appraisal of the project, is the lake component. Despite upgrading and improvements of facilities at the two ports in Chipoka and Chilumba, at the ship yard in Monkey Bay, and the acquisition of a container vessel (a total investment of US$22 million), hardly any traffic (11,500 tons in 1993/94 compared to forecast of around 170,0000 tons in SAR) has been taken on the lake. The main reason is attributed to the failure to carry out the required dredging of the two ports, although this was identified at the outset of the project. This problem has partly been resolved, and it was anticipated that the new vessel would commence a weekly operation between Chipoka and Chilumba by the end of 1995. This target date for starting the operation between the two ports was not met, and it is uncertain when the vessel will commence operation. The fuel vessel, however, started its operation immediately after the dredging activities were completed in late March, 1995. This was possible as the oil jetty is located at the outer end of Chipoka port, away from where the main dredging problems are encountered. H. Future Operation 44. The creation of MCCL was a key element in ensuring a sustainable future operation of the NTC. The ownership structure, with the private sector involved, has given MCCL access to expertise in freight forwarding, freight brokerage and transport services marketing. The - 11 - company has now successfully operated the NTC for 4 years, and been instrumental in facilitating exports/imports of Malawi traffic. 45. Due to the problems with Lake Services (par. 43) a restructuring and commercialization of LS has been included as a follow up project in a component of the Malawi Railways Restructuring Project, Credit 2696-MAI. The main objective of this component is to allow LS to become a separate company with its own management and Board of Directors. However, even after becoming an autonomous company, LS would need further restructuring and rationalization of staff. It is intended that, after being registered as a separate company, LS's business activities would be split into three separate result centers, viz., freight services, passenger services, and vessel maintenance and decisions would be taken as appropriate for commercialization and privatization of these activities. To link the operation of the different ports (currently under the Marine Department of MOTCA) to the shipping activities, the port operations would possibly be transferred to a concessionaire. To enable LS to achieve the objectives of restructuring and commercialization, the Malawi Railway Restructuring Project will provide support to LS in the form of equipment and consultancy services for institutional development. I. Key Lessons Learned 46. Implementation of a complex project such as the NTC has provided useful lessons learned for future similar projects in the sector: a) the ownership by and the division of responsibilities between implementing agencies (MOTC, MOW, MR, LS, MCCL) should have been more clearly defined, and dedicated full time staff should have been appointed by the agencies, rather than the use of busy in-line staff; b) the project manager/coordinator should have been replaced immediately after the coordinator employed at the start of the project terminated his contract; c) the close coordination between GOM and donors during the identification and planning of the project should have been maintained during the implementation stage, e.g. through annual joint supervision missions; d) for such a complex project, which had to reap its benefits in a short period of time, the implementation program, and phasing of the many activities, should have been more carefully analyzed at the planning stage of the project, and the design should have left some flexibility to adjust for modifications during the implementation phase. It would have been advantageous if MCCL had been established earlier in the process, and provided guidance in the design as well as implementation matters, and also to initiate the marketing of the NTC system as early as possible to convince the export/import industry of the potential to channel traffic via the port of Dar es Salaam (which at the beginning of the project implementation was heavily congested and regarded as inefficient with high risk of damages and pilferage's of cargo); - 12 - e) GOM should have had full time representation in Tanzania during the first phase of the implementation, rather than reliance on staff from the High Commission in Dar- es-Salaam; f) on a large complex project like this it would have been advantageous to keep the responsibility for design and supervision to a minimum of consultants, with the GOM as the client for all contracts. Too many problems arose from lack of coordination among the different consultants engaged in the design and implementation of different components; and g) the concern expressed from the outset about the implementation capability of the Dar es Salaam City Council to implement the resettlement component should have been taken more seriously, and an arrangement should have been made with ODA and GOT on how to deal with a non compliance by the implementing agent. Clear definitions on authority and responsibility of supervising agencies should also have been established. PART II: SUPPORTING STATISTICAL TABLES AND ANNEXES Table 1: Summary of Assessments Table 2: Related Bank Loans/Credits Table 3: Project Timetable Table 4: Loan/Credit Disbursements Table 5: Key Indicators for Project Implementation Table 6A: Project Costs Table 6B: Project Financing Table 7: Economic Re-Evaluation Table 8: Studies included in Project Table 9: Status of Legal Covenents Table 1 OA: Bank Resources: Staff Inputs Table 1OB: Bank Resources: Missions Table 11: Traffic Through Different Corridors Table 12: Traffic Through Different Corridors (Graph) Annex 1: Aide memoire ICR Mission Annex 2: Project Review from Cofinanciers perspective TABLE 1: SUMMARY OF ASSESSMENTS Not A. Achievement of Objectives Substantial Partial Negligible Applicable Macro Policies X Sector Policies X Financial Objectives X Institutional Development X Physical Objectives X Poverty Reduction X Gender Issues X Other Issues X Other Social Objectives X Public Sector Management X Private Sector Management X Other (Economic Independence) X B. Project Sustainability Liketr Unliketi Uncertain x Hightv C Bank Performance Satisfactory Satisfactory Deficient Identification X Preparation Assistance X Appraisal X Supervision X Highly D. Borrower Performance Satisfactory Satisfactory Deficient Preparation X Implementation X Government Compliance X Operation X High/y Un- Highly Un- E. Assessment of Outcome Satisfactory Satisfactory Satisfactory Satisfactory X TABLE 2: RELATED BANK LOANS/CREDITS Amount Year of Status Project ID US$M Purpose Approval 1(% complete) Preceding Operations 3MALPA002 0.50 Highway Engineering: Detailed engineering of 1967 Completed the Zomba-Lilongwe road (290 kin) 3MALPA005 11.50 Highways: Reconstruction, bitumen paving of 1968 Completed the Zomba-Lilongwe road. Consultants study of road transport licensing regulations. 3MALPA013 10.00 Highways 11: Construction of the Lilongwe- 1975 Completed Kasungu road (113 ki). First phase of a District Roads Improvement and Maintenance Program (DRIMP). 3MALPA019 10.50 Highways Ill: Construction of Kasungu-Jenda 1978 Completed road (85 kin) feasibility study & detailed engineering of Jenda-Mzuzu road. 3MALPAO26 33.00 Highways IV: Construction of main Jenda- 1981 Completed Mzuzu-Ekwendeni road and second phase of DRIMP. 3MALPAO35 44.9 Hiehway V: Road construction, third phase of 1984 Completed DRIMP; construction of Luwawa-Champhoyo road: provision of weigh bridges. Following Operations 3MALPA056 28.8 Infrastructure 1: The project would finance a 1990 Active time slice of the agreed infrastructure investment program, including highways and bridge rehabilitation, district roads maintenance, road safety, improved rural transport services, urban and rural water supply rehabilitation. Railways Restructuring Proiect: MW-PA-34489 16.2 Revitalizing the shorter route to Nacala; 1995 Active Restructuring commercialization and eventually privatization of the Railways and Lake Services TABLE 3: PROJECT TIMETABLE Steps in Project Cycle Date Planned Date Actual Identification NA November - December 1984 Initial Project Brief NA February 15, 1985 Preparation March - April 1985 April - May 1985 Appraisal October 1985 October 1985 Negotiations October 1986 October 20-24, 1986 Board Presentation January 6, 1987 March 3, 1987 Signing April - May 1988 May 6, 1988 Effectiveness August 4, 1988 June 7, 1988 Project Completion June 30, 1994 June 30, 1994 Last Disbursement Date October 31, 1994 April 12, 1995 TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATES AND ACTUAL (US$ THOUSANDS) FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Appraisal Estimate 1,600 3,300 6,400 9,600 12,000 13,300 13,400 13,400 Actual 4,835 7,063 8,691 9,523 11,063 11,600 13,969 14,009 Actual as% of estimate 302 214 136 99 92 87 104 105 Date of final disbursement 04/12/95 Note: Actual is greater than appraisal estimate due to changes in SDR/US$ rate. Actual disbursements amounted to SDR 10.386 million, against an approved amount of SDR 11.100 million. TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION Key Implementation Estimated Actual Physical Objectives a. road reconstruction and rehabilitation 298 km 298 km b. cargo centers in Tanzania 2 2 c. upgrading of ports, Lake Malawi 2 2 d. acquisition of container vessel I 1 e. economic rate of return (overall) 16 % 7 % - Fuel handling facilities 24% 17% - MCC -- Karonga-Uyole road 16 % 5 % - Salima-Balaka road 14% 10% - Improvements to Lake Services 13 % (negative) TABLE 6A: PROJECT COSTS Appraisal estimate (US$M) Actual/latest estimate (US$M) Local Foreign Total Local eiggn Total A Road Construction (i) (a) Karonga-Songwe (46km) 3.34 7.78 11.12 0.00 12.75 12.75 (b) Songwe-lbanda (5 km) 0.00 2.27 2.27 included in A (i)(a) (ii) lbanda-Uyole (98 km) 0.00 13.91 13.91 0.00 16.40 16.40 (iii) (a) Salima-Jct. M18 (63 km) 1.84 4.31 6.15 6.12 10.76 16.88 (b) Chipoka Access (2.5 km) 0.06 0.11 0.17 included in A (iii)(a) (c) Jct. M18-Balaka (82 km) 1.92 4.48 6.40 0.68 4.20 4.88 (d) Ngodzi Bridge not part of the original design 0.14 1.11 1.25 Subtotal 7.16 32.86 40.02 6.94 45.22 52.16 1 Malawi Cargo Center (i) Dar-Dry Cargo Construction 0.00 10.07 10.07 0.00 16.24 16.24 (ii) Mbeya-Dry Cargo Construct. 0.00 5.81 5.81 included in B (i) (iii) Gantry Cranes & Generators included in B (i) (ii) 0.00 3.71 3.71 (iv) Tools & Equipment included in B (i) (ii) 0.00 I 92 1.92 (v) Misc. included in B (i) (ii) 0.00 0.53 0.53 (iii) Squatter Resettlement 0.00 0.130.73 3.27 3.27 Subtotal 16.61 16.61 0.00 25.67 25.67 C. Fuel Handling (i) Dar-Fuel Storage 0.00 5.03 5.03 0.00 22.26 22.26 (ii) Mbeya-Fuel Storage 0.0 2.28 2.28 Included in C (i) Subtotal 0.00 7.31 7.31 0.00 22.26 22.26 V Fuel Transport (i) Tank Containers 0.00 0.45 0.45 0.00 0.90 0.90 (ii) Rail Tank Wagons .00 O1.05 1.05 0.00 1.24 1.24 Subtotal 0.00 1.50 1.50 0.00 2.14 2.14 L Lake Services (i) Vessel 0.70 1.30 2.00 0.00 7.33 7.33 (ii) Chipoka Port 0.53 3.02 3.55 0.00 2.06 2.06 (iii) Chilumba Port 0.79 4.47 5.26 0.00 3.85 3.85 (iv) Gantry Cranes & Generators included in E (ii) (iii) 0.00 3.95 3.95 (v) Monkey Bay Shipyard 0.63 2.53 3.16 0.00 2.86 2.86 (vi) Tools & Equipment included in E fi0 (iii) (v) 0.89 1.03 1.92 Subtotal 2.65 11.32 13.97 0.89 21.08 21.97 F. Border Post & Weigh Bridge (i) Border Post 0.25 0.25 0.50 0.48 0.05 0.53 (ii) Weigh Bridge 001 0 0.14 included in Karonaa-Sonpwe road Subtotal 0.26 0.38 0.64 0.48 0.05 0.53 Contingencies are treated separately Appraisal estimate (IJS$M) Actual/latest estimate (US$M) Local Foreign Total Local Foreign Total G. Consulting Services (i) T.A. - MTC 0.14 0.58 0.72 0.17 1.68 1.85 (ii) T.A. - Lake Service 0.12 0.47 0.59 0.06 0.34 0.40 (iii) Supervision of: A(i) & F(ii) [Kronga-lbanda] 0.43 1.70 2.13 0.00 2.46 2.46 A(ii) [lbanda-Uyolel 0.21 0.83 1.04 0.41 1.23 1.64 B [MCC] 0.16 0.63 0.79 0.00 0.95 0.95 (iv) Supervision of: A(iii) [Salima-Balaka] 0.21 0.83 1.04 0.50 6.23 6.73 D [fuel transport], E [Lake], & F(i) 0.27 1.09 1.36 included in A(i). above [border post] C [fuel handling] included in D-F(i), above 0.07 1.41 1.48 (v) Supplementary Detailed Engineering 0.00 1.50 1.50 0.00 011 0.11 Subtotal 1.54 7.63 9.17 1.21 14.41 15.62 H Training (i) Staff Training 0.00 0.25 0.25 Subtotal 0.00 0.25 0.25 Base Cost A-H 11.54 77.61 89.15 1 Contingencies Physical (10%) 1.16 7.61 8.77 Price (12.5%) 6.03 5.82 11.85 Subtotal 7.19 13.43 20.62 J. New Components Dredging Chilumba 0.07 0.07 Dredging Chipoka 0.13 0.13 Subtotal 0.20 0.20 TOTAL PROJECT COST 62.98 91.29 110.09 9.52 131.23 140.75 (net of taxes) TABLE 6B: PROJECT FINANCING Appraisal Estimate Actual/Latest Estimate (US5M) (US$M) Local Foreign Local Foreign Source Costs Costs Total Costs Costs Total Government of Malawi 2.89 0.00 2.89 7.15 0.96 8.11 IBRD/IDA 0.00 13.40 13.40 1.48 13.50 14.98 EDF, EEC 4.00 15.95 19.95 - 12.75 12.75 KfW 3.78 15.10 18.88 - 44.01 44.01 ODA 4.00 15.34 19.34 0.89 20.94 21.83 USAID 1.80 16.20 18.00 - 18.57 18.57 The Netherlands 0.18 17.13 17.31 - 20.50 20.50 TOTAL 16.65 93.12 109.77 9.52 131.23 140.75 TABLE 7 EcoNOMIC RE-EVALUATION Project Objectives: The basic objective of the NTC project has been to reduce the transport cost of Malawi imports and exports, in comparison to transport via the southern routes to South Africa. The quantifiable benefits have been the savings in transport cost per ton for traffic diverted from the southern routes to the NTC. As for the rehabilitation of the Salima-Balaka road, the economic objectives were to reduce vehicle operating costs. The quantifiable benefits have been savings per vehicle-km multiplied by number of vehicles traveling on the road. Cost and Monetary Units: As in the SAR, economic costs have been based on financial costs, excluding taxes and duties. Unlike the SAR which calculated all costs (and benefits) in MK, the present analysis have calculated all costs (and benefits) in US$, to overcome the problem of continuous devaluation of the Malawi Kwacha. The exchange rates selected, based on IMF data, have been the averages for the years in which the specific project components were implemented. Traffic Forecast: The SAR analysis of benefits (with the exception of Salima-Balaka road) were based on traffic forecasts of commodity shipments through various sections of the NTC. The ICR has used revised forecasts based on actual traffic flows, by commodity, between 1990 and 1994, as reported by the MOTC and MCCL. Actual traffic on the NTC has been lower than estimated in the SAR. For example, in 1990 the actual traffic through NTC was about 140,000 tons compared with SAR estimate of 255,000 ton, in 1993 it was 192,000 tons compared with an estimate of close to 300,000 in the SAR. Other than fuel shipments, which slightly exceeded the SAR estimate (about 57,000 tons in 1993 compared to less than 55,000 in the SAR), the shipments of all other commodities fell short of the SAR estimates. One reason for this has been the opening of the corridors through Mozambique (Nacala and Beira), other reasons are related to the overall decline of the economy in Malawi over the period in comparison. Tables 10 and 11 show the flow of cargo among the four major corridors between 1990 and 1995 (1995 figures are based on tentative information of the first 6 months traffic). The changes that have taken place in the utilization of different corridors between 1991 and 1994 are further illustrated in Fig 7.1 below. For the fuel traffic from 1994 and onwards it has been assumed an annual increase of 2.5% '/ up to year 2000, after which the traffic will be stagnant between year 2001 to 2010. Although precise and reliable forecasts of dry cargo, in particular bulk traffic, may be very difficult to make, bulk grain and fertilizer imports will remain a crucial traffic through the NTC. It is also estimated that the current proportion of Malawi's imports/exports of containerized traffic will be handled through the NTC. An annual increase of 2.5% has therefore been assumed over the period in review (1995-2010). As for the Salima-Balaka road and number of vehicles, it has been assumed a 5%1/ growth per annum from 1994 onward. Data for 1994 were based on traffic counts over the Lafidzi bridge. li Assumed GNP growth rate. 2/ Actual annual growth rate between 1988 and 1995 has been more than 9%, but it is estimated that it will vow down to on average 5% for the remaining period in review. Benefits: The quantifiable benefits have been identified for different components (sections) of the NTC, as well as for the project as a whole. The quantifiable benefits, by section, were: (a) Karonga-Ibanda-Uyole road - savings in transport costs of diverted dry goods; (b) Malawi Cargo Centers - savings in transport costs of diverted dry goods; (c) Fuel Handling - savings in transport costs of diverted fuel; (d) Lake Facilities - savings in transport costs of dry goods and fuel in comparison to road transport; (e) Salima-Balaka road - savings in operating costs of vehicles and on road maintenance. The SAR estimated savings per ton for traffic diverted to the NTC from Blantyre-Mchinji- Durban (via Zambia) corridor. The same methodology as used in the SAR has been used to analyze the economic results of the NTC project. The project's ERR have been recalculated by using actual traffic data available through 1994, and estimated projections for future years. Given the increasing prospect for peace in Mozambique from 1991 and onwards, it was possible to gradually increase the utilization of the corridors through Mozambique, and to reduce the dependence on the longer route to Durban via Zambia. Therefore, in recalculating the benefits of the NTC project it has been assumed that with effect from 1993 the diversion of traffic has been from the shorter route to Durban via Tete corridor, which opened in late 1992, as opposed to an assumed shift from the longer Blantyre-Mchinji-Durban (via Zambia) in the SAR. This shift in use of corridors has significantly reduced the benefits of diverting traffic to the NTC, particularly with regard to dry cargo including containerized traffic. 1991 1994 TeteNacala NTC Nacala NTC 7% 4% 14% 11% 19% Mchinji 9% Mchinji Tete 75% 61% Fig 7.1 In summary, the recalculated economic returns for the project overall and for the various components are as follows (SAR estimates in parentheses): D Project overall, 7% (16%); L Karonga-Ibanda-Uyole Road (50% of the cost/benefit is included in MCC:s Dry Cargo, and 50% is included in MCC fuel facilities) L Malawi Cargo Centers (MCC) in Mbeya and Dar es Salaam (Dry cargo), 5.3 % (16%); LI MCC in Mbeya and Dar es Salaam (Fuel facilities include. tank wagons), 17% (24 %); LI Lake Facilities, negative (13 %); LI Salima - Balaka Road, 10% (14%); I Consultancy Services and Technical Assistance (No specific economic analysis has been undertaken, neither in the SAR nor in this recalculation, for the TA component of the project because of the difficulty of quantifying the benefits. The total costs of TA and other consultancy services, however, are included in the total costs of the project when calculating the economic return of the overall NTC. If these costs would have been excluded, the overall ERR would have been 8%). The reason for a negative ERR for Lake Services improvements is that practically no traffic has been taken by the LS up to 1995, and there is no clear indication about traffic handling in the future (in 1993/94 LS handled only 11,500 tons of traffic, compared to an estimate of 174,000 tons in the SAR). The very low ERR for the MCC Dry Cargo Facilities (5.3% compared with SAR estimate of 16%) is mainly due to heavy delays and cost increases of constructing the two cargo centers in Tanzania, as well as the roads construction on the Tanzanian side. Contributing to the low ERR has also been a significantly less traffic than forecast. TABLE 7.1: NTC BENEFITS AND COSTS RELATED TO THE OVERALL PROJECT Benefits YEAR Total Costs Div. traffic dry Salima-Balaka Diverted Lake transport Net all projects cargo, MCC, & Road Fuel traffic vs. Road Benefits Karonga-Uyole Transport Road 1988 15.75 0.00 0.00 0.00 0.00 -15.75 1989 24.25 0.00 0.00 0.0 0.00 -24.25 1990 42.91 4.24 0.00 , 25 0.00 -34.42 1991 20.53 5.82 0.00 3.83 0.00 -10.88 1992 17.98 8.68 0.00 4.08 0.00 -5.22 1993 15.30 2.13 2.36 4.01 0.00 -6.80 1994 4.03 2.18 2.53 6.88 0.00 7.56 1995 0.00 2.24 2.63 7.05 0.00 11.92 1996 0.00 2.29 2.75 7.23 0.00 12.27 1997 0.00 2.35 2.87 41 0.00 12.63 1998 0.00 2.41 2.99 7.60 0.00 13.00 1999 0.00 2.47 3.13 7.79 0.00 13.39 2000 12.38 2.53 3.26 7.98 0.00 1.39 2001 0.00 2.59 3.41 /.98 0.00 13.98 2002 0.00 2.66 3.56 7.98 0.00 14.20 2003 0.00 2.72 3.72 7.98 0.00 14.42 2004 0.00 2.79 3.8S 7.95 0.00 14.66 2005 0.00 2.86 4.07 1.98 0.00 14.91 2006 0.00 2.93 4.26 !.98 0.00 15.17 2007 12.38 3.01 445 7.98 0.00 3.06 2008 0.00 3.08 4.66 7.98 0.00 15.72 2009 0.00 3.16 4.87 7.98 0.00 16.01 2010 0.00 3.24 5.10 1.98 0.00 16.32 Capital Cost 140.75 Maint. Cost 24.76 ERR= 7 Total costs all projects include cost of TA and consultancy services (US$ 15.63 million). If these costs were excluded the ERR would be 8%. TABLE 7.2: NTC - COSTS OF DIFFERENT COMPONENTS Cost YEAR MCC Karonga- Fuel Fuel Salima Lake Technical Total Dry-Cargo Uyole Rd Facilities Vehicles Balaka Rd Services Assistance Cost 1988 0.88 4.86 2.16 5.25 2.60 15.75 1989 0.89 4.86 7.42 1.07 2.16 5.25 2.60 24.25 1990 19.55 4.86 7.42 1.07 2.16 5.25 2.60 42.91 1991 0.40 4.86 7.42 5.25 2.60 20.53 1992 1.92 4.86 7.64 0.96 2.60 17.98 1993 1.50 4.85 7.64 1.31 15.30 1994 0.53 0.53 1.25 0.40 1.31 4.02 1995 0.00 1996 0.00 1997 0.00 1998 0.00 1999 0.00 2000 3.45 1.59 2.19 0.21 2.64 2.30 12.38 2001 0.00 2002 0.00 2003 0.00 2004 0.00 2005 0.00 2006 0.00 2007 3.45 1.59 2.19 0.21 2.64 2.30 12.38 2008 0.00 2009 0.00 2010 0.00 0.00 Capital Cost 25.67 29.68 22.26 2.14 23.01 22.37 15.62 140.75 Maint. Cost 6.90 3.18 4.38 0.42 5.28 4.60 0.00 24.76 TABLE 7.3: NTC - BENEFITS AND COSTS RELATED TO MCC DRY CARGO MCC Karonga - MCC/Karonga YEAR Dry-Cargo Uyole Rd Uyole Rd Cost Cost (50%) Benefits Net Benefits 1988 0.88 2.38 -3.26 1989 0.89 2.38 -3.27 1990 19.55 2.38 4.24 -17.69 1991 0.40 2.38 5.82 3.04 1992 1.92 2.38 8.68 4.38 1993 1.50 2.38 2.13 -1.75 1994 0.53 0.56 2.18 1.09 1995 2.24 2.24 1996 2.29 2.29 1997 2.35 2.35 1998 2.41 2.41 1999 2.47 2.47 2000 3.45 0.80 2.53 -1.72 2001 2.59 2.59 2002 2.66 2.66 2003 2.72 2.72 2004 2.79 2.79 2005 2.86 2.86 2006 2.93 2.93 2007 3.45 0.80 3.01 -1.24 2008 3.08 3.08 2009 3.16 3.16 2010 3.24 3.24 Capital Cost 25.67 14.84 Maint. Cost 6.90 1.59 ERR= 5.3%/1 Traffic for 1990-1993 is based on actual tonnage reported by MCCL; For 1994-2010 it is assumed a 2.5% growth rate per annumn;1990-1992 Mozambique corridors largely closed; 1993-2010 Mozambique corridors open. TABLE 7.4: NTC - BENEFITS AND COSTS RELATED TO FUEL TRAFFIC YEAR Fuel Fuel Karonga - Savings Facilities Vehicles Uyole Rd Divertea Cost Cost Cost (50%) Fuel Net Benefits 1988 2.38 -2.38 1989 7.42 1.07 2.38 10.87 1990 7.42 1.07 2.38 4.25 -6.t2 1991 7.42 2.38 3.83 -5.97 1992 2.38 4.08 1 70 1993 2.38 401 163 1994 0.56 6.88 6 32 1995 7.05 05 1996 7.23 7 23 1997 7.41 741 1998 7.60 7 60 1999 7.79 7 79 2000 2.19 0.21 0.80 7.98 4 79 2001 ' j8 / 8 2002 7.98 7.98 2003 7.98 7 98 2004 7.98 7.98 2005 /-98 / 98 2006 7.98 /98 2007 2.19 0.21 0.80 [.98 4.19 2008 7.98 /.98 2009 7.98 / 98 2010 7.98 7.98 Capital Cost 22.26 2.14 14.84 Maint. Cost 4.38 0.42 1.59 ERR= 17 1990-1993 based on actual tonnage reported by MCCL, 1994-2000 assume 2.5% growth rate per annumn; 2001-2010 assume no growth rate (Nacala corridor rehabilitated); 1990-1992 Mozamoique corridors largely closed; 1993-2010 Mozambique corridors open. TABLE 7.5: NTC - BENEFITS AND COSTS RELATED TO SALINIA-BALAKA ROAD YEAR Capital VOC Road Maint. Total Cost Savings Savings Savings Net Benefits 1988 2.16 000 -2.16 1989 2.16 000 -2.16 1990 2.16 0.00 -2.16 1991 0.00 0.00 1992 7.64 0.00 -7.64 1993 7.64 2.01 0.35 2.36 -5.28 1994 1.25 2.18 0.35 2.53 1.28 1995 2.28 0.35 2.63 2.63 1996 2.40 035 2.75 2.75 1997 2.52 0.35 2.87 2.87 1998 2.64 0.35 2.99 2.99 1999 2.78 0.35 3.13 3.13 2000 2.64 2.91 0.35 326 0.62 2001 3.06 0.35 3.41 3.41 2002 3.21 0.35 3.56 3.56 2003 3.37 0.35 3.72 3.72 2004 3.54 0.35 3.89 3.89 2005 3.72 0.35 4.07 4.07 2006 3.91 0.35 4.26 4.26 2007 2.64 4.10 0.35 445 1.81 2008 4.31 0.35 4.66 4.66 2009 4.52 0.35 4.87 4.87 2010 4.75 0.35 5.10 5.10 Capital Cost 23.01 Maint. Cost 5.28 RR= 10%/ Note. VOC and Road Maintenance costs are based on SAR estimates.No. of vehicles is based on actual traffic counting up to 1994, and a 5% growth rate between 1995-2010. TABLE 7.6: NTC - BENEFITS RELATED TO MCC AND DRY CARGO TRAFFIC Year Tons Savings/ton Savings US$ $million 1990 89,373 47.47 4.24 1991 122,141 47.65 5.82 1992 179,090 48.45 8.68 1993 78,696 27.04 2.13 1994 80,663 27.04 2.18 1995 82,680 27.04 2.24 1996 84,747 27.04 2.29 1997 86,866 27.04 2.35 1998 89,037 27.04 2.41 1999 91,263 27.04 2.47 2000 93,545 27.04 2.53 2001 95,883 27.04 2.59 2002 98,281 27.04 2.66 2003 100,738 27.04 2.72 2004 103,256 27.04 2.79 2005 105,837 27.04 2.86 2006 108,483 27.04 2.93 2007 111,195 27.04 3.01 2008 113,975 27.04 3.08 2009 116,825 27.04 3.16 2010 119,745 27.04 3.24 1990-1992 NTC via rail/road (instead of Durban via Mchinji); 0-13 NTC via rail/road (instead of Durban via Tete); 1994-2010 NTC via rail/road (instead of Durban via Tete), assuming 2.5% growth per annumn; TABLE 7.7: NTC - BENEFITS RELATED TO FUEL TRAFFIC Year Tons Savings/ton Savings US$ $million 1990 50,958 83.47 4.25 1991 45,899 83.47 3.83 1992 48,873 83.47 4.08 1993 56,621 70.91 4.01 1994 97,058 70.91 6.88 1995 99,484 70.91 7.05 1996 101,972 70.91 7.23 1997 104,521 70.91 7.41 1998 107,134 70.91 7.60 1999 109,812 70.91 7.79 2000 112,558 70.91 7.98 2001 112,558 70.91 7.98 2002 112,558 70.91 7.98 2003 112,558 70.91 7.98 2004 112,558 70.91 7.98 2005 112,558 70.91 7.98 2006 112,558 70.91 7.98 2007 112,558 70.91 7.98 2008 112,558 70.91 7.98 2009 112,558 70.91 7.98 2010 112,558 70.91 7.98 1990-1992 NTC via rail/road (instead of Durban via Mchinji); 0-13 NTC via rail/road (instead of Durban via Tete); 1994-2000 NTC via rail/road (instead of Durban via Tete), assuming 2.5% growth: 2001-2010 NTC via rail/road (instead of Durban via Tete), assuming no growth; TABLE 7.8: NTC - BENEFITS SALIMA - BALAKA ROAD Year Average Daily Savings/ton VOC savings Salima-Balaka Road - 145 km Traffic US$ $ million 1990 ADT Savings/ Savings, 145 km 1991 Sep-94 Veh-Km, $ per year $ 1992 Cars 183.0 0.10 968,528 1993 253 0.15 2.01 Vans 54 7 0.20 579,000 1994 274 0.15 2.18 Buses 07 0.18 6,669 1995 288 0.15 2.28 Truck-Light 25.0 0.21 277,856 1996 302 0.15 2.40 Truck-Heavy 12.2 0.44 284,101 1997 317 0.15 2.52 Total 276 015 2,116,153 1998 333 0.15 2.64 1999 350 0.15 2.78 2000 367 0.15 2.91 2001 386 0.15 3.06 2002 405 0.15 3.21 2003 425 0.15 3.37 2004 446 0.15 354 2005 469 0.15 3.72 2006 492 0.15 3.91 2007 517 0.15 4.10 2008 543 0.15 4.31 2009 570 0.15 4.52 2010 598 0.15 4.75 TABLE 8: STUDIES INCLUDED IN PROJECT Study Purpose as defined at Status Impact of study I Appraisal I 1. GITEC, "Transport A feasibility study, Completed July 1985; Set the ground work for System Study of the project preparation, and financed through PPF to the project; the SAR Blantyre-Dar es Salaam detailed design for the the Government of depends largely on results Corridor," July 1885 NTC Malawi of this study. 2. Art Hansen, An assessment of Completed May 1987 Accepted as a guideline "Resettlement resettlement site and for the resettlement plan Consultant's Report to resettlement plan in Dar to accommodate the the World Bank: Malawi es Salaam construction of the MCC NTC Project," May 22 at the port of Dar es 1987 Salaam 3. Malawi-Tanzania NTC: To assess progress status Report completed July No real change in lack of Dry goods facilities: Dar of the resettlement of the 1991. implementation of the and Mbeya, Report on Kwasini squatters in resettlement plan. resettlement, July 1991 Yombo, roughly a year (Draft Final) funded by after the site of Kurasini ODA. was cleared: and to provide guidelines for actual implementation of the resettlement plan. 4. Laymeyer International An overall supervision of A report covering most of Provided the necessary Consulting Engineers/ the MTC Project the project's components documentation and Sellhorn Engineering was completed follow up as envisioned Company, Consortium, November 1994. It in the SAR Malawi Northern includes II individual Corridor Project reports. The only Consulting Services, remaining components to Final Report. November, be reported on are: 1994 supply of slipway winches, Monkey Bay; and construction of fuel facilities at Dar-es- Salaam and Mbeya. 5. Government of Malawi, A coordination mechnism Last report, No 14, was Expedited completion of John Ryder Project to expedite completion of submitted for December the NTC project Coordinator, Progress the NTC project. This is 1994 Reports for the an addition to the original completion of supervision component of outstanding works in the project in the SAR connection with the NTC project TABLE 9: STATUS OF LEGAL COVENANTS Malawi - Northern Transport Corridor Original Revised Covenant Present Fulfillment Fulfillment Description of Agreement Section Type Status Date Date Covenant Comments Article IlI 3.03 12 CP The borrower will consult with the Investment in the NTC was generally Association prior to undertaking any major according to the covenant. However, in other investments in its transport sector, including sector, i.e. aviation the government did investments in vessels and port maintenance consult with the Association. in Lake Malawi. Article VI 3.04(a) 5 C 06/30/88 The borrower will take all necessary measures The MCC Company was established, and has or later to establish the MCC Company by June 30, been operating the NTC as envisioned in the 1988 or later date as may be agreed by the SAR Association. 3.04(b) 5 C 06/30/88 The borrower, prior to the establishment of or later the MCC will furnish the Association, for its review, the memorandum and articles of Association. 4.01 2 CP The borrower will furnish the Association not Audited reports have always been submitted later than 6 months after the end of each year later than required. The last report covered the for MRHC, MR and the MCC, and 9 months period ending March 30, 1994. As final after the end of each year for NTC and MWS, disbursement took place on April 12, 1995 the a certified copy of the report by the auditor. borrower has been requested to provide audited reports for the period ending March The MR maintains with respect to the LS 30, 1996. 4.02 (a)(i) 12 NC operation the following ratios of total operating expenses to total operating revenues: not more than 100% FY88/89 not more than 95% FY89/90 not more than 90% FY91-FY94 It has been agreed between MR and the Govt. That LS will have full operational autonomy in management and finance from April 1, 94. But due to the poor performance in the past years and the yearly operational losses of around MKl0 million the restructuring and privatizing of LS was included as a component of the Malawi Railway Restructuring Project. Original Revised Covenant Present Fulfillment Fulfillment Description of Agreement Section Type Status Date Date Covenant Comments 4.02(a)(ii) 12 NC 06/30/91 Restructure lake passenger-service, with a same as 4.02(a)(i) view to eliminate all losses no later than 06/30/91 4.02(b)(c) 12 NC Before Dec. MR will provide the Association a review of same as 4.02(a)(i) (d) 31 of each whether it will meet the guidelines above. If year not, the borrower will take all necessary measures (including change in rates and frequency of service) to comply with these guidelines. 5.01 C Operate the project with sound administrative. financial, transportation practices and engineering practice Covenant Type: Present Status I Accounts/audits 8 Indigenous people C covenant complied with 2 Financial performance/revenue generation 9 Monitoring, review and reporting CD complied with after delay from beneficiaries CP complied with partially 3 Flows and Utilization of project fund 10 Project Implementation not covered by NC not complied with categories 1-9 Counterpart funding 4 11 Sectoral or cross-sectoral budgetary or other Management aspects of the project or resources 5 executing agency 12 Sectoral or cross-sectoral Environmental covenants policy/regulatory/institutional action 6 Involuntary resettlement 13 Other 7 TABLE 1OA: BANK RESOURCES: STAFF INPUT Stage of Project Cycle Planned Revised Actual Weeks Weeks Weeks Through appraisal 0 0 50.8 Appraisal-board 0 0 74.0 Board-effectiveness 0 0 11.8 Supervision 89.0 94.0 69.8 Completion 0 10.0 8.1 Total 89.0 104.0 214.5 TABLE 10B: BANK RESOURCES: MISSIONS Performance Rating Stage of Project Cycle Month/Year No. of DaYs in Specialized staff skills Implementation Status Development Objectives _I Persons field represented Types of Problems Through Appraisal 11-12/84 4 11 HE, RE, TEC. EC 4-5/85 4 12 HE. TO, TEC. FA 10/85 5 17 TO,FA.EC(C).HE.TEC Appraisal through 2/86 4 19 LE, HE, PO. FA Board approval 6/86 1 N/A HE 10/86 6 5 EC,TEC.HE,FA,CO,DIS 2/87 I N/A HF 5/87 1 12 RS(C) 10/87 I 15 HE Board approval through 2/88 1 N/A HE Effectiveness Supervision 9-10/88 2 24 HE. PE 2 I T, F 6/89 2 12 HE, EC 3 3 F 6-7/89 1 10 PE 2 1 T 4/90 1 15 HE 2 2 M, T 10/90 1 10 HE 3 3 M, T 8/91 2 5 HE,FA 3 2 M.T 3/92 1 7 TE 2 1 T 7/92 2 13 TE, PE 2 2 T, F 10/92 2 8 TE, PE 2 2 M, T, F 2-3/93 1 7 PE 2 2 M. T, F 9/93 1 5 PE 2 1 F 1 4/94 1 8 PE S S Completion - - - - 1/ I-Problem frec; 2-Moderate problems, 3-Major problems with appropriate actions being taken to address them: S-Satisfactory 2/ Combined with supervision/preparation missions for other projects 3/ HE-Highway Engineer: RE-Railway Engineer, TEC-Transport Economist EC-Economist. TO-Transport Operations Specialist; FA-Financial Analyst: LE-Legal Officer: PO-Port Operations Specialist, CO-Counsel: DIS-Disbursement Specialist: RS(C)-Resettlement Specialist (Consultant): TF-Transport Engineer. PE-Port Engineer 4/ M-Municipal: T-Technical: F-Financial TABLE 11: NTC - TRAFFIC THROUGH DIFFERENT CORRIDORS 1990 1991 1992 1993 1994 1995 Imp Exp Total Imp Exp Total lm Exp Total Imp Exp Totaf 'mp Exp Total Imp Exp Total N TC (via Kaporo( Fuel 50,958 50,958 45 899 45,899 40 ? 48.873 56.521 56,621 97,058 97,058 68831 68,831 Dry Cargo 65.517 23856 89 373 86 -14 35 527 122,141 1454: 33,619 179,090 119.628 16.181 135,809 65.134 13,562 78,696 30,627 6,000 36,627 Sub-total 116,475 23856 140 331 132 113 35,527 168,040 19,; 33,619 227,963 176249 16181 192,430 162,192 13,502 175,754 99458 6,000 105,458 Mchin%_(via ZambA) Fuel 63,375 63,375 124,760 124,760 118 004 118,004 47,739 47,739 22,820 22,820 7,683 7,683 Dry Cargo 84,945 27,784 112,729 695,269 84,988 780.257 260 780 35,222 296,002 31,187 10,489 41,676 39,736 17,752 57,488 26,171 6,446 32,617 Sub-total 148,320 27.784 176,104 820,029 84,988 905,017 378 764 35,222 414,006 78.926 10,489 89,415 62,556 17,752 80,308 33,854 6,446 40,300 Tete via SA and Mozambiq ue Fuel 76,191 76,191 6,875 6,875 18.949 18,949 54,651 54,651 54,514 54,514 25,310 25,310 Dry Cargo 378,328 144,151 522,479 66,000 15,020 81 020 433,554 118,218 551,772 550,664 109,133 659,797 391,114 123,556 514,670 143,039 52,198 195,237 Sub-total 454,519 144,151 598,670 72,875 15,020 87,895 452,503 118,218 570,721 605,315 109,133 714,448 445,628 123,556 569,184 168,349 52,198 220,547 Nacala Corridor Fuel 1,779 1,779 4,491 4,491 7.203 7,203 11,355 11,355 11,650 11,650 8,390 8,390 Dry Cargo 19,874 9,471 29,345 24,747 14,076 38,823 48,433 13,585 62,018 69,944 16,926 86,870 59,704 26,084 85,788 35,686 26,038 61,724 Sub-total 21,653 9,471 31,124 29,238 14,076 43,314 55,636 13,585 69,221 81,299 16,926 98,225 71,354 26,084 97,438 44,076 26,038 70,114 All Corridors Sub-total fuel - - - - - - 192,303 192,303 182,025 182,025 193,029 193,029 170,366 170,366 186,042 186,042 110,214 110,214 Sub-total dry cargo 548,664 205,262 753,926 872,630 149,611 1,022,241 888,238 200,644 1,088,882 771,423 152,729 924,152 555,688 180,954 736,642 235,523 90,682 326,205 Grand Total 1740,967 205,262 946,229 1,054,655 149,611 1,204,266 1,081,267 200,644 1,281,911 941,789 152,729 1,094,518 741,730 180,954 922,684 345,737 90,682 436,419 Source of Data: Ministry of Transport and Civil Aviation 1) 1995 figures are provisional for all boarders for January - June (first half of 1995) Table 12: Traffic through different Corridors 1,400,000- 1,200,000- 1,000,000 800,000 0 Nacala OTete 0 WMchinji 600,000 ENTC 400,000 200,000 - 0 - dW.- 1990 1991 1992 1993 1994 1995 Year 1/ 1995 figures are provisional for all boraders for January-June (first half of 1995), multiplied by 2. ANNEX 1. AIDE MEMOIRE NORTHERN TRANSPORT CORRIDOR (CR. 1879-MAI) WORLD BANK SUPERVISION MISSION I. INTRODUCTION 1. A World Bank (IDA) mission comprising Mr. Sture Karlsson, Port Engineer, Energy and Infrastructure Division, Eastern Africa Department, (AF2EI) visited Malawi between April 20 and 27, 1994, for supervision of the Northern Transport Corridor (NTC) Project, Credit 1879-MAI. 2. Meetings and discussions were held with the Ministry of Transport and Communications (MOTC), Ministry of Works (MOW), Economic Planning and Development Department (EP&D), as well as with representatives of Lake Services, Malawi Cargo Centers (MCCL), and with Lilongwe- based representatives of USAID. Close liaison was maintained with The World Bank Resident Representative's Office. 3. This Aide Memoire, which will be submitted for approval of IDA Headquarters, highlights the main observations and findings of the mission, and records the understanding reached with MOTC and MOW. 4. The mission wishes to record its appreciation for the assistance, cooperation and courtesies extended to it by the Government of Malawi. 5. As indicated in a telex to GOM of April 6, 1994, the NTC supervision mission's objectives were to review: (i) progress on the completion and correction of outstanding items at the Cargo Centers in Tanzania, and the two Lake Ports at Chilumba and Chipoka, including the issue of dredging of the two ports; (ii) progress on the construction of Ngodzi Bridge and Boarder Post at Songwe; (iii) status of finalizing a lease agreement between the Government and Malawi Cargo Centres Limited (MCCL); (iv) training of port staff; (v) procurement issues; (vi) project costs; and (vii) preparations for the Project Completion Report (PCR). II. PROJECT IMPLEMENTATION STATUS 6. Cargo Centres at Dar es Salaam and Mbeya. It was reported that the drainage work at Mbeya was almost completed, but that there were a few new outstanding items identified, which preferably could be added to the existing contract by means of a variation order. Outstanding items are related to the security wall, sound-proofing to offices and the crane cable channel, and cost estimated at around US$ 8,900. MOTC informed that for each item three quotations have been obtained, and that the contractor on site was the lowest for each of them. The mission agreed to the proposal to include the works in the existing contract, and that a no objection will submitted. It was, however, emphasized that the additional works must be completed before June 30, 1994, if they are to be funded under the Credit. NTC Aide Memoire - 2- April 26, 1994 7. It was further informed that Kfw has agreed to finance most of other outstanding items at the two cargo centres, but that there is a shortage of funds to complete minor civil works in Dar es Salaam related to the fire fighting water reservoir, security wall and guard shelters, warehouse lighting alterations, and minor modifications to offices and workshop areas. The seven identified items are cost estimated at around US$ 49,000 in total, and quotations have been obtained from local contractors. The mission agreed to the proposal to carry out the works under funding from the Credit, provided all works can be completed by June 30, 1994. 8. Construction of Border Post at Songwe. The original contract for the civil works did not include provision for water supply and electricity. MOTC requested the IDA approval of including the construction of a water tank, pipe reticulation, submersible pump and motor including pumping house for the provision of water supply, and the erection of overhead lines from the generator, as well as modifications to the parking space and some plantations in and around the area.. Additional cost for the works is estimated at around MK 555,000. The mission agreed to the proposal to include the works as a variation order to existing contract, and will arrange for a no objection to be issued. MOTC was, however, reminded that the additional works must be completed by June 30, 1994, if they are to be funded under the Credit. 9. Salima - Balaka Road. The actual date of completion of the works was November 19, 1994, ahead of the contractual completion date. The contractor is now involved in de-silting and re-grading of drainage channels, and repairs of localized embankment scour. The second coat of paint to the road markings on Contracts 11/91 and 32/91 has also been applied during the past month. As most of the rectification work has been completed, the contractor has now advised the Engineer that he intends to discontinue maintenance activities, and return later this year to complete outstanding maintenance activities. With regard to claims it was reported that the contractor has submitted in total 38 claims, of which around 50% have been substantiated. The Engineer, however, is confident that previous estimated total contract value, MK 7,626,000 including estimated value of claims, is appropriate. 10. Ngodzi Bridge. The mission traveled together with the consultant to visit the site. It was noted that both abutments, as well as the center pier were completed, and that steel beams for half of the bridge span were delivered and erected. The remaining steel beams will be delivered within two weeks, by the time it is anticipated that deck form work and false work for the first span will be completed and ready for concreting of the bridge deck slab. By providing separate form work and false work for each of the bridge's two spans (instead of providing one set, stripping 14 days after concreting and re-erecting as originally planned), the contractor is optimistic that these inputs will lead to a return to the program, and the completion of the works by June 30, 1994. 11. Karonga - Ibanda Road and Bridges. The construction of the paved road and five bridges was completed and opened for traffic in 1991. All five bridges, however, have developed cracking in the concrete deck slabs, and MOW, with financial assistance from the European Community, has appointed a consultant to investigate the causes of these cracking and to advise on remedial measures to be adopted in order to rectify the situation. Four of the bridges are located immediately north of the town of Karonga in Malawi, whilst the fifth bridge is situated some 2 km across the border in Tanzania. The five affected bridges are all major river crossings and are composed of various multi- span arrangements comprising steel/concrete composite bridge construction. Within a short period NTC Aide Memoire -3 - April 26. 1994 after the road was opened the concrete deck slabs were found to be exhibiting cracking of varying patterns, which caused concern as to the structural integrity of the bridges. 12. The consultant, in his report dated February 1994, concludes that the cracking does not at present unduly compromise the structural integrity of the bridge decks, but will reduce the durability of the reinforced concrete sections by increasing the permeability and thus the incidence of corrosion of the reinforcement. The service life of the structures will thus be reduced unless remedial works are undertaken. 13. Several different, but sometimes inter-related factors have been identified that have led to the variety of cracking seen in the concrete of the bridge decks. It is concluded that the following have contributed to the concrete cracking: * Insufficient attention has been paid to the detail design in the provision of reinforcement to control cracking induced by early thermal movement stresses in the concrete deck coupled with long term shrinkage movement being restrained by shear connectors to the steel beam members. The effects of this may have been increased by the use of high cement contents in the concrete, although the cement content is just within specified limits. This element of the phenomena is the responsibility of the designer/specifier rather than the contractor; * Secondary cracking has also arisen from drying and plastic shrinkage during the curing period of the concrete. No definite evidence was found of the curing methods adopted by the contractor, but there remains suspicion that better protection of the concrete during curing would have reduced the incidence of this cracking; 14. The consultant recommends that a waterproofing deck membrane and surfacing should be applied to the bridge decks affected by the cracking, but do not consider it necessary to undertake major concrete repair works. The consultant, furthermore, suggest that in the future the form of composite construction used for these five bridges should be avoided, particularly for the longest spans, and that more attention should be paid to accommodating thermal movement. 15. Ibanda - Uyole Road (Tanzania). MOW reported that the rehabilitation of this 98 km road on the Tanzanian side, delayed due to insufficient funds, is now expected to be completed by July 1994. The works are funded by EEC, EDF and The Netherlands. 16. Chilumba Port. The mission was informed that the rectification's required for the fuel pumps and pipelines in Chilumba now are completed, but that the commissioning of the works have not been carried out due to shortage of fuel. The modification works have been entirely financed by the GOM. 17. With regard to dredging of the port the mission was informed that a team from the contractor Kier International visited the port on April 16-17 to investigate the soil conditions as well as quantities to be dredged. There is a shallow ridge running parallel to the container quay wall, almost in the middle of the basin and some 15-20 meter from the quay wall. By hammering and driving a steel bar into the ground, the diver concluded that most of the material should be feasible to excavate with a grab from a crane positioned on a pontoon. NTC Aide Memoire -4- April 26, 1994 18. Requested by MOTC, and based on the survey carried out as described above, the contractor submitted a proposal on April 25, 1994 regarding dredging of the port of Chilumba. The contractor suggest to mount a crane upon a barge with which grabbing and/or dragline operations will be carried out. The excavated material will be deposited on the barge and will, from time to time, be removed either into deep see water or on the quay apron to be removed by a front-loader. Total cost is estimated at Lstg. 36,340 (around US$ 50,000) divided into mobilization, demobilization and a unit rate for the 1,600 m3 material to be dredged. The quotation from the contractor excludes rent of floating craft (barge + tug boat), which is supposed to be provided by the Client (MOTC). The mission concur with the recommendation by MOTC that the dredging of Chilumba, including the cost of renting required floating craft for the dredging at both Chilumba and Chipoka, should be financed under the provisions made in Infrastructure I project (Credit 2065-MAI), and undertook to discuss with the task manager. 19. Chipoka Port. The mission was informed that Kfw has agreed to allocate savings from Salima-Balaka Roads Contracts to finance Phase I of required dredging, provided that dredging of Chilumba can be funded under the World Bank Credit (see. 18 above). The quantities to be dredged in Phase I are about 25,000 m3, and cost estimated at around DM 200,000. This initial dredging would allow the container vessel to start its operation without major interference with Phase II dredging, to be carried out when the new dredger, funded under a USAID grant, will arrive in late 1994. The dredging contractor, Kier International, will start mobilization of pumping equipment immediately, and it is anticipated that the works can commence in late May, and be completed within 8-10 weeks. It is foreseen that dredging in Chilumba will be carried out immediately after the works in Chipoka have been completed. 20. Lake Services and Monkey Bay Shipyard. The management of Lake Services informed that the issue of defect slip winches eventually seems to be resolved, and that the supplier will provide the new winches, although no firm date has been suggested when this long standing issue will be resolved. It was also informed that the new dredger, to be funded under an USAID grant, is ordered and will be delivered within 5 months. Furthermore it was reported that the modification and extension of the floating dock, wholly funded by GOM, is slightly behind schedule and is now scheduled to be completed by June/July, 1994, and that the installation of new main engines for the passenger vessel Ilala has recently been completed, and is currently under commissioning and sea trials. 21. The mission was further informed that as a step towards the complete autonomy of the Lake Services as a separate legal entity, prior to possible privatization, it has been agreed between MR and the Government that LS, with effect from April 1, 1994, should have full operational autonomy in its day to day management, including a separate accounting function and financial independence. However, the financial and operational performance of LS has been poor in the past, with substantial yearly operational losses (estimated at around MK 10 million in FY95), and the issue of subvention of the predicted deficit for FY95, and provision of sufficient working capital for LS to operate its activities, has not been resolved as yet. 22. Given the overstaffing and overcapitalization of LS, commercial viability can be achieved only by implementing a comprehensive plan aiming at increasing efficiency and reliability of operations, radical restructuring and privatization of part or the whole of LS, and involving the private sector in core activities. Simultaneously there would be a need of aggressive marketing to NTC Aide Memoire - 5 - April 26, 1994 convince the market that there is a role for LS to play in the transport sector, particularly with regard to freight traffic. 23. The restructuring of Lake Services is included as a component of the Malawi Railways Restructuring Project, which was appraised prior to this supervision mission. As an initial step to the preparation of restructuring Lake Services, it has been agreed to utilize proceeds from Credit 1879- MAI to finance a privatization/commercialization study on the potential of privatizing part or the whole of LS, including the issue of operations of the ports, particularly Chilumba and Chipoka. Draft TOR is attached as Appendix 1, and the study will be completed before the closing date of the Credit on June 30, 1994. 24. Consultancy Services, MOTC informed that a letter will be submitted shortly to the Resident Mission requesting for an extension of Mr. Ryder's contract for a period of 3 months. Mr. Ryder's services are to be funded under the Infrastructure I Project, Credit 2065-MAI. 25. The MOW once again brought up the issue of outstanding invoices from the consultants Lahmeyar International, originally in the sum of DM 152,379.60, but now reduced to around DM 107,000. As previously conveyed, the mission informed that in the first instance this dispute has to be discussed and eventually settled between the GOM and the consultants, as provided for in the contract signed between the parties. After the parties have agreed, the issue will be reviewed by The Bank for further consideration. However, given that the additional services eventually agreed by the parties were carried out some years ago, it is not likely that a no objection to amend the consultancy agreement, for financing under the Credit, would be given retrospectively. 26. Technical assistance and training, During the previous supervision mission in September, 1993, it was agreed to postpone the provision of long term technical assistance (ships captain and chief engineer), that was planned for a duration of one year to assist in the operation of the new container vessel. The main reason was attributed to the dredging issue, and that without dredging of the two ports the container vessel could not start its operation and calling at the two ports. As the project now will be closed on June 30, 1994, and the dredging of the two ports will not be completed by the closing date, it was agreed to cancel this component of the project. 27. Regarding training of port staff it was agreed to cancel also this component of the project, as the training concept was based on the participation of the container vessel in the port of Chipoka. The mission informed that training of port staff, considered essential for a successful operation of the upgraded ports, is intended to be included in the Lake Service's component of the recently appraised Malawi Railways Restructuring Project. 28. Project Cost. The mission, together with the Financial Controller of MOW, carried out a thorough review of the project cost, although lack of information regarding actual SDR equivalents for applications made since May 1993. The revised financial statement, Appendix 2, shows that there are sufficient funds to complete all outstanding items agreed on, and that there would still be an uncommitted balance of around SDR 425,000. 29. The mission emphasized that the closing date of the Credit is June 30, 1994, and that uncommitted funds at the closing date will be canceled. It was further informed that withdrawal after closing date to cover payments made, or payments due for services that have been provided on or NTC Aide Memoire -6- April 26, 1994 before the closing date, might usually be suggested for a limited period not exceeding four months. The GOM, however, requested The Bank to favorably consider that payments for services provided before the closing date will be accepted for a period of six months after closing date, until December 31, 1994. The main reason for this request is to allow for payment of retention moneys for different contracts, particularly the rehabilitation of Salima-Balaka road. Given the past difficulties regarding this roads contract, where the original contract had to be suspended and a re-tendering of the works carried out, and the fact that the new contracts were completed in advance of the contractual completion date, the mission supported the GOM request for an extension of the withdrawal period to 6 months after the closing date, and undertook to bring the issue to the management for further consideration. 30. Auditing. The mission reminded MOW and MOTC that the overdue audited report for 92/93 project account has not been submitted. The Financial Controller informed that the financial statements were issued in late January, and submitted to the Auditor General. It was originally agreed that the accounts would have been audited by the end of February. It is now anticipated that the accounts will be submitted to the Bank before May 17, which is the deadline notified by the Bank until the account will be suspended. 31. Covenants. The status on compliance of covenants is reflected in Appendix 3. With regard to the lease agreement between the GOM, Malawi Railway Holding Company (MRHC) and MCCL, it was informed that the a draft agreement has been circulated to relevant parties for comments, and that the aim is to finalize the agreement for signature before June 30, 1994. 32. Project Completion Report (PCR). The World Bank Guidelines on preparing the PCR was handed over to representatives of MOW, who undertook to coordinate the work between the different agencies involved in the implementation of the NTC-project. It was tentatively outlined that Part I and 111, to be prepared by the Bank, would be ready for submission to the Borrower by early November, 1994, and that Part II, to be prepared by the Borrower, would be ready within 4 weeks of receipt of Part I and Ill. 33. Next mission. The next mission, and last supervision mission of this Credit, is tentatively planned for late June. Lilongwe April 26, 1994 B. W. Zingano Sture Karlsson Principal Secretary Task Manager NTC Aide Memoire - 7 - April 26, 1994 Distribution MOTC: Principal Secretary, Chief Transport Planning Officer, and Principal Transport Planning Officer. MOW: Principal Secretary, Chief Planning & Program Evaluation Officer, and Controller of Roads. MOF: Principal Secretary, and Deputy Secretary for Multilateral Aid. ED&P: Principal Secretary MR: General Manager Lake Services: Divisional Manager MCCL: General Manager. World Bank: Resident Representative. Donor Community: USAID, BDDSA, KFW (to be distributed by the Office of the World Bank Resident Representative). ANNEX 2. W fKreditanstalt KNW fir Wiederauffiau Postfach 11 1141 60046 Frankfurt em Main TELEFAX - TELEFAX - TELEFAX - TELEFAX Telefax number: 001-202-473 8326 aticarincharge: Mr. von Bechtolsheim our ref.: Bhh/Min IBRD - Energy & Infrastructure Op. Div. *xtension: 2913 - Southern Africa Department - date: February 28, 1996 Att Mr. S. Karisson Washington, D.C. Telefax number: 00265-743480 cc: NTCP Coordinator Att. Mr. J. Ryder Telefax number: 00265-780250 German Embassy Aft. Dr. W. Klapper L2b2 - Financial Cooperation with Malawi ICR on Northern Corridor Project (# 1879-MAI) Dear Mr. Karisson, as discussed on the phone, please find a condensed write-up of our remarks to the above report. To repeat, we feel that the ICR generally gives a true and fair assessment of the project. As we shall carry out a final evaluation of the components financed through KfW (fuel facilities. container vessel and Salima-Balaka road), we shall be highly grateful to receive your disaggregated calculations concerning the economic assessment of NTC fuel traffic (ICR/table 7.4) and the Salima-Balaka road (ICR/table 7.5) - many thanks in advance! JAL282\_MALAWI\MIN10422.DOC Parmengaranstrade 5- Telax: 4 15 25 0 kwd Landeian'nsitmbnk FrndutAklin 80325 Frankfun am Main Tatefax: (89) 74 31 29 44 Konionummet 50020400 Teron (069) 74 31 40 S.W.I.F.T.: KFWDEFF BankleitMah 500 204 00 Ut1 3 EVZ1 IN Idnval MENi H:01 9661 *~~ -2- Coming to the contents of your ICR. allow us the following remarks: * part 1. para 3 (last line): the term "less costly modes" is certainly correct on a theoretical basis, but does not necessarily take into account actual managerial and organisational capacities of Lake Services and TAZARA. * part 1. para 13: Funding through KfW covered construction costs of 126.4 km (Salima- Mua and Mua-Penga Penga) as wel6 as 2.5 km access to Chipoka - part 1, para 17: Anecdotal evidence suggests that dredging problems were not the only cause for the stand-still of the container vessel. After dredging - in the first half of 1995 - the vessel's services were advertised, but demand response was negligible, possibly related to apprehensions concerning the associated "broken transport chain". - part 1, para 45 c: this point was of particular importance for an institution, which - like KfW - is not continuously represented in Malawi. Best regards and thanks for your efforts. KREDITANSTALT FUR WIEDERAUFBAU C S £1N IUMNVE Mx~ H:01 9661 q~a -6z UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT MISSION TO MALAWI P.O. Box 30455 NICO House, City Centre Lilonw 3 Tel. :782 455/378/694 MalaV^vi Telex: 44627 .M....... Fax :783 181 n 0 8 1996 MALAWl: NodbThr Trsport.: AF1Er: CaridorTrampori I Los No Mr. Jeffrey Racki R"""i=-d7: Division Chief 2 .Ar 3. Rime Southern Africa Department 4. AISC -oBI-oss Energy and Infrastructure Division Acdon Taken on Tncoming Correspondence The World Bank Washington, D.C. 20433 Date im Sined By Dear Mr. Racki: Malawi - Northern Transport Corridor, Cr. 1879-MAI Implementation Completion Report USAID Malawi appreciates the opportunity to comment on the Implementation Completion Report prepared by IBRD staff covering the Northern Corridor project. USAID was one of the donors participating, using funds appropriated for the Southern Africa Regional Program. The Implementation Completion Report finds the Project to generally have been successful, although rates of return on the whole were less than forecast. However, certain of USAID's portions of the Project, primarily port development at Chipoka and Chilumba, and vessel repair facility improvements at Monkey Bay, turned out to be poor or non-performing in the IBRD analysis. There is no disagreement with this conclusion. It is fitting that we take this opportunity to try to fathom what led to investment decisions which have not begun to pay off, and which are unlikely to do so given the present economic organization of transport along the Northern Corridor. We do so from hindsight and with limited institutional memory. We are unable to find any indication that a decline in the depth of the water at the two ports was considered as a possible risk before making substantial investments in freight handling equipment there. U.S. Postal Address: USAID/Lilongwe (ID) Washington, D.C. 20521 -2280 -2- Nor was the complexity of the multi-modal system adequately analyzed- from Dar es Salaam by rail, road, vessel, and back to rail to arrive at Blantyre. Even if the two ports had had adequate water depth, use of three different modes for the less than 1000 km. stage between Blantyre and the TAZARA Railway at Mbeya, Tanzania would have been out-competed by through trucking arrangements. Only petroleum imports, whose modal choice is decided by the Government's Petroleum Control Commission, have used the water route to any appreciable extent. Fortunately for the rest of the Project, the water route was redundant. The welcome return to peace in Mozambique has brought the potential for Northern Corridor cargo volume down to normal, much lower numbers while the successful highway improvement programs have solidified the comparative advantage of trucking on the NCR. In retrospect, risk analysis might have suggested that possible implementation delays, an earlier than expected reopening of the Mozambican transport routes, the possibility of falling Lake Malawi water levels, and the redundancy of the water route could have combined to some degree to make the lake cargo investments doubtful starters. While it may have been outside the scope of the Implementation Completion Report, we believe it is now appropriate to begin the process of finding alternative uses for the non-performing assets at Chipoka and Chilumba. The gantry cranes and some of the other installations have alternate uses, and should be made available to the private sector for redeployment. In a larger sense, the monolithically structured Malawi Lake Services needs to be restructured by vertical separation so that its various parts are subject to competitive forces and as a result appropriately sized. We suggest that the Monkey Bay repair facilities and each of the ships could be individually privatized and that each of the ports could become the responsibility of the shippers in its hinterland. And Malawi Cargo Centers Ltd. (of which Malawi Railways Holdings Ltd. owns a substantial share) should be discouraged from 'filling the gap' in trucking services between Mbeya and Chilumba that falsely appears to be a cause of the low volume of lake cargo carried to date. We appreciate the opportunity to have this comment included in the Implementation Completion Report and look forward to collaborating with you in the redeployment of lake transport assets especially in view of our historical involvement in this area. Sincerely, nthia F. Rozell Mission Director EUROPEAN UNION DELEGATION OF THE EUROPEAN COMMISSION IN THE REPUBLIC OF MALAWI Lilorigwe, 19 February 1996 File Ref.: RR/ftp/378 TELEFAX MESSAGE To : World Bank Att. : Mr Jeffrey Racki Telefax No. 101 1 202 477-1234 No. of pages : 2 (including this page) Subject: Northern Transport Corridor, Cr. 1879-MAT Implementation Completion Report Ref.: Your note dated 16.1.1996 Dear M Racki Find be,ow the comments on the implementation report: They r. rr to paragraphs and I hope they can be of some help. I wouk like to stress the importance of our continuous cooperation on a commoi agreed methou )logy and strategy in the infrastructure sector in Malawi. Certainly the Northern Corridor has last much of its appeal since the Mozambiqve war is ever. Nevertheless nobody should put down the level of attention on the different Corridors serving this landlocked country. We do believe still that the Corridor has to be completed (i.e. the terrible road between Karonga and Chiweta and the containerboat traffic established) before finally evaluating bow the transport market reacts to it. Evalu; c.'on Summary 7. A re-evaluated ERR of 7% is not unusual in under developed economies pa,ticularly ior project of a big size with many components. 8 As you cortainly know the majority of the shares of MCCL belong indirecty to GOM (Malawi Railways + Malawi LAk Service + Pctroleun Commission). The import of oil is "forced" into the corridor by one or the stakehalders of MCC, nevertheless. the profitability of MCC is more than questionable. 13. Maybe it is worth considering the lake component as supplementary/parallel component since it is unlikely that it will cver work. Europa house. Capital City, P.O. Box 30102, ULONOWE 3 Telaphowe: (2&5) 78.31.99 - TeLex: (0904) 44260 OELEGEUR MI - Fax: (265) 78.35.34 23'02 *96: 07 TS76I5 Jl4. Di:56.& -2- Part J: Performance assessment from IDA perspective 6a. Maybe it is worthwhile to include the road Dwangwa-Nkhata Bay Road (EDF 69%. KfW 31%, 1990 - 1994) that gives strength and scope to the Salima-Balal- Road otherwise meaningless to the NTC purposes without the lake component under operation. 8. To judge the success of the project exclusively through the reduction in transport costs may be too limitative in this case for several reasons. We could see the problem in a long term perspective and in connection with a more libersalized regional market. The creation of a transport network is important. This is far from being achieved but the NTC was and is in the right direction. 11. A design and a tender documentation is currently being prepared by consultants to tnddrike lhc remedial wwM (1996?. 12. EDF not EEC. 19. it is not clear whether the designed flexibility (summary P. 14) was the core problem or the lack of project management together with lack of project design (as it seems to me). 30. It could be useful to add that currently transport operators are trying to avoid the Corridor due to poor condition of the Karonga-Chiweta Road (109 km) that required a truck 5 to 6 hours of driving. A reference to the fuel import traffic (steered by GOM) going through the NTC should be made. Another factor to be mentioned is the monopoly of NASACO in Tanzania in handling the typical shipping lines and forwarders procedures in a very bureaucratic way. Table 1: It is remarkable to notice the change in assessment of the outcome from satisfactory to unsatisfactory (see draft report 25.5.95). Table 6: In relation to point 1 and 4, there seems to be a need to add something on the impact of the quality of the performance delivered. Yours sincerely PETER BECK CHPJSTIANSEN HEAD OF DELEGATION 18RD 19421 / ю гr К.Ьм8о гr \•и * »• �л• 'rf,y �� Г-.е �� eмzz.vuE�- �им ��°! \ ь� а' .;1 ч � i \ Ч.ыв Non .�_/+•.� �,.: ри51Ч5Ч I�г ТоЬао То � ZA1RE � -_ виGОiв1 - . _ _ см� кРыт. �� � - ". - � � �iido п�ьоb оРдм�о � _ тЧ ,}, .1 _ _ DагвгSйеап \ S L .�..Т '-� \ l 1 г' L� �... ; � г l s �' Кама ..••.- f- у �. МЬвю / `� Р.1а,1 j ; уа��_в ьи�е� �' `- . меiеп,. , � - u�oi , „ �` 7мУв � Кагоп � 1 ь mbo t и�.гоi � �.� - Т у � �,� �. ... ,. �, � � � МосИеде % - -.� /\�.J р. , ^ � ` ^ J'i lиЬвn � sh� ,�,,, , . MAlA1N1 J „ В.�, i -� i - Ati�o�A �--�-� иВо�Р� � � �� • г � 1 мсп,гу, � •ti�i v 1 �,1r�. Е� � � _. � ° �O _ -t ZAMBIA ,.'-�, ` . ,�а��'1' - 1 - ' i ' � Nою1а � �^0� lU5AK4 � ' ' +� . 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ROAD BE1NG 5П1рЕО г. л„ ггvЦксиD там Оиг+мЧ vи - � \ S лгю.д', mr ---- асндs ииоЕR СоrlsтисТlви нnАМЕ МА LLNXA F нwцви � -- MqpR PAVED ROADS �� �w " �� �LE50TM0 ааРп wrw+E - шwи • мсе�и � \ J .ьоР --^- маи а,елпашs Р^� гwиисио rпал a�rew и, wи+и+Е мо и.а+кв ��' �' • иnnowLL сллпаs �� р�+ � � �. о PRINCIPAI С1ПЕ5 i70вD мЕS9nЧ - ыИААЕ - l1йЧгА � мСг1вU °` аьп/д(Уд гидМ д1п9ч+ ьн G�В�г�ОиF MD и.SвК� у PORfi Г ф ПЙL ОМ Е5 $l4/ЧАг - LU5A1fA � Е�, RNERS пCV�D lUiцЧ - г.qваli - 1A1�5 г оь RОЮ �пОМ MR Е5 SцММ ьИ ШS�КА � SWAMPS А-7а рйьгD гЯ�гь1 D� 6 SVAN� 1М И�ЕУА � " _" �'- WгEl7NAПON4� BWиIW71E$ sЕтг bMen п]b FЧUROвD НгОМ WR 6 i�КМИг VИ MBEVA �� 7UVи --- ' lbrr Чl�вд i _ _- _ -_ - b�ËLгobrh .ио�.гпгs� �оо юо юо _ .оо юо � � �. .nn а гоа юо �т юо �w�.�....�+.....1� .��.rw�ц х и• п п• ю• г DECEMBER 1GB5 MALAWI NORTHERN TRANSPORT CORRIDOR PROJECT Project Roads, Construction and Rehabilitation DAR ES * Malawi Corgo Centers D A Fuel Handling and Storage Facilities 4 Port Improvements - Poved Roads -- - Poved Roads Under Construction •• Pcived Road, Proposed Principal Gravel and Earth Roads Railays SCorridor Route I Rivers o District Administrative Centers 9 National Copitals tnternational Boundories T A N Z A N l A Z A M B QAU .A OM Z A M l Q U E utNw - poka Nky MO0 Z A M B Q U E 2t TAZNA0 50 ,,,XaMI -b.E s , - L T AreicMJ 7o.-.1,00 !MAG',ING Report No: 15808 Type: Icý