Malawi - Road Maintenance and Rehabilitation Project (ROMARP)

Report No. PID5057 Project Name Malawi-Road Maintenance and (@+) ... Rehabilitation Project (ROMARP) Region Africa Sector Roads/Transport Project ID MWPE1666 Borrower Government of the Republic of Malawi Implementing Agencies Ministry of Works and Supplies Private Bag 316 Lilongwe 3, Malawi Telephone: 265-780200, Fax: 265-732328 National Road Authority Private Bag B346 Lilongwe 3, Malawi Telephone: 265-744448, Fax: 265-744448 Date of this PID September 2, 1998 (Original January 24, 1997, First Update December 15, 1997) Projected Appraisal Date September 1998 Projected Board Date December, 1998 Country and Sector Background. 1. In the first 15 years after independence in 1964, Malawi's economy grew at an average 6% per annum, one of the highest rates in Africa. Growth has slowed in the intervening period as the country has been hit by a number of misfortunes - the refugee exodus from Mozambique, terms of trade shocks and droughts. This has increased macroeconomic instability and resulted in declining per capita income and increased poverty. The country remains heavily reliant on agriculture and a well maintained economic infrastructure for the resumption of growth. 2. The Government of Malawi's investment in the road infrastructure initially concentrated on expanding the national network, especially into areas with high agricultural potential and export/import corridors, as well as upgrading major sections of the network to an all-weather standard. From the late 1980s, the Government shifted emphasis to rehabilitation and intensive maintenance given declining road quality. A number of donors have supported these efforts including IDA most recently through the Malawi Infrastructure Project which closed in December 1995. It remained evident however that the network was not receiving adequate financial allocations for maintenance - a 1993 study showed that for a 107% growth in the length of roads under the responsibility of central government since 1980, the real value of road maintenance allocations over the same period declined by approximately 200%. Under the Medium Term Expenditure Framework (MTEF) for 1995/96 to 2000/01, the road sector is recognized as one of five priority areas to receive preferential financial allocations In the first year of implementing the MTEF, the roads sector received MK105 million (US$7 million), in the second MK125 million (US$8.3 million). While a considerable improvement over the past, the MTEF allocations represent less than 40% of the total funding required to maintain the network to an adequate level of service.  3. While the Ministry of Transport (MoT) is responsible for policy and planning for the transport sector as a whole, the Malawi Public Roads Act vests responsibility for the planning, development, and maintenance of the road infrastructure in the Roads Department in the Ministry of Works and Supplies (MoWS). The Roads Department is therefore responsible for all classified roads other than district and urban roads which fall under local authorities. A small network of unclassified roads is administered by other agencies, principally estate and private roads. All sector institutions however suffer to a greater or lesser extent from inadequate resources, staffing and tools to carry out their mandated roles. Consequently as indicated below, Government is embarking on a program of reforms to address the institutional constraints in the sector. Sector Strategy. 4. The Malawi Government is committed to a strategy of strengthening the institutional framework for the management of the roads sector, increasing the volume of financial resources available for road maintenance and rehabilitation, and developing opportunities for greater private sector participation in the roads sector. To this end in October 1994, Malawi joined the Road Maintenance Initiative (RMI) as an associate member and established an RMI Country Program in 1995. An RMI coordination unit has been set up with the assistance of the Bank and the European Union (EU). A Program Steering Committee (PSC) has been established and has prepared a National Road Authority (NRA) Bill which provides inter alia for the creation of a Road Fund. The bill has been approved by Cabinet, passed by the National Assembly and gazetted as the NRA Act No. 13 of 1997 in May 1997. The Board was appointed end August 1997 with a private sector chairman and private sector members in a clear majority. The NRA has the mandate of preparation and implementation of the national roads program and of managing the Road Fund. This arrangement is expected to contribute to the creation of a reliable and sustainable source of funding for the maintenance of the road network, building upon the MTEF, to facilitate higher and better focused spending on roads, and to bring in the active participation of the private sector as a major stakeholder in the maintenance and operation of roads. From July 1998, the maintenance program (funded solely from the proceeds of a MK1/liter (US$0.04) fuel levy deposited in the Road Fund) is being managed by the NRA. It is expected that about MK245 million (US$9.8 million), will be mobilized to this end in 1998/99. The PSC also managed a program of policy studies under EU funding covering the areas of improved road management and financing; road safety; axle load control; training of sector staff, contractors and consultants; and plant and vehicle pool management. Stakeholders reached agreement June 1997 on a series of recommendations arising out of these studies and Government will signal its assent through the letter of road sector policy to be provided before November 1998. Principal among these is the recommendation to establish a Central Roads Agency (CRA) to operate the main road network on a commercial basis and to provide technical services to the local authorities for the management of the tertiary and district road networks. The NRA and CRA would essentially subsume most of the functions of the Roads Department which would be restructured and downsized accordingly to an agreed timetable. Project Objectives. 5. The principal objectives of the Road Maintenance and Rehabilitation - 2-  Project (ROMARP) is to support the Government's sector reform strategy and to bring about sustainable improvements in the quality of Malawi's road infrastructure which will help improve economic growth and diversification in the Malawian economy by reducing transport costs and increasing accessibility. The project aims over the period 1999-2004 to facilitate the start up of the NRA and the CRA as well as of the Road Fund which are to improve the effectiveness of sector management and to ensure sustainable local financing for road maintenance. The project also intends to address the development of the local construction and consulting industries in order to ensure effective local participation in works to be financed under the project. Under the project, a start will be made to address the backlog of maintenance on main, secondary and tertiary roads. To this end a technical and economic study as well as feasibility and preliminary engineering of a priority program for the first two years of the project are being carried out with PPF and Japanese PHRD Grant financing. Improvements in road safety and road traffic management, which are aimed at reducing the costs of road transportation and road accidents, will now be supported through a parallel project expected to be launched in 1999 and for which a separate PID will be issued September 1, 1998 (Road Safety Project, MW-PE-57761). Project Description. 6. The four main components of the proposed road maintenance and rehabilitation project may be summarized as follows: i) Strengthening of Road Sector Agencies: the newly established NRA will be strengthened to carry out its planning and programming role and to effectively manage the Road Fund while the implementing agencies for road maintenance and rehabilitation, principally the CRA but also the Department of Local Government and District Administration (DoLGDA) and the local authorities, will be strengthened and selectively restructured to increase capacity; ii) Development of the Construction Industry: the project will provide for training of local consultants and contractors who will be expected to take on an increasingly large share of road maintenance work as well as assistance to address policy, financial and equipment constraints to the private sector. iii) Periodic Maintenance: for economically viable subprojects in the core network, the project will cover periodic maintenance requirements to arrest and begin to reverse network deterioration; and iv) Rehabilitation and Upgrading: for selected roads within the core network where high economic rates of return and broader economic benefits can be demonstrated, the project will finance rehabilitation and a limited amount of earth-to-gravel and gravel-to-paved upgrading; Project Cost and Financing. 7. The proposed project is estimated to cost US$39.5 million of which 60t in foreign exchange. The local contribution is expected to be of the order of US$2.5 million from Government and cofinancing is expected in the amount of US$7 million. Recurrent maintenance costs are to be borne out of road user charges channeled through the Road Fund. Project Implementation. 8. The project is to be implemented over a five-year period commencing in 1999. The PSC, which is chaired by the Secretary for Works and Supplies -3 -  comprising public and private sector stakeholders, and which is already in place to oversee the RMI program, is presently coordinating project implementation. This function will be taken on by the NRA Board under the project. A Project Task Force made up of operational representatives of MWS, MoT, DoLGDA, the Ministry of Finance (MoF) and a private sector representative is currently managing project preparation and providing oversight of the PPF financed study. This function will be taken on under the project by the NRA Technical Subcommittee. Implementation of the main and secondary roads component of the civil works program will rest initially with the Roads Department but will then devolve to the CRA. The CRA will assist the local authorities and DoLGDA in the tertiary road program in both urban and rural areas. The Road Fund managed by the NRA will be used to channel funding for the agreed program of road maintenance to be executed by the private contractors and consultants. Project Sustainability. 9. Strengthened institutions, adequate funding for, and improved management of, the road network, and an improved road safety record are all key success factors for the sustainability of the roads sector. The project is expected to enhance sustainability by addressing these factors in a coherent and effective manner. The recently adopted transport sector policy framework, supported by strengthened institutions should improve planning, programming and implementation of high priority road projects. Financing for road maintenance will be addressed in such a way as to ensure greater regularity and flexibility of financial flows to the sector which should reduce the fiscal burden on the recurrent budget. The participatory nature of project preparation, involvement of the private sector in the PSC discussions leading to the establishment of the Road Fund and the NRA, as well as opportunities to be created by the project, augur well for a high degree of project ownership on the part of stakeholders of the network in Malawi. Lessons learned from past operations. 10. Experience gained from implementing infrastructure projects in Malawi indicate the persistence of a number of problems impeding effective sector development namely: lack of commitment to road maintenance; weak institutions and a shortage of qualified staff; inadequate planning and programming of development as well as maintenance work; and inadequate and unpredictable budget allocations for road maintenance. The recently completed Malawi Infrastructure Project was only partially successful in addressing these issues. It is intended that ROMARP go further by addressing directly and up front the financial and institutional constraints to a sustainable improvement in the performance of the roads sector. Poverty Reduction and Alleviation. 11. The project will help address poverty through reducing transport costs and increasing farm gate prices for rural smallholder farming families. The project will deal with rural district roads which will help open up and increase accessibility to a number of parts of the country, and create new marketing opportunities as well as enhance the participation of the rural poor in facility planning and implementation. Better roads will also help alleviate poverty by improving access to health, education, and other socio- economic facilities. In addition, new jobs are expected to be created through - 4 -  the project, especially as a result of the labor-intensive works associated mostly with rural earth and gravel roads. Environmental Aspects. 12. ROMARP is a Category B project. An environmental assessment has been carried out as part of the project preparation process under the framework of the PPF funded technical and economic study. Findings of the study were discussed with the Government of Malawi, and an action plan that includes mitigation measures and institutional strengthening has been prepared prior to project launch. Road sector institutions will have to be given a strengthened environmental management capacity. The environmental impact of the project is not expected to be major, although any road realignment, traffic diversion, and quarrying of fill and road layer material will have to be carefully managed. Detailed engineering design documents and tender documents associated with any construction work will inevitably include clear instructions relating to the location and operation of construction camps, treatment of borrow pits, and routing of traffic to offset any potential environmental hazards, including road safety, arising out of road works. Program Objective Categories. 13. The primary project objective category is environmentally sustainable development. Secondary project objectives are improved public sector management, greater private sector participation in road sector development and maintenance, and poverty alleviation through improved accessibility in rural areas and employment creation in labor based works. Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending September 11, 1998. - 5 -  Annex Because this is a Category B project, it may be required that the borrower prepare a separate EA report. If a separate EA report is required, once it is prepared and submitted to the Bank, in accordance with OP 4.01, Environmental Assessment, it will be filed as an annex to the Public Information Document (PID) . If no separate EA report is required, the PID will not contain an EA annex; the findings and recommendations of the EA will be reflected in the body of the PID. -6-