Niger - Transport Infrastructure Rehabilitation Project

Report No. PIC4674 Project Name Niger-Transport Infrastucture ... Rehabilitation Project Region Africa Sector Urban Transport Project ID NEPA35608 Borrower Republic of Niger Implementing Prime Ministry Agency Ministry of Equipment and Infrastructure Ministry of Transport Environment Category A Date this PID Prepared February 1997 Projected Appraisal Date April 1997 Projected Board Date May 1997 1. Country Background. Niger is one of the poorest countries in the world with a per capita GDP of US$176 in 1994 and social indicators which are among the lowest in the Sahelian countries. Its rapidly growing population (8.9 million in 1994 with a 3.3% growth rate) is about half under 15 year old and 80% rural. Long dominated by an inefficient public sector, the formal economy depends on uranium, a primary commodity with poor prospects. Other source of wealth consist of subsistence agriculture and livestock. The Government has taken initial steps to improve economic management and to maintain a stable macroeconomic framework, conducive to private sector activity. In particular, it has taken full advantage of the devaluation of the CFA franc in early 1994 to restore competitiveness, provide a policy environment favorable to the private sector, and redirect public resources toward human resource development, infrastructure maintenance, and the provision of efficient services to support agriculture and preserve the fragile natural resource base. In reaction to a military takeover in January 1996, several donors have suspended aid causing uncertainty for the budget situation and medium term prospects. The Government has adopted in early 1996 a macro-economic program supported by an ESAF arrangement with the IMF. Government continued action on key reforms, the rapid solution to the political transition and the resumption of donor assistance will be key to the success of the program. 2. Transport Sector Background. The Government is committed to improve highway management and road transport performance to promote the competitiveness of Niger's economy and achieve the economic growth targeted for the future. The interurban road network is 14,000 km long, including 3,500 km of paved roads. The urban road network is estimated to be 840 km long, of which percent is paved. Road maintenance performance has deteriorated during the past five years mostly because of lack of incentives and salary arrears, low availability of equipment  (about 60 per cent for heavy equipment), insufficient financing, and cumbersome procedures. Because of lack of resources, the Government has concentrated its maintenance effort on a priority network of about 7,656 km. Even on this priority network, about one billion CFAF (one third of the current operating expenditures for road maintenance) is lacking to carry out maintenance with proper standards. About 55 percent of paved roads and 44 percent of earth roads are in poor condition. Most roads not recently built or maintained with external financing are 9- to 10- year old and periodic maintenance is crucial now to preserve road assets and prevent further costly rehabilitation. 3. The sector is managed by the Ministry of Equipment and Infrastructure. The Highway Department has a staff of 1,400 employees. MEI does not have a clear procedure to establish road maintenance and rehabilitation programs. A road data bank was set up under the Transport Sector Project (Cr. 1706-NIR closed on June 30, 1993). The data bank was maintained as long as the TSP was effective, but data have not been regularly collected since project completion. However, MEI's staff was trained to operate the data bank which was used for the preparation and the economic analysis of the proposed Infrastructure Rehabilitation Project after more recent data on road condition were collected. The strategy which provides the basis for establishing road maintenance programs by using the road data bank needs to be updated by changing methods of works and taking into account budget constraints as well as lessons learned from the experience of road maintenance in Niger during the past ten years. The new strategy is expected to be available by October 1997. 4. Lack of resources for road maintenance hampers sustainability of investments in the highway sector. The 1996 operating budget amounts to CFAF3.6 billion, about 2.1 percent of the national budget. 24 percent are for salaries, 72 percent for road maintenance related expenditures, of which most expenditures are ascribed to DMTP. As a first step to accelerate payment of contractors which do not have enough cash to bear long delays of the normal payment procedure through the Treasury, the Government will create by February 1997 a Road Maintenance Account with resources allocated from the Treasury. One billion CFA, one third of the operating expenditures, excluding salaries of civil servants in the Ministry, will be allocated to the Account. As a second step, to sustain road maintenance financing, the Government will create in 1998 a Road Maintenance Fund with resources coming from road user charges. The type of charges and their collection process have still to be defined. Revenues from existing road tolls are potential resources for the Road Fund. However, current revenues are only about one third of revenues estimated on the basis of traffic surveys. A study will be carried out in 1997 to prepare the creation of the Road Fund. It should include a revision of the road tolls system and consider the possibility of contracting, for some specific routes, one operator to operate road tolls and maintain the itinerary. 5. To improve efficiency, the Government has decided to progressively divest of road maintenance execution, use civil works contractors and focus on planning, programming, budgeting and supervision of works. The equipment pool will be transformed into a equipment rental company with private managers. The decision on the type of structure to replace the -2 -  equipment pool should be taken before October 1997; the structure should be created before September 1998. The Road Laboratory, which is responsible for the geotechnical supervision of road works, will change its statute before May 1998 in order to become autonomous and financially viable. The Highway Department will be restructured to reflect these changes. The Road Maintenance Account and the Road Fund mentioned above will contribute to promote development of small and medium contractors. In 1997, in addition to operating expenditures used for emergency operations and usually carried out by local contractors, about 500,000 dollars from the Government's budget will be used for pilot operations to develop the use of local contractors for routine maintenance. Starting in 1999, 100 percent of routine maintenance will be contracted out except in unsafe areas where it will be carried out by the army and the Ministry of Public Works. The Highway Department will be restructured before May 1998 to reflect changes in its role. 6. High transport costs are a major constraint to Niger's development. They result of the regulatory framework for international freight transport and restrictive practices by the road transport industry. Price regulation was abolished in 1994 except for petroleum products. Access to the industry is unrestricted. In 1996, the Government abolished the monopoly granted to the national road transport company (Societe Nationale des Transports du Niger, SNTN) for mining freight. SNTN is being restructured with interurban transport activities transferred to a private company created in 1994; urban transport activities transferred to a company jointly owned by Niamey's municipality, the State and other public investors created in December 1996; SNTN itself will remain as a semi-private freight transport company jointly owned by the State and a foreign private freightforwarder. Completion of SNTN's restructuring has been delayed because of lack of financing for severance payment of redundant staff, but is expected before June 30, 1997. However, although the Government has liberalized the sector, the road transport union (Syndicat des Transporteurs Routiers du Niger, STRN) has established a system to allocate domestic passenger traffic and international freight from Benin and Togo with negative effects on the economy: (a) international tariffs set by STRN are 50 percent above tariffs practiced by Beninese truckers; (b) the system prevents contractual relationships between shippers and truck owners; (c) implementation of the system is distorted in favor of large fleet; (d) the system prevents transport operators to invest in new vehicles; and (e) the safety and comfort of passengers is negatively affected because transport is not profitable enough to maintain the vehicles and passengers are not allowed to choose between buses in fair or poor condition. However, the allocation system does not apply to international freight between Niger and Nigeria, Ghana and C"te d'Ivoire, which represents about one third of all international traffic. Nor is the system applied to passenger traffic within an area of about 100 km around Niamey. Free competition for long distance passenger transport is also allowed between buses subject to the allocation system and smaller vehicles and SNTN buses not subject to the system. Competition also exists between bus stations which offer departures to the same destinations. To further reduce the negative impact of the current allocation system for passenger transport, the Government has launched discussions with STRN to implement bus schedules, which would let passengers decide on the vehicle they prefer to take. -3 -  7. The Government intends to revise the regulatory framework within which operates the joint Benin-Niger institution (Organisation Commune Benin-Niger, OCBN), which manages the Nigerien transit traffic through Benin. OCBN operates the Beninese railway from Cotonou to Parakou and is granted the monopoly for international freight transport between Benin and Niger. The railway carries also a substantial volume of passengers. Passenger traffic is most likely to be subsidized by freight traffic, although this cannot be substantiated because of OCBN's poor accounting practices. The Beninese and Nigerien Governments are committed to abolish OCBN's monopoly when road tolls being constructed on the road between Cotonou and Parakou are in service. This should result in the disappearance of the freight allocation system. Construction of road tolls has started but completion expected in December 1996 has been delayed and is now expected before the end of the first 1997 semester. Because privatization of OCBN is supported by the Nigerien Government but not fully by the Beninese Government, the Nigerien Government does not have full autonomy in the decision and no timetable has been agreed yet. 8. The Government prepared a plan of action to improve road safety in 1990. However, the cost of the plan estimated at about US$4 million was out of proportion with the Government's capacity to finance the plan. The only information on accidents date from 1990. That year, about 500 people had been killed, 1,000 people had suffered heavy injuries and 3,000 people light injuries. Road accidents had been estimated to cost about CFAF2 billion to the economy. The Department of Land Transport in the Ministry of Transport needs to be strengthened to be able to analyze and use efficiently information on accidents. The institutional framework needs to be revised to improve collaboration between public and private institutions involved in the sector. 9. The Government has proposed to ASECNA, the Air Safety Agency for Africa and Madagascar, to manage the airports. Nigerien airports are currently managed by the Civil Aviation Agency. The Department of Civil Aviation in the Ministry of Transport regulates the sector. The main airport is Niamey with about 130,000 annual passengers, mostly international. ASECNA is currently responsible for air traffic control. Although reliable information is unavailable, financial statements for Niamey's airport would be expected to be balanced. Because of a low level of traffic, those for secondary airport would show a deficit. Cross-subsidization between airports would be unacceptable if the amount of the cross-subsidy is too high, because it would make Niamey's airport unattractive especially for tourism. In this case, the management contract should be restricted to a few airports where revenues and expenditures can be balanced. However, to improve the management of secondary airports, a specific contract, which would specify requirements for Government subsidy, might be signed, provided that the contract includes a provision for contract cancellation if the subsidy is not paid. 10. Objectives. The development objectives are to improve the condition of the road network and efficiency and sustainability of road maintenance management and execution. The project will have specific objectives: (a) to implement immediate institutional reforms decided by the Government aimed at: (i) improving mobilization and use of scarce - 4 -  resources; (ii) developing road maintenance by contract; and (iii) focusing the role of the Ministry on planning, budgeting, programming and supervising road maintenance works; and (b) maintain the earth road network to prevent further costly rehabilitation. 11. Description. The project will include seven components: (a) Regraveling of earth roads: This component would include the regraveling of 1,060 km of earth roads; detailed engineering studies and site-specific environmental mitigation plans for works included in the project; environmental assessment of road maintenance works on two important roads of the priority network, not included in the project, crossing environmentally sensitive areas; supervision of works execution. (b) Improvement of road maintenance administration and management: This component would include: support to Government's divestiture of public works equipment rental activities; support to the Road Laboratory's restructuring; support to the Highway Department's restructuring; support to the Highway Department to improve road maintenance programming procedures, monitor road conditions and contract out road maintenance; training to strengthen the Highway Department's capacity in road maintenance programming, procurement and works supervision; implementation of a computerized system and procedures to manage the Road Maintenance Account; technical audits of annual road maintenance programs; financial audits of the Road Maintenance Account; study for the creation of a Road Fund; road maintenance strategy study; training in environmental considerations of staff in the environmental unit of the Ministry of equipment and staff of the Highway Department; equipment. (c) Rural road maintenance: This component would include the definition of a strategy involving beneficiaries in rural road management, the environmental impact assessment of civil works on the rural road network; the preparation of a pilot operation and the coordination of its implementation; detailed engineering studies and site-specific environmental impact assessments; supervision of works and civil works. (d) Road transport: This component would include: preparation of a road safety plan; assistance to the improvement of vehicle technical control of vehicles; assistance to the revision of the regulatory framework to improve protection of road assets, including axle load limitation; study of the links between transport and poverty; sensitization activities aimed at the road transport industry. (e) Civil aviation: This component would include the technical appraisal of Niamey's airport and an assistance to the commercialization of airport management. (f) Project management: This component would include: financial audit of the project accounts; implementation of a computerized management information system in the National Bureau of Coordination and provision of an accountant; and equipment. - 5 -  12. Financing. The total project cost is estimated at US$30.2 million. IDA's contribution will amount to US$.3 million. The Government will finance counterpart funding equivalent to US$2.8 million and taxes equivalent to US$2.1 million. 13. Implementation. The Prime Ministry will be responsible for the overall coordination of the project through the National Bureau of Coordination (NBC) and for the implementation of structural reforms identified in the Letter of Sector Policy being prepared by the Government. The Highway Department in MEI will be responsible for the highway component, including road maintenance strategy studies, engineering studies and execution of the earth road regraveling program financed under the project. The Department of Land Transport will be responsible for road transport-related studies. The Department of Civil Aviation will be responsible for the air transport-related studies. The National Council of Environment for Sustainable Development and the Department of Environment in the Ministry of Hydraulics will be advisors to MEI regarding environment-related activities. 14. Sustainability. Sustainability will be achieved through: (a) institutional reforms in the transport sector to improve the planning and management capacities of sector institutions and the mobilization of resources for road maintenance; (b) State divestiture of force account for road maintenance execution, public works equipment rental entity and restructuring of the Road Laboratory to improve its financial viability; (c) development of the Nigerien construction industry; and (d) execution of a focused training program. 15. Lessons Learned from Past Operations in the Country/Sector. The experience under the Transport Sector Project (TSP, Cr. 1706-NIR, closed on June 30, 1993) calls for a strong consensus between the Borrower and donors on objectives for any new project in the sector. This consensus was reached with the new Government which came on power early 1996 and which is committed to improved macro-economic management. The TSP's ICR also recommended to establish a road maintenance policy based on economic criteria, to strengthen road management capacities and to reactivate road management tools, all activities which are included in the proposed project. Lack of local funds for rural road maintenance hampered sustainability of the Feeder Roads Project. The proposed project will help develop a rural road maintenance strategy to address this issue which has remained unaddressed. 16. Rationale for IDA Involvement. The proposed project is consistent with the Country Assistance Strategy (CAS) discussed by the Board in May 1994. A new CAS is being prepared and expected to be completed by April 1997. The CAS is based on four major building blocks: (a) addressing long-term human capital (including poverty alleviation) and natural resource issues; (b) building public and private sector institutions to promote private sector based growth; (c) increasing efficiency of public resource management; and (d) supporting actions to facilitate supply response in the wake of the CFAF devaluation. Public resource management will be improved and private sector promoted under the project by divesting the State of road maintenance execution and focusing the role of the Ministry of Equipment and Infrastructure on programming, budgeting and supervision of works. IDA will have a critical role in - 6 -  assisting the Government in establishing a new framework for transport development and future donor interventions in the sector. Not many other donors are currently involved in the transport sector, especially in policy dialogue, and interventions are uncoordinated. Pilot operations carried out during the project will help establish a new strategy to sustain rural road maintenance, then develop the road network in the rural areas where poverty issues are critical. 17. Issues and Actions. During negotiations, the Government should agree: (a) to open a Road Maintenance Account to finance road maintenance expenditures with resources allocated from the Treasury; (b) to budget, starting with the 1999 budget, resources necessary to maintain the priority network in accordance with the timetable and the amounts determined on the basis of the outcome of the road maintenance strategy study and the study to create the Road Fund; (c) to carry out a financial audit of the Road Maintenance Account annually; (d) to carry out annually a technical audit of road maintenance works executed with Government and IDA funds; (e) to prepare annual budgets and Public Investment Programs in the transport and urban sectors in consultation with IDA; (f) to the letter of sector policy; (g) to key performance indicators; (h) to the carrying out by IDA of a mid-term review at mid- execution of the project to assess the Government's continued commitment to the objectives listed in the letter of sector policy and to the project's objectives; (i) and to the Project Implementation Plan, including management procedures of the Road Maintenance Account. 18. As a condition for Board presentation, the Government should ratify the letter of sector policy. As a condition for credit effectiveness, the Government should: (a) open in the Central Bank the Road Maintenance Account and deposit the initial amount; (b) open in the Central Bank the Project Account and deposit the initial amount; (c) open in a commercial bank the Project's Special Account and deposit the initial amount; (d) appoint the auditor of the Road Maintenance Account, the Project Account and the Special Account. 19. Environmental Aspects. The project is rated category A. During pre-appraisal, an environmental impact assessment of regraveling works on the priority earth road network was carried out which concluded that most of civil works carried out under the highway component of the project are unlikely to have any major adverse impact on the environment as they involve regraveling of existing roads and no new construction is intended. Environmental impact assessments will be carried out and measures to mitigate negative environmental impacts such as loss of vegetation cover, soil erosion, land degradation will be defined for each road as part of the engineering studies. A comprehensive environmental impact assessment will be carried out before appraisal on two existing roads with potential impact on natural habitats: the Gaya- Margou which cross the Dosso Reserve, created as a buffer zone for the W National Park; and the Margou-Ounditan road which serves the Dallol Bosso area, home of the last giraffes remaining in West Africa. The project will assist in the implementation of the mitigation and monitoring plans although works on these two roads are not included in the project itself. 20. An environmental impact assessment of road works, including - 7 -  maintenance, rehabilitation and construction, on the rural road network was carried out. The assessment identified roads which would need a full environmental impact assessment before the decision to carry out the road works is taken. As the project will finance only a pilot operation to demonstrate the sustainability of the road maintenance strategy which will be prepared with the project's assistance, the Government agrees that these roads will not be included in the pilot operation. Technical studies preliminary to the execution of the pilot operation will include site-specific environmental assessments. A environmental unit was created in the Department of Highway in the Ministry of Equipment and Infrastructure. Resources and training will be provided under the project to help in the startup of the unit. The proposed mid-term review will include a post-evaluation of the environmental impact of the project and formulate recommendations if necessary for the second half of the project. 21. Participation. A seminar was held to define the logical framework of the project. Constituencies involved in environment in Niger were regularly consulted during the carrying out of the various environmental assessments. Donors were informed on the discussions with the Government regarding the transport sector reform. The project will assist in the definition of a new rural road maintenance strategy based on a large consultation process of local governments and populations. 22. Program Objectives Categories. Environmentally Sustainable Development. Poverty Reduction. Private Sector Development. 23. Benefits. Benefits have been calculated for the regraveling of earth roads included in the project. They will result from savings in vehicle operating costs and preservation of road assets preventing further costly rehabilitation. Works included in the project yield an average Economic Rate of Return (ERR) of 57 percent. ERRs for individual roads range between 21 and 297 per cent. Benefits from the basic scenario have been compared to benefits resulting from other alternatives which were eventually rejected: (a) pavement of one among two earth roads with traffic above 150 vehicles per day and regraveling of earth roads keeping the overall project's budget constant; (b) postponement of works by two years until 2000; and (c) alternatives with a 10-cm and a 20-cm surface layer. 24. Other benefits have been identified but not measured: (a) Benefits expected from the institution building component for the public works sector are: strengthening of the existing capacity in MEI to monitor road conditions and program road maintenance works; improved use of budget resources for road maintenance; improved efficiency of road maintenance execution by using local small and medium enterprises to replace force account; reduction of adverse impact of road works on environment. (b) Benefits expected from the rural road component are: improved sustainability of rural roads development programs; and reduced poverty in rural areas where the pilot operation will be executed. (c) Benefits expected from the road transport component are: - 8 -  improved road safety and better protection of road assets. (d) Benefits expected for the civil aviation component are: improved management of airports and reduction of public expenditures in the sector. 25. Project Risks. Several risks have been identified: (a) The political risk is the most important risk. Although the Government is committed to reforming the country's economy, difficulties encountered during the preparation of the project before 1996 demonstrate that reforms might encountered strong resistance if the commitment weakens due to political changes. This could delay State divestiture of operations in the transport sector or the road maintenance sector. It is difficult to identify measures which could mitigate this risk. Therefore, should the risk occur, the mid-term review would give the opportunity for any decision regarding project continuation, restructuring or cancellation. (b) As the project will support a significant restructuring of the transport and public works sector, there is a risk of delays in the implementation of the reforms due to Government's reluctance to proceed because of social impact, under the pressure of staff to be laid off in the institutions which needs to be restructured. The risk will be mitigated by sensitization activities to inform and explain the rationale for the reforms. More importantly, availability of funds for severance payment would facilitate the restructuring process. Lack of funds is, however, a risk. to mitigate this risk, particular attention will be paid during project execution to the inscription of the required resources in the annual budgets prepared in consultation with IDA. (c) Because of the passenger traffic allocation system, the risk is that savings on vehicle operating costs are not passed on to passengers. The risk does not exist for freight transport as the allocation system is not applied to domestic freight transport and the project will not finance strengthening of paved international itineraries which link Niger to Benin and Togo and where the system is applied. For passenger traffic, the Government is committed to discouraging this system and seek to replace the system by bus schedules. Sensitization activities aimed at transport operators will mitigate the risk that discussions between the Government and transport operators fail and that the allocation system be maintained. (d) Lack of protection of road assets after their maintenance is a risk which would hamper the sustainability of road works. Cooperation of the road industry is essential to mitigate this risk. The project will include sensitization activities aimed at the road transport industry to improve compliance with the regulation on axle loads and rain barriers. Involvement of road users in the Road Fund will also be a measure expected to sensitize road users to the need to protect road assets. -9-  (e) To mitigate the risk of lack of counterpart funds, the Government will be requested to deposit counterpart funds for any works contract financed from the IDA credit under the road component on a project account in a commercial bank prior to the signature of the contract. (f) In the highway sector, the risk of lack of funds to finance recurrent costs will be mitigated by improved planning and budgeting and the creation of the Road Maintenance Account and, later, the Road Fund. A satisfactory macro-economic framework will also alleviate this risk. (g) Lack of sustainability of capacity building activities may result of the mobility of staff in the technical ministries. This will be mitigated by favoring mass training rather than individual training. (h) Lack of consistency in the dialogue between IDA and the Government due to the turnover of IDA's task managers resulting often in the new task managers questioning the approach taken under the project is a risk emphasized by the Government. This risk will be mitigated by involving more the Resident Mission in the supervision of the project to ensure better continuity on the IDA side and by carrying out a joint Government-IDA mid-term review to decide on actions to restructure or revise the project if necessary. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending February 7, 1997. - 10 -