Document of The World Bank Report No. 16539-ZA STAFF APPRAISAL REPORT REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM September 4, 1997 Transport 1 Africa Region CURRENCY EQUIVALENT (as ot'Jul 31. 1997) Currency Unit = Zambia Kwacha (K) USS =K 1,00.00 SDR I = KI.767_00 K 1.000 =USS0-77 AVERAGE ANNUAL EXCHANGE RATE Year = K per US Dollar 1994 669 1995 860 1996 = 1229 WEIGHTS AND MEASURES I metric ton (tonne) =1000 kg or 2.205 pounds I meter (m) = 3.2808 feet I kilometer (km) = 0.6214 miles ABBREVIATIONS AND ACRONYMS AfDB = African Development Bank CAP 464 = Roads and Road Traffrc Act CAS = Country Assistance Strategy DISS = Department of Infrastructure and Support Services ECZ = Environment Council of Zambia EIA = Environmental Impact Assessment ERR = Economic Rate of Retumn EU = European Union FEDHAUL= Federation of Road Hauliers GDP = Gross Domestic Product H1vlS = Highway Management System ICB Intemational Competitive Bidding IDA = Intemational Development Association IMT = Intermediate Mleans ofTransport MCT = Mlinistry of Transport and Communication MFED M Ministry of Finance and Economic Development MWS = Ministr- of Works and Supply MLGH = Ministr. of Local Govemment and Housing NCB = National Competitive Bidding NCC = National Council for Construction NGO = Non-Govemmental Organization NRB = National Roads Board NRSC = Natibnal Road Safety Council PSRP = Public Sector Reform Program PSC = Project Steering Committee Roads Dept. = Roads Department RDC = Rural District Council RIM I = Road Maintenance Initiative ROADSIP = Road Sector Investment Program RTTP = Rural Travel and Transport Program SDR = Special Drawing Right SRP = Social Recovery Project SRPU = Social Recovery Project Unit TETAP= Transport Engineering and Technical Assistance Program UNCDF = United Nations Capital Development Fund UNDP = United Nations Development Program VOC = Vehicle Operating Costs ZNTB = Zambia National Tender Board FISCAL YEAR January I to December 31 Vice President: Catlisto Madavo. AFR Country Director: Phyllis Pomerantz, AFC02 Technical Manager: Yusupha Crookes. AFTTI Task Team Leader: Stephen Brushett. AFTT1 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM Table of Contents Page No. CREDIT AND PROJECT SUMMARY ...............................................1 1. SECTOR BACKGROUND ...............................................2 A. Country Background ................................................2 B. The Transport Sector ................................................3 C. The Road Subsector ................................................6 2. THE PROGRAM AND THE PROJECT .............................................. 19 A. Program and Project Objectives ............................................... 19 B. Rationale for IDA Involvement ............................................... 20 C Project Description ............................................... 21 D. Project Strategy ............................................... 24 E. Project Cost ................................................ 25 F. Project Financing ............................................... 27 G. Foreign Funding ............................................... 27 H. Local Funding ............................................... 28 3. PROJECT IMPLEMENTATION ............................................. 31 A. Implementation Arrangements ............................................... 31 B. Technical Assistance and Training ............................................... 33 D. Disbursement ............................................... 37 E. Auditing and Accounting ............................................... 39 F. Monitoring and Reporting ............................................... 39 G. Supervision ............................................... 40 4. PROJECT BENEFITS AND RISKS ............................................. 41 A. Project Benefits ............................................... 41 B. Key Performance Indicators ............................................... 43 C. Poverty Reduction and Employment Generation ............................................... 43 D. Development of Local Contractors ............................................... 44 E. Environmental Impact ............................................... 45 F. Sustainability .46......................................... . . ....................................... 46 G. Project Risks ........ 46 5. AGREEMENTS REACHED AND RECOMMENDATION ............................................. 49 A. Agreements ............................................... 49 B. Assurances Provided at Negotiations ................................................ 50 C. Recommendation ............................................... 51 LIST OF TABLES TABLE 1- 1: 1994 MODE OF TRANspoRTING ZAMBIAN IMPORTS AND EXPORTS .............................................4 TABLE 1-2: 1994 PASSENGER VOLUME PER TRANSPORTATION .......................................................................5 TABLE 1-3: ROAD NETWORK .......................................................................... 12 TABLE 1-4: 1995 CONDITION OF SOME MAIN ROADS ......................................................................... 12 TABLE 1-5: ESTIMATED DOMESTIC VEHICLE NUMBERS ......................................................................... 14 TABLE 2- 1: SUMMARY OF PROJECT COST (US$ MILLION) ......................................................................... 26 TABLE 2-2: 1997-2002 ESTIMATED COSTS OF CIVIL WORKS (US$ MILLION) .............................................. 26 TABLE 2-3: SUMMARY OF PROBABLE PROJECT FINANCING (US$ MILLION) ................................................. 27 TABLE 2-4: SOURCES OF ROAD FUND RESOURCES (US$ MILLION) ............................................................... 30 TABLE 2-5: USES OF ROAD FUND RESOURCES (US$ MILLION) ..................................................................... 30 TABLE 3- 1: SUMMARY OF PROCUREMENT ARRANGEMENTS (US$ MILLION) ................................................ 35 TABLE 3-2: PROJECTED DISBURSEMENTS FISCAL YEAR ENDING JUNE (US$ MILLION) ................................ 37 TABLE 4- 1: LOCAL REVENUE REQuIREMENTS OF VARIOUS SCENARIOS ....................................................... 47 TABLE 4-2: FUEL LEVY PROCEEDS: RISK ANALYSIS SUMMARY ................................................................... 48 Definition of Terms ANNEXES 1-1 Letter of Road Sector Policy 2-1 Description of Civil Works Program 3-1 Project Implementation Schedule 3-2 Disbursement Schedule and Comparative Disbursement Profile 3-3 Monitoring and Implementation Indicators 3-4 Supervision Plan 4-1 Economic Analysis List of Documents in the Project File Map: IBRD No. 28475 This report is based on the findings of a Bank appraisal mission which visited Zambia June-July 1996, comprising Stephen Brushett (Senior Operations Officer, Task Team Leader and Mission Leader), Ian Heggie (Principal Roads Adviser), Subhash Seth (Highways Engineer), Robert Tillman (Senior Environment Specialist), Toshiyuki Iwama (Transport Planner), Marianne Fay (Economist), Christina Malmberg Calvo (Economist), Moctar Thiam (Consultant, Engineer), Ole Sylte (Consultant, Highway Engineer) and George Sikazwe (Procurement and Disbursement Officer). Rosemary Cubagee (Consultant) prepared the first draft of this report. Mary Ann Arouna, Marjorie Kingston, and Josiane Luchmun provided editorial and administrative support in preparation of the report. Alan Coulthart, Alfred Nickesen and Nwanze Okidegbe are the peer reviewers. Yusupha Crookes is the Technical Manager, Phyllis Pomerantz is the Country Director, and Callisto Madavo is the Regional Vice President. REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM CREDIT AND PROJECT SUMMARY Borrower: Government of the Republic of Zambia. Implementing Agencies: Ministry of Communications and Transport (MCT), National Roads Board (NRB), Ministry of Works and Supply, Roads Department (Roads Dept.), Ministry of Local Government and Housing (MLGH), Ministry of Finance and Economic Development, Social Recovery Project Unit (SRPU). Beneficiaries: Road users, urban and rural communities, farmers, local contractors and consultants. Poverty: Program of Targeted Interventions. Amount: SDR 51.5 million (US$70.0 million equivalent). Terms: Standard IDA terms, with 40 years' maturity. Commitment Fee: 0.50% on undisbursed credit balance. On-Lending Terms: Not applicable. Financing Plan: See Schedule. Economic Rate of Return: 21% average for major road works. Staff Appraisal Report: 16539-ZA Map: IBRD No. 28475 Project Identification Number: ZM-PA-3236 - 2 - REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM 1. SECTOR BACKGROUND A. Country Background 1.1 Zambia is a land locked country with a surface area of about 750,000 km2and a population of about 9.4 million, about half of whom live in urban areas. The country is endowed with abundant land for agricultural expansion, a resource-base which includes minerals, and a relatively unspoiled environment that hosts abundant wildlife and considerable tourism potential. Zambia's rich endowment of copper at one time seemed to ensure a glowing future. The reality has been vastly different. Since independence in 1964, Zambians have grown poorer and more heavily indebted, and the economy is facing large external imbalances. Zambia's economic problems are partly due to lack of diversification in the economy and to continued excessive reliance on copper, despite falling prices and production since the mid-1970s. Coupled with this, its economic policies in the past have failed to adapt to economic realities. Several partial economic reform programs were initiated during the 1 980s, but these reforms were not sustained and had little lasting effect. With the accumulation of arrears, Bank and IMF lending operations were suspended between 1987 and March 1991 and again in September 1991. In November 1991, the Movement for Multiparty Democracy (MMD), a political party committed to policy reform, won the general elections. The new Zambian Government cleared arrears to the Bank, agreed on a new Policy Framework Paper (PFP) with the Bank and IMF, and began a Rights' Accumulation Program to clear arrears to the IMF. Disbursements under IDA operations resumed in February 1992. 1.2 Over the past five years, the Zambian Government has sustained an ambitious economic reform program designed to encourage movement towards a full market economy and to significantly reduce the role of the state. Nearly all price and exchange rate controls have been dismantled, import and export licensing has been eliminated, interest rates have been decontrolled, the tariff structure has been compressed and lowered, and comprehensive programs of civil service reform and parastatal privatization have been started. These measures have helped create conditions conducive to increased agricultural production and to the promotion of the private sector which over time should reduce the country's dependence on the mining sector (especially copper) for output, employment and exports. Economic performance has picked up relatively slowly thus far and dependence of external financing for investment remains high. External assistance from donors, however, slowed significantly in 1996 in large part due to concerns about the conduct of the national elections held last November in which MMD was returned to - 3 - power. A resumption of donor support at least to the levels obtaining in the early 1990s together with a concerted effort to reduce external indebtedness, inter alia through the recently approved Heavily Indebted Poor Countries' Debt Initiative, will be necessary to ensure there is adequate funding for Zambia's ongoing reform effort. 1.3 The Government's main concerns over the medium term are to accelerate the supply response in the Zambian economy and provide infrastructure for growth, to directly reduce poverty, and to reform the public sector and strengthen governance. In line with this and in furtherance of the overriding objective of poverty reduction, the Bank's country assistance strategy (CAS) for the period 1997 to 1999 aims to support the Government's program as follows: (i) create a stable macroeonomic environment as a prerequisite for growth and employment; (ii) target assistance to the poor and vulnerable groups; and (iii) promote private sector development and greater public sector efficiency to stimulate more rapid and inclusive growth. 1.4 The dilapidated state of Zambia's infrastructure, particularly in transport and power, is a serious obstacle both to economic growth, because of the country's distance from export markets, and to poverty reduction, because of its widely dispersed rural population. The Government's approach is to adopt comprehensive strategies in the various infrastructure subsectors aimed at ensuring sustainable growth through reform of the policy and institutional environment, through specific measures designed to increase domestic resource mobilization to reduce dependency on external financing, and through action to increase private sector participation to increase the efficiency of service provision and to improve access to service. With regard to investment, the proposed approach is to undertake comprehensive and integrated sector operations to ensure that available funding is channeled to highest priority programs. B. The Transport Sector 1.5 The contribution of the transport sector to the Gross Domestic Product (GDP) has fluctuated around 5% in recent years. In 1994, road transport contributed about 23% compared to 27% from the railways to transport sector output. The volume of road transport activity was adversely affected by drought in the period 1992-4 but still actually rose in value in real terms by about 5% in 1994. About 2.2 million tonnes of the country's imports and exports were transported by road in 1994 in comparison to only 400,000 tonnes by rail. In addition, the transport sector provides about 20,000 formal sector jobs averaging about 4-5% of the total formal sector employment in the country. 1.6 In spite of the strategic importance of the transport sector to the Zambian economy, resource allocation to the transport sectQr as a proportion of total national capital investment in real terms is low and has been declining. In 1975, 13% of the total capital investment was allocated to the transport sector. The equivalent allocation was slightly under 7% in 1985 and less than 2% in 1994. Consequently, the general deterioration of transport infrastructure in terms of both road and railway has accelerated, making certain parts of the country impassable especially during the rainy season and - 4 - exacerbating the isolation of poor, rural communities. This notwithstanding, the burden of the transport sector on the recurrent budget is considerable and largely due to the inefficiency of transport sector enterprises. Losses were estimated as equivalent to 12% of total government revenue in 1990-91. This was due partly to enterprise deficits though these have since been brought down somewhat by liquidation (Zambia Airways) and by restructuring of these enterprises. This level of losses is also explained by the shortfall of road user charges in relation to road sector expenditure. 1.7 The transport network in Zambia comprises five distinct modes of transport, viz.: rail, road, civil aviation, inland water transport and pipeline. Increasingly, road transport is becoming the most important mode for both freight and passengers. An overview of Zambia's major modes of transport reveals that rail and road account for the movement of three quarters of total import and exports. Air and water play a very insignificant role while the role of the Zambia-Tanzania Pipeline (TAZAMA) is limited to the transportation of spiked crude oil from Dar-es-Salaam in Tanzania to Ndola in Zambia. Table 1-1: 1994 Mode of Transporting Zambian Imports and Exports Exports Imports Mode of Transport Mt-Tonnes Percent Mt-Tonnes Percent Air 27,485 2.8 261,751 10.2 Inland Waterway 10,274 1.1 146 - Parcel Post 60 4- 24 Rail 326,267 33.5 60,397 2.4 Road 609,004 62.6 1,604,553 62.6 Pipeline l - 635,883 24.8 Total 973,1 10 100 2,563,074 100 Source: Ministry of Communication and Transport 1.8 The most important sea routes/ports for land locked Zambia are to: Dar-es-Salaam in Tanzania; Durban and East London in South Africa; and Maputo, Beira and Nacala in Mozambique. The railway network comprises two systems, i.e., Zambia Railways Ltd. (ZR) and Tanzania-Zambia Railways Authority (TAZARA). The ZR network comprises 1,273 km linking the Copperbelt of Zambia to the seaports of Durban and East London in South Africa. ZR is further connected to Zaire Railways as well as TAZARA at Kapiri Mposhi. ZR plies from the Copperbelt via Lusaka to Livingstone in Southern Province. TAZARA provides services between Dar-es-Salaam and Kapiri Mposhi. Locally, TAZARA provides passenger services from Nakonde through Northern and Central Provinces to Kapiri Mposhi. 1.9 Although Zambia Railways (ZR) has the capacity for transporting about 8.5 million tonnes annually, the actual performance has fallen steadily in recent years. For most of the 1980s, the company carried about four million tonnes of freight and two million passengers per year. The performance in 1994, however, stood at two million tonnes of freight traffic and one million passengers. Problems of ZR include: Overage - 5 - tracks; inadequate signaling system; inadequate motive power and rolling stock; deferred maintenance and stiff competition from road hauliers; and high quality intercity bus services. The financial condition of ZR has been on a deteriorating trend. During the financial year 1994, revenue amounted to K27.8 billion on which ZR incurred an operating deficit of over KI 0 billion against the anticipated operating surplus of K 1I billion. Domestically, ZR plays an important but declining role in transporting agricultural and mineral products, thus increasing the demands on Zambia's road infrastructure. Some measures are now being taken to improve management of ZR. Given the limited impact of reforms introduced to date, radical restructuring, which could include concessioning of railway management to the private sector or outright privatization, is being considered. Table 1-2: 1994 Passenger Volume Per Transportation Mode of Transport Passenger Volume Percent Air 83,631 18 Lake (Lakes Bangweulu & Mweru) 29,900 1 Rail (Zambia Railways only) 1,005,660 37 Road (UBCZ only) 1,200,000 44 Total 2,319,191 100 Source: Ministry of Communications and Transport 1.10 TAZARA is jointly owned by the Government of Zambia and Tanzania and has a total track of about 1,860 kms of which about 883 kms is in Zambia. The track extends from Kapiri Mposhi in Zambia to the port of Dar-es-Salaam in Tanzania. Like Zambia Railways, TAZARA has experienced operational problems and has been working at less than half of designed capacity largely due to shortages of motive power, rolling stock and poor signaling and maintenance. Recently, however, TAZARA has undergone a major restructuring and comniercialization process. Both the Zambia and Tanzania sectors now operate as cost/profit centers with some degree of autonomy although operational and financial performance is still suboptimal. 1.11 Zambia Airways Corporation Limited (ZA) used to be Zambia's national flag carrier. However, in December 1994, the corporation was liquidated after years of chronic operational and management problems. In place of Zambia Airways, a number of privately owned airlines have emerged including Zambia Express Airways and Aero Zambia, both of which are competing for the airline passenger domestic and sub regional market. The airlines provide an alternative to road transport at the top end of the market for passenger service to Livingstone and to Ndola and the Copperbelt. Operation of Zambia's four largest airports have been commercialized and these are run generally on efficient lines by National Airports Corporation Limited (NACL). Civil aviation services are regulated by the Department of Civil Aviation (DCA) which also operates 40 smaller airports in Zambia at a loss. 1.12 Inland water transport is the most underdeveloped mode of transport in the country although it has potential for exporting freight to Zaire, Burundi and Tanzania -6 - through this means. The sub-sector continues to be constrained and hampered by deferred maintenance and lack of rehabilitation. Freight movement on Lake Bangweulu, for example, declined by 53% between 1993 and 1994 with only 123 tonnes of cargo carried in 1994. Movements may continue to be adversely affected by subregional political instability. 1.13 The Ministry of Communications and Transport (MCT) is responsible for overall transport policy and for supervision of transport sector institutions. The Government has over the past few years tried to pursue policies to improve sector performance to respond to the changing requirements of consumers. The policy framework has favored an increasing the role of the private sector transport as well as increased competition within the transport subsectors, especially, road and air. The policy, with regard to the transport sector, is set out in the White Paper on Communications and Transport Policy of May 1995 which is currently in the process of being updated for formal adoption by Cabinet. Recognizing that sector investment has not kept pace with the economic importance of the sector, and that the investment that has taken place has mostly been ineffective in terms of raising the levels and quality of service offered, the Government has arrived at the following specific objectives: (a) ensure availability of sufficient resources from both private and public sector to create capacity in the transport sector commensurate with the requirements of the economy; (b) allocate available resources among transport modes to meet requirements at minimum cost to society; and (c) establish a system of transport pricing that would ensure a reasonable return on transport investment. The white paper makes reference to the dualistic pattern of development in the country and the need to ensure future transport sector development, especially in the road sector, pays greater attention to the periphery than hitherto, in particular to effectively support the agricultural sector. The Government also envisages that greater attention will need to be paid to the mitigation of the adverse environmental impact of the transport sector, with particular regard to the road sector. C. The Road Subsector I. Road Policy and Management 1.14 National road policy is laid down in the Roads and Road Traffic Act (CAP 464) passed in 1959 with subsequent amendments. The Act defines the different types of roads and lays down regulations governing their construction and maintenance. The Act designates the following seven types of road: (i) inter-territorial main roads (T); (ii) territorial main roads (M); (iii) district roads (D); (iv) rural district roads (RD); (v) - 7 - rural roads (R); (vi) branch roads (B); and (vii) estate roads (E). All roads designated are supposed to be assigned to a particular road authority in terms of the Act. T, M and D roads fall under the responsibility of the Roads Department in the Ministry of Works and Supply (MWS) except for those M and D roads which fall within a local authority area. Local authorities under the Ministry of Local Government and Housing (MLGH) are responsible for RD and R roads as well as for urban roads. In the case of B and E roads, a highway authority is to be designated at the discretion of the minister. Responsibilities are also assigned under the Act to the Department of Parks and Wildlife for the management of roads within the boundaries of national parks and to the Ministry of Agriculture, Food and Fisheries for the management of a limited network of roads leading to agricultural camps and institutions. 1.15 While the legislation is fairly clear in that it sets out who is responsible for what, there are a number of issues that need to be addressed and there is a need to update aspects of the legislation to take account of current realities. Firstly, the role of all institutions currently involved in the roads sector is not defined. MCT is now responsible for setting overall policy on road transport. The Ministry of Finance and Economic Development (MFED) has some responsibility for budgeting and planning processes in the road sector under separate legislation. In addition, a National Roads Board (NRB) has been recently established, under Statutory Instrument No. 42 of 1994, to manage and administer the Road Fund and is under the supervision of a Committee of Ministers chaired by the Minister of Communications and Transport. Secondly, not all roads in Zambia have been designated and of those which have been designated not all have been assigned to a particular road authority. This leaves responsibility for management unclear, and as a consequence many of these roads have not been maintained. A related issue is that the original designation of a particular road may be outdated and that the road is not assigned to the most appropriate authority. Thirdly, another issue is that the Act makes no specific provision for the financing of roads so that resources may not always be available to go with the responsibilities assigned under the Act. This has in the past had negative consequences for the quality of the road network. Government intends to revise CAP 464 to address these issues and to provide a firmer legislative basis for its evolving policy initiatives in the roads sector. 1.16 A number of other institutions are involved in the roads sector although these do not have a direct management function for the road network. Under the Ministry of Communications and Transport, the Road Traffic Commission is responsible for motor vehicle testing, drivers licenses and road patrols. The National Road Safety Council (NRSC), established by Act in 1995, is responsible for planning and programming of road safety programs, accident recording and the dissemination of road safety information. The Ministry of Environment and Natural Resources through the Environment Council of Zambia (ECZ) is responsible for regulation and enforcement of environmental legislation as it applies to the road sector. The Zambia National Tender Board (ZNTB) has an oversight role in procurement and approves nearly all contracts for services and supply. - 8 - IL Human Resources and Implementation Capacity 1.17 The capacity of the various road authorities to carry out their responsibilities is limited in that the requisite resources, in terms of staff, tools and finance, have generally not been made available on a timely and adequate basis. All the authorities are constrained to a greater or lesser extent by inadequate capacity due, among others, to unfavorable conditions of service prescribed for civil servants, cumbersome tendering procedures for purchases of goods and services, delays in making payments for completed works and services, low road plant and equipment serviceability due to limited repair capacity, and inability to replace salvaged road plant equipment due to shortage of capital funding. In addition, the road maintenance program has typically been undertaken in the past through force account. This approach has deficiencies in that it depends strongly on the experience and motivation of a limited number of supervisors and managers. In addition, there are the drawbacks of using poorly trained and motivated staff. 1.18 The Roads Department has suffered from a lack of experienced personnel and has in the past found difficulty in retaining senior staff. This shortage of qualified staff was and is primarily attributable to the poor terms and conditions of employment for Roads Department staff. In 1993, the incomes of engineers including allowances were less than 15% of comparable staff in the private sector. In the last two years, however, this gap has been reduced somewhat and there has been an influx of young Zambian graduate engineers joining the Roads Department and only five of the 29 engineering posts are presently vacant. 67 out of 84 authorized technician positions are filled. Whereas the staffing of the department has thus improved, the quality of technical staff in terms of experience to be able to plan, program, supervise, manage and control the work activities is yet to be attained. Accordingly, the Department continues to rely on foreign technical personnel in certain positions. Training and capacity building is being provided to the newly recruited engineers through ongoing donor assistance to the road sector. 1.19 Under the Public Sector Reform Program (PSRP), a restructuring plan has been prepared for the Roads Department as part of the overall restructuring of the Ministry of Works and Supply. The plan was adopted in October 1994 although the implementation only commenced in 1997. The structure is predicated on a policy of increased reliance on the private sector for road construction and maintenance, the phasing out of force account and the strengthening of contract management and contractor supervision capabilities. Implementation of this structure would have significant implications for the staffing of the Roads Department - up to two thirds of casual staff and up to 15% of regular staff have been identified as surplus to requirements. It would also require the Roads Department to dispose of most of its vehicle and plant pool. The new role of the department would generate a demand for more highly qualified and experienced personnel and would also require strengthening of the provincial road engineers' offices which will fill a critical role in contract management. These changes are being underpinned by institutional support programs inter alia from NORAD and FINNIDA. In addition, IDA financing through the Transport Engineering and Technical Assistance - 9 - Project (TETAP) is supporting the development of a highway management system (HMS) to improve planning capability as well as the preparation of programs to improve equipment management and maintenance. 1.20 No technical capacity for managing the road sector has previously existed in the Ministry of Local Government and Housing (MLGH) and this is only now in the process of being created. The Government has taken the policy decision to vest in the ministry the overarching responsibility for urban and rural district (feeder) roads and has decided to create three roads positions within the Department of Infrastructure Support Services (DISS), newly established as a consequence of the PSRP for MLGH. The effectiveness of this new arrangement cannot as yet be fully determined as these staff are only recently recruited and are still in the process of being trained. At present, internal and external consultants are supplementing DISS' capacity. Much of this support has been financed by IDA through TETAP through which consultants are currently preparing the first detailed inventory of feeder roads based on province by province surveys and providing training in roads planning to the ministry and to local authority staff. At local authority level, technical posts (Director/Deputy Director of Works) are usually only 50% filled and the incumbents are called on to address a variety of sectors including roads. The lower levels of staff have had limited exposure to roadworks and their capacity is correspondingly limited. The capacity of local authorities for implementation of roadworks is thus still limited in terms of both physical capacity and experience. 1.21 NRB is currently managed by a small secretariat reporting to an Executive Secretary. Salaries of key staff are being funded externally through the end of 1997 and there is a small government budget contribution to cover operating costs. The Board itself comprises representatives of the private sector and the public sector. While primarily an advisory body to a Committee of Ministers chaired by the Minister of Communications and Transport, the NRB has generally been allowed to exercise full discretion in the allocation of resources to road maintenance (see para 1.24). The Board consists of five ex of icio members representing government ministries (Finance, Works and Supplies, Transport and Communications, Local Government, and National Commission for Development Planning) and seven members representing road users and the business community (Chamber of Commerce, road transport industry, Automobile Association, farmers, Institute of Engineers, Chartered Institute of Transport, Copperbelt University). All Board members are nominated by the organizations they represent and the board elects its own chairperson and vice chairperson (currently from the Chartered Institute of Transport and the Automobile Association respectively). The ex officio members of the board participate in discussion, but have no vote. There are standing committees which make recommendations to the main Board on technical and financial matters. Whilst the NRB has only been operational since October 1994, it has been quite effective to date in managing the Road Fund despite its limited human resource base. More resources than hitherto have been channeled into road maintenance and the works have generally been well supervised. Accordingly, Government is favorable to an increase in staff complement and to the responsibilities of the NRB in the management of the road sector. As a first step, additional expertise in engineering, finance and - 10- procurement is being recruited to enable NRB to sustain and to subsequently increase the size of the road maintenance program. From July 22, 1997 in terms of Statutory Instrument No. 93 of 1997, NRB has been given clear authority to hire staff it requires on appropriate terms subject to the cost not exceeding 5% of Road Fund revenues. III. Road Financing and Expenditure 1.22 Funding for road activities has been characterized in the past by lack of reliable needs assessment, inadequate financing, heavy dependence on external sources, unpredictable budgetary releases, limited accountability and insufficient value for money. The level of road maintenance budgets have been erratic and disbursements often cut and as a result maintenance programs have had to be deferred. In general, disproportionately high amounts of the budget have been allocated to capital programs leaving insufficient funds for maintenance. Consequently, while new roads were being constructed, the existing network was being neglected resulting in deterioration of significant lengths of the road network. 1.23 There are currently three major sources of funds for road programs: Government budget, the donor community and, since 1994, the Road Fund. The Governnent has consistently underfunded the road sector. Government's maintenance expenditure was only 12% of the total network requirements in 1991, estimated then at US$33.0 million equivalent, and has actually been in decline in real terms since. Of the amount budgeted for maintenance, only a fraction has been actually released in recent years - the situation has worsened with the advent of cash budgeting in 1995 such that effectively the budget does not finance maintenance at all at this juncture. The bulk of Government funding for the road sector which has been released is intended for counterpart contribution to the capital program. Most funding for capital investment in the road sector has, however, been made available in terms of donor grants and loans. In addition, it is estimated that on average about 80% of maintenance requirements have been funded by donors in recent years. This is unsustainable given that the injection of donor capital funds has not been balanced by a proportionate increase in maintenance funds by the Government, at least up to and including 1994. Over the past five years, annual donor commitments to the road sector program have averaged about US$30.0 million per annum in current prices. This support fortunately has been and continues to be extensive and well diversified although new funding commitments have been adversely effected by the deterioration of donor relations since 1996. 1.24 The Road Fund was re-established in 1993 under Section 8 of Part II of the Finance (Control and Management) Act Cap 347 and has been administered since October 1994 by the National Roads Board (NRB). A fuel levy of K10 per liter of petrol and diesel subsequently increased to K30 per liter in January 1995 and to K40 per liter in January 1996. From fiscal 1997, the fuel levy is to be set as a percentage of the wholesale price of fuel, currently 15%. These resources accrue to the Road Fund for the purpose of funding road maintenance, the only consistent local source of road maintenance funds at present. The fuel levy is collected by the oil marketing companies - 11 - and, since June 1997, channeled to the NRB through the Ministry of Communications and Transport. Government is committed to streamlining these procedures and to ensuring transparency in the flow and use of resources. The NRB has allocated money to the Roads Department to maintain main, trunk, and district roads. Further funds have been released to the local councils to carry out repairs on urban and feeder roads. Works are actually managed by consulting engineers, and to a certain extent by the provincial road engineers under the Roads Department, on behalf of these road authorities and works are carried out by local private contractors. The fuel levy generated approximately US$10.0 million in 1995 and this increased to US$13.0 million in 1996, which still represents only 30% of maintenance expenditure requirements. This is currently distributed on a regular basis to the various road authorities on the basis of the following policy: Roads Department 40%, District Councils 40% and Urban Councils 20%. In practice, district councils have been able to utilize only a fraction of this entitlement due to capacity constraints. In 1996, disbursements to Lusaka and the Copperbelt towns alone were about US$4.0 million equivalent. The amount of the fuel levy is also, at present, insufficient to meet all maintenance needs. The Road Fund needs to be supported from several sources rather than being totally reliant on the fuel levy. Government has thus adopted a policy of paying over a portion of other road user charges, e.g., transit fees and vehicle license fees, into the Road Fund to increase resources available for maintenance. The Government has committed itself in its sector policy letter to taking this approach from fiscal year 1998 (para 1.36). IV. Road Network 1.25 The extent of the entire road network in Zambia is not yet accurately established. The total length of designated roads is about 37,000 kilometers whereas undesignated roads may amount to up to 30,000 kilometers according to an estimate produced by consultants financed by IDA under TETAP. This latter includes some 5,000 kilometers of roads in Zambia's national parks which fall nominally under the responsibility of the Department of Parks and Wildlife and an estimated 1,500 kilometers of urban roads. The table below summarizes the road network by road class, road surface type and responsibility. Zambia's designated road density works out to be 45 kilometers per thousand square kilometers of land which is relatively low by Sub-Saharan Africa standards. By contrast, it has one of the highest lengths of road network per capita in Africa, at 3,800 kilometers per million population, which adds to the challenge of providing adequate funding for maintenance. A very high proportion of these roads are paved in relation to the situation prevailing in Zambia's neighbors. - 12- Table 1-3: Road Network Road Surface (KM) Road Class KM of Roads Paved Earth Gravel Road Department T-Roads 3,225 3,085 140 - M-Roads 3,943 2,008 216 1,719 D-Roads 13,696 1,289 5,670 6,537 Sub-Total 20,864 6,582 6,026 8,256 Local Authorities RD-Roads 10,184 - 9,096 1,088 R-Roads 5,714 - 5,714 - Urban Roads 1,543 700 - 843 Sub-Total 17,441 700 14,810 1,931 Parks and Wildlife Parks Roads 5,162 - 4,000 1,162 Other Rural 22,483 - 22,483 - Grand Total 65,950 7,282 47,319 11,349 Of Which Designated 36,762 6,582 20,836 9,344 Source: Roads Department and Bank Estimates 1.26 Designated roads are classified according to their construction design standard with regard to formation width, carriageway width and surface type. Class 1 roads in three subcategories are all bitumenised whereas Classes 11 and 111 roads are gravel surface. Earth roads are not classified. A large part of the main road network was constructed in the decade between 1965 and 1975. For a long time routine and periodic road maintenance have been neglected mainly due to lack of funding. These roads are now in the last part of their design life. For the paved network, in 1984 the proportion in good, fair and poor condition was 40%, 30% and 30% respectively. However, by 1995 these proportions had worsened to 20%, 29% and 51 % respectively according to a survey of just over 8,800 kilometers of trunk main and district roads. In addition, little or no maintenance has been carried out on feeder roads and the condition of these roads is even worse, an estimated 90% being in poor condition. Table 1-4: 1995 Condition of Some Main Roads Road Quality Road Class Good Fair Poor Total T-Roads 454 694 1,188 2,336 M-Roads 771 939 1,782 3,492 D-Roads 514 893 1,620 3,027 Total Length 1,739 2,526 4590 8,855 % 20% 29% 51% 100% Source: Roads Department - 13 - V. The Road Construction Industry 1.27 The road construction industry in Zambia is relatively underdeveloped. There was a lack of incentive in the past to private sector involvement due to low and erratic financing for maintenance and rehabilitation, to cumbersome public sector tendering and payment procedures and to the predominant role in the past of public sector force account. The Government has, however, now placed high priority on private sector construction industry in line with its development objectives and has issued a National Policy on the Construction Industry (NPCI). Under this policy, a National Council for Construction (NCC) has been reestablished under the Societies Act with private and public sector membership and with the goal of reviewing and proposing modifications to standards, regulations and legislation affecting the industry and of monitoring construction industry development. At present out of 554 formal sector contractors registered with the Ministry of Works and Supply only 46 are registered as road contractors. According to a recent study financed by IDA under TETAP, the capacity of the local road construction industry is put at US$25.0 million per annum. Only 20% of this capacity is Zambian majority owned and only about 50% of this capacity is currently being utilized. Growth is still constrained by the perception of a lack of sufficient demand and by aging and inefficient plant. Informal sector contractors or potential contractors cannot readily be estimated but in terms of potential output, employment and tumover may be equivalent to or greater than the formal sector. Some specific programs are now underway, including the UNDP-funded feeder road program in Eastern Province, to encourage labor-based contracting for which increasing opportunities are emerging in routine maintenance and rehabilitation of feeder roads in areas where there is a lack of existing construction capacity. Under NORAD funding, ILO has been supporting the diversification of the Roads Training School's programs to cater for small contractors' needs. VI. Road Transport 1.28 The number of vehicles registered in Zambia during 1975 - 1995 is shown below. The data, which are not however considered to be fully reliable, indicate that between 1975 and 1988 the fleet declined considerably but since then it has more than doubled to a fleet strength of 129,000 in 1995, the majority of which are passenger cars. Recent survey findings and records at the Road Traffic Commission appear to suggest that the private sector currently owns more than 95% of the total road passenger vehicles as well as road freight fleet. On the basis of recent averages, there were about 12 vehicles per 1,000 population in Zambia compared to 47 in the SADC region and to about 20 in Sub Saharan Africa as a whole. -14- Table 1-5: Estimated Domestic Vehicle Numbers Vehicle Type 1975 1980 1984 1988 1992 1995 |Motor Cycles 10,208 5,164 4,819 5,238 5,000 5,500 Passenger Cars 94,259 69,003 68,032 26,702 70,000 90,000 Buses & Minibuses 855 957 1,064 2,545 2,500 4,500 Vans, Vanettes & Ambulances 29,438 17,821 18,545 18,911 19,000 22,000 Trucks 17,293 12,447 16,971 5,597 6,000 7,000 Total 1 52,053 105,392 109,431 58,993 102,500 129,000 Source: Road Traffic Commission 1.29 Traditionally, road freight transport in Zambia had been broadly divided into three main categories: parastatals, notably Contract Haulage (CHL), ZAM-TAN and the Zambia Co-operative Federation (ZCF) transport division; members of the Truckers Association of Zambia (TAZA)/Federation of Road Hauliers (FEDHAUL); and independent and own account operators. Up until the mid-1980s, the road haulage industry was dominated by parastatals but these have either collapsed through inefficiency or have been very much reduced in importance. The advent of deregulation and privatization has helped private haulage to emerge as a formidable force in the domestic road haulage sector. The average number of operational trucks per day is estimated at 60 and 2,000 for parastatals and private sector respectively. The average distance covered per month per vehicle is 6,000 km and 12,000 km for parastatals and private sector respectively. In this period also, the dominance of road freight over other modes has been established - road accounted for 60% of all freight in 1994 compared to under 20% in 1989. 1.30 Since the mid- 1 980s, the quality of road passenger transport has been generally poor. During the 1 990s, public transport services can be described as a declining dominance of the public sector and increasing importance of the private sector. Following the temporary suspension of duty on commercial buses from 1994 and the liquidation of the United Bus Company of Zambia (UBZ) at the beginning of 1995, the number of passenger carrying vehicles has increased by an estimated 75%. Fares are now broadly set by market forces with minimal government intervention which is seen as generally favorable to further private sector involvement in passenger transport. The Road Traffic Commission remains responsible for issuance of licenses and for vehicle inspection. Rural areas are not fully catered for in terms of motorized transport. Survey findings in three provinces, Luapula, Northern and Southern, confirm that walking and to a lesser extent bicycles are the predominant means of transport (90% of trips) in villages, the major explanatory variable being the poor state of roads in rural areas and the lack of access to credit for small operators. VII. Road Safety and Accidents 1.31 With a recent average of over 900 persons killed in road accidents every year, Zambia has one of the highest fatality rates per 1,000 vehicles, both in the sub-region, and - 15 - among developing countries. About 118 persons are killed every year in road accidents per every 1,000 vehicles in Zambia compared to an average of 71 in the SADC region or about 62 in Sub Saharan Africa (average of sixteen countries). Pedestrians constitute 42% of fatal road accident victims in Zambia followed by passengers of motor vehicles at 36%. The poor are a disproportionally large element among pedestrian casualties. Important causal factors relate to incompetent driving exacerbated by inadequate traffic signs and faulty vehicles. Further, unmaintained and sub-standard roads have contributed to accidents, especially on busy urban roads. Efforts to date to arrest the increasing incidence of accidents have not been particularly effective. This has not been helped by the involvement of a number of institutions in the area of road safety whose interventions have not been well coordinated. The creation of a National Road Safety Council in 1995 with significant private sector involvement could address the issue more effectively in future provided the Council would have adequate financial and human resources at its disposal. 1.32 Road accidents cause both tangible and intangible costs to the economy. Tangible costs include direct costs such as: (i) direct damage to the vehicles (replacement of parts); (ii) policing and administration costs; (iii) medical treatment and indirect costs of injury; (iv) reduction in output due to injury and death; and insurance costs. Intangible costs include pain, grief and suffering and the risk of being involved in an accident. In economic terms, it is estimated that the cost of road accidents to the Zambian economy is over US$78.0 million or 2.3% of the Gross National Product (GNP) in 1995. Since all vehicles are imported, this amount also represents the scarce foreign exchange that has to be earned and spent. VIII. Environmental Aspects 1.33 Historically, there had been neither emphasis on nor any legal requirements for road authorities submitting environmental impact analyses (EIA) for road works. The few EIAs which had been done on some roads had been as a result of the requirement by some donor or international funding agencies. However, new EIA guidelines have been finalized by the Environmental Council of Zambia (ECZ) and the necessary enabling legislation passed - The Environmental Protection and Pollution Control (Environmental Impact Assessment) Regulations, 1997. These regulations require that a project brief and environmental impact study be performed for any new project, extension, or maintenance of an existing project. The EIA guidelines will still need to be customized to the needs of the road sector. The environmental impact of new road construction is considerable but that of rehabilitation and maintenance programs much less so. Aspects which require particular attention are: management of road realignment and diversion; borrow pits and construction camps; and road safety during construction and/or maintenance. In advance of proposed road sector investment program and under funding provided from TETAP, the Government appointed a local consultant to provide an environmental impact analysis and to propose specific mitigation measures, including the creation of environmental management capacity in the roads sector. On the basis of this report, an environmental management committee was established in October 1996 with private and public sector - 16- participation to put together specific proposals for strengthening environmental management in the roads sector. Among other things, the committee has drawn up terms of reference and has arranged the recruitment of specialized consultancy services to firstly prepare road sector environmental standards and guidelines for use in all future road works, and to secondly staff an environmental management unit attached to Roads Dept. for a pilot phase of two years. IX. Lessonsfrom Previous Bank Group Programs 1.34 Experience from three past highways lending operations in Zambia (Third Highway Project loan number 1566-ZA, Second Highway Project loan number 563-ZA and First Highway Project loan number 469-ZA) indicate the persistence of a number of problems hampering effective sector development, i.e.: lack of commitment to road maintenance; weak institutions and a shortage of qualified staff; inadequate planning and programming; and insufficient and unpredictable budget allocations for road maintenance. A number of these shortcomings are already being addressed through measures Government has adopted such as increased, dedicated maintenance funding and through an ongoing a program of studies, technical assistance and workshops to develop a sustainable system for the management and financing of roads. The Bank Group is making a major contribution to these efforts, through both the Road Maintenance Initiative (RMI) and through TETAP. Through RMI, and particularly the February 1993 workshop, broad consensus was developed in Zambia on the need for institutional reform and improvement in the financing arrangements for road maintenance - subsequent decisions on the creation of the Road Fund and NRB owe a good deal to this initiative. Through TETAP and as noted above, the Bank has tendered support to a number of activities preparatory to the launching of a comprehensive sector investment program including: strengthening of the management and financing of roads; support to the new urban and feeder road function in MLGH; establishing a highway management system (HMS) in Roads Dept.; studies on the construction and consulting industries and equipment management and maintenance. In addition, the design of the proposed program explicitly incorporates lessons learnt from recent Africa region experience in building sustainable roads programs, notably in: Tanzania - Integrated Roads Project-IRP (Credit No. 2149-TAN); Mozambique - Roads and Coastal Shipping Project-ROCS II (Credit No. 2599-MOZ); and Ghana - Highway Sector Investment Program (Credit No. 2858-GH). Particular note has been taken of the following points: using an integrated sector approach; carefully phasing policy reforms and investrnents; stimulating the development of a local contracting industry through the provision of suitably packaged works; resolving early in the project maintenance funding and organizational issues; and emphasizing capacity-building by using short-term TA and local consultants, and ensuring transfer of skills to identified counterparts. 1.35 Important lessons have also been gleaned from the experience of ongoing sector investment programs in other sectors, including the health and agricultural sectors in Zambia. The potential benefits from sector wide approaches are significant but experience suggests that there are high risks especially where all preconditions are not in -17- place. The lessons of experience suggest the following are particularly important: sector investment and expenditure programs need to be embedded in good economic and sector strategy; strong analytical underpinning to the design of the program is required including adequacy of institutional arrangements and local capacity; broad participation of stakeholders and genuine and committed leadership from the country is essential as opposed to from the Bank or donor community. Experience in Zambia, especially in the health sector, demonstrates the value of a flexible approach in that policy and program implementation goals need to be reviewed, and adjusted where necessary on a regular basis, as the real capacity of the country to deliver on the ground becomes apparent. X Road Sector Development Strategy 1.36 The government's road sector development strategy starts from the aforementioned white paper on communications and transport (para 1.13). The strategy also incorporates the key findings and recommendations of earlier sector studies, notably the Road Maintenance, Organization and Training Study (RMOTS) completed in August 1993 under AfDB funding, which identified the need for sector reforms. The key elements of the strategy to be followed in order to address the inadequacy of road infrastructure, meet growing traffic demand and increase access in rural areas are set out in the letter of March 21, 1997 of the Minister of Finance and Economic Development to the President of the Bank which deals with road sector policies and the road sector investment program and which is at Annex 1-1. The Government's sector strategy lays particular emphasis on: (a) Creating an appropriate institutional framework for the management of the road sector. (b) Rehabilitating priority roads in view of the large backlog of works. (c) Ensuring effective arrangements for the management and financing of maintenance. (d) Developing the domestic construction and consulting industry. (e) Improving community accessibility and mitigating environmental impacts. 1.37 These strategic considerations have come about as a result of an intensive preparation process piloted by the Government through MCT. The process has, however, relied on significant input from the community of local stakeholders. A national task force was established in June 1995 to prepare a road sector investment program after extensive consultation with local stakeholders and with the donor and NGO communities. The Bank has actively supported this process by providing part of the funding requirements of preparing position papers - on inter alia road transport, road safety, environmental considerations, selection criteria and community road management - which were presented as a basis for discussion at a stakeholder workshop in February - 18- 1996. The workshop endorsed the proposed road sector investment program (ROADSIP) which was subsequently discussed by and agreed to by the Committee of Ministers and which forms the basis of the proposed operation. - 19- 2. THE PROGRAM AND THE PROJECT A. Program and Project Objectives 2.1 The overriding goal of the Government for the roads sector is to facilitate economic growth and diversification (particularly in the agricultural sector) through appropriate investments in road infrastructure and through a sustainable system for the financing and management of the road network. The Government's medium term program, ROADSIP, is expected over a 10-year time horizon to address this goal and has the following other major objectives: (a) bringing a core network of 33,500 kilometers into maintainable condition; (b) bringing the condition of the road network to at least 50% good and about 10% poor for all types of road; (c) strengthening the technical and managerial capacity of road authorities; (d) creating employment opportunities in the road sector and alleviating poverty through the creation of 30,000 new jobs in road maintenance; (e) improving road safety and reducing road accidents by at least 20%; (f) improving environmental management in the road sector through establishing procedures and guidelines; (g) providing an enabling environment for improved road transport services and increasing the truck and bus fleet by at least 20% in rural areas; and (h) developing a framework for the management of community roads and promoting community participation in road management. 2.2 The project addresses the first time slice of the program for the period 1997-2002 and is expected to contribute to the realization of the program goals. The five specific objectives of the project are: (a) reform of the road sector policy and institutional framework, including changes to the legal framework for roads and road traffic management and strengthening and refocusing the roles of sector institutions (NRB, Roads Dept., and MLGH) aimed at enhancing capacity, increasing efficiency of the use of resources and improving planning and implementation performance; -20- (b) strengthening of road sector financing aimed at ensuring the sustainability of the road maintenance effort and reducing the strain on limited government revenues with the specific targets of streamlining the functioning of the Road Fund and increasing and diversifying road user charges to ensure at minimum 70% coverage of periodic and routine maintenance costs of the core network by 2002; (c) strengthening of the local construction and consulting industry in line with country objectives of creating greater opportunities for the private sector to participate in the design, construction and maintenance of roads and with the specific target of creating 14,000 new jobs by 2002; (d) addressing the road maintenance and rehabilitation backlog through a priority investment program with the specific target of increasing the proportion of main roads in good condition to about 45% and the proportion of feeder roads in good condition to about 15% of the network by the year 2002; and (e) establishing a pilot program for community road management in at least three districts to test approaches for sustainable improvements in maintenance of these undesignated roads and to promote increased usage of non-motorized transport means. B. Rationale for IDA Involvement 2.3 The Bank's Country Assistance Strategy (CAS) dated June 25, 1996, and discussed by the Board July 18, 1996, supports the Zambian Government's development objectives and policies. The Bank is supporting a three pronged strategy - helping to create a stable macroeconomic environment, to promote private sector development and greater public sector efficiency, and to target assistance to poor and vulnerable groups. To this end, the Government wishes to address current transport infrastructure deficiencies and has identified the need for integrated road sector development associated with policies to increase private sector participation in the road sector, to increase the volume of self financing and to improve rural accessibility. The CAS underlines the importance of improved infrastructure, particularly in transport, for growth and for poverty reduction. The Bank is uniquely well placed to help government deliver a road sector program that is consonant with its development objectives. The Bank has been strongly associated with the changes recently effected in the roads sector. Through the 1992 public expenditure review for the transport sector and through the Road Maintenance Initiative (RMI), which is a multi-donor program managed by the Bank, critical impetus has been given to sector reform, and to the establishment of the Road Fund and the NRB in particular. The RMI program in Zambia is ongoing and provides for a number of capacity building and dissemination programs which are helping build consensus among stakeholders on the need for, and the direction of change, including - 21 - greater involvement of the private sector. IDA's involvement in the proposed program will help ensure that stakeholder coordination is maintained throughout. C. Project Description (a) Civil Works 2.4 The civil works component will focus on the priority needs for road maintenance and rehabilitation for the period 1997-2002 which is expected to cover about 22,000 kilometers out of the core network. The program also includes limited accessibility improvement on up to 17,000 kilometers of feeder roads, including some currently undesignated roads, only a portion of which will eventually be upgraded to full engineering standard. The program is inclusive of ongoing works. The component would include inter-territorial trunk, territorial main, district, and primary feeder and urban roads in all provinces of the country. A large part of the unpaved road including 90% of the feeder roads and 41% of the district roads are non-engineered and are inadequate in terms of both geometric dimensions and structural strength of the road pavement. Poor/non-engineered roads will need to be upgraded to an acceptable standard before they qualify for regular maintenance. 2.5 Given the large part of the core road network has suffered due to prolonged backlog of road maintenance, the civil works program is based on an optimum balance of: (a) carrying out routine and periodic maintenance on all good and fair roads in order to avoid a further increase in the maintenance backlog; (b) rehabilitation of poor roads based on priority ranking, based on economic rate of return for most main and urban roads and on multi criteria selection for feeder roads and for some low volume main roads, and the roads after rehabilitation would be placed under annual routine maintenance and pluri-annual periodic maintenance program; (c) upgrading important non-engineered roads based on the above agreed selection criteria; and (d) providing all- weather possibility to the strategic links of non-engineered roads, particularly during peak agriculture seasons. The strategy does not provide for any new road construction, but rather places emphasis on gradually reducing the proportion of the road network that is poor, i.e. from 56% to 19% for main roads and from 90% to 71% of feeder roads by the end of project period. A detailed description is at Annex 2-1. The main sub-components are as follows, with estimated base costs given in parentheses: (a) Routine maintenance (US$70.1 million). The annual routine maintenance program would cover only good and fair roads, the volume of which will increase over the course of the program. The program will amount to about 6,700 km in 1997 and is expected to rise to 15,700 km by 2002. (b) Periodic Maintenance (US$75.6 million). The periodic maintenance program would focus on preserving the network from further deterioration especially unpaved roads with low traffic volume. The component would include resealing/ resurfacing of about 1,200 km of paved roads and - 22 - regravelling of 5,400 km of unpaved roads both inclusive of spot repairs on the surface area of less than 10%. Periodicity for periodic maintenance of both paved and unpaved roads would be generally in the range of 6 to 10 years. (c) Rehabilitation (US$145.0 million). Rehabilitation will be carried out on 1,200 km of paved trunk and main roads and on 300 km of paved urban roads. After completing rehabilitation works the roads will be covered under the regular maintenance program. (d) Upgrading (US$32.8 million). Upgrading of non-engineered roads is necessary before they can be placed under a regular maintenance program. The project would include the provisions for upgrading about 2,600 km of unpaved (district and feeder) roads to acceptable engineering standards. (e) ImprovingAccessibility (US$24.0 million). Non-engineered roads not covered under the phased program of upgrading must be kept passable, especially during the peak agriculture season. This intervention will, however, be carried out only on selected road sections on initially 17,000 kilometers falling to 14,400 kilometers by 2002 as selected roads are upgraded during the project. 2.6 The program has been developed taking into account planning, implementation and supervision capacity of NRB, Roads Dept. and MLGH, assessing the capacity of local contractors and the expected availability of counterpart and donors financing, including for ongoing works. The program is based on the most likely or medium case scenario which is broadly consistent with the program proposed in Government's letter of sector policy. But because of uncertainties regarding future implementation capacity and funding availability, a low case and a high case scenario have also been developed and are at Annex 2-1. The high case assumes that all the backlog of periodic maintenance will be addressed during the project period and that the Government's quality improvement goal for the program can be achieved within five years. The low case assumes none of the backlog is addressed and that a very limited rehabilitation program is undertaken to ensure no further network deterioration in aggregate. All three cases presume that the routine maintenance requirements of the network in good and fair condition are met as the first priority. The priority program for which works will commence in the first two years has been defined in detail as a condition of negotiations (see para 5.1) whereas the program for the outer years remains indicative at this stage. The program for the outer years is to be firmed up after the process of annual review of program implementation has determined the implementation capacity and the availability of local and foreign financing and any proposals will have been made and agreed to by Government for modifying the scope and objectives of the civil works program in these years. The criteria for the selection of projects have been proposed by Government and agreed to by IDA as a condition of credit negotiations (para 5.1). - 23 - (b) Community Accessibility Program 2.7 The component for community road and road transport development (US$6.3 million) is aimed at improving access for the poor. In recognition of the importance for the country's development of increasing the access of the poor to the market economy and to essential services, a separate and innovative program will be included with the objective of developing a framework for sustainable management of community road infrastructure and of creating an enabling environment for the increased use of intermediate means of transport (IMT). The program will be carried out in conjunction with MLGH and the Social Recovery Project Unit(SRPU) and will start on a pilot basis in one province (Eastern) in up to three districts and will eventually be mainstreamed on the basis of the pilot exercise. Up to 500 km of roads and bridges are expected to be covered under the program under about 70 separate subprojects to the cost of which communities will contribute in cash or in kind. At least 10 subprojects are to be implemented in the first year of the program. The component would also cover technical assistance support in the areas of community development, including a roads technical specialist for the SRPU; training support in the areas of participatory assessment; labor based construction methods; and finance and business management; a program of studies and a demonstration program for IMT options to increase rural mobility. The recently established Zambia country program of the Rural Travel and Transport Program (RTTP), which is administered by the Bank and which is funded by bilateral donors, will support the pilot initiative. The legal status of community roads will be addressed as part of the policy support component under the MCT (para 2.9) (c) Construction Industry Development Program 2.8 The component for promoting the development of local construction and consulting capacity (US$2.8 million) is aimed at increasing capacity to meet growing needs for road maintenance and rehabilitation and addressing constraints to the fuller involvement of local contractors, particularly small labor based contractors, in the road program. The component includes the following subcomponents: (a) technical assistance for improving Government contracting policies and procedures, including streamlining of contractor registration procedures, developing new simplified tendering procedures and contract documentation, and streamlining of the legal framework; and (b) further development of training programs for contractors with particular emphasis on labor based methods and strengthening the capacity of the Roads Training School. The Ministry of Works and Supply is responsible for construction industry development and will thus coordinate this component. The ministry will work closely with the National Council for Construction (NCC) which has been reestablished in July 1996 to provide a more effective forum for the private sector to discuss issues and agree on action plans for construction industry development. It is thus envisaged that support will be provided to NCC through the project to enable it to effectively carry out its mandate. - 24 - (d) Institutional Capacity Building 2.9 Technical assistance and training in the areas of policy support, implementation support and institutional development (US$5.8 million). The strong focus of this project is support to strengthening of sector capacity through restructuring road sector institutions and improving management structures. The main elements of the component include: (a) policy support: analysis and evaluation of the impact of program road sector institutional strengthening measures; analysis and evaluation of measures taken to strengthen road sector financing through streamlining management of the Road Fund and diversifying road user charges; development of a road safety action program including strengthening of NRSC; development of a program for the reform of the legal framework for roads and road transport, including regulation and licensing of the private sector; and improvement in axle load management; (b) implementation support: technical assistance support to program implementation in NRB, to support to help manage the feeder road program in MLGH and in local authorities, and to project supervision in Roads Dept.; and (c) institutional development: develop NRB and Roads Dept. capacity in the following areas: environmental analysis and monitoring, contracts management, financial management, equipment management and maintenance, selection criteria, procurement management and quality assurance, and data bases for core network management; and develop an urban road management system for MLGH. (e) Engineering Services 2.10 Technical assistance for feasibility studies, engineering design and supervision of rehabilitation and maintenance works (US$20.8 million). D. Project Strategy 2.11 The Government fully recognizes the seriousness of the sector problems and is adopting a strategy of rationalizing the planning, construction and maintenance of roads, of ensuring adequate funding is made available in a sustainable fashion, and addressing the lack of road infrastructure to increase access especially in rural areas. The govermment's strategy is to build carefully and sequentially on recent improvements in the management and financing of roads through further strengthening of the policy and institutional framework and to build up the size and scope of the maintenance and rehabilitation program commensurate with available capacity. The medium term objective remains that of deepening reform of the sector institutional framework in line with the policy of fully commercializing the road sector. The Government expects that, once road sector institutions have been strengthened as a first step in this direction under the present program, rationalization of these institutions can take place with a view to establishing a single national road organization with overarching responsibility for road sector management. The sector policy letter clearly indicates Government's preparedness to modify or accelerate this institutional strategy should this be necessary to address problems and issues that may arise during implementation. The Government has specified particular objectives for the coming five years for the road sector on which basis - 25 - it will determine how and over what period of time the balance of ROADSIP goals can be achieved. There are three other important strategic developments which underpin the program. Firstly, explicit attention is to be given to addressing constraints to the fuller participation of the private sector in roads. Secondly, the program recognizes the particular problems of rural accessibility and seeks to address this with a view to increasing participation in the market economy. Thirdly, the government has sought to actively involve all stakeholders in the preparation of the program and will support a policy of systematic involvement of these groups in program implementation. E. Project Cost 2.12 The five-year project (including physical and price contingencies) is estimated to cost US$459.8 million of which about 55% would be in foreign exchange. Of the base costs of about US$383.2 million, about US$347.5 million would be for civil works, including US$70.1 million on routine maintenance, US$75.6 million on periodic maintenance, US$145.0 million on rehabilitation of selected roads, US$32.8 million on upgrading of feeder roads, and US$24.0 million on accessibility improvement for feeder roads. The cost of the community program would be US$6.3 million, US$2.8 million would be the cost of the construction industry development program, US$5.8 million the cost of the institutional capacity building and US$20.8 million the cost of engineering services. The cost estimates for rehabilitation works were prepared in June 1996 and updated in February 1997 based on the prices given in the recently awarded contracts. The unit rates for maintenance operations were derived from the data entered in the HMS. A summary cost table is included below. - 26 - Table 2-1: Summary of Project Cost (US$ million) Project Components Local Foreign Total A. Civil Works * Routine maintenance of the core network 51.9 18.2 70.1 * Periodic maintenance of the core network 49.1 26.5 75.6 * Rehabilitation of selected roads 29.0 116.0 145.0 Upgrading offeeder roads 6.6 26.2 32.8 * Accessibility improvement for feeder roads 15.6 8.4 24.0 Subtotal Civil Works 152.2 195.3 347.5 B. Community Accessibility Program 1.3 5.0 6.3 C. Construction Industry Development Program 0.0 2.8 2.8 D. Institutional Capacity Building 1.9 3.9 5.8 E. Engineering Services 8.3 12.5 20.8 Total Base Costs 163.7 219.5 383.2 Physical Contingencies 15.3 20.0 35.3 Price Contingencies 26.3 15.0 41.3 Total Project Cost 205.3 254.5 459.8 2.13 The estimated annual costs of the various components of the civil works program are given below. Maintenance expenditure will increase year-by-year as capacity is built up and as the percentage of the network in good and fair condition increases. Expenditure on maintenance in real terms is not, however, expected to stabilize until after year 2002, in fact no earlier than.the year 2007, by which point the maintenance backlog is expected to have been fully addressed. The rehabilitation program for the first two years is largely based on the expected expenditure on ongoing or already committed donor funded projects with the addition some of the works to be funded from the proposed IDA credit. Table 2-2: 1997-2002 Estimated Costs of Civil Works (US$ million) Year 1997/98 1999 2000 2001 2002 Total Routine Maintenance 9.2 11.3 13.5 16.5 19.5 70.1 Periodic Maintenance 14.7 14.5 15.6 15.4 15.3 75.6 Subtotal 23.9 25.8 29.1 31.9 34.8 145.7 Rehabilitation 15.0 30.0 33.0 25.0 42.0 145.0 Upgrading 3.6 5.5 6.4 8.2 9.1 32.8 Accessibility Improvement 5.1 5.1 4.9 4.6 4.3 24.0 Grand Total 47.6 66.4 73.4 69.7 90.4 347.5 - 27 - F. Project Financing 2.14 The total contribution from local sources is expected to be about US$157.8 million. Of this amount US$115.0 million is to be mobilized from the existing fuel levy and US$16.0 million from other road user charges both to be channeled through the Road Fund (see paras 2.16-2.17). An estimated US$14.5 million towards counterpart funding for ongoing rehabilitation works and an additional US$12.3 million towards counterpart funding of new upgrading and rehabilitation works will come from the Government budget. The total estimated external financing requirement is thus put at US$302.0 million. IDA will provide US$77.5 million, of which about US$7.5 million from ongoing projects, which would finance about 16% of the total project cost. The balance is expected to be provided out of ongoing and new commitments by other donors. Ongoing commitments are estimated at US$116.5 million and estimated new financing to be negotiated in 1997 and to be made available for the project is US$65.0 million. With satisfactory performance of the project, it is not anticipated that it would be difficult to mobilize the balance of funding of US$55.5 million required for the project. In the event that other donors cannot commit to this balance, accelerating additional IDA financing could be considered. This will be explicitly built into the agenda for discussion at mid- term review. In the event of less than satisfactory implementation performance, the low case scenario for civil works comes into play for which no additional external financing would be needed. A summary of the financing is given below. Table 2-3: Summary of Probable Project Financing (US$ million) Source Local Foreign Total Percent Road Users 91.7 39.3 131.0 28.5 Government 26.8 0.0 26.8 5.8 Local Sub Total 118.5 39.3 157.8 Ongoing/Committed IDA 7.5 1.6 AfDB 17.0 3.7 EU 20.0 4.3 Denmark 32.0 7.0 Germany 4.0 0.9 Japan 20.0 4.3 Norway 6.5 1.4 UNDP 6.5 1.4 Finland 2.0 0.4 Others 1.0 0.2 Foreign Sub Total 22.5 94.0 116.5 New financing IDA 70.0 15.2 Norway 20.0 4.3 Denmark 40.0 8.6 New Foreign Sub Total 45.0 85.0 130.0 To be Identified 19.3 36.2 55.5 12.1 Grand Total 205.3 254.5 459.8 100.0 Source: Ministry of Communications and Transport and Bank estimates G. Foreign Funding 2.15 The proposed IDA credit of US$70.0 million would finance various components of the proposed program. In addition, an estimated amount of U$6.5 million will be - 28 - made available from the Zambia Agricultural Marketing and Processing Project (ZAMPIP) to finance part of the costs of the feeder road upgrading and accessibility improvement components. TETAP, which is currently scheduled to be completed mid- 1998, will continue to fund the technical assistance to the feeder road section in MLGH up to an estimated amount of US$1.0 million. On closure of the IDA credit for TETAP, currently scheduled after one extension for June 30, 1998, the balance of this commitment will be absorbed under the new credit for the program. 2.16 A number of donors have ongoing commitments or programs under implementation thus: (i) African Development Bank (AfDB) for US$17.0 million for Great East Road rehabilitation Lusaka to Luangwa Bridge; (ii) European Union (EU) US$20.0 million for the feeder roads program in Central and Copperbelt provinces, Kabwe-Kapiri Mposhi engineering and Chisambe district road rehabilitation; (iii) Norway US$6.5 million for main road rehabilitation in the Southern province (Mazabuka-Monze); (iv) Denmark US$32.0 million for Kapiri Mposhi - Serenje rehabilitation and Luangwa Bridge rehabilitation; (v) Germany US$4.0 million for Western and North Westem provinces, both main and feeder roads, and for Livingstone- Sesheke engineering; and (vi) Japan US$20.0 million for the first phase of Lusaka urban roads' rehabilitation. Other donors include for US$6.5 million for feeder road improvement in Eastern Province which is being executed by UNCDF in collaboration with ILO. 2. 17 Support for institutional development is from Norway and Finland by way of the continuation of ongoing programs through 1997. Norway is expected to continue its assistance under a new four-year program agreement to be concluded in mid-1997 for a total of about US$20.0 million which will also cover some civil works. Denmark is expected to discuss additional program support for priority civil works with the Government in the later part of 1997. Extension of ongoing programs of other donors is also likely, but has been excluded from consideration in total foreign funding. In addition, donor support will be forthcoming through the Zambia Country Programs of the Road Maintenance Initiative (RMI) and Rural Travel and Transport Program (RTTP) in the respective amounts of US$0.2 million and US$0.4 million over the program. These programs are administered by IDA and managed in Zambia by respectively the RMI Coordinator in MCT and the RTTP Coordinator in MLGH. An IDA-administered grant from the Japanese Policy and Human Resource Development Fund of US$0.4 million has been made available for workshops, study tours and exchange programs and technical assistance and training. H. Local Funding 2.18 Local funding is to cover 100% of an increased routine maintenance program and on average the local cost portion of the periodic maintenance program, i.e., about 40% of total cost - it is anticipated though (and built into IDA credit disbursements arrangements, see para 3.18) that the local portion will increase over the life of the project. In addition, on average about 10% of the rehabilitation program costs are projected to have to come - 29 - from local resources. In policy terms, the Road Fund is to finance out of its revenues (i) as a first charge, routine and periodic maintenance on the core network in good and fair condition, (ii) as a second charge, counterpart funding required on donor grants and loans made available for rehabilitation the program (or by the government budget where funding is insufficient) and (iii) Road Fund running costs from July 1997 onward, which are not to exceed 5% of the proceeds of total Road Fund revenue. Appropriate legislation to allow for (iii) was published July 1997 as a condition of credit negotiations (see para 5.1). The long run goal is to develop the resource base of the Road Fund to bring it to a level sufficient to cover the entire maintenance requirement of Zambia's entire core network. This is estimated at US$45.0 million per annum in current prices as and when the core network would have been brought into either good or fair condition by or about year 2007. 2.19 Government's policy is that there should be cost sharing on urban and rural district (feeder) roads as well as on community (unclassified) roads. Local authorities will eventually be expected to contribute to the cost of road maintenance programs once their present revenue generation constraints are addressed under the current urban restructuring and government decentralization exercises. It is not anticipated that the local authorities will be in a position to make such contributions during the project period but this will need to be formally revisited as part of the review of financing arrangements to be carried out prior to mid-term review. Communities, in kind or in cash, will be expected to contribute to the cost of their road programs - this is to be set at 75% for maintenance projects and 25% for rehabilitation projects. These arrangements will be in place from the start of the program in the targeted pilot districts (see para 2. 7) and may be adjusted as necessary by mid-term review. 2.20 Local funding will be channeled largely through the Road Fund rather than through any annual allocation from Government's general budget. The exception is an estimated amount of US$14.5 million representing Government's counterpart financing obligations on ongoing or committed donor funded projects and an estimated US$12.7 million towards the cost of new commitments. The bulk of the resources for the Road Fund will come from the fuel levy which is currently the only steady source of financing for road maintenance. In addition, Government has agreed per its policy letter to allocate from fiscal 1998 to the Road Fund a portion of the proceeds of road service license fees, international transit tolls and weighbridge fines -- all of which are currently part of the general budget. The expected impact on the Government budget would be a loss in annual revenues of about US$2 million if estimated at current levels of collection efficiency. This will be more than offset by the increase in VAT revenues that will be generated by the increase in fuel levy (see para 4.1). 2.21 The Road Fund derived revenues of about US$11.0 million in 1996 from the payment of fuel levy. There is a need to significantly increase the revenues generated by the fuel levy as given below in the tables on sources and uses of funds for the Road Fund. However, any plan to do so must bear in mind the need for the increase in the levy to be gradual so as to allow the increased user costs to be offset by improved road - 30 - conditions and not so large as to result in Zambia's fuel prices being much higher than in neighboring countries. Fuel levy increases are thus calibrated so that the induced increase in the price of fuel does not exceed 3% per annum in real US$ terms throughout the project period. Since the levy is now calculated on an ad valorem basis, at a rate of 15% of the wholesale price, and since the wholesale price of diesel is lower than that of petrol, the levy on diesel is correspondingly lower. This is a positive development since there is a greater possibility of revenue leakage on diesel - trucks have an opportunity to fill up with cheaper diesel in neighboring countries- and cross border price elasticities are relatively high. Table 2-4: Sources of Road Fund Resources (US$ million) Year 1998 1999 2000 2001 2002 Total Revenues from levyI (a) Diesel 8.3 11.4 14.6 18.1 20.5 72.8 (b) Gasoline 4.7 6.5 8.4 10.4 11.8 41.8 Sub-Total 13.0 17.9 23.0 28.5 32.2 114.6 Vehicle license fees 0.9 1.0 1.0 1.0 1.0 4.9 Transit fees 1.9 1.9 2.0 2.0 2.1 9.8 Weighbridge fine/fees 0.5 0.4 0.3 0.1 0.0 1.3 Total 16.3 21.1 26.2 31.6 35.4 130.6 1/ Based on a real increase of the levy from its 1997 level of 3.75 cents/liter for petrol and 3.5c/l for diesel to 8.25c/l and 7.6c/l respectively. For a constant real wholesale price of petroleum, this represents an increase in ad valorem rate form the current 15% to 33% by 2002. For all else constant, fuel levy would increase from 6.1% to 12% of petrol and diesel prices. 2/ This is based on 30% of the license fees being attributed to the Road Fund which is considered conservative. Table 2-5: Uses of Road Fund Resources (US$ million) Year 1998 1999 2000 2001 2002 Total Routine Maintenance Zi 10.5 13.6 16.9 21.6 26.6 89.1 Periodic Maintenance 2' 5.0 6.4 7.3 7.0 6.4 32.3 Rehabilitation, upgrading & 0.0 0.0 0.7 1.4 0.4 2.5 access improvement Running costs l/ 0.8 1.1 1.3 1.6 1.8 6.6 Total 16.3 21.1 26.2 31.6 35.4 130.6 1/ Represents a ceiling of 5% of Road Fund revenues in line with Government policy. Actual costs are expected to be below these amounts in any given year. 2/ Following ratios (rounded) will be included in performance benchmarks. Year 1998 1999 2000 2001 2002 Road Fund/Total Routine and Periodic Maintenance Requirements % 33 40 50 60 70 Road Fund/Annual Routine and Periodic Maintenance Expenditure % 65 75 80 90 95 - 31 - 3. PROJECT IMPLEMENTATION A. Implementation Arrangements 3.1 The project will be implemented by various authorities and agencies making the fullest use of existing oversight, management and consultative structures. Given its mandate for transport sector policy, MCT will retain overall responsibility for project implementation and will appoint a Project Coordinator. A number of specific functions outlined below will however be delegated to the NRB, including that of coordinating the implementation of the civil works program. Roads Dept. will implement the main, trunk and district roads program and the local authorities with the assistance of MLGH will implement the urban and rural district roads program. The community accessibility component will be implemented by the communities themselves with the help of the local authorities and with technical assistance from the SRPU with financing of the RTTP. Consultation with stakeholders impacted by project implementation will be assured by the maintenance of structures established for this purpose under the RMI program and under TETAP, i.e.: the Committee of Ministers under the chairmanship of the Minister of Communications and Transport; a Project Steering Committee (PSC) at permanent secretary level under MCT chairmanship; and the technical and financial subcommittees of the NRB. 3.2 NRB will have the responsibility for coordinating implementation of the project, for financial management for the project and for assembling all technical and financial reports. NRB will approve the annual road program on the basis of the submissions made by the various road authorities. NRB will manage the financing of road maintenance (as now) as well as (in future) the financing for rehabilitation work under the project. The role of existing road authorities will be focused on the preparation of longer term network plans, annual programs for funding consideration and the implementation of the civil works program (with the involvement of the private sector). Roads Dept. will be responsible for establishing standards for maintaining and rehabilitating roads, for developing road maintenance policies and for regularly updating the road data base in the HMS. It will also be responsible for implementing rehabilitation and upgrading of trunk, main and district roads - overall responsibility will be with the Assistant Director for Operations with day-to-day management devolved to the contract management units under the provincial road engineers. These units will be supplemented as necessary by private consultants. The DISS in the MLGH will be strengthened through the infusion of consultancy assistance on a medium term basis to provide support to local authorities in planning road sector programs and through training for MLGH and local authority staff in client management, who are expected to transfer their skills to the local authorities. -32 - Maintenance and rehabilitation of urban and rural roads remains ultimately the responsibility of the relevant local authorities. 3.3 The NRB secretariat will be strengthened to enable it to effect its responsibilities for ROADSIP. As a first step, the NRB is to employ three additional staff - a highway engineer, a procurement specialist and a financial specialist - to meet these increased responsibilities. These staff are being supported for a period of 4-6 months by short term technical assistance funded under the IDA-administered Japanese PHRD grant. A short term procurement specialist is helping NRB develop standard bidding documents acceptable to IDA and other donors and assisting NRB staff on procurement management and monitoring. Short term highway engineering and transport economics expertise has helped to complete the analysis and preparation of the first two years core investment program and to provide training to the new staff. For the initial two years of the program, a management support team will be recruited composed of foreign and local consultants to help coordinate the civil works program. Whether this arrangement would be extended or not will be reviewed no later than the proposed mid-term review. In all events, additional staff, expected to be up to three professionals and two support staff, may be added to the NRB complement as implementation of the project gets underway to act as counterparts to the project management team. Whereas the costs of the team are expected to be funded externally, the costs of NRB staff will be recovered through the proceeds of the Road Fund (see para 2.17) 3.4 A detailed project implementation plan (PIP) and implementation manual is under preparation. The plan is summnarized at Annex 3-1. The draft PIP was presented to the Bank as a condition of negotiations (para 5. 1). The PIP will be finalized and formally adopted no later than credit effectiveness (see para 5.3). NRB is responsible for the preparation of these documents. NRB is also responsible for managing the program launch and for preparing the report on the completion of the program no later than December 31, 2002. The implementation plan provides for a process of annual review of project implementation which will take place not later than end of October each year. The plan also provides for a mid-term review to take place not later than June 30, 2000. 3.5 The project is to be implemented over a five-year period from July 1, 1997. The civil works program for this period has been prepared on an indicative basis in relation to available implementation capacity in foreign and local construction industry and the financial capacity of Zambia, and in particular of the road users (para 2.6). The program to be comnmenced during the first two years has been defined in detail and has been agreed by the Bank as condition of credit negotiations (see para 5.1). Consultancy services for the design and engineering of the rehabilitation works in this program will be tendered no later than credit effectiveness (see para 5.3). The maintenance program for 1998 will be prepared by no later than October 31, 1997 at which time tenders for contracted work will be prepared and force account work allocated. The detailed program for 1999, as well as the indicative program for 2000-2001, for both maintenance and rehabilitation will be deternined no later than the annual review for 1998. -33 - 3.6 With regard to policy and institutional reform, the Government has discussed its objectives extensively with the Bank and has concretized these through the letter of sector policy signed March 21, 1997 which was a condition of credit negotiations (Para 5.1). The reform program includes both short and medium term institutional restructuring, terms of reference for the restructured road authorities and for the key positions. The short term institutional restructuring (strengthening the NRB) shall take place before credit effectiveness and, based on achievement of program implementation and outcome of the Public Service Reform Program, a realistic medium term restructuring strategy of road authorities will be prepared at the mid-term review. 3.7 With regard to financing reforms, Government intends to take action to ensure the value of the fuel levy is maintained in real terms and is thus regularly adjusted to ensure funding available for maintenance does not decline over time. From fiscal 1997 fuel levy is to be expressed as a percentage of the wholesale fuel price which Government has undertaken in its sector policy letter to review on a regular basis. Government also intends to take the necessary steps to provide from fiscal 1998 for the deposit into the Road Fund of international transit fees, a portion of vehicle license fees and weighbridge fines and fees. The financing requirements for the project will in all events be reviewed on an annual basis to ensure the annual maintenance and rehabilitation program can be funded. B. Technical Assistance and Training 3.8 Technical assistance services will be required during the life of the project, particularly in the first two years, to ensure the various executing agencies have the capacity and know how to implement the program effectively. This technical assistance will be strongly linked to various measures, such as locally based and overseas training, workshops, exchange programs and study tours, aimed at knowledge transfer and building the capacity of Zambians in road authorities in a sustainable fashion. Because of the maintenance backlog and because of the particular requirements brought about by institutional restructuring, additional expertise will be needed to fill gaps and expand capacity. Terms of reference for all technical assistance expected to be required have been developed and will be agreed with IDA prior to implementation. The technical assistance provided to Zambia through the RMI and RTTP programs is being integrated into the single framework of ROADSIP. Also included is technical assistance to finalize the preparation of ROADSIP and to disseminate the program and its objectives through a series of upfront national and provincial workshops which is being financed through a Japanese PHRD grant administered by IDA. 3.9 Policy support. Technical assistance in three components will be provided to MCT with the broad objective of increasing the capacity for policy analysis and policy formulation for the roads sector: (a) a Program Advisor for a period of 24 man months to help strengthen the ministry's policy capacity, to provide training, and to advise on the mid-term review of the road sector institutional and financing strengthening measures to be taken; (b) technical assistance for the development of a road safety program, including - 34- requisite institutional strengthening and financing reform, in the amount of 12 man months of which half is expected to be local consultancy; and (c) technical assistance to help Government revise the legal framework for the roads and road traffic management, including Cap 464, in the amount of 12 man months with again half expected to be provided by local consultancy. 3.10 Institutional development. Technical assistance will be provided to the respective agencies to strengthen capacity in road management and financing. For NRB, a management support team will be required to help create capacity in a number of areas which will be critical to the program's effectiveness in a total amount of 108 man months, i.e.: 36 man months for a highway engineer/team leader; 18 man months for contracts management and procurement assistance; 18 months for financial management; and 24 months for short term specialist assistance in training, quality control and in labor- based maintenance methods. For Roads Dept., technical assistance will be required to support the restructuring program and is envisaged to cover the following areas: 24 man months for the start up of the environmental management unit with particular emphasis on environmental analysis and monitoring; 12 man months of support to the restructuring of the plant and vehicle pool and to improving equipment management and maintenance; 6 man months of assistance to the HMS unit for the further development of the data base on the core network; and 6 man months on the development of selection criteria and analytical tools. For MLGH, technical assistance will help further development of the capacity in DISS for policy and planning in the roads sector and help strengthen local authority capacity for roads and will specifically cover 12 man months of consultant services for the development of urban road management systems. This will complement the assistance already provided under TETAP for the development of capacity for rural (feeder) road planning. 3.11 Implementation support. Short term technical assistance of 6 months will be required to help strengthen the NRB to prepare the necessary program documents and to assist to launch the program (see para 3.2). For Roads Dept., technical assistance through two experts each for 24 months will be required to assist the contract management units to be established in each provincial road engineer office. Consultancy support for DISS in MLGH, a continuation of what has initially been provided for under TETAP, to plan and administer road maintenance and rehabilitation for the rural (feeder) road program is estimated as 24 man months. Provision is also made under Engineering Services for consulting services for the preparation of feasibility studies, design, economic evaluation, preparation and evaluation of tenders and supervision of contracts estimated as 6% of the total estimated costs of civil works. 3.12 Under the community accessibility program, required technical assistance is mostly to be provided locally with a view to strengthening the capability of communities to manage their own programs. A roads engineer will be provided on a full time basis at the SRPU to oversee the program and supervise the technical support to be provided in the field to the communities. Allowance has also been made in project costing for short term consultancy and training in participatory techniques, financial management and - 35 - labor based methods. For the development of intermediate means of transport (IMT), the required technical assistance will be contracted out to a local NGO who will be expected to provide project management, field facilitation and technical services. Under the construction industry development program, technical assistance will be provided to help the Ministry of Works and Supply and the NCC in the areas of contractor registration, tendering procedures and streamlining of the legal framework for contracting. C. Procurement 3.13 Procurement arrangements for the project are summarized below in Table 3.1. Procurement of IDA-financed goods and works will be carried out in accordance with Guidelines Procurement under IBRD Loan and IDA Credits (January 1995, Revised January and August 1996). Selection and appointment of consultants will be in accordance with the Guidelines: Selection and Employment of Consultants by World Bank Borrowers (January 1997). Goods, works and consultants' services financed by other donors would be procured in accordance with their respective guidelines. Table 3-1: Summary of Procurement Arrangements (US$ million) Items ICB NCB Others NIF Total A. Civil Works 1. Routine Maintenance 0.0 0.0 0.0 70.1 70.1 2. Periodic Maintenance 5.4 (3.6) 4.4 (3.2) 2.5 (1.5) 62.1 74.4 (8.3) 3 Rehabilitation 33.5 (30.3) 5.1 (4.7) 0.0 106.4 145.0 (35.0) 4. Feeder Road Upgrading 8.0 (7.4) 3.3 (3.0) 0.0 22.5 33.8 (10.4) 5. Accessibility Improvement 0.0 4.5 (4.2) 0.0 19.5 24.0 (4.2) 6. Community Transport Infrastructure 0.0 0.0 2.5 (2.1) 2.8 5.3 (2.1) B. Goods 0.6 (0.5) 0.6 (0.5) 0.0 0.0 1.2 (1.0) C. Consultants and Training 1. Intermediate Means of Transport 0.0 0.0 0.6 (0.6) 0.4 1.0 (0.6) 2. Construction Industry Development 0.0 0.0 1.6 (1.6) 1.2 2.8 (1.6) 3. Policy Support 0.0 0.0 1.0 (1.0) 0.0 1.0 (1.0) 4. Implementation Support 0.0 0.0 1.4 (1.4) 0.0 1.4 (1.4) 5. Engineering Services 0.0 0.0 3.9 (3.9) 16.9 20.8 (3.9) 6. Institutional Development 0.0 0.0 0.5 (0.5) 2.9 3.4 (0.5) Total 47.5 (41.8) 17.9 (15.6) 14.0(12.8) 304.8 384.2 (70.0) Note: Figures in brackets are the respective amounts financed by IDA -- NIF is NOT IDA-financed. 3.14 Civil works will be carried out under contract as detailed below. This is with the exception of approximately US$9.0 million which will be under force account but which will not be financed by IDA. Upgrading and rehabilitation will be carried out under international competitive bidding (ICB) procedures for large contracts in excess of US$1.0 million and otherwise under NCB, procedures for which have been reviewed at appraisal and which have been brought into line with IDA requirements with the help of technical assistance to NRB. A portion of periodic maintenance will be also under ICB, with bulking up of the required work in the first two to three years to help address the - 36 - backlog. Prequalification of contractors will be required for contracts valued in excess of US$10 million. NCB contracts would be open to local and foreign firms up to a maximum of US$1.0 million per contract. The NCB contracts would be packaged in a variety of sizes to promote competition and provide incentive for local firms to compete for work. Goods would be procured on the basis of competitive bidding, with use of ICB for US$100,000 or above and NCB below this threshold. 3.15 For routine and periodic maintenance limited provision will be made for direct contracting to encourage the development of recently trained small local contractors. Under IDA financing, for periodic maintenance, these contractors will be eligible for only one direct contract upon graduation from training of up to US$50,000 equivalent, provided that they have not been previously awarded an ICB or NCB contract and provided all such contracts and rates are subject to prior review by IDA. The average estimated contract size of the routine maintenance is up to 10 km and for periodic maintenance is up to 15 km. A ceiling of US$1.5 million for these contracts has been established. A specific procurement procedure will be followed for community transport infrastructure, that is rehabilitation and maintenance of community roads and bridges. This procedure will be that adopted under the Second Social Recovery Project and approved by IDA for infrastructure (microprojects) subcomponents, i.e., individual contracts of an estimated value of US$50,000 equivalent or less to be procured on the basis of at least three quotations from qualified community-based contractors up to an aggregate amount of US$2 million. When sufficient community-based contracts are not available, contracts may be awarded directly on the basis of standard rates to be agreed with IDA. 3.16 For consulting services, the normal method of procurement will be on the basis of quality and cost based selection (QCBS) from a short list of international and national consultants. The exceptions are anticipated to be as follows: QCBS on the basis of a short list of national consultants for engineering design and supervision of smaller civil works and for consultancy services for the community accessibility component for up to US$200,000 per contract; quality based selection (QBS) for the management support team for NRB up to an aggregate amount of US$1.5 million; single source selection where preexisting contracts under TETAP are extended for financing under the proposed credit for strengthening MLGH and Roads Dept. institutional capacity and for IMT studies up to an aggregate amount of US$500,000 and for engineering supervision services where the detailed design has been carried out in a satisfactory manner by the same firm; and individual consultants in case of components of the policy studies program up to an aggregate amount of US$200,000. 3.17 Prior review thresholds will be US$100,000 for goods, US$250,000 for works, US$100,000 for consulting firms, and US$50,000 for individual consultants. The first five contracts let under NCB procedure will be subject to prior review regardless of contract amount. For direct contracts, IDA will be provided a copy of specification and the draft contract for prior review in each case. Procurement under the program will be the responsibility of the relevant executing agencies with NRB carrying out a review and - 37 - support role. A procurement management system will be established in NRB as a result of the institutional capacity building program (see para 3.10) and appropriate training for staff will be provided. NRB has developed standard forms of contract and standard specifications for NCB for direct contracting and for labor based work. Agreement has been reached with the National Tender Board that responsibility for these tenders subject to an upper limit of US$100,000 (and later be increased up to US$600,000) will rest with the NRB and the executing agencies. All ICB works and goods as well as consultants' services' tenders will go through the established procedures. Consideration will be given no later than mid-term review to further decentralization of the procurement review process and strengthening the role of NRB. D. Disbursement 3.18 The credit is expected to be fully disbursed by March 31, 2003 as shown below. The estimated disbursement schedule (Annex 3-2) is based on the detailed implementation plan. Table 3-2: Projected Disbursements Fiscal Year Ending June (US$ million) Year 1997 1998 . 1999 2000 2001 2002 . 2003 Annual 0 6 9 14 25 15 1 Cumulative 0 6 15 29 54 69 70 % of Credit i0% 9% 21% 41% 77/s 99% 100% The proceeds of the credit are expected to be disbursed in accordance with the allocation by category shown below, over a period of 6 years. A provision has been made for retroactive financing up to a ceiling of SDR 2 million (4% of the proposed credit arnount) in respect of road rehabilitation projects for which tenders were let prior to negotiations and for which contracts are expected to be signed prior to credit signature, but after August 15, 1997. -38 - Table 3-3: Disbursement Categories Amount of % of Expenditure the Credit to be Financed By Category Allocated IDA 1. Civil Works for Periodic Maintenance 2.7 90 .__ ___ 2.7 60 2.4 30 2. Civil Works for Rehabilitation of selected roads 33.7 90 3. Civil Works for Upgrading feeder roads 10.0 90 4. Civil Works for Accessibility improvement of feeder roads 4.0 90 5. Civil Works for Community Transport Infrastructure 2.0 75 6. Equipment, Vehicles and Materials 1.0 90 7. Consultants Services and Training 8.7 100 8. Unallocated 2.7 as disbursed Total 70.0 3.19 All applications to withdraw proceeds from the credit would be fully documented except for: (i) expenditures for civil works including community roads with an estimated value of US$250,000 or less; (ii) expenditures for goods of US$100,000 or less; and (iii) expenditures on consulting services of US$100,000 or less for consulting firms and US$50,000 or less for individual consultants for which reimbursement would be made against statements of expenditure (SOE). Supporting documentation for expenditures claimed against SOEs will be retained by NRB for review by periodic IDA supervision missions and by external auditors. 3.20 To facilitate disbursement and reduce the volume of withdrawal applications, two Special Accounts will be opened in a commercial bank on terms and conditions acceptable to IDA. The Special Account A would be managed by NRB. The authorized allocation to cover four months of expenditures is set at US$3.0 million. Upon effectiveness the amount of US$1.5 million, 50% of the authorized allocation will be deposited into the Special Account. The remaining balance will be made available as disbursements reach SDR 7 million. The Special Account B would be managed by SRPU for the sole purpose of facilitating the community transport infrastructure component of the project. The authorized allocation for this account will be US$0.5 million of which 50% will be made available on declaration of credit effectiveness and the balance as disbursements reach SDR 1.5 million. 3.21 A condition of disbursement for expenditures under the community accessibility component will be that operational guidelines to be followed in approving and disbursing grants to beneficiary associations as well as a memorandum of understanding setting out the roles of all implementing agencies for this component will have been prepared and agreed to by IDA (para 5.4). - 39 - E. Auditing and Accounting 3.22 The NRB will be responsible for coordinating project accounting, maintaining overall records, producing an aggregated and consolidated project account, managing disbursements and ensuring timely audited accounts. The NRB has been assuring this function under TETAP in a satisfactory manner but will require increased capacity to handle the additional volume of work under ROADSIP. This will be managed through the additional of one full time qualified accountant and the provision of a financial specialist on the management support team (see para 3.10). The specialist will help develop accounting systems and procedures which will however remain on a cash rather than an accrual basis. 3.23 Annual audits of the consolidated project account and subsidiary statements of project activity undertaken by other road authorities will be carried out by external auditors satisfactory to IDA. Under the Social Recovery Project, a separate account will be prepared and audited on an annual basis for the community transport infrastructure component. Terms of reference for these audits contain a component of technical audit to provide independent verification of the achievement of physical targets. It has been agreed at negotiations that audits will be submitted to IDA within six months of the end of the respective financial year. Audits will include a separate auditor's opinion on the Special Accounts and use of SOE procedure. Per terms of reference, a management letter will be submitted to IDA with each audit report. Audits will be carried out by an appropriately qualified firm. F. Monitoring and Reporting 3.24 NRB will be responsible for preparing monthly reports on the physical and financial performance of the program against target. Proposed monitoring indicators are at Annex 3-3. These have been reviewed at appraisal and have been agreed as a condition of credit negotiations (para 5. 1). These reports are to be submitted, in the first instance, to MCT for discussion and action as required. In the second instance, these reports will be consolidated into a quarterly report which will be widely disseminated to IDA, the donor community and the various local stakeholders. The content of the quarterly report will be included in the PIP. NRB will also be responsible for producing annual reports of achievements to be submitted one month before the Annual Review (see para 3.4). A mid-term report will be produced no later than two months in advance of the Mid-term Review. NRB will produce within six months of the closing of the IDA credit an implementation completion report. Independent technical audits will be carried out on a periodicity and according to terms of reference both satisfactory to IDA in order to verify physical progress and to assess quality. - 40 - G. Supervision 3.25 Overall, supervision will amount on average per annum to a total of 25 staffweeks of field supervision and an additional 20 weeks for review of documents, reports, etc. at headquarters and in the resident mission. This will require an annual budget of about US$150,000 which is reflected in the business plan for Zambia. A detailed plan for the field supervision of the program, including a summary of IDA requirements, is included at Annex 3-4. -41 - 4. PROJECT BENEFITS AND RISKS A. Project Benefits 4.1 The project will help assure that there is adequate road infrastructure to underpin Zambia's continuing economic reform effort. The program is affordable in terms of the total resources available to Zambia for the sector and is reasonable in terms of the size of Zambia's road network. The amount to be allocated to roads out of total investment is within international norms. The project investment is equivalent to 1.9% of projected GDP for Zambia, of which about 1.2% is represented by rehabilitation. This compares to the figure of 2.2% derived from a study of about 33 developing countries undertaken in the 1980s. An increasing portion of the local funding for this investment will come from direct road user charges channeled through the Road Fund rather than through general taxation. This has the benefit of ensuring scarce public funds are effectively utilized and that the road users take on a steadily increasing proportion of total local funding with the largest contribution to come from the most frequent users of roads in terms of kilometers driven (through fuel levy payments) and from heavy vehicle owners (road service license fee). As VAT of 20% is currently levied on top of the fuel levy, Government finances benefit from increasing the fuel levy. This fiscal benefit is expected to be of the order of US$12.7 million equivalent in 1996 prices over the period 1997-2002. This partly offsets the loss of general tax revenue through the transfer of road user charges proceeds to the Road Fund of US$9.8 million and the incremental cost to the budget of US$12.6 million for the counterpart funding of the project for a net fiscal impact of negative US$9.7 million. 4.2 The project will help address deficiencies in the road network, increase the proportion of the network in good condition, and improve sector management and financing. At the national level, economic benefits will more than offset the direct negative fiscal impact through the creation of higher taxable incomes from reduced transport costs. The direct benefit to the road users of improvement in road conditions is considerable and are expected to outweigh the financial cost occasioned by the higher road user charges to finance road maintenance. Given the competitive structure of the road transport industry, transport cost savings are very likely to be passed on to consumers in terms of lower final product prices. A recent study by FEDHAUL has indicated an additional cost of US$14,000 equivalent per annum per heavy vehicle for incremental repairs occasioned by roads in poor condition. Given the current size of the truck fleet and the current condition of Zambia's roads, meeting the project objective for the improvement in the portion of roads in good condition is estimated to generate a gain of about US$30.0 million or about 1% of GDP in avoided vehicle maintenance costs. 4.3 The methodology of assessing the benefits of the main roads and feeder roads components of the project and the results of the economic analysis are set out in Annex 4- -42 - 1. The basis for prioritizing main road subprojects will be economic rate of return (ERR) subject to a threshold value of 12% representing the estimated opportunity cost for capital in Zambia. For subprojects identified for the first two years program, ERRs are in the range 12% to 42% with a weighted average of 21%. The estimates have been constructed on the basis of HMS input data, determining the most cost effective rehabilitation option with benefits representing vehicle operating cost (VOC) savings. Cost benefit streams have been valued using economic prices, adjusting for duties and taxes included in financial prices. Since the exchange rate is market determined and cost composition is similar for costs and benefits, no conversion factor has been applied. The ERR estimates are considered conservative and represent lower bound values given that no other benefits - such as time savings and generated traffic - have been included and an assumed traffic growth rate of 3% per annum has been used. Sensitivity analysis has been carried out for different forecasts of traffic growth and a switching value analysis has been done for capital cost variation. The first two years program contains the rehabilitation of a number of sections of the Great North Road which assures international road traffic links with Tanzania and is thus of strategic economic importance. The economic benefit arising from avoiding the complete loss of any section of this road is likely to be considerable and certainly greater than the VOC benefits. For the Chinsali-Nakonde section of this road, the ERR for any rehabilitation or maintenance alternative is less than 12% on the basis of VOC savings from existing traffic, but has been estimated at 28% when account is taken of the economic benefit from generated traffic estimated as the equivalent of the current traffic carried by the TAZARA railway. 4.4 Feeder roads have been prioritized on the basis of multi criteria analysis (MCA), under which an important weight is given to agricultural production potential and access of the rural poor to markets and services and under which an important role is assigned to choices made by affected communities in each district The methodology has been developed with the help of consultants under TETAP and has now been formally adopted by Government as the basis for the subproject selection under the project. Through the TETAP-funded road inventory, a primary core feeder road network has been determined on a district by district basis. Specified economic and social criteria have been applied to determine a priority ranking of primary feeder roads for each district. This prioritization informs discussions which will take place on an annual basis involving communities, district councils, MLGH staff and other stakeholders as to how the available resources will be allocated among the priorities - for example the tradeoffs between allocating resources to upgrading a few roads as opposed to improving accessibility on a larger number of roads will be discussed and agreed at community level and will not be centrally determined. For roads selected for full improvement, an "ex ante" and "ex post" analysis will be undertaken to determine the net economic benefit. 4.5 A major project benefit will be job creation through the development of increased opportunities for the local contracting and consulting industries. The Government's medium-term goal for ROADSIP is 30,000 new jobs - it is expected that by 2002 about 14,000 new job opportunities will have been created thus. Other benefits of the program would include increased marketed agricultural output as a result of the feeder road - 43 - component, improved access in rural areas to health and education facilities and human resource development which will complement the policy and institutional building components, and increased active participation of local communities in decision making about road infrastructure. B. Key Performance Indicators 4.6 Improving the quality of information on the road sector and assuring that it is effectively used to improve decision making, including but not limited to the allocation of scarce financial resources, is a key benefit anticipated from the project. Key indicators of successful project implementation will include inter alia: (a) efficient service delivery by increasing number of kilometers of roads rehabilitated and then regularly maintained; (b) improving service quality by lowering road transport unit costs and vehicle operating costs; (c) sustainability of the road maintenance efforts by increasing road user charges devoted to maintenance; (d) strengthening of local construction industry by increasing the volume of work offered; (e) reducing poverty by creating job opportunities for both skilled and unskilled workers ; and (f) increasing the percentage of classified roads in good or fair condition. These are to be included in the PIP. IDA will focus on a subset of these indicators designed to measure the critical success factors for implementation success of all project components in terms of both qualitative and qualitative improvements - these are given in Annex 3-3 and will be reviewed on a regular basis by IDA and Government. (See para 3.23). Progress in the institutional reforms would be monitored through completed studies, preparation of time-based action plans based on the recommendation of the studies, and monitoring the realization of action plans through regular progress reports which will be submitted on a quarterly basis to IDA. C. Poverty Reduction and Employment Generation 4.7 The project is expected to have a significant impact on poverty reduction and includes specific targeted interventions particularly in the rural areas, through feeder road rehabilitation and maintenance which will help reduce transport costs, increase mobility and increase farm gate prices for small scale farmers. The project's initial focus is expected to include three provinces, Northern, Luapula and Eastern, where 50% of the core poor of Zambia live, as well as Western province where isolation and poor rural access are particular acute and are major contributory factors to high poverty levels. This is consistent with Government's development objective of reducing poverty, inter alia through improving the income generating potential of the poor by enhancing their access to productive resources. The project component dealing with the reconstruction and rehabilitation of community (undesignated) roads will help develop participatory approaches to road planning and maintenance which will empower poor communities. Better rural district (feeder) roads and community roads are expected to help improve food aid distribution in the event of future drought or hardship in the rural areas - poorly maintained roads are recognized by NGOs and community groups to have been a major stumbling block to the success of relief efforts in the recent past - and facilitate in good - 44 - years the marketing of agricultural surpluses. A significant number of new jobs will be created through the project, especially as a result of the development of small scale labor based contractors to compete for work on the urban and rural district feeder roads. In order to measure progress on this front, it is proposed that two poverty reduction impact assessments be undertaken during the life of the project and according to terms of reference satisfactory to IDA - one prior to mid-term review and one within 6 months prior to project completion. D. Development of Local Contractors 4.8 The project seeks to address all three current sets of problems of the construction and consulting industry, i.e., financial, technical and Government procedures. In terms of financial issues, the project will ensure timely and prompt payments to the contractors - specific standards have been set and these will be monitored. Stable cash flow to the Road Fund will ensure that the contracts are not suspended or terminated before completion and the contractors will have the chance to better plan, allocate and utilize their resources. This should result in reduction of costs, as has already been demonstrated in the first two years of the operation of the NRB, and should enable development of local contractors who can compete with the other regional and international bidders. It is expected that, by the end of the project in 2002, there should be up to 300 contractors active in routine and periodic maintenance and up to 70 contractors for rehabilitation projects. The current turnover of the locally based contractors is about US$12.5 million, whereas the capacity is estimated at US$25.0 million per year. The amount of work available to the local contracting industry will rise during the project, from US$12.0 million in 1997 to US$28.0 million in 2002 expressed in 1996 prices. It is thus expected that this capacity will be better utilized and further expanded during the life of the project. 4.9 Conventional civil work methods in Zambia had been equipment-intensive. Construction projects were often managed by expatriates. The program aims at a different approach that will seek to create incentives for use of labor-based methods for road works and encourage a larger role for locally-based contractors and consultants. Compared to the equipment based methods, labor-based methods can more effectively mobilize domestic resources and can save foreign exchange. Labor-based methods can be readily acquired by unskilled people and can be disseminated across a wide area since are not dependent on heavy machinery with limited availability and enable road works to be more easily performed in remote areas where unemployment is a prevailing problem. Training to be provided under the program will help increase the productivity of small scale contractors. Opportunities will be offered to retrenchees arising from the restructuring of Roads Dept. as well as to contract managers within public service and to local consultants. Upon graduation, contractors will be given work opportunity through direct contract to demonstrate skills and experience acquired through training. (See para 3.15). After graduation and work training, the small scale contractors will be encouraged to compete for further work through provision for small packaged contracts. - 45 - 4.10 Under the project, the use of a standardized national competitive bidding document is intended to facilitate the participation of local contractors. Improved procurement management in the sector is expected to reduce delays, in particular with regard to processing time for bids and for payments. In addition, for labor based works under direct contract, a simplified document will help inexperienced contractors to more easily manage their work. E. Environmental Impact 4.11 The project is focused on maintenance and rehabilitation of the road network. Upgrading is expected to amount to less than 8% of the total cost of civil works. There will be no construction of new roads other than a very limited amount of bridge and track construction under the community accessibility component. Resettlement and vulnerable minorities' plans are not anticipated for any subprojects envisaged under the project, and not at all in the case of works already identified for the first two years program. The adverse environmental impact is thus not considered likely to be major and the project has accordingly been rated Category B. 4.12 An environmental analysis has been carried out and an environmental mitigation plan prepared in conformity with the requirements of OD 4.1 on Environmental Assessment for Category B programs. The work was carried out by a local consultant working within the framework of the national task force which prepared ROADSIP. The analysis was submitted to Government and to the Bank for review in June 1996 and accepted with some minor revisions as a basis for an action plan for improved environmental management in the roads sector. The analysis identified fourteen areas of main environmental concern and has specified a range of measures to be taken. Out of these fourteen, five have been highlighted for specific attention, i.e., destruction of wildlife habitats and biodiversity; increased soil erosion leading to river and stream siltation; soil and water contamination through chemical, oil and fuel spillage; increased deforestation through road improvement and greater road usage; and disruption of traditional lifestyles and increased sexually transmitted diseases. 4.13 The mitigation plan is part of a proposed environmental management program which is intended to raise capacity in the road sector to address both immediate and likely future environmental concerns. A environmental management working committee, including the local consultant, has been tasked from September 1996 with the finalization of this plan. The committee has made very good progress and has been made more effective by drawing in private and public sector representation from a variety of organizations, including ECZ. The plan includes four elements critical both to the development of capacity and to building linkages between the sector program and national environmental policy and guidelines, i.e., establishment of an environmental management unit to be housed initially in the Roads Department with external funding for technical assistance and training during the first two years of operation; development of road sector environmental standards and guidelines, including review and strengthening of the environmental clauses in use in NCB procurement documentation; - 46 - carrying out environmental assessments on specific road improvement projects on a selective basis; and carrying out monitoring and evaluation activity to ensure compliance with environmental guidelines during the construction phase of projects. The aforementioned committee will serve as a steering committee for the program during the first two years of pilot operation. F. Sustainability 4.14 Clarified institutional roles, improved management structures and adequate funding for road maintenance are key factors for sustainability. The project is expected to enhance sustainability by addressing these factors in a coherent and effective manner. Establishing an appropriate sector policy framework supported by strong and effective institutions is the ultimate goal of the program. This will facilitate an improvement in the quality of planning and programming in the roads sector. Given its revised status, NRB is expected to have greater freedom to offer the terms and conditions which will attract and keep qualified Zambian staff and to contract out services as far as possible. Road financing will be addressed in such a way to ensure greater regularity and predictability of financial flows to the sector which should reduce the fiscal burden and place greater reliance on road user charges through the Road Fund to finance road expenditures. This greater predictability, associated with a steady rate of increase in the resources made available for road maintenance, are expected to create a sustainable market for road construction services that will stimulate the creation of new small business and new jobs. The participatory nature of program preparation, the involvement of the private sector in the management of NRB, augur well for a high degree of program ownership on the part of all Zambian stakeholders. G. Project Risks 4.1]5 The Government's program is an ambitious one, though its scope and objectives are appropriate for bringing about a real improvement in the quality of road infrastructure in Zambia. There are, however, substantial risks to be addressed. Under the project, these risks have been allocated appropriately and mitigated to the extent possible. The major outstanding risks are institutional and financial. On the institutional side, considerable effort has gone into designing strengthening and restructuring measures which attract the support of all stakeholders. There is a risk that these measures will not succeed in improving sector management performance to the extent expected which could in turn lead to delays in project implementation. The restructuring of existing institutions, in particular of Roads Dept., depends on the effectiveness of the PSRP in creating the conditions, including pay and incentives, which will facilitate the professionalization of government services. In the event that these measures fall short, Government anticipates in its letter of sector policy that alternative strategies which including the acceleration of the pace of commercialization and rationalization of road sector institutions will be considered. Therefore, the effectiveness of the new institutional arrangements are to be assessed after each of the first two annual project reviews and any - 47 - adjustments will be made by the time of mid-term review. In addition to institutional structure, it must be recognized that human and material capacity remains limited and this weakness may be fully addressed only over the medium term. In the initial years of the project, this constraint will have to be addressed by technical assistance and training, the need for which is to be reassessed by mid-term review. 4.16 On the financial side, the risk is that the project will not be affordable and that Government will not be able to raise the necessary local funding. Most local funding will, however, come through road user charges and not through general tax revenues - road users have expressed a willingness, in a general sense, to pay higher charges in the interest of financing a larger road program than hitherto. These funding arrangements do not fully mitigate the financial risk for the funding of local costs of the project -firstly, the Government may not be in a position to agree to the projected increase in fuel levy and road user charges and secondly the flow of funds, which is still through the government budget process, could be delayed or diverted in the event of a deterioration in fiscal and macroeconomic performance. There is a related risk of a shortfall on external financing given that known new commitments for the road sector are less than the total anticipated requirements for the project. These risks are being partially mitigated by ensuring that the scope and objectives of the first two-year program are tailored to current known local and external resource availability and adjusting the scope and objectives of the outer years by mid-term review as a function whether this availability will actually increase as projected or not. High and low case scenarios for the civil works program have been developed as a function partly of the uncertainty about future financing levels (see para 2.06). The financing implications of these scenarios is given below. The low case represents the level to which total financing could fall without any further network deterioration. Table 4-1: Local Revenue Requirements of Various Scenarios Required Local Required Road Required G'mt Required Max. Total cost Financing Fund Revenues/i Funding Levy/2 Case (US$, Mns) (US$, Mns) (US$, Mns) (US$Mns) (% Wholesale Price) 1. Low 372.45 123.89 100.45 23.44 0.23 2. Medium 459.80 157.78 130.62 27.16 0.33 3. High 617.75 188.63 151.53 37.10 0.43 1/ Fuel levy, international transit fees, weighbridge fines, and 30% of Road license fees 2/ This shows the level the levy needs to reach by 2002, assuming a constant domestic wholesale price of fuel (K325/1 for petrol and K300/1 for diesel in 1996 Kwacha). For a 3% per annum decrease in fuel consumption the equivalent amounts would be 30%, 42% and 55%. 4.17 A substantial part of local funding is from fuel levy proceeds. The fuel levy is from fiscal 1997 onward calculated as percentage of the wholesale fuel price and thus fuel levy proceeds are sensitive to changes in both fuel prices and fuel consumption. The above analysis assumes that fuel prices in real local currency terms are constant, since the fall in international fuel prices is expected to be of the same magnitude as the projected - 48 - depreciation of the Kwacha. It also assumes fuel consumption to grow at 3% per year in line with expected GDP (and road traffic) growth. However, the relationship between GDP and fuel consumption has historically been quite volatile and there is a risk that fuel consumption could fall, thus reducing the expected proceeds form the fuel levy in any given year. This risk, as well as a worst case scenario of a 4% p.a. increase in domestic wholesale fuel prices have been modeled and are summarized below. To maintain proceeds at the level anticipated for the year 2002 under the worst combination of circumstances (4% p.a. increase in wholesale fuel prices, and a 3% p.a. decrease in consumption), the fuel levy would have to reach the equivalent of US$0.105/1 for petrol and US$0.097/1 for diesel. This is not considered to be unsustainable, although it is certainly higher than the expected US$0.082/1 for petrol and US$0.076/1 for diesel if wholesale prices remain constant and consumption increases. Table 4-2: Fuel Levy Proceeds: Risk Analysis Summary Fuel Consumption Fuel Increasing By 3% Consumption p.a. Decreasing By 3%p.a. 2002 2002 l Levy required to finance Medium Case Scenario: l Petrol (k/i) 107 136 Diesel (k/l) 99 126 Levy as % wholesale price For Wholesale Price of Fuel Constant 33% 42% For Wholesale Price of Fuel Increasing by 4% p.a. 28% 36% - 49 - 5. AGREEMENTS REACHED AND RECOMMENDATION A. Agreements 5.1 Prior to negotiations, the Government presented evidence satisfactory to IDA that the following have been accomplished: (i) A letter outlining the Govermnent's road sector policies and road sector investment program (paras 1.36, 3.6). (ii) The publication of legislation providing for NRB powers to hire and pay for its own staff (para 2.17, 3.2). (iii) The draft project implementation plan and performance monitoring indicators (para 3.4). (iv) The proposed investment program for the first two years of the project (para 2.6). (v) The selection criteria for the inclusion of roads in the proposed investment program (para 2.6). 5.2 Prior to Board Presentation, the Government has taken the following actions satisfactory to IDA: (i) The establishment of the environmental management unit and the adoption of environmental standards and guidelines (para 4.12). (ii) The issuance of a request for consultant proposals for the management support team in NRB (para 3.2). 5.3 Prior to Effectiveness, the Government will take the following actions satisfactory to IDA: (i) The finalization of the project implementation plan and performance indicators (para 3.4). - 50 - (ii) The employment of consultants for the management support team in NRB (para 3.2). (iii) The issuance of tenders for the engineering of all rehabilitation work to be carried out during the first two years of the project (para 3.5). 5.4 Prior to credit disbursement on the community accessibility component, the Government will provide operational guidelines and a memorandum of understanding on the roles of the implementing agencies to be satisfactory to IDA (para 3.4). B. Assurances Provided at Negotiations 5.5 The Government provided assurances at negotiations that it will: (a) Carry out the project in accordance with the implementation plan, including a mid-term review no later than June 30, 2000 and annual reviews (commencing 1998) no later the October 31 of the preceding year, and utilizing reporting procedures and performance monitoring indicators acceptable to IDA (para 3.1). (b) Maintain project accounting consistent with internationally accepted standards, and submit annual audited financial reports no later than 6 months after the end of each fiscal year according to terms of reference agreed with IDA and maintain appropriate technical auditing standards acceptable to IDA (paras 3.21, 3.22, 3.23). (c) Carry out policy studies, engineering feasibility and design studies, institutional development and capacity building in implementing agencies per the project and according to terms of reference to be reviewed with and agreed to by IDA (paras 3.9, 3.10, 3.11). (d) Adopt procurement procedures acceptable to IDA including the use of the Bank standard bidding documents for works and goods under ICB and for consultants services, the use of an agreed local bidding document for civil works under NCB, and the use of a standard simplified document for the procurement of small works and for directly contracted works (paras 3.5, 3.17). (e) Review the revenue requirements for the Road Fund on an annual basis and utilize the proceeds of the Road Fund exclusively for routine and periodic maintenance costs, for the counterpart contribution of donor funded projects approved under the project, and for the operating costs of NRB not exceeding 5% of total Road Fund proceeds in any year (para 3.7). - 51 - (f) Adopt and maintain agreed selection criteria for the inclusion of road projects in the program and to agree not to undertake any works outside of the project (para 2.6). (g) Assure the continued function of the Highway Management System (HMS) and the Roads Training School (RTS) throughout the life of the project and to provide all the necessary funding for the respective programs to be agreed on an annual basis with IDA no later than the date of the annual review (paras 1.19, 1.27, 2.8, 2.9); and (h) Carry out an action plan to improve road safety (See para 2.9). (i) Prepare and submit for agreement with IDA the operational guidelines and a memorandum of understanding on the roles of the implementing agencies for the carrying out of the community accessibility component of the project (para 2.7). C. Recommendation 5.6 On the basis of the above actions, conditions and agreements, the proposed Program would be suitable for support from an IDA credit of SDR 51.5 million (US$70.0 million equivalent). - 52 - REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM Definitions of Terms Terms Meaning Routine Regular (often daily) maintenance activities carried out on the road including grading, clearing Maintenance of drains, pothole patching, vegetation control, painting of signs and roadside furniture, sweeping and major repairs. l.............. .............................................................................I...................................................................................................... Periodic Maintenance activities which are carried out a number of times during the life of the road but Maintenance with intervals of more than one year between them (usually 3-7 years apart). This includes resealing with single surface dressing or premix and painting of shoulders on paved roads and regravelling to restore depleted on gravel roads as well as spot repair for up to 10% of the road surface area. Upgrading This is the work required to raise the standard of an existing road to a higher class of engineered road, e.g. converting a gravel road to a paved road. ........................................... ............................................................................................................................................................................... ..... Rehabilitation This is work done in scarifying existing pavement by replacing poor base and sub-base in order to restore to original design; and in case of paved roads: Resurfacing (three options linked with, roughness, rutting depth and extent and nature of cracks): slurry seal (superficial cracks, few ruts); single or double bituminous surface dressing; and premix carpetloverlay of appropriate thickness. Options include spot repair in excess of 10% of the road surface area Reconstruction A category of rehabilitation involving replacement of below standard parts of the road structure. This can include scarifying existing pavement resurfacing (slurry soil, single or double surface existing, premix). surface ripping up and recompacting pavement layers, addition of new pavement layers including strengthening and widening, reshaping etc. Generally this follows the existing alignment but can include improvements to the vertical and horizontal alignment isolated section. For unpaved roads reconstruction involves regravelling to appropriate thickness. ..................................... .................................................................................................................................................................................... New Construction These are the activities required to construct a new road when no road exists. , ................... ... .................................................................................................................................................................................. Designated Roads This term refers to legal declaration of the status of a road in terms of CAP 766 of the Laws of Zambia. Roads are designated and formally gazetted in the Government Gazette. l.~ .. .........I............... I--.........................................I.............. ........................................................................................................... Undesignated Roads This refers to roads which have never been designated before as above. This group of roads includes those roads which are often (but erroneously) referred to as "Unclassified Roads". An Undesignated road is however always "unclassified" as the standard for the road has not been specified. lassified Roads These are roads which have been legally designated and in addition the class or standard of sections of the road has been specified. Classification of a road or sections of a road is based on the design standard and surface type. For an example, an inter-territorial trunk (T) road would be designated for its entire length as a "T" road in accordance with its function but the standard may vary along its length as traffic levels vary. In this case the designation of the road remains as "T" but the route consists of various classifications based on geometric standards of the sections. ...................... ............................................................................................................................................................................... .... Unclassified Roads These are roads for which the geometric standards have not been specified. It is noted that all Undesignated roads have not been classified and therefore are unclassified. It is also noted however that standards for some designated roads (legally declared) have not been specified and these designated roads are also unclassified. - 53 - ROAD CONDITION A. Paved Roads Roughness based on International Traffic Vehicles Per Day Roughness Index Good Fair Poor 00-299 0-8 8-11 > 11 300-999 0-6 6-9 > 9 1000+ 0- 5 5 - 8 > 8 B. Gravel Roads Comfortable Travel Speed (km/hr.) -Type Good Fair Poor Main Gravel > 80 60 - 80 < 60 I Other Gravel > 60 40 - 60 < 40 54 - Annex 1-1 Page I of 10 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM Letter of Road Sector Policy c, ?t4n: LU&L 25426tJ(WZc- e Tti= ZA 42221 Pyptaqj Fa* 23494 .,VoJIF.,MO IV REPUBLIC OF Z7MBI 4ISTRY OF FIN4ANCE AND ECONOPi0IC D'EV!OPMEN? OFFICE OF THE AfLNISTr P.O. BOX 50062 EIDGEWAY, 15101 21st March 1997 CrLANGAUROAI LUSAZk Mr. James D. Wolfensohn President World Bank 1818 H Steet, N.W. Washington, DC 20433 TJNE ST.ATES OF AMERICA Dear Mr. Wolfensohn: RE: ZAMBIA'S ROAD SECrOR POLICIES AND ROAD SECTOR INVEST ENT PROGRAMNE (ROADSIP) This letter summarises various policy measures which the Government intends to pursue to support implementation of its road sector strtegy during the period 1997 to 2002. The letter deals first with the Governmentes economic and social development policies; second with transport sector policies; third with road sector; fourth with the Government's policies and objectives for the road sector; and finally with the various road sector policy issues which the Government intends to tackle during the period up to the year 2002. Economic and Social Development Policies 2. Government's medium term macroeconomic poUcy framework has been desigzted to promote economic growth with stability based on market determined allocation of resources. In the MIedium Term Fmancial Framework (1996-1998) , priority spending focusses on those sectors that support growth such as roads, agriculture and provision of social services. The objectives of this policy framework are; 2.1 to speed up the institutional reform process through the Public Service Reform Programme (PSRP); 2.2 to continue with the policy of economic libernlisatlon and further encourage the release of the private sector initiative and investment to facilitate the attainment of positive per capita growth; and 2.3 to pursue an ambitious privatisation programme aimed at increasing participation of the private sector in the economy. - 55 - Annex 1-1 Page 2 of 10 It is only by achieving these objectives that government can provide on a sustainable basis, basic social services, a social safety net for the vulnerable a2nd rehabilitate /maintain essential economic and social infrastructure. Transport Sector Policy Framework 3. Government's policy objective framnework for the Communications and Transport sector is to improve the operating efficiency and performance of the sector for the benefit of the customers' changing requirements as spelt out in the transport policy White Paper 1995. The primary objectives of the policy are to: 3.1 ensure availability of sufficient resources from the private and public sectors to create capacity in the sector commensurate with the requiremnents of the economy; 3.2 allocate available resources among modes to meet requirements at minimum cost to society; and 3.3 establish a system of pricing that will ensure a reasonable return on transport investments. 4. Government will therefore continue to accord high priority to rehabilitation and maintenance of infrastructure in order to stimulate and optimise the existing productive capacities in the following sub-sectors of Communications and Transport: 4.1 CivilAviation: after, the liquidation of the National carrier, Zambia Airways, Government's policy has been to liberalise the civil aviation industry to encourage and promote private operations of airlines and airports. By the end of 1996, a total of eight (8) Zambian registered private holders of air service permits were operating air transport services carrying passengers and cargo on domestic, regional and international routes; 4.2 Rail transport: as railways are the backbone of the Zambian transport system, I accounting for a significant percentage of the movement of the country s imports and exports, the Government is focussing on enhancing the railways capacity by commercialising it in order to improve the performance of the sector; 4.3 Road Transport: both passenger and freight transportation have been liberalised. Government efforts shall be confined to matters relating to safety and quality of service and improving access to rural areas as a matter of priority; 4.4 Inland Waterways Transport: the Government policy shall be to encourage the development of inland waterways and maritime transport by commercialising the sector; 4.5 Urban Transport: Government focus shall be to promote the use of mass transit systems, after determination of an optimal modal mix, ensure quality of service and orderliness in public transport operations; and -56 - Annex 1-1 Page 3 of 10 4.6 Communications: to increase competition and efficiency throughout the economy the former Posts and Telecommunications Corporation has been split into Zambia Telecommunications Company (ZTC) and Zambia Postal services. The former is scheduled for privatisation. Background to the Road Sector 5. Zambia has an area of 753,000 sq.km, with a total population in 1995 estimated at about 9.3 million inhabitants. The present state and future development of its economy is supported by a multi-modal transportation system operated through various infrastructure including roads, railways, airways, inland waterways, and pipelines. Among these, the road infrastructure is the most significant in termns of network extent and dispersion across the country. Since the 1980s, traffic has shifted from rail to road. 6. In 1995, the total length of the road network was estimated at about 67,000 km made up of 36,761 km of gazetted and designated roads under various functional classes and about 30,000 km of ungazetted roads. Road usage is about 129,000 motor vehicle units per day of various types and about one million litres of fuel consumed per day including both petrol and automotive diesel. 7. At present, approxinately 20 percent of the road network is in good condition, 40 percent fair and 40 percent poor, due to persistent neglect of maintenance. The root cause for failure to maintain the road network could be attributed to inadequate funding and poor management of the Road Sector. 8. Government decided to introduce a fuel levy in 1993 whose proceeds are deposited into the Road Fund. The National Roads Board (NRB) was established in 1994 to manage and administer the Road Fund for the purpose of maintaining and rehabilitating roads in the country. Objectives of the Road Sector 9. On the basis of the foregoing, the Government through its Ministry of Communications and Transport (MCT) established a national task force in June i995 to prepare a Road Sector Investment Programme (ROADSIP) after extensive consultation with local stakeholders and with the donor and Non- Governmental Organisations(NGOs) comrnmunities. I note that the Bank has actively supported this process by providing part of the funding requirements to prepare position papers, which were presented as a basis for discussion at a stakeholder workshop in February 1996. The workshop endorsed the proposed ROADSIP which was subsequently discussed and agreed to by my Government. 10. The overall objective of the Government is to facilitate economic growth and diversification, particularly in the agriculture sector through appropriate investment in road infrastructure. ROADSIP is to be implemented in two phases over a period of 10 years (1997- 2007) and is expected to lead to a substantial improvement in the quality of the road network and road sector management. It is envisaged that the goals of phase 1 (1997-2002) of the programme will be to: -.57 - Annex 1-1 Page 4 of 10 10.1 create a domestic sustainable system for financing and management of the road network which will reduce dependence on erternal financing for maintenance and rehabilitation; 10.2 increase the proportion of roads in good condition to no less than 50 percent of the network, thus reducing vehicle operating costs; 10.3 address poor accessibility in the rural areas with emphasis on feeder roads leading to productive areas; 10.4 put in place an accelerated programme to address the deterioration of selected main and urban roads; and 10.5 put in place measures that will mitigate against adverse effects that road works might have on the environment. The Government has determined that ROADSIP will be the all encompassing programme for road sector investments. Accordingly, Government intends that all future donor support wfll be channelled through ROADSIP. Road Sector Development Strategy 11. In order to achieve the above objectives , the Government will adopt the following strategies for road sector development:- Strengthening Institutionalfframework. 11.1. Creating an appropriate institutional framework for management of the road network- will be the Government's highest priority during this period. This is to be implemented in two phases: 11.1.1. strengthening the NRB, and complete restructuring of the Roads Department (RD) in the Ministry of Works and Supply (MWS) and the Department of Infrastructure and Support Services(DISS) in the NMinistry of Local Government and Housing (MLGH) within the framework of the PSRP, to enhance the capacity, increase efficiency in the use of resources and improve planning and implementation performance in the management of the road sector; and 11.1.2. by mid-term review of ROADSIP, assess the opportunity to rationalise these institutions by vesting in a single commercially oriented semi-autonomous NRB, full responsibility for managing the road sector with Government retaining overall policy and planning functions for roads. Rehabilitating Priority Roads. 11.2. Given the large backlog of deferred maintenance, the civil works programme to be financed under ROADSIP will focus on rehabilitation of roads classified as being in poor condition. The Government will develop and adopt consistent selection criteria and specifications for road programmes and for maintenance standards to ensure scarce financial -58 - Annex i-1 Page 5 of 10 resources are applied to highest priority programmes. Priorities will be established on the basis of: 11.2.1. economic rates of return(ERR) for main and trunk roads. The threshold value of the ERR will be subject to agreement with the Bank prior to credit negotiatdons. Government may seek agreement with the Bank on specific projects that do not meet the threshold value requirements, but are of high strategic priority andlor considerable social benefis. 11.2.2. multi criteria ranking for feeder roads, and national parks access roads. Government will make intensive efforts to identify least cost most appropriate solutions for rehabilitating roads. All roads rehabilitated under ROADSIP will be placed under annual routine maintenance and periodic maintenance. Non-engineered roads will be selectively upgraded, based on selection criteria to be agreed with the Bank. This stratgy aims to reduce the proportion of the core road network classified as being in poor condition from the current level of 40 percent to 20 percent by the end of phase one of the programme period. 11.3. The rehabilitation programme under phase one is expected to cover 2100 km of paved roads (Bituminous) and 4050 km of unpaved roads countrywide fUSS270 million]. The works to be undertaken will include full reconstruction, upgrading of selected non- engineered roads, spot improvement and minor rehabilitation. A first full year programme of ROADSIP has been prepared by the Government and will be reviewed and agreed with the Bank not later than credit negotiations . Bids will be invited for all works included in the first year programme of ROADSIP and will be issued by credit effectiveness. The scope and content of the rehabilitation programme wiU be reviewed annually by Government in consultation with the Bank and stakeholders. As a matter of urgency, the first year proaramme includes priority main and urban roads which require immediate attention through an accelerated rehabilitation programme. Ensuring Effective MVaintenance. 11.4. During the past 20 years, the country's road network has suffered badly from the neglect of maintenance and the Government is determined, with the assistance of the Road Fund, to give high priority to routine and periodic maintenance of all roads classified as being in good and fair condition. The annual routine maintenance programme will aim to cover about 7,200 km in 1998 and this will rise to about 16,700 km by 2002 [USS 79 million]. The periodic maintenance programme will likewise cover resealing/ resurfacing of about 4,100 km of paved roads and regravelling of 2,180 km of gravel roads over the five year programme period [USS 84 million]. MVanaging MVaintenance - 1i.i. Roads Department (RD): The Government recognizes that the institutional capacity of the RD to plan and implement road maintenance programmes has been seriously eroded, largely on account of poor remuneration and inadequate funding . The Government has recognized the need to address this issue and has therefore approved a plan to restructure the RFD under the PSRP. The restructuring focuses on moving away from force account work -59- Annex 1-1 Page 6 of 10 and turning the RD into an organization which plans and supervises work carried out by private sector consultants and contractors. Specifically, the Government strategy is: 11.5.1. to phase out force account within a period of five (5) years starting with Lusaka and Copperbelt provinces. The implementation of this strategy will be reviewed on an annual basis and adjusted when necessary. The RD will only retain some small core teams to undertake emergency work and maintenance work. In parallel with these steps, training opportunities will be offered to enable redundant staff to move into the construction industry as consultants or contractors; 11.5.2. at the same time, to take steps to commercialise the Department's quarries prior to privatising these entities within 5 years, in line with the phasing out of force account; to hand over management of weigh-bridges to the NRB to have them managed under contract; and to delegate the management of pontoons to local communities or other commercial entities, where feasible;. 11.5.3. to put particular emphasis on the strengthening of the Provincial Road Engineer's (PREs) functions within the RD, under the PSRP. Accordingly, it has been necessary to ensure appropriate experience and qualifications are required for the positions which are to be advertised. If it proves impossible to recruit suitable staff, the Government will assess with the Bank - no later than the time of the first annual review of ROADSIP- the alternative course of action that could be adopted to ensure the effective supervision of rehabilitation and maintenance works. This will include a deliberate intervention of development of local staff to ensure that they acquire the necessary sidlls and experience to enable them to undertake effective supervision of rehabilitation and maintenance works. On a short term basis expatriate staff will be recruited for purposes of enhancing the capacity and capability of Zambian technical personnel; 11.5.4. adopt measures to maintain an inventory and update the road condition data through the Highway Management System (HMS); and 11.5.5. strengthen the planning and supervisory capacity of the RD to ensure the consistent application of appropriate engineering standards and technical specifications. 11.6. Natonal Roads Board (NRB): The Government recognizes the effectiveness of the IRB and has therefore assigned to it primary responsibility for overseeing implementation of ROADSIP. To ensure it can perform this function and discharge the duties assigned to it, the Government has agreed that the NRB should be strengthened. This will be done by publishing appropriate legislation, prior to credit negotiations, which wil provide the NRB with powers to: 11.6.1. recruit an Executive Secretary and other staff as may be needed to manage the Road Fund and discharge the other duties assigned to the NRB under terms and conditions of service determined by the NNRB; and 11.6.2. charge the costs of the NRB staff, excluding the costs of any staff financed under donor-financed aid programmes, against the Road Fund provided such costs do not exceed 5 percent of the annual revenue derived from road user charges. - 60 - Annex i-l Page 7oflO In addition, the Minister of Comunications and Transport wiU communicate to the NRB, powers and arrangements under which the NRB will discharge its responsibilities. The INR3 and the Road Fund were established through a Road Maintenance Initiative(RMII) consultative process. Therefore, any substantive changes to the composition of the Board will be by mutual agreement the Government and the World Bank. 11.7. Department of Infrastructure and Support Services (DISS): DISS has managed to recruit two of the three staff forming part of its Roads Section. It is also receiving Technical support from the International Development Agency (IDA) through an international firmn of consultants financed under the Transport Engineering and Technical Assistance Project (TETAP). At least three months before the end of the consultant's contract, the MLGH will advise the Bank on what steps it intends to take to ensure it has the capacity to continue supporting the urban and rural councils to rehabilitate and maintain their urban and feeder road networks. These steps might involvement of private local consultants to take over the support providing consultancy and project supervision services to local authorities. Developing the Domestic Construction and Consulting Industy. 11.8. The Government strategy is to: 11.8.1. encourage private sector involvement in road construction, rehabilitation and maintenance through assuring a predictable and growing market for the local construction industry; 11.8.2. develop road maintenance and engineering skills, especially in labour based construction methods; 11.9 The Government has therefore, decided that the capacity of the domestic consulting and construction industry needs to be enhanced and increased by removing any constraints hampering active involvement of local consultants and contractors. The programme to address these constraints will be coordinated by the MWS in close collaboration with the National Construction Council (NCC) and includes the following: 11.9.1. technical assistance to improve Government contracting policies and procedures (including streainlining consultant, contractor registration procedures, developing new simplified tendering procedures, contract documentation, and streamlining the legal framework); 11.9.2. further development of training programmes for consultants and contractors with particular emphasis on labour based work methods and strengthening the capacity of the Roads Training School; 11.9.3. provision of equipment to local contractors through leasing arrangements. Funding is to be identified-to help the expansion of Zambian leasing companies into the small equipment business; 11.9.4. provision of credit financing to medium scale contractors through the financial system; and -61 - Annex 1-1 Page 8 of 10 11.9.5. encouragement of joint ventures between foreign contractors and consultants and indigenous consultants and contractors to build the capacity and capability. Improving MVanagement of Roads Deparrment P!ant and Equipment. 11.10. Government strategy is to improve the management of plant and equipment owned by the RD. In view of the low availability rate of plant and equipment in the Department coupled with the decisioa to phase out force account, Government has decided to 11.10.1. dispose of all unsenriceable plant and equipment; 11.10.2. down-size the existing Mechanical Engineering Section (MES) in the RD in line with the PSRP; 11.10.3. establish a small unit in each province. for emergency work holding only the minimum amount of equipment subject to the proviso that in remote provinces, a larger pool may be held to facilitate hire of equipment to the private sector; and 11.10.4. review the need for these units and identify any excess equipment to be disposed of, after the first year of the programme Mfobilising and allocadon of Road Sector Revenues. 11.11. Government policy is that local financing shall cover an increasing share of sustainable maintenance and rehabilitation costs during the programme period. An estimated US$14.5 million representing Government's counterpart financing obUgations to on-going donor financed projects which will continue to be fnanced from the Government 's general budget. Al road user charges will be channelled through the Road Fund. Road Fund resources will be allocated as follows: 11.1.1.i as a first charge, routine and periodic maintenance of all core roads classified as being in good and fair condition; 11.11.2. as a second charge, counterpart funding of donor-financed rehabilitation programmes; and 11.11.3. the costs of managing the Road Fund which are not to exceed 5 percent of the road fund revenues mobilised through road user charges). 11.12. In line with the need to increase the sustainable flow of resources through the Road Fund, the Government shall consider increasing road user charges and ensure that in future the bulk of such revenues are channelled to the Road Fund to fund maintenance and rehabilitation. Specifically, the Government intends from fiscal year 1998, to allocate to the Road Fund , international transit fees, weighbridge fines, and a portion of road service license. From fiscal year 1997, fuel levy is expressed as a percentage of the wholesale fuel price, which shall be reviewed on an annual basis. The Government recognises the - 62 - Annex I-] Page 9 of 10 importance of streamlining procedures for managing fuel levy proceeds to the benefit of the programme. The Government has therefore decided that henceforth, Zambia National Oil Company (ZNOC) shall directly deposit proceeds from the fuel levy into the Ministry of Finance and Economic Development account, who in turn shall channell it without delay into the Road Fund. Improving, Community Accessibility. 11.13. The Government recognises the importance of bringing as many roads as possible under regular maintenance, particularly in rural areas where many roads do not form part of the public road network, but are nevertheless important for agriculture and to enable rural communities to gain access to essential services. ROADSIP will therefore include a programme of community accessibility designed to develop an institutional framework for sustainable management of community roads, bridges,culverts, canals,tracks and trails. The programme will be carried out in conjunction with Social Recovery Projects (SRP) for construction and rehabilitation of roads, and-the NRB for maintenance. The programme will start on a pilot basis . Based on the results of the pilot, the Government will consider main- streaming the scheme throughout the country. 11.14. The community accessibility programme also aims to encourage the increased use of low-cost intermediate means of transport(IMT) which are affordable to rural populations such as draught animals, carts, motorised and non-motorised two and three wheelers. To this end, the programme will include studies on past and current experiences with INIT in Zambia, assessments of policy and regulation and a demonstration project to promote IMT. Mitigating Environmental Impacts. 11.15. The plan for dealing with potential environmental impacts includes four elements critical both to the development of capacity and to building linkages between the sector programme and national environmental policy and guidelines. They include: 11.15.1. establishment of an environmental management unit to be housed initially in the RD with external funding for technical assistance and training during the first t-o years of operation; 11.15.2. development of road sector environmental guidelines, including review and strengthening of the environmental clauses in use in national competitive bidding (NCB) procurement documentation; 11.15.3. carrying out environmental assessments on specific road improvement projects on a selective basis; and 11.15.4. carrying put monitoring and evaluatioa activity to ensure compliance with environmental guidelines during the construction phase of projects. Improving Road Safety 11.16. Government is mindful of the unsatisfactory state of road safety in the country and has agreed that the National Road Safety Council (NRSC), under the MCT, should - 63 - Annex I-1 Page 10 of 10 prepare an Action Plan which would have as its target improving road safety and reducing road accident fatalities by at least 20 percent by the year 2002. The Action Plan would be prepared and presented to the Bank by the first annual review of ROADSIP. Revising Road Sector Legislation 11.17. Many, if not most, of the above policy initiatives have implications for the Roads and Road Traffic Act, Chapter 766 of the Laws of Zambia ( CAP 766) and the various amendments passed since 1959. Government therefore intends to revise CAP 766 during the course of ROADSIP to brine it up to date, to reflect the policy decisions taken since 1959 and to put the Road Fund and the NRB on a firm legislative basis. Much of the preliminary work required to revise CAP 766 has already been done and Government intends to work towards having legislation ready for consideration by Parliament during the 1999 session. The scope of the intended legislation will be discussed with the Bank not later than the mid-term review of ROADSIP. Reviewing Implementation of ROADSIP 11.18. Since ROADSIP has a large number of components, and includes several important policy reforms, the Government intends to review the programme with the Bank and other donors on an annual basis. At the mid-point of the planned implementation period, the Government will also undertake a more detailed review of progress with the Bank and other donors. During these reviews, there will be a general review of progress against the various targets established in the programme implementation manual, together with a review of progress in implementing the policy measures included in this letter of sector policy. Based on these reviews, the Government may then request the Bank to discuss the provisions in this letter and amend them to reflect changes in the overall macro-economic environment, agreed new directions occasioned by unexpected opportunities or constraints, and changes that reflect lessons learned in relation to the desired policy objectives of ROADSIP. If necessary, the CGovernment will request that these amendments be reflected in appropriate changes made to the credit agreement. 12. I trust that the above policy framework gives confidence that an effective and efficient road network is one of the country's highest priorities and that the Government is willing to go to great lengths to ensure we achieve this objective. Yours sincerely RON M MINISTER OF-FINANCE & ECONOtMIC DEVELOPMIENT - 64 - Annex 2-la Page 1 of 4 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM Description of Civil Works Program 1) Routine Maintenance Year km Paved G Main G Feeder P Urban G Urban Subtotal District 1997/98 3748 394 1896 150 382 160 6730 1999 4418 496 2040 1400 382 210 8946 2000 5091 904 2184 2000 382 260 10821 2001 5452 1662 2528 2700 432 360 13134 200'2 5746 2159 3172 3600 482 460 15619 Total 24454 5616 11819 9850 2062 1451 55251 Year US$ m Paved G Main G Feeder P Urban G Urban Subtotal District 1997/98 4.62 0.67 2.90 0.09 0.57 0.36 9.21 1999 5.45 0.85 3.12 0.84 0.57 0.47 11.29 2000 6.28 1.54 3.34 1.20 0.57 0.58 13.51 2001 6.72 2.84 3.87 1.62 0.64 0.81 16.50 2002 7.08 3.69 4.85 2.16 0.71 1.03 19.53 Total 30.15 9.60 18.08 5.91 3.05 3.26 70.05 Note: Paved road includes Trunk (T), Main (M), District (D) roads. 2) Periodic Maintenance Year km P Trunk P Main G Main P District G District Feeder P Urban G Urban Subtotal 1997/98 434 36 102 75 144 850 0 50 1691 1999 313 36 407 75 144 0 0 50 1025 2000 0 36 758 75 344 0 0 100 1313 2001 0 36 497 75 644 0 0 100 1352 2002 0 36 71 75 1144 0 0 100 1426 Total 747 180 1836 374 2420 850 0 400 6807 Year US$ m P Trunk P Main G Main P District G District Feeder P Urban G Urban Subtotal 1997/98 7.99 0.66 1.24 1.10 1.44 1.70 0.00 0.60 14.74 1999 5.76 0.66 4.92 1.10 1.44 0.00 0.00 0.60 14.50 2000 0.00 0.66 9.16 1.10 3.45 0.00 0.00 1.21 15.59 2001 0.00 0.66 6.01 1.10 6.46 0.00 0.00 1.21 15.44 2002 0.00 0.66 0.86 1.10 11.48 0.00 0.00 1.21 15.31 Total 13.75 3.31 22.19 5.51 24.28 1.70 0.00 4.83 75.58 - 65 - Annex 2-la Page 2 of 4 3) Rehabilitation Year km US$ m P Trunk P Main P Urban Subtotal P Trunk P Main P Urban Subtotal 1997/98 125 0 0 125 15.00 0.00 0.00 15.00 1999 203 47 0 250 24.36 5.62 0.00 29.98 2000 203 47 75 300 24.36 5.62 3.00 32.98 2001 113 70 75 233 13.56 8.42 3.00 24.98 2002 356 70 150 526 30.13 5.97 6.00 42.10 Total 1000 234 300 1434 107.41 25.62 12.00 145.04 4) Upgrading of Feeder Roads 5) Accessibility Improvement for Feeder Roads Year km US$ mn Year km US$ mn 1997/98 400 3.64 1997/98 17000 5.10 1999 600 5.46 1999 17000 5.10 2000 700 6.37 2000 16300 4.89 2001 900 8.19 2001 15400 4.62 2002 1000 9.10 2002 14400 4.32 Total 3600 32.76 Total 80100 24.03 Notes: Accessibility Improvement will be applied on the average 15% of the length mentioned in table 5). Source: RD and own estimation Unit Costs (US$ per km) P Trunk P Main G Main P District G District Feeder P Urban G Urban Routine Maintenance 1233 1233 1709 1233 1530 600 1480 2246 Periodic 18412 18412 12086 14729 10033 2000 21600 12086 Maintenance Rehabilitation 120000 120000 N.A. N.A. N.A. N.A. 40000 N.A. Upgrading of Unengineered Feeder Roads 9100 Accessibility Improvement for Feeder Roads 2000 Notes: For paved T and M roads with relatively low traffic a low cost rehabilitation with unit cost of US$ 84650 per km will be applied in the fifth year. Source: RD and own estimation - 66 - Annex 2-la Page 3 of 4 Base Cost in US$ million Low Case 1997/98 1999 2000 2001 2002 Total Routine 9.21 10.73 12.13 13.63 15.39 61.10 Maintenance Periodic 8.57 7.04 7.04 7.04 7.04 36.74 Maintenance Rehabilitation 11.67 20.74 21.26 38.30 38.82 130.79 Upgrade 3.28 4.91 5.73 7.37 8.19 29.48 Improve 4.59 4.59 4.40 4.16 3.89 21.63 Accessibility Total 37.31 48.02 50.56 70.51 73.33 279.73 Base Case 1997/98 1999 2000 2001 2002 Total Routine 9.21 11.29 13.51 16.50 19.53 70.05 Maintenance Periodic 14.74 14.50 15.59 15.44 15.31 75.58 Maintenance Rehabilitation 15.00 29.98 32.98 24.98 42.10 145.04 Upgrade 3.64 5.46 6.37 8.19 9.10 32.76 Improve 5.10 5.10 4.89 4.62 4.32 24.03 Accessibility Total 47.69 66.33 73.34 69.74 90.37 347.46 High Case 1997/98 1999 2000 2001 2002 Total Routine 9.21 11.08 14.25 17.61 21.82 73.98 Maintenance Periodic 7.12 19.85 19.85 26.47 26.47 99.75 Maintenance Rehabilitation 42.75 75.10 63.38 49.16 24.54 254.92 Upgrade 3.64 5.46 6.37 8.19 9.10 32.76 Improve 5.10 5.10 4.89 4.62 4.32 24.03 Accessibility Total 67.82 116.58 108.75 106.04 86.24 485.44 - 67 - Annex 2-la Page 4 of 4 Length in km Low Case 1997/98 1999 2000 2001 2002 Total Routine 6,730 8,424 9,701 11,099 12,777 48,732 Maintenance Periodic 1,253 488 488 488 488 3,206 Maintenance Rehabilitation 80 250 280 379 409 1,398 Upgrade 360 540 630 810 900 3,240 Improve 15,300 15,300 14,670 13,860 12,960 72,090 Accessibility Base Case 1997/98 1999 2000 2001 2002 Total Routine 6,730 8,946 10,821 13,134 15,619 55,251 Maintenance Periodic 1,691 1,025 1,313 1,352 1,426 6,807 Maintenance Rehabilitation 125 250 325 258 576 1,534 Upgrade 400 600 700 900 1,000 3,600 Improve 17,000 17,000 16,300 15,400 14,400 80,100 Accessibility High Case 1997/98 1999 2000 2001 2002 Total Routine 6,730 8,793 11,417 14,212 17,701 58,853 Maintenance Periodic 1,260 1,316 1,316 1,769 1,769 7,430 Maintenance Rehabilitation 403 708 779 820 589 3,299 Upgrade 400 600 700 900 1,000 3,600 Improve 17,000 17,000 16,300 15,400 14,400 80,100 Accessibility - 68 - Annex 2-lb Page 1 of 2 REPUBLIC OF ZAMBIA ROAD SECTOR IN VESTMENT PROGRAM The Core Main Roads Program Civil works on some of the main roads has been already started, partly under donor financing. They are mentioned in Table (1) below. Of the remaining paved main roads the road sections for which reconstruction, overlay and/or repair/reseal is also included for the first two years of the program, are summarized in Table (2). The selection has been based on cost benefit analysis with the highest priority being given to roads demonstrating the highest economic rates of return (ERR) with benefits measured primarily on the basis of vehicle operating cost savings (VOC). The methodology underlying this analysis and the results of the various tests carried out are given in Annex 4-1. All ongoing and planned roads are a part of the overall yearly civil works program described in the tables in Annex 2-la. (1) Ongoing Road Section Length Major Financing Type of Intervention No. Implemented Source TOO1 Monze - Mazabuka 64 km NORAD Rehabilitation T001 Mazabuka - Kafue 58 km NORAD Repair/Reseal T002 Kapiri Mposhi - Serenje 198 km DANIDA Overlay T004 Lusaka - Luangwa Bridge 375 km AfDlB Rehabilitation T004 Luangwa Bridge DANIDA Rehabilitation MOOS Mutanda - Jct Dl 81 104 km GRZ Reconstruction MO10 Livingston - Shesheke 201 km KfW Under Feasibility Study MO11 Choma - Namwala 169 km GRZ Reconstruction D181 Jct M008 - Kasempa 47 km GRZ Reconstruction D286 Manyinga - Mwinilunga 220 km KfW Upgrading D469 Luanshya - Mpongwe 62 km GRZ Reconstruction - 69- Annex 2-lb Page 2 of 2 (2) Priority Roads Included in First Year Program Road Section Length Major Financing Type of Intervention or No. Implemented Source Remarks TOO1 Zim Border - Livingstone 6 km Repair/Reseal T002 Chirundu - Kafue 80 km _ Repair/Reseal T002 Kabwe - Kapiri Mposhi 68 km EU Reconstruction, Repair/ I ~~~~~~~~~~~~~~~Reseal T002 Serenje - Mpika 235 km IDA Repair/Reseal T002 Mpika - Chinsali 168 km IDA Maintenance T002 Chinsali - Nakonde 210 km IDA Maintenance T003 Chingola - Kasumbalesa 46 km Overlay, Repair/Reseal T004 Km 233 - Km 260 27 km Overlay T005 Chingola - Solwezi 172 km Reconstruction M004 Ndola - Mwambeshi 43 km Overlay, Repair/Reseal M006 Kafulafuta - Luanshya 43 km Overlay, Repair/Reseal M009 Lusaka - Mumbwa 65 km IDA Reconstruction, I_________ ______________ Repair/Reseal M009 Mumbwa - Mongu 86 km IDA Reconstruction, _________ c___________________________ =____________ c___________ R epair/R eseal - 70 - Annex 2-ic Page 1 of 4 THE CORE FEEDER ROADS PROGRAM 1. On the basis of comprehensive surveys carried out so far in five provinces, Zambia's core feeder roads network has been estimated at 19,000 km. I The data collected indicates that less than five percent of the primary network is in good or fair condition. The remainder is poor or very poor. Under ROADSIP, improvement efforts will be of two types: i) upgrading which will upgrade unengineered roads to acceptable engineering standards; and ii) accessibility improvements which focus specifically on drainage and improvement of well known trouble spots. Each district council, with advice from the MLGH central rural roads unit, will determine the specific program in its jurisdiction. The strategy of each council will therefore need to strike a compromise between upgrading and accessibility improvement. During ROADSIP, core feeder roads in fair condition will receive periodic maintenance and then be included in a sustainable routine maintenance program. All good feeder roads will be placed under routine maintenance. 2. It is foreseen that a total amount of US$ 60 million will be allocated to feeder roads during the first five years of ROADSIP. IDA support to feeder roads will be US$16 million, i.e., one third of the total feeder roads program, and will be destined for three provinces--Luapula, Northern, and Western. These provinces have been selected in consideration of on-going and planned support by other donors to feeder roads. 3. Given the scenario outlined in the table below, which assumes that US$ 60 million is available for feeder roads over five years and that all core roads will receive some intervention, 3,600 km would be upgraded and the remainder of the core network would receive accessibility improvements. Following this strategy, 56 percent of the funding ($33 million) will be allocated to upgrading, 40 percent to accessibility improvement ($24 million) and four percent to periodic maintenance ($2 million). At the end of the five year program, 4,600 km of feeder roads (24 percent of the core network) would be in good or fair condition receiving regular maintenance compared to less than five percent of the feeder road network in year one, and 14, 400 km of the core network (the remaining 76 percent) would have received annual accessibility improvements during five years, something which will have significantly improved accessibility in rural Zambia. The surveys estimate that there are about 34,000 km of feeder roads in Zambia. On the basis of socio- economic criteria, these have been divided into primary, secondary and tertiary feeder roads. The primary roads constitute the core feeder roads network. - 71 - Annex 2-ic Page 2 of 4 Improvement (1cm) Routine Upgrading Access Per. Maint. Maintenance Year $9, 1 00/km $2000/km $2,000/km Total km (km) 1 400 17,000 1,000 18,400e- 2 600 17,000 19,000 1,400 3 700 16,300 19,000 2,000 4 900 15,400 19,000 2,700 5 1000 14,400 19,000 3,600 Total km 3,600 80,100 19,000 Total $ 33 million 24 million* 2 million I *Accessibility Improvements will be made on 15 percent of the core network which is not in good or fair condition or scheduled for upgrading. **The 600 km of roads scheduled for upgrading in the second year will not receive any improvement in the first year. Methodology for Feeder Roads Program 4. The feeder roads methodology constitutes an important part of a long-term effort to bring coherence and order into the management of local road system in Zambia. Under ROADSIP, all core feeder roads are expected to be designated as the responsibility of local councils. As such, the function and condition of the core feeder roads will be monitored periodically as part of the local road management system. The feeder roads program has been developed using a four step methodology. Guided by a technical process (steps 1 through 3 of the feeder roads methodology), each local council determines the specific program interventions in its jurisdiction (step 4): i. The first step involves a comprehensive inventory and condition survey of all roads in rural Zambia excluding only those which are under the designated responsibility of the Roads Department and the National Parks Services. The inventory therefore includes all RD and R roads which are the responsibility of local councils as well as currently undesignated roads which may have been constructed by NGOs, freestanding projects, and communities. ii. The second step divides the feeder roads network into three levels--primary, secondary and tertiary--according to set of network based criteria. A primary feeder road must satisfy three criteria: a) link with another all-weather road and form a coherent link between population and production centers and the national road network; b) form a loop, on its own or in combination with other roads, to facilitate passenger and goods transport; and c) not duplicate the function served by other roads in the network, i.e., roads in flat and rolling terrain should be 15-20 km apart or in very hilly terrain 7-10 km apart. The primary roads will constitute the core feeder roads network. iii. The third step ranks the primary/core feeder roads according to socio-economic importance using ordinal rankings. This multi-criteria analysis includes, among other factors, population served by the road, presence of social and economic facilities - 72 - Annex2-lc Page 3 of 4 (schools, clinics, markets, crop stores/processing facilities, administrative services), projected increase in traffic volume, current and potential agricultural production and programmed development activities. An example of how the criteria has been applied is given in Box 1. These criteria have been discussed and agreed to by key stakeholders including the Ministry of Agriculture, Food and Fisheries and the National Roads Board which has significant road user representatives in its committees. The multi-criteria analysis, in addition to providing an initial ranking of the core feeder roads, informs and facilitates the discussions among local constituents. iv. The centerpiece of the methodology is the fourth andfinal step which results in the feeder roads program for each council based on constituent priorities. The MLGH rural roads unit presents the outcome of step one through three to individual councils and their 2 constituents. Based on the resource envelope , each district council, with the assistance of the MLGH rural roads unit, decides whether to fully upgrade a few roads or do a mixture of full upgrading and accessibility improvements. The MLGH rural roads unit acts as technical adviser to the council and will assist the councils to make technically informed decisions and draw up a plan which meets local priorities. 5. As part of the technical and consultative process, each council gains a clear grasp of the network for which it is responsible and an understanding of the maintenance requirements of this network. A detailed feeder roads program has been developed in consultation with the 15 local councils in Luapula and Northern Provinces. The process is expected to commence in Western France in early 1998. The first two years of the program will address the full upgrading of 12 of the 15 councils. The typical council elected to fully upgrade about 20 percent of its network providing low cost accessibility improvements to the rest of the core network. This amounts to an estimate of 1380 kilometers of feeder roads for upgrading. Responsibility for some of the secondary and tertiary roads may be assumed by communities as part of the community accessibility program. This program encourages communities to claim ownership for roads which provide access to their locality. 2 The resource envelope for each district has been determined using a simple formula. Since MLGH currently is not using any composite index for allocating resources among districts, the rural roads unit is using a simple formula based on road and population density and economic activity. The total index is derived by adding: population index + road index + activity index = total index. The range of indices is from a total of 3 for the districts with the lowest road density, the lowest population density and the lowest economic activity to 9 for the economically most active districts with the highest road density and the highest population. The resource envelope for each district is then determined by a weighted proportion of its total index and kilometers of core feeder roads. - 73 - Annex 2-ic Page 4 of 4 Box 1. Ranking offeeder roads using multi-criteria analysis The feeder roads inventory covered all roads in each district. Socio-economic data was assembled in 8 different indices (see below). Given the scant data available on traffic flows and agricultural production along individual roads in rural Zambia, these indices act as a proxy to rank the network according to economic and social importance. Indices a) through d) combine into an economic dimension scale; indices e) through j) combine into a social dimension scale. The socio economic justification index is arrived upon by adding the two together. Roads are subsequently ranked according to their combined socio-economic index. Equal weight has been granted to all factors which are each assigned a number between I and 10. The higher the index, the more important the road. For example, road X, which is a currently unclassified road in Mporokoso district in the Northern province, was rated as indicated the table above. The economic dimension scale was 22/4=5.5; the social index is 26/4=6.5. The combined socio-economic index is 6.0 which gives this road a rather high ranking, specifically considering that it is unclassified. Jndex Road X a) current agricultural production index 9 b) potential marketed production index 7 c) existing production facilities index 3 d) planned development projects index 3 e) population served by road index 9 f) social facility intensity index 3 i) potential traffic and mobility index 9 j) employment creation potential index 5 The resultant ranking of feeder roads is subsequently subjected to local level consultations. Republic of Zambia Road Sector Investment Program Implementalion Schedule b6 1997 1998 1999 2000 2001 2002 2 ID Task Name Duration 3 0Q4 Q1 02 Q3lQ4|1 IQ2 Q3 Q4 Q Q|Q2 Q3 Q4Q1 Q2 Q3 Q4 1Q 02 03 |Q41Q1 0231 Q2 1 1. Road Maintenance (Routine and Periodic) 1325d O ! 2 Detailed Maintenance Program for 1997 4w 3 Perform Maintenance for 1997 52w 4 Detiled Maintenance Program for 1998 4w 5 Perform Maintenance for 1998 S2w 6 Detailed Maintenance Program for 1999 4w 7 Perform Maintenance for 1999 52W 8 Detailed Maintqnance Program for 2000 4w 9 Perform Maintenance for 2000 52w 10 Detailed Maintenabce Program for 2001 4w 11 Perform Maintenance for 2001 52w 12 2. Road RehabilitationlUpgrading/Accessibility Improvement 1326d . ! - 13 Preparation of 5 Year Outline Rehabilitation Program 4w | 14 Preparation of Detailed Program for 1997198 - 1998199 4w 15 Finalize Detailed Program for 1997198 4w 16 Perform Civil Works for 1997198 52w 17 Finalize Detailed Program for 1998199 4w 18 Perform Civil Works for 1998199 52w 19 Preparation of Detailed Program for 1999100 - 2001/02 6w 20 Finalize Detailed Program for 1999/00 4w .. | Task _" Summary Rolled Up Progress Project: Zambia RSIPI_ Date: 6/9/97 Progress . Rolled Up Task |Milestone *RollbdUp Milestone Annex 3-2 Republic of Zambia Road Sector Investment Program Implementation Schedule -96 1997 1998 1999 2000 2001 2002 2 ID Task Name Duration Q3 f4 01 42 Q3IQ4 Q1 1Q21031Q4I Q IIQ21031Q41Q1 102Q3104 Qi1 1021Q31Q4 Q1 1Q2 131Q4 2 21 Perdorm Civil Works for 1999100 52w - 22 Finalize Detailed Program for 2000101 4w 23 Perform Clvil Works for 2000101 52w - 24 Finalize Detailed Program for 2001102 4w 25 Perform Civil Works for 2001/02 52w 26 3. Community Accessibility Program 1310d . .mm 27 Community Transport Infrastructure 1310d : - - - I ~ ~ ~ ~ ~ ~ MMO 28 Implementation of Pilot Project in one province 78w 29 Training for staff and community representalives 159w |. 30 Implementation extended to other provinces 184w 31 Intermediate Means of Transport 630d 32 Study on IMT 53w 33 Implementation of a Pilot Project 53w 34 4. Construction Industry Development Program 1140d . m m l, 35 Government Procedures 300d 36 Streamlining of Registration Process 24w 37 Sirnplify Tendering and Contract Document 8w 38 TA to MWS and NCC 52w 39 TrainingPrograminRTS 1140d .l.0l; 40 Development of Contractor Training Program 90d : * __;_._._.______ Task _ Summary Rolled Up Progress Project: Zambia RSIP Progress RolledUTs Milestone *ARolled Up Milestone O Annex 3-2 Republic of Zambia Road Sector Investrnent Program Implementation Schedule .6 1997 i998 i999 2000 2001 2002 2 ID Task Name Duration Q3Q4Q10Q2Q3|Q4 IQ1Q2IQ3IQ4IQIQ2IQ3IQ4IQ1|Q2IQ3IQ4QIQ2Q3I Q4Q1Q2Q3Q4QQ2 41 Set up and Implement Contractor Training Program 210w 42 5. Capacity Building and Training 1146d 43 A. Policy Support 1042d ._i 44 Policy Advisor 104w 45 Update Transport Sector Policy Framework 40d 46 Study on Improving the Management and Financin 50d I 52 Institutional Strengthening of Roads Authorities 104w 53 Restructuring Road Fund 104w_ __ 54 Road Safety Action Program 225d 63 Road Traffic Legislation 225d 72 B. Implementation Support 385d 73 TA to NRB 225d 82 TA to RD 385d 91 TA to DISS 385d i 100 C. Institutional Development 885d 101 Highway Engineer/Team Leader 885d 110 Contracts ManagemenUProcurement 365d 119 Financial Management 365d i 128 Short Term Specialists 265d 137 Environmental Management 495d Task _ _ Summary _ Rolled Up Progress Project: Zambia RSIP Date: 619A97 Progress Rolled Up Task_- Milestone *Rolled Up Milestone Annex 3-2 Republic of Zambia Road Sector Investment Program Implementation Schedule 1'97 I ~ . 1998 1999 2000 2001 2002 2 ID Task Name Duration fQi Q1lQ2Q3JQ4Q1O2JQ3JQ4IQ11Q2Q3Q4Q1Q2Q3Q4QQ23Q4Q1Q2Q3Q4J1 Q2 146 Restructuring Plant and Vehicle Pool 365d 155 HMS Unit 235d 164 Selection Criteria and Analytical Tools 235d 173 Urban Road Management System 235d : _ , ,, 182 6. implementation Banchmarks 1380d 183 Project Launch 4w i 184 First Year Annual Review 4w ., 185 Second Year Annual Review 4w 186 Mid Term Review 4w 187 Third Year Annual,Review 4w 188 Fourth Year Annual Review 4w 189 fifth Year Annual Review 4w 190 ICR 96d Task _ Summary _ Rolled Up Progress Project: Zambia RSIPPrgesRldUpTk Date: 6/9/97 Progress Rolld Up Task Milestone Rolled Up Milestone 0 Annex 3-2 - 78 - Annex 3-2 Page I of 2 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM DISBURSEMENT SCHEDULE Appraisal Estimate Cumulative Standard Amount Amount Disb. Profile FY Qtr. (US$ million) (US$ million) Percentage for Transport FY98 Dec-97 0 0 0% 0% Mar-98 1 1 1% 0% Jun-98 1 2 3% 0% FY99 Sep-98 2 4 6% 0% Dec-98 2 6 9% 0% Mar-99 2 8 11% 1% Jun-99 2 10 14% 3% FY00 Sep-99 2 12 17% 5% Dec-99 3 1 5 21% 6% Mar-00 3 18 26% 8% Jun-00 3 21 30% 10% FY01 Sep-00 5 26 37% 12% Dec-00 3 29 41% 14% Mar-01 4 33 47% 18% Jun-01 6 39 56% 22% FY02 Sep-01 7 46 66% 30% Dec-01 8 54 77% 38% Mar-02 5 59 84% 38% Jun-02 5 64 91% 40% FY03 Sep-02 4 68 97% 42% Dec-02 1 69 99% 48% Mar-03 1 70 100% 54% Jun-03 0 70 100% 56% FY04 Sep-03 58% Dec-03 66% Mar-04 74% Jun-04 80% FY05 Sep-04 86% Dec-04 93% Mar-05 98% Jun-05 __99% FY06 Sep-05 100% - 79 - Annex 3-2 Page 2 of 2 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM DISBURSEMENT SCHEDULE COMPARATIVE DISBURSEMENT PROFILE 100 * * 90 80 70 60 50 ort Profile (Zartbia) 40 4SARestimate 20 10 0 o N~ 'D co 0 cm'IT'~ co co 0 C4- v co co 0 Quarters REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM Key Perforinance Indicators Objectives Performance hidicators Unit 12/98 12/99 12/00 12/01 12/02 1 MeansofVerification Input Indicators To increase road sector financing Funding made available (annual basis) UJS$ M Project Progress Reports Financial Audit 1. Fuel Levy 13.0 17.9 23.0 28.5 32.2 2. Olher Road User Charges 3.3 3.3 3.3 3.1 3.1 3. Budget 4.6 5.2 5.1 4.1 8.1 4. IDA Funding * ROADSIP 8.0 10.0 15.0 26.0 11.0 * Other 2.0 3.5 1.0 0.0 0.0 5. Donor lunding 38.8 29.4 26.9 9.0 32.0 To bring Lhe core road network Civil works contracts awarded Project Progress Reports into a maintainable condition 1. Periodic Maintenance USS M 13.74 13.5 14.59 14.94 14.81 Km 1,576.0 954.0 1,229.0 1,308.0 1,379.0 2. Reihabilitation US$ M 15.0 29.98 32.98 24.98 42.10 Km 125.0 250.0 300.0 233.0 526.0 Output Indicators O 'I'o improve road Iransport services Completion of road works Km Project Progress Reports anid reduce transport cost 1. Routine Mainitenanicc (aniual) 6,730.0 8,946.0 10,821.0 13,134.0 15,619.0 'Technical Audit 2. I'criodic Maintcianice (cumilalive) 3,691.0 2,716.0 4,029.0 5,381.0 6,807.0 3. Reliabilitationi (cumulative) 125.0 375.0 675.0 908.0 1,434.0 4. Feeder Road Upgrading (annual) 400.0 600.0 700.0 900.0 1,000.0 To address improved conimnunity Completion of community road projecis No. I0 25 40 56 70 Project Progress Reports accessibility Km 70.0 160.0 280.0 400.0 500.0 SRPU Reports Outcome Indicators To bring the condition of road % of foad network; in good conditiosi I IlMS network at least 50% good I. Paved roads 29.0 37.0 39.0 41.0 47.0 Field Surveys 2. Unpaved roads 8.0 9.0 8.0 17.0 33.0 Technical Audit 3. Feeder roads 2.0 5.0 7.0 11.0 I 5.0 To alleviate poverty through Create employment opportunities in Ilic No. 2,000 5,000 8,000 33,000 14,000 lProject Progress Reports crealion of new jobs labor-based consitriction works Impact Indicators To improve road safety by Accident dala per year No. Projecl Progress Reports reducing road accidents by at least Aniual 'Iransport 20%/o 1. Road accidents 8,200 7,800 7,500 7,200 7,000 Stalistics ) 2. Fatalities 870 830 800 770 750 0 X To strengthen local construction Number of contractors trained No. Project Progress Reports02 industry NCC Reports 1. Routinie Maintenanice 60 180 300 300 300 U4 2. Rehabilitation 5 20 30 50 70 Flapsed Iine betwccn invoice I)ays 14 10 10 10 10 subnIissioi and paymncti I I I I I I I - 81 - Annex 3-4 Page I of 2 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM SUPERVISION PLAN Approximate Staff Date of Input Weeks (Mo/yr.) Activity Expected Skill Required in Field Oct/Nov 1997 Project Launch: Transport Specialist 15 Review: progress of the program so far; Highway Engineer including civil works and policy reforms; Specialist for Institutional the first year maintenance program; Reform procurement status; status of stakeholder Rural Transport Specialist participation. Procurement Specialist Develop: action plans on institutional Legal Counsel reform, community accessibility program Disbursement Officer and construction industry development program May/Jun l998 Supervision 1: Transport Specialist 12 Review: status of capacity building Highway Engineer prograrns, achievements to date in road Rural Transport Specialist maintenance and rehabilitation, Environment Specialist environmental management improvement, action plan on restructuring :_____________ plant pool, review studies on IMT. Oct/Nov First Annual Review: Transport Economist 12 1998 Review: institutional strengthening of Highway Engineer other road authorities, training progress; Rural Transport Specialist progress on institutional reform; second Procurement Specialist year maintenance program and indicative Financial Analyst program for 2000-2001 both for maintenance and rehabilitation; audit performance. Develop: labor based maintenance and rehabilitation methods, third year road maintenance and maintenance plan, evaluation according to performance indicators. Feb/March 1999 Supervision 2 Transport Economist 12 Preparation for mid-term review, Highway Engineer assessment of 1998 outturn numbers, Specialist for Institutional economic evaluation thus far, review Reform studies on institutional and financing Transport Economist reform performance to date. - 82 - Annex 3-4 Page 2 of 2 Approximate Staff Date of Input Weeks (Mo/yr.) Activity Expected Skill Required in Field Oct/Nov 1999 Second Annual Review Transport Specialist 8 Review third year road maintenance Highway Engineer program, progress on policy reform; Rural Transport Specialist development of contractors; performance of road works Feb/Mar 2000 Supervision 3 Transport Specialist 6 Review evaluation of performance Highway Engineer according to performance indicators for Transport Economist mid-term review, progress on legal reform and transport policy action plans Jun/July 2000 Mid-Term Review: Transport Specialist 20 Review: performance of road authorities Highway Engineer and need for further reform, progress on Rural Transport Specialist capacity building program, efficiency of Financial Analyst road fund management, development of Specialist for Institutional private contractors, community Reform development and participation, Procurement Specialist achievements on road maintenance and Disbursement Specialist rehabilitation, progress on legislation Legal Counsel review. Develop: staff training goals; environmental and traffic safety action plans,; financial management systems l OctlNov 2000 Third Annual Review Transport Specialist 10 Review: institutional performance, Highway Engineer achievement on civil works; effectiveness Rural Transport Specialist of financing reforms; development of Environmental Specialist community ownership, progress on environmental management, fourth year maintenance program l May/June 2001 Supervision 4 Transport Specialist 6 Review on: Progress on policy reform; Highway Engineer development of contractors; performance Transport Economist of road works Sept/Oct 2001 Fourth Annual Review Transport Specialist 8 Review on: achievement on civil works; Highway Engineer progress on policy reform; development Rural Transport Specialist of community ownership; fifth year Procurement Specialist maintenance program r March/April Supervision 5 and ICR Transport Specialist 12 2002 Review: Assessment on project Highway Engineer performance, reevaluation of costs and Rural Transport Specialist benefits, preparation of draft ICR. Specialist for Institutional Reform Transport Economist Estimated Field Supervision Staff Weeks 125 - 83 - Annex 4-1 Page I of 7 REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM ECONOMIC ANALYSIS Methodology and Results for Priority Main Roads Program 1. The main direct benefit from main road pavement improvements is the reduction of vehicle operating costs (VOC). These in turn will usually result in lower transport costs for people and goods, when there is a competition in the road transport sector. Traffic volumes on the Zambian roads are generally low; only T roads in the Copperbelt province and near townships experience 500 and more vehicles per day while M roads in rural areas and n roads often carry less than 100 vehicles per day. The analysis has been based on the data &-lIected and stored in the Highway Management System (HMS) under the IDA financed Transport Engineering and Technical Assistance project (TETAP). Because the origin and destination of the traffic on these roads are not known and traffic demand is not likely to be suppressed due to the present road conditions, no consideration has been made for generated traffic. Traffic generation, time savings and other benefits are likely to be positive but not included in the analysis, so that the VOC savings represent a lower bound. 2. The roads analyzed show in general high roughness because of the years of neglected maintenance caused by lack of resources. However, because of the generally low traffic volume and a sound initial engineering standards with relatively strong road subbase, the deterioration of the roads is estimated to be slower than a case one would expect from present surface conditions. For this reason, reconstruction is limited to a minimum amount and repair/reseal options were selected whenever possible. Once the backlog maintenance is covered, the roads would be put to regular annual maintenance program. The sections of the road as well as selection of the proposed intervention type for the capital investment have been selected based on ERR justified by VOC savings. The road sections with economic rate of return (ERR) of 12% and above over a twenty year analysis period have been included. 3. The cost and road condition data were collected and input during the period from April to September 1995. The unit costs in the HMS, as mentioned in Table A, were developed as the average costs for the works carried out under the Roads Department in 1995 and were revised end 1996 based on recent contract documents from the Roads Department. Since the exchange rate is market determined, and composition of the labor - 84 - Annex 4-1 Page 2 of 7 and equipment costs is assumed to be similar for costs and benefits the conversion factor is assumed to be 1. RTIM3 based economic analysis was conducted with the traffic growth rate of 3 % which is taken from the recent experience and future projected economic growth of the country, which is however on conservative side. A complete output of the economic analysis with detailed data for each link between years 1997 and 2016 is included in the Project Implementation Plan (PIP). Table B shows the ERR and the cost for the roads which satisfied the ERR threshold of 12 % for the base case scenario and which are included in the first two years program. The overall ERR for all priority paved road improvements is 21 %. 4. Sensitivity Analyses were conducted on the high priority roads to test the impact of: (i) variations from the initial normal traffic growth (3 %) and (ii) the effect of capital cost variation. The result for each road in the priority program is in Tables C and D. The priority roads in general remain economically sound even in case of low traffic growth of 1 % p.a. Only the ERR of M4 would turn out to be less than 12 %. The results of switching value analysis shows that except for M4, which already has 12% ERR at the base cost estimate, roads would remain economically viable for capital costs increase of up to 105%. 5. Detailed feasibility studies have been conducted for the Great North Road (T2) from Kapiri Mposhi to Nakonde. The road is divided into four sections with an approximate length of 200 km for each of the sections. The traffic level is generally low with a current daily traffic level of around 500 vehicles at Kapiri Mposhi. The level gradually decreases towards the Tanzanian border where the traffic is less than 100 vehicles per day. The origin - destination survey shows that a high percentage (up to 80 %) of the traffic is regional or international long distance traffic, so that the major benefit would arise from the reduction of the VOC. 6. Rehabilitation on the Sections 1 and 2 will be economically feasible and included in Tables B and C. Staged construction is proposed for the Section 2 where further strengthening of the road surface is scheduled after 6 or 12 years, depending on the condition of the road. This strategy has the advantage of reducing the high initial investment costs. On the Sections 3 (Mpika - Chinsali) and 4 (Chinsali - Nakonde) no rehabilitation option is justified economically because of low traffic benefits. For these two sections continuous maintenance with patching and reseal will be the only feasible option to keep the road passable for heavy traffic. Only one link of the Section 4, which has already failed, will be reconstructed to ensure cross border traffic to use the road. The ERR resulting from the maintenance is 22 % for the Section 3 while for the Section 4 the value is 8 %. The Section 4 is the last section of the Great North Road towards the Tanzanian Border and the only road link to Tanzania from Zambia. This link is of - 85 - Annex 4-1 Page 3 of 7 strategic importance for the country because if this section becomes impassable the international road link to Tanzania would be lost. In addition, the road backs up the TAZARA. If TAZARA collapses, all traffic to Tanzania would be diverted to the road. The volume of the diverted traffic is estimated to be the order of 85 over-five-axle trucks per day with 6 % increase per year. Incorporating this potential traffic volume the ERR would be 28 % which is taken as a proxy indicator of the net economic benefit to Zambia for maintaining this road link. The detailed sheet of the economic analysis is shown in Table E and F. Table A HMS Input Costs for Intervention Categories Costs (US$) Intervention Economic Financial Forex Routine maintenance 1030.54/km 1499.38/km 360.30/km Patching 18.00/m2 27.31/m2 9.09/m2 Reseal 1.80/m2 2.68/m2 0.91/m2 Slurry seal 1.48/m2 2.23/m2 0.75/m2 DBST** 9.84/m2 14.83/m2 5.34/m2 Overlay** 11.48/m2 14.56/m2 8.03/m2 Reconstruction 19.67/m2 24.94/m2 13.77/m2 Notes: * Includes grading *e Includes regulation - 86 - Annex 4-1 Page 4 of 7 Table B ERR and NPV of High Priority Main Roads Proposed NPV at Intervention Type 12% Economic Roughness Discount Capital Range in Route Repair/ Rate ERR Cost IRI for the No. Proposed Section Rehab. Reconstr Reseal (US$ m) % (US$ m) Section Ti Zimbabwe Border 5 km 1 km 0.4 25 % 0.4 5.2 - 6.6 - Livingstone T2 Chirundu - Kafue 72 km 2.2 23 % 1.4 4.5 T2 Kapiri Mposhi - 39 km 96 km 62 km 5.0 15 % 20.7 2.9 - 7.8 Serenje T2 Serenje - Mpika 235 km 2.9 14 % 14.2 2.7 - 6.0 T3 Chingola - 15 km 13 km 6.1 42 % 2.6 2.9 - 7.4 Kasumbalesa T4 Km233 -Km 11 km 3km 9km 0.3 16% 1.3 7.1 -9.0 260 at Kachalola l T5 Chingola - 101 km 2.2 18 % 3.6 3.4 - 8.1 Solwezi M4 Ndola - 29 km 3 km 11 km 4.0 12 % 3.6 4.1 - 5.8 Mwambeshi M6 Kafulafuta - 4 km 30 km 1.3 23 % 1.1 4.0 - 6.1 Luanshya l M9 Lusaka - 36 km 10 km 33 km 3.9 22 % 4.9 4.5 - 10.0 Mumbwa M9 Mumbwa- 27 km 13 km 26 km 1.7 18 % 4.1 4.0 - 10.0 Mongu - 87- Annex 4-1 Page 5 of 7 Table C Sensitivity to Traffic Growth ERR at 1% ERR at 3% ERR at 5% Traffic Traffic Traffic Route Growth p.a. Growth p.a. Growth p.a. No. Proposed Section (Low Case) (Base Case) (High Case) TOOI Zimbabwe Border - Livingstone 22 % 25 % 27 % T002 Chirundu - Kafue 20 % 23 % 27 % T002 Kapiri Mposhi - Serenje N.A. 15 % 19 % T002 Serenje - Mpika N.A. 14 % N.A. T003 Chingola - Kasumbalesa 37 % 42 % 47 % T004 Km 233 - Km 260 at Kachalola 13 % 16% 19% T005 Chingola - Solwezi 14 % 18 % 21 % M004 Ndola - Mwambeshi 10 % 12 % 14 % M006 Kafulafuta - Luanshya 21 % 23 % 25 % M009 Lusaka - Mumbwa 20 % 22 % 25 % M009 Mumbwa - Mongu 15 % 18 % 21 % Table D Sensitivity to Capital Cost Variations % Capital Cost Increase Route to Yield 0 NPV at 12 % No. Proposed Section Discount Rate TOOl Zimbabwe Border - Livingstone 70.0 % T002 Chirundu - Kafue 59.5 % T002 Kapiri Mposhi - Serenje 27.3 % T002 Serenje - Mpika 12.7% T003 Chingola - Kasumbalesa 104.6 % T004 Km 233 - Km 260 at Kachalola 17.0 % T005 Chingola - Solwezi 28.8 % M004 Ndola - Mwambeshi 0.0 % M006 Kafulafuta - Luanshya 50.5 % M009 Lusaka - Mumbwa 55.6 % M009 Mumbwa - Mongu 30.1 % - 88 - Annex 4-1 Page 6 of 7 Table E Economic Analysis for the Great North Road Sections 3 and 4 Routine+Periodic Maintenance vs. No Maintenance Section 3 Section 4 Section 4 with traffic from TAZARA Year Costs VOC saving Total Benefit Costs VOC saving Total Benefit Costs VOC saving Total Benefit 1 2.53 0.00 -2.53 1.12 0.07 -1.05 4.12 0.18 -3.94 2 0.17 0.12 -0.05 2.00 0.08 -1.92 0.21 0.26 0.05 3 0.17 0.25 0.08 1.00 0.10 -0.90 0.21 0.35 0.14 4 0.17 0.39 0.22 0.21 0.10 -0.11 0.21 0.42 0.21 5 0.17 0.55 0.38 0.21 0.10 -0.11 0.21 0.79 0.58 6 0.17 0.70 0.53 0.21 0.11 -0.10 0.21 1.22 1.01 7 0.17 0.87 0.70 0.21 0.25 0.04 0.21 1.69 1.48 8 1.84 1.05 -0.80 2.31 0.40 -1.90 2.31 2.21 -0.10 9 0.17 1.24 1.07 0.21 0.58 0.37 0.21 2.79 2.58 10 0.17 1.45 1.28 0.21 0.76 0.55 0.21 3.43 3.22 11 0.17 1.67 1.50 0.21 0.97 0.76 0.21 4.13 3.92 12 0.17 1.90 1.74 0.21 1.19 0.98 0.21 4.88 4.67 13 0.17 2.15 1.99 0.21 1.36 1.15 0.21 5.71 5.50 14 0.17 2.91 2.74 0.21 1.54 1.33 0.21 6.61 6.40 15 1.84 3.50 1.65 2.31 1.74 -0.57 2.31 7.59 5.28 16 0.17 3.55 3.38 0.21 1.95 1.74 0.21 8.65 8.44 17 0.17 3.60 3.43 0.21 2.17 1.96 0.21 9.51 9.30 18 0.17 3.65 3.49 0.21 2.41 2.20 0.21 10.44 10.23 19 0.17 3.70 3.54 0.21 2.66 2.45 0.21 11.42 11.21 20 0.17 3.73 3.56 0.21 2.86 2.65 0.21 12.25 12.04 ERR 22% 8% 28% NPV at 12% in US$ m 3.67 -1.41 12.67 - 89 - Annex 4-1 Page 7 of 7 Table F Sample Economic Analysis Output T002 Serenje - Chinsali Without Project With Project Benefits Increase in Avoided Year VOC Recurrent VOC Capital VOC saving Civil Works Total Costs Costs Expenditure 1 14.26 0.01 14.26 3.20 0.00 -3.19 -3.19 2 14.99 0.01 14.72 5.50 0.28 -5.49 -5.22 3 15.79 0.02 15.32 5.50 0.48 -5.48 -5.01 4 16.64 0.02 15.94 0.69 0.02 0.72 5 17.55 0.03 16.61 0.94 0.03 0.97 6 18.52 0.04 17.34 1.18 0.04 1.22 7 19.51 0.05 18.16 18.50 1.36 -18.46 -17.10 8 20.55 0.05 16.60 3.95 0.05 4.00 9 21.65 0.05 17.27 4.37 0.05 4.43 10 22.81 0.06 17.94 4.87 0.06 4.93 1 1 24.05 0.06 18.64 5.41 0.06 5.47 12 25.39 0.06 19.37 6.02 0.06 6.08 13 26.84 0.06 20.16 11.30 6.68 -11.24 -4.56 14 28.40 0.07 18.60 9.80 0.07 9.87 15 30.09 0.07 19.25 10.84 0.07 10.91 16 31.87 0.07 19.91 11.95 0.07 12.02 17 33.64 0.07 20.61 13.03 0.07 13.10 18 35.27 0.07 21.32 13.94 0.07 14.02 19 36.65 0.08 22.08 2.70 14.57 -2.63 11.94 20 37.82 0.08 22.85 14.97 0.08 15.05 ERR 14% NPVat 12% $2.85 m - 90 - REPUBLIC OF ZAMBIA PROJECT TO SUPPORT A ROAD SECTOR INVESTMENT PROGRAM List of Documents in the Project File Ministry of Communications and Transport: Statement of Communications and Transport Sector Policy. Draft white paper dated May 1995. Ministry of Communications and Transport: Road Sector Investment Program (ROADSIP) Project Proposal. Task Force Report dated February 1996. Final version dated April 1997. Ministry of Communications and Transport: "Roads 2001 - The Way Forward". Workshop at Mulungushi Conference Center, Lusaka, February 27-29 1996. Workshop communique. Papers prepared for the workshop. Miscellaneous documentation. Ministry of Communications and Transport: "Roads 2001 - The Action Plan, Workshop to Launch ROADSIP," July 9-11, 1997, Lusaka. Paper prepared for the workshop. Miscellaneous documentation. Ministry of Communications and Transport: "Environmental Analysis of Road Sector Investment Program" by Julius Chileshe in association with Chalo Consultants, July 1996. Ministry of Communications and Transport: "Study to Improve Management and Financing of Roads" by Louis Berger International. Draft final report dated September 1996 with comments of the Government and the World Bank. Monthly progress reports. Proceedings of a Workshop on How to Improve Road Management in Zambia, January 16-18, 1996. Ministry of Communications and Transport: "Establishing a Road Renumbering and Mapping System for Zambia" by Carl Bro International, May 1996. Ministry of Local Government and Housing: "A Rural Feeder Road Support Program" by GITEC Consultants. Inception report dated September 1995. Monthly progress reports. Report on screening and selection of feeder roads, assessment and evaluative framework dated September 1996. Reports on the Great North Road for the Ministry of Works and Supply, Roads Department: - 91 - "Economic Assessment for Kapiri Mposhi-Nakonde Road" by Norconsult, May 1997. "Economic Analysis of the Great North Road between Kapiri Mposhi and Nakonde" by VWL International, June 1996. Engineering Design Reports and Economic Evaluation Reports for (a) Section 1 Kapiri Mposhi-Serenje by Carl Bro International (b) Section 2 Serenje-Mpika by RITES/Burrow Binnie Zambia (c) Section 3 Mpika-Chinsali by Gauff Ingenieure (d) Section 4 Chinsali-Nakonde by VWL International Engineering and economic reevaluation for Section 1 by COWI Consult. Ministry of Works and Supply: "Highway Management System" by Carl Bro International in association with Danish Road Directorate and Ranking Engineering Consultants. Interim Report dated May 1996. Various Working Documents and System Manuals. HMS output, cost assumptions, economic analysis for the core investment program 1997-2002. Ministry of Works and Supply, Roads Department: "Equipment Management and Maintenance Study" by Crown Agents Institutional Development Group. Final report dated September 1996 with Government and World Bank comments. Ministry of Works and Supply, Roads Department: "The Civil Works Construction Industry, The Building Construction Industry, The Consulting Services in Zambia" by Kampsax International in association with Brian Colquhoun, Hugh O'Donnell and Partners (Zambia). Final report dated July 1996 with Government and World Bank comments. Ministry of Works and Supply, Roads Department: "A Study of Labor-Based Contracting in Zambia" by IT Transport. Final report dated November 1995. Restructuring Report for the Ministry of Works and Supply by Management Development Division, Cabinet Office dated November 1994. Cap 464 Roads and Road Traffic Act and amendments. Statutory Instruments and other legal instruments pertaining to the National Roads Board and the Road Fund. United Nations Development Program/United Nations Capital Development Fund: Project Agreement for Rehabilitation and Maintenance of Feeder Roads in Eastern Province. - 92 - Supplemental Annexes (1) Organizational Charts (2) Road Network Data (3) Vehicles per Population 1992 (4) Comparative Road Accident Statistics (5) Detailed Project Costs (6) Description of the Community Accessibility Component (7) Description of Construction Industry Development Program (8) Financing Local Revenue Requirements (9) Project Implementation Organization (10) Standard Packaging Plan and Indicative Packaging Plan for IDA Funded Civil Works Staff working papers as follows: (1) Restructuring of Road Sector Institutions (2) Terms of Reference (3) Draft Detailed Implementation Plan (4) Proposed Classification of Road Contractors (5) Economic Analysis working papers (6) Recent Donor Financing for the Road Sector (7) Environmental Mitigation Plan IBRD 24 3 2 3 K-h" R.)o TANZANIA ROAD SECTOR INVESTMENT PROGRAM NIP. F.9.Q I 1997-2002 MAIN ROADS PRIORITY PROGRAM T Mb- COMPLETED AFTER 1990 OR ONGOING TRUNK AND MAIN ROAD5 r kkd-o INI k OVERLAY / RECONSTRUCTION RAILROADS . . . . .REPAIR / RESEAL RIVERS 6 K.- b, o SELECTED CITIES SWAAAPS PROVINCE CAPITALS PROVINCE BOliNDARIES KASAMA NATIONAL CAPITAL WERI'lAlIONAL BOUNDARIFS c DEM. REP (MANSA OF CONGO k. PI SOLWEZ 12 A N G 0 L A N 0 R T H W E S T E R N - - - - - - - - - -11 SI- ? -p. MALAWI 14 KABWE 3 3,4 K,, .[,,o KENYA R.ANDA_- MONGU OF TAN7,\r4lA A Kl- [11 Ng- ON. E R N 0 ANGOLA Mm-q-y ...... S --9P.')k",bP MOZAMBIQUE s iD Z I M B A BW E ZIMBABIE NAMIBIA BOTIANA ,cc Z-b 0 15C GSTOrIE NAMIBI SOUTH AFRICA 2A jULY 1-1
Группа Всемирного банка · Staff Appraisal Report
Zambia - Road Sector Investment Program Project
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