Ghana - The First and Second Transport Rehabilitation Projects and the National Feeder Roads Rehabilitation and Maintenance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.: 19517 PERFORMANCE AUDIT REPORT GHANA TRANSPORT REHABILITATION PROJECT I (CREDIT 1858-GH) TRANSPORT REHABILITATION PROJECT II (CREDIT 2192-GH) NATIONAL FEEDER ROADS REHABILITATION AND MAINTENANCE PROJECT (CREDIT 2319-GH) June 28, 1999 Sector and Thematic Evaluations Group Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = cedi (C) US$ 1 1990 326 cedis (SAR) 1991 = 367 cedis 1992 = 437 cedis 1993 = 651 cedis 1994 = 964 cedis 1995 1,200 cedis 1996 = 1,500 cedis 1997 = 2,000 cedis 1998 = 2,300 cedis WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 hectare (ha) 2.47 acres 1 kilometer (km) 0.62 mile (mi) 1 metric ton (t) 2,205 pounds (lb) FISCAL YEAR January 01 - December 31 ABBREVIATIONS AND ACRONYMS Danida - Danish International Development Assistance DFR - Department of Feeder Roads GOG - Government of Ghana ERR - Economic rate of return ICB - International Competitive Bidding IMT - Intermediate Means of Transport MPBS - Maintenance Performance and Budgeting System NCB - National Competitive Bidding NFRRMP - National Feeder Roads Rehabilitation and Maintenance Project NGO - Non-Government Organization OPEC - Organization of Petroleum Exporting Countries PPF - Project Preparation Facility RTTP - Rural Travel and Transport Program SAR - Staff Appraisal Report SDR - Special Drawing Rights SSATP - Sub-Saharan Africa Transport Policy Program TRP-1 - First Transport Rehabilitation Project TRP-2 - Second Transport Rehabilitation Project USAID - United States Agency for International Development ICR - Implementation Completion Report EVM - Evaluation Memorandum ES - Evaluation Summary OED - Operations Evaluation Department Director-General, Operations Evaluation : Mr. Robert Picciotto Director, Operations Evaluation Department : Ms. Elizabeth McAllister Manager, Sector and Thematic Evaluations Group : Mr. Gregory K. Ingram Task Manager : Mr. Binyam Reja FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 U.S.A. Office of the Director-General Operations Evaluation June 28, 1999 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Ghana: Performance Audit Report First Transport Rehabilitation Project (Credit 1858-GH) Second Transport Rehabilitation Project (Credit 2192-GH) National Feeder Roads Rehabilitation & Maintenance Project (Credit 2319-GH) Attached is the Performance Audit Report (PAR) prepared by the Operations Evaluation Department on three transport projects in Ghana: First Transport Rehabilitation Project (Credit 1858-GH, approved in FY88); Second Transport Rehabilitation Project (Credit 2192-GH, approved in FY91); and National Feeder Roads Rehabilitation Project (Credit 2319-GH, approved in FY92). The projects closed 12-24 months behind scheduled. A total of US$216 million equivalent was disbursed, and US$2.8 million was cancelled at closing. The main goals of the three project were to support the economic recovery program (ERP) of Ghana by removing transport impediments to private sector investment and economic activities through physical rehabilitation and through the promotion of market-oriented reforms in the roads and railways subsectors to create a favorable environment for the private sector, and to improve public sector management and resource allocation. The projects also sought to alleviate rural poverty by promoting intermediate means of transport, improving access to markets and socioeconomic activities, and introducing income-generating opportunities by promoting labor- intensive construction methods. The physical objectives of all the audited projects were achieved. By improving economically important roads, the projects contributed to the success of the ERP. The projects helped to put in place a program of road rehabilitation and maintenance to arrest the deterioration of the road network and improve its condition. They helped in removing the physical constraints to transport and reducing transport costs, which in turn helped stimulate exports, farm production and marketing, and helped improve the mobility of passengers and goods. This is reflected in the high economic rate of return, which ranged from 18-42 percent. The National Feeder Roads project and pilot feeder roads and rural transport components in the First and Second Transport Rehabilitation projects improved access and mobility of the rural population to markets and socioeconomic activities. Agricultural produce increased and became more diversified. Commercial transport also increased on improved feeder roads, thus enhancing the mobility of the rural population. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. -2- The objectives of the railways component in the TRP-I and II were not achieved. The railway in Ghana still suffers from poor physical condition and a deficient organizational framework. Institutional strengthening and policy reforms have improved the management and financing of the road subsector. The Ghana Highway Authority and Department of Feeder Roads now carry out most of their maintenance and rehabilitation work using private contractors and consultants rather than direct force account. This has resulted in a thriving local construction and consultancy industry. In addition, the introduction of pavement management systems in the two agencies has enabled them to improve their expenditure and work programs. The establishment of a reformed road fund, with an autonomous board and secretariat, has vastly improved cost recovery and allocation of funds for maintenance. The audit rates the outcome of the First and Second Transport Rehabilitation projects as satisfactory, sustainability as uncertain, institutional development impact as substantial, and Bank and Borrower performance as satisfactory. These ratings are consistent with those of the ICR, as reviewed by OED. The audit rates the outcome of the National Feeder Roads project as highly satisfactory (versus satisfactory in the ICR), sustainability as likely (versus uncertain in the ICR), institutional development impact as substantial (in concurrence with the ICR), Bank performance as highly satisfactory (versus satisfactory in the ICR), and Borrower performance as satisfactory (in concurrence with the ICR). The Bank's project management style and policy dialogue with the client were exemplary and represent a "best practice" in the road subsector. The Bank provided timely and relevant sector assistance. It responded to the needs of the economic recovery program early on, and proceeded to design projects to address both the emergency needs of the ERP and the long-term needs of the sector. The policy dialogue in the road subsector was highly beneficial to the outcome of the projects and to the improved sector organization. Three lessons emerge from the audited projects. First, the benefits of contracting out with the private sector for the design and implementation of civil works are eroded when public road agencies lack adequate capacity to manage contracts and an institutional mechanism to make sequential adaptations to changing circumstances and resolve disputes. The corporatization of road agencies and the establishment of a dispute resolution mechanism need to precede (or be done alongside) the institutional change to contract out with the private sector. Second, the decentralization of feeder road management to the district level needs to be preceded by a clear definition of ownership and a classification of feeder roads, and requires a coherent strategy to devolve power and accountability for resource allocation and generation to the district level. Third, road funds can be an important step in managing roads in a market economy. To complete the commercialization of roads in Ghana, the Fund should generally allocate funds in proportion with a region's contribution, but should also have a mechanism to address regional disparities arising from the unbalanced allocation of resources in the past. The second-generation road funds improve upon the first-generation road funds by enhancing the oversight responsibility and limiting the government's discretionary power to divert funds for other use. Attachment 1 Contents Principal Ratings.................................................................................................................. ii Preface ................................................................................................................................... v 1. Introduction and Background......................................................................................1 The Context ...................................................1 Bank Group Involvement in the Transport Sector..........................2 2. Project Objectives and Relevance ............................................................................3 3. Implementation Experience and Results ................................................................. 6 Physical Achievements .................5................ ..........5 Trunk Roads .............5.............................. Feeder Roads ................6.............. ...............6 Railway .............................................. .....7 Institutional and Policy Development..................................8 Road Subsector ..............8.............. ................8 Railway Subsector ..........8............... .................8 Technical Assistance...........................................8 Monitoring and Evaluation ..............8........... ..............8 4. R atings ............................................................................................................................ 9 Outcome.......................................................9 Sustainability ........................................... .......9 Institutional Development ..............9............ .............9 Bank Performance........................................ .........10 Borrower Performance ...................... ................10 5. Outstanding Issues and Challenges Ahead.................................10 Contract Management ............................................10 Decentralization ........................................ ........12 Road Fund ....................................................13 Sustaining the Road fund.......................................14 Rationalizing the Allocation of Resources ................... .........15 Increasing Road Fund Revenue .....................................15 6. Lessons Learned and Recommendations .................................................................16 Annexes A. Basic Data Sheet .............................................17 This report was prepared by Binyam Reja (Task Manager), who audited the project in February 1999. William B. Hurlbut edited the report. Romayne Pereira provided administrative support. 111 Principal Ratings First Transport Rehabilitation Project (Credit 1858-GH) ICR' OED/EVM' PARJ Outcome Satisfactory Satisfactory Satisfactory Sustainability Likely Uncertain Uncertain Institutional Development Substantial Substantial Substantial Bank Performance Highly Satisfactory Satisfactory Satisfactory Borrower Performance Satisfactory Satisfactory Satisfactory Second Transport Rehabilitation Project (Credit 2192-GH) ICR OEDIES PAR Outcome Satisfactory Satisfactory Satisfactory Sustainability Uncertain Uncertain Uncertain Institutional Development Partial Substantial Substantial Bank Performance Satisfactory Satisfactory Satisfactory Borrower Performance Satisfactory Satisfactory Satisfactory National Feeder Roads Rehabilitation Project (Credit 2319-GH) ICR OEDIES PAR Outcome Satisfactory Satisfactory Highly Satisfactory Sustainability Uncertain Uncertain Likely Institutional Development Partial Substantial Substantial Bank Performance Satisfactory Satisfactory Highly Satisfactory Borrower Performance Satisfactory Satisfactory Satisfactory Key Staff Responsible First Transport Rehabilitation Project (Credit 1858-GH) Task Manager Division Chief Country Director Appraisal T. Pankaj A. Soto N/A Completion N/A J. Wright N/A Second Transport Rehabilitation Project (Credit 2192-GH) Task Manager Division Chief Country Director Appraisal T. Pankaj J. Wright E. Lim Completion S. Hallgrimsson M. Plessis-Fraissard P. Harold National Feeder Roads Rehabilitation Project (Credit 2319-GH) Task Manager Division Chief Country Director Appraisal A. Nickeson J. Wright E. Lim Completion S. Hallgrimsson M. Plessis-Fraissard P. Harold I Ratings assigned by the Region in the Implementation Completion Report (ICR). 2 Ratings assigned by OED in the Evaluation Memorandum (EVM) or Evaluation Summary (ES) during the ICR review exercise. I Ratings assigned in this Performance Audit Report (PAR) based on the OED audit. V Preface This is a Performance Audit Report (PAR) of three transport projects in Ghana: the First Transport Rehabilitation Project (Credit 1858-GH); the Second Transport Rehabilitation Project (credit 2192 -GH); and the National Feeder Roads Rehabilitation and Maintenance Project (credit 2319-GH). The PAR was prepared by the Operations Evaluation Department (OED). In February 1999, an OED mission traveled to Ghana, where it held discussions with relevant government officials, private sector representatives, beneficiaries in villages, professional and trade organizations, and Bank staff in charge of the projects at headquarters and the resident mission. The kind cooperation and invaluable assistance from all the people consulted are gratefully acknowledged. OED staff also reviewed the President's Reports, Staff Appraisal Reports (SARs), Implementation Completion Reports (ICRs), transcripts of Board proceedings, project correspondence files, Bank documents on other transport projects, and other Bank and non-Bank materials. The PAR adds value to the ICRs by focusing on selected issues that are likely to dominate future Bank-GOG dialogue in the sector: contract management, decentralization, and Road Fund. Following standard OED procedures, copies of the PAR were sent to the relevant government officials and agencies for their review and comments. No comments were received. 1 1. Introduction and Background The Context 1.1 When the economic recovery program (ERP) was launched in 1983, Ghana's transport sector was severely deteriorated. Years of maintenance neglect and mismanagement had left it in such poor condition that it had become a liability to the national economy and hindered the effectiveness of the recovery program. In the road transport subsector, the road infrastructure had deteriorated so much that it had lost its capacity to carry even the reduced levels of traffic of the early 1980s. Of the 14,134 km of trunk roads in 1984, about 6,500 km (46 percent) had suffered moderate or severe failure.4 The situation was even worse for feeder roads, as the majority of the roads could not be used during the rainy season. The situation in the railway subsector was similar. Rail infrastructure and rolling stock were in poor repair, and derailment and breakdowns were frequent. 1.2 Transport sector institutions were also deficient, hindered by inefficient organizational arrangements and poor incentive structures. The poor macroeconomic conditions and political instability of the 1970s and 1980s had resulted in the exodus of many well-educated Ghanaians from the country. Those who remained had to contend with wages that did not cover the cost of living and a management system that was highly politicized, causing high absenteeism, low productivity, and widespread demoralization. 1.3 Although Ghana once enjoyed a relatively high living standard compared with most other West African nations, the combination of political uncertainty, dirigiste economic policies, and deterioration in the external terms of trade in the 1970s led to severe macroeconomic imbalances and a decline in income through the early 1980s. Import volumes fell by a third, real export earnings by 52 percent, and domestic savings from 12 percent of GDP to almost insignificant levels.5 1.4 In 1983, the government launched an economic recovery program (ERP) with the support of the World Bank, IMF, and other agencies to restore macroeconomic stability, maintain an incentive framework to enhance efficiency, encourage savings and investment, provide an enabling environment for the private sector, and improve public sector resource management. In the decade following the reforms, real GDP growth ranged from 5 to 12 percent and the benefits of that growth have been widely shared.' 1.5 The main elements of Ghana's transport system are: (a) a network of about 14,400 km of trunk and urban arterial roads, and about 21,000 km of feeder roads; (b) a 950-km railway system linking three main cities, Accra, Kumasi, and Takoradi, and two main ports; (c) two major ports at Tema and Takoradi; and (d) a maritime and airline system. 1.6 The Ministry of Roads and Transport has overall responsibility for the transport sector. It sets out sector strategy and policy for monitoring the performance of its agencies. In the road subsector, the Ghana Highway Authority (GHA) is responsible for managing the trunk road network. The Department of Feeder Roads (DFR) and Department of Urban Roads (DUR) are respectively responsible for the preservation, improvement, and development of the feeder and urban road networks. The Ghana Railway Corporation is responsible for managing the operations 4. Ghana: Transport Sector Strategy Note (1985). Washington, D.C.: World Bank. 5. Ghana: Country Brief. http://afr.worldbank.org/gh/info.htn. 6. Ibid. 2 of the railway system. Bank Group Involvement in the Transport Sector 1.7 The Bank's role in the transport sector in Ghana has been important in guiding and supporting rational sector policies and institutional reforms, and in supplementing resources. Since 1969, when the Bank first approved an engineering credit, Ghana has received 12 transport projects totaling US$558 million to develop, improve and preserve its transport sector. These included five highway projects (US$117 million); one highway sector investment project (US$ 100 million); one railway and one port project (US$29 million and US$24.5 million, respectively); two transport adjustment projects (US$156 million); and one rural roads and urban transport project (US$55 million and US$76 million, respectively). In addition, there have been important transport components in other programs for emergency credit and agriculture projects. 2. Project Objectives and Relevance 2.1 In consultation with the government, the Bank issued a Transport Sector Strategy Note (1985) to lay out the measures that needed to be taken in order to rehabilitate the sector and to support the economic recovery program. The main recommendations of the Sector Strategy Note were to: * Rehabilitate the physical infrastructure. * Establish an improved system of resource allocation and infrastructure financing. * Restructure sector agencies. * Support private contractors. * Improve policies and incentives for road transport. * Promote intermediate means of transport. 2.2 The Sector Strategy Note, which was developed through intensive dialogue with the client and other donors, guided subsequent project designs and policy dialogue with the client. The Bank and the government (as well as the donor community) agreed on a series of short-and medium-term measures to redress the deficiencies in the transport sector in Ghana. The note was also a means to go beyond emergency repairs and develop a process to bring a long-term solution to the management and financing of the transport sector. 2.3 The audited projects benefited from a well-defined and well-thought out strategy and enjoyed borrower commitment and donor support. The main objectives of the First Transport Rehabilitation project (TRP-I) and the Second Transport Rehabilitation project (TRP- II) were to help sustain and accelerate Ghana's economic recovery program by removing transport barriers to private sector investment and economic activities. The projects were also designed to promote market-oriented reforms to increase the efficiency of the transport sector, create an environment conducive to the development of domestic private sector contractors, and improve public sector management and resource allocation. Finally, the projects had some pilot-components to promote intermediate means of transport in the rural areas and create economic opportunities for the rural poor by promoting labor-based construction methods. (Specific project objectives and components are listed in Table 2.1). 2.4 The National Feeder Roads Rehabilitation and Maintenance project (NFRRMP) sought to support the ERP by focusing on the feeder road network. Improving the feeder road network was essential to increase the production of food and cash crops by facilitating the transport of agricultural produce and inputs to and from markets. The project was also an attempt to improve 3 the mobility and economic opportunity of the rural poor, and increase the use of labor-based construction methods. 2.5 The objectives of the three audited projects were highly relevant to the needs of the client and were consistent with the Bank's strategy. In many ways, the concepts embedded in the projects represent innovative thinking for the time. The projects sought to promote the commercial management of roads, increase the capacity the private domestic contractors industry, introduce labor-based construction methods and promote intermediate means of rural transport. These project concepts are currently considered "best practices" in the Bank, and have been used in other developing and developed countries to design successful transport interventions. 2.6 One serious shortcoming of the design of the projects is the railway component of the TRP-I and TRP-II. The two projects were not adequately designed to raise Ghana's railways to acceptable condition. The needs of the subsector were not adequately addressed through an appropriate investment strategy, and policy and institutional reform. Table 2.1 Project Objectives and Components Project Name Project Objectives Project Components First Transport Rehabilitation Remove physical bottlenecks to the Road maintenance and rehabilitation Project (Credit 1858 - GH) expansion of exports, farm production and Railway rehabilitation program. labor mobility through better maintenance Support for transport sector institutions. Approved: December 10, 1987 and further rehabilitation of the transport Pilot programs for road transport and rural Effective: May 9, 1988 infrastructure, transport. Raising the efficiency of the transport Support for infrastructure planning. Original Closing Date: sector. December 31, 1993 Facilitating rural transport by promoting Actual ClosingDate: December appropriate low-cost technology; and 31, 1995 Reducing transportation costs for both goods and passengers. Loan Amount US$ 65 M Project Cost: US$200 M Second Transport Removing physical bottlenecks to the Civil works, institutional strengthening and Rehabilitation Project (Credit expansion of exports, farm production and equipment in the road sector (64%); 2192-GH) labor mobility; and facilitating private Capacity improvement in the railway sector development through improved subsector through provisions for locomotives Approved: December 13, 1990 maintenance and rehabilitation of the road and wagons, equipment and tools, civil works, Effective: June 18, 1991 and railway infrastructure; and institutional strengthening (33%); Improving the efficiency of both the public Public and private transport sector institutional Original Closing Date: and private sector transport management development (22%); and September 30, 1996 through promotion of market-oriented Low-cost rural infrastructure development and Actual Closing Date: policies, institutional development and maintenance systems with emphasis on December 31, 1997 manpower training; women's employment and involvement Encouraging new methods of through provision for civil works and Loan Amount: US$96 M infrastructure rehabilitation and institutional support to women and NGOs Project Cost:US$212 M maintenance practices, using appropriate (11 %). technology, local resources, and community participation; Reducing transportation costs; and Alleviating poverty in rural areas, and improving the self-development of rural women. National Feeder Roads To provide improved feeder road access to Full rehabilitation of 2,500 km of feeder roads Rehabilitation and transport agricultural inputs and in 16 selected road areas with high and Maintenance project (Cr. agricultural produce to and from farms or medium agricultural potential; 2319-GH) villages and nearby markets and thereby Regravelling of 2,850 km of feeder roads increase food and cash crop production; which were rehabilitated since 1982 and were Approved: February 7, 1992 To improve mobility and economic now under maintenance; Effective: July 22, 1992 opportunity for the rural por; and Construction of up to 5,000 culverts including To improve the institutional capacity of spot improvements on some 720 km of Original Closing Date: DFR to sustain the feeder road program selected feeder roads to provide minimum June 30, 1997 over time and to ensure the maintenance access; Actual Closing Date: of the rehabilitated road network. Purchase of road maintenance and workshop 4 June 30, 1998 equipment and tools and spare parts; Consultant services for engineering design Loan Amount: US$ 55 M and contract supervision for components and Project Cost: US$102.7 M for an organization and management study; a maintenance performance budgeting system development; and socio-economic impact studies; Technical assistance to support DFR in contract management, road planning, road maintenance and equipment maintenance/repair operations; Overseas training for DFR staff and support for the Koforidua labor-based training school; Support to the local contracting industry including assessment of industry performance; provision of training, and light equipment for labor-based contractors; Rural mobility and environmental improvements and assistance to NGOs and women; and DFR decentralization support to develop and test a district-based routine maintenance system on feeder roads involving local communities (Extract from Staff Appraisal Report No. 9823-GH). The goals as stated in the SAR were realistic and achievable. 5 3. Implementation Experience and Results 3.1 All three projects were successfully implemented after some startup delays. Technical assistance and training programs linked to projects increased the capacity of the implementing agencies to expeditiously implement the projects. In the end, all three projects closed with some delays. The closing dates for TRP I and II were extended by 24 months and 15 months, respectively, from the SAR projection. The original closing date for the National Feeder Roads project was extended by 12 months. The main reason for these delays was the slow procurement process and the government's inability to provide timely counterpart funding. Physical Achievements Trunk Roads 3.2 The projects achieved their physical targets to rehabilitate and maintain the trunk road network. Under the First and Second Transport Rehabilitation projects, 4,705 km of trunk roads (35 percent of Ghana's trunk road network) received some periodic maintenance and rehabilitation work.7 The projects helped to put in place a program of road rehabilitation and maintenance to arrest the deterioration of the trunk road network and improve its conditions. In 1989, only 33 percent the trunk roads were in good or fair condition, with a substantial part of the road network suffering from moderate and severe failure. By 1997, however, the danger of road failure was largely averted and the percentage of roads in good or fair condition increased to 42 percent (Table 3.1). While this is a major improvement, 58 percent of the network remained in poor condition by 1997. The Bank is supporting GOG through the ongoing Highway Sector Investment Program to bring the network to 70 percent in good condition and 20 percent in fair condition by 2005'. Table 3.1 Improvement in Road Conditions* Trunk Roads Feeder Roads 1989 1997 1989 1997* % Good 13 18 16 51 21 % Fair 120 24 24 36 15 Poor 67 158 61364 1Data tr 1989 comes from SAR TRP- , while the Data for 1997 comes from the Road Condition Study: Final Report. The numbers may not be comparable over the different years because the surveys were done using different standards. ** The 1997 figures for feeder roads are divided by the maintainable network (9,805 kilometers), and the entire feeder road network (23,605 km), which includes the non-maintainable network (13,800 km). 3.3 By improving economically important roads, the projects were able to contribute to the success of the ERP. The projects helped in removing the physical constraints to transport and reducing transport costs, which in turn helped in stimulating exports, farm production and marketing, and improving the mobility of passengers and goods. This is reflected in the high economic rate of return of the projects, which was re-estimated at 42 percent (versus 61 percent at appraisal) for TRP-I, and 18 percent (versus 30 percent at appraisal) for TRP-Il. 7. ICR: TRP1 (Report No. 15741) and TRP2 (Report No. 18413). 8. Ghana: Highway Sector Investment Program: SAR (Report No. 14572-GH). 9. ERR for road components only. 6 Feeder Roads 3.4 The National Feeder Roads Rehabilitation and Maintenance Project and the pilot feeder roads components in TRP-I and TRP-II have improved access and mobility of the rural population to markets and socioeconomic activities. Over 6,600 km (31 percent) of Ghana's feeder roads received some rehabilitation and maintenance work under the NFRRMP. The condition of the network has improved significantly (Table 3.1), with only 13 percent of the maintainable-network being in poor condition in 1997. However, a significant portion of the network remains non-maintainable, hence in poor condition, making the percentage of roads in poor condition 64 percent. 3.5 A socioeconomic impact monitoring study0 undertaken during the implementation of the National Feeder Roads project suggests that agricultural production increased and became more diversified after feeder roads were rehabilitated. Commercial transport services also increased in improved corridors, thus enhancing the mobility of the rural population. 3.6 The findings of the study are corroborated by interviews conducted with beneficiaries for the purpose of this audit. The audit mission held focus group meetings with villagers from selected corridors in the Brong Ahafo Region. The feeder roads, where the village interviews were conducted, fall into the following categories. (i) rehabilitated under NFRRMP; (ii) rehabilitated using labor-based methods, and funded by another donor; (iii) received some spot improvement through DFR's own fund; and (iv) not improved at all, and passable only with great difficulties. 3.7 The interviewed villagers highlighted the following effects of improved feeder roads on their life: (i) Transport services are signficantly more frequent and cheaper in the corridors where the feeder roads were rehabilitated than where there were no improvements done. The villagers in the improved corridor said that the evacuation of their produce has significantly improved since the road was rehabilitated, as there were now more vehicles coming to their villages. On the other hand, the villagers who live along the unimproved feeder road complained that it is extremely difficult to get service into their village. When they do get service, they have to pay more than those who live along the improved corridor. Transporting one-hundred kilograms of maize to market costs 2,000 Ghanaian cedis in the improved corridor, versus 3,000 cedis in the non- improved one for the same distance (Table 3.2). Passenger services are also cheaper in the improved corridor, where it is 200-300 cedis cheaper than it is in the unimproved corridor for comparable distance. (ii) Farmers in improved corridors have reduced their use of intermediaries to sell their harvest and are getting better prices for their crops. Because of the difficulties in getting transport services, many villagers used to sell their produce to intermediaries, at below the market price to compensate for the service provided by the intermediary. However, the improved transport services have decreased the need to sell their produce to an intermediary. Hence, villagers are getting a better price for their produce. (iii) Shopkeepers in improved corridors say their costs and sales have improved since the road was rehabilitated. The costs of bringing goods from major markets to village shops decreased 10. Socio-Economic Impact Monitoring and Evaluation Studies. Ministry of Roads and Transport, Department of Feeder Roads: National Feeder Roads Rehabilitation and Maintenance Project. 7 because shopkeepers are able to find transport services without difficulty. According to one shopkeeper in the corridor where the feeder road was improved under NFRRMP, transport service was difficult to get before the road was improved, as many providers refused to go to the village. Since the improvement of the road, the shopkeeper said, he has no problem in getting service to bring his goods to the shop. In addition, he maintains that his sales have improved since the road was rehabilitated, as many villagers have become more mobile and pass through his shop more frequently. (iv) Summoning an emergency vehicle to take an ill person to a health facility is easier and cheaper where the roads were improved. In Ghana's villages, when a person falls ill, the people send someone, often on a bicycle, to the main road or the next town to fetch a taxi to take the ill person to the hospital or clinic. The ease with which this service can be obtained and the price of the service significantly varies by the condition of the road. As Table 3.2 shows, if the roads are in good condition, taxis are more willing to go and charge less (15,000-25,000 cedis for a trip). On the other hand, if the roads are in bad condition, people have to wait until they find a taxi willing to go to that village, and when they do get one they pay a higher price (25,000-30,000 cedis per trip). Moreover, if a segment of the road is not motorable, the ill person has to be carried by the villagers to the point where it becomes motorable. Table 3.2 Impact of Improved Feeder Roads on Transport Cost Transport Cost (in Cedis CHARACTERISTICS OF FEEDER ROADS Freight, 100 kg Maize 2,000 2,000 3,000 3,000 Shared taxi 1,200 1,200 1,500 1,500 Minibus 1,000 1,000 1,000 1,200 Emergency taxi 15,000-20,000 20,000-25,000 25,000-30,000 25,000-30,000 Source: Village Interviews. i. Rehabilitated under NFRRNP ii. Rehabilitated using labor-based methods, and funded by another donor iii. Received some spot improvement through DFR's own fund; and iv. Not improved at all, and passable only with great difficulties 3.8 It should be noted that these findings from interviews with villagers are not intended to be exhaustive conclusions on what happens when feeder roads are improved. The purpose here is to get some sense of what the beneficiaries feel about the impact of improvements of feeder roads on their daily life, and to confirm the findings of the above-mentioned study. When the views of the beneficiaries are combined with the more systemic impact monitoring study, a clearer view emerges of what the impact of feeder roads is on rural life in Ghana. Undoubtedly, improvements in feeder roads have significant economic and social benefits, which may not appear in traditional cost-benefit analysis. Railway 3.9 In the railway subsector, TRP-I and II financed the rehabilitation of some railway tracks, rolling stock, and equipment. However, the projects' effect on the condition and efficiency of the railway system is negligible. The support and attention provided to the railways was not commensurate with the daunting problem the railways were facing at the start of the transport rehabilitation program. Unlike in the road subsector, the railway component lacked a comprehensive and strategic program to bring about a fundamental change in the physical condition and management of the railway system. 3.10 The railway component suffered from a lack of adequate attention early in the project cycle. Supervision missions did not provide enough attention to this component, and there was not much substantive policy dialogue to improve the railway system. Most of the Bank-GOG 8 dialogue centered on the roads component, while railways were largely neglected. The policy dialogue substantially improved toward the end of TRP-II when the Bank began attending to this component more closely and entered into more intensive dialogue with the client. As a consequence of this action, the client is now poised to introduce private sector participation in the subsector. In retrospect, having a separate railway project would have focussed stronger attention on the problems of the railways. Institutional and Policy Development Road Subsector 3.11 The audited projects provided substantial support to enhance the capacity of the sector organizations through a combination of market-oriented reforms, technical assistance, and training programs. At the start of the TRP, both GHA and DFR carried out most of the civil works through direct labor force, and had very limited use of private contractors. Today, however, both these agencies extensively use the private sector to design and carry out most of the civil works. This has resulted in a thriving domestic construction and consultancy industry in Ghana. The Bank's support in this area came in two forms. First, through its policy dialogue, the Bank encouraged the client to increase its use of private contractors to undertake civil works and reduce its unskilled labor force. At the same time, the Bank arranged for a comprehensive training program for domestic contractors, with a particular focus on labor-based construction methods. These efforts have paid off, and Ghana's construction industry is now among the most vibrant and well-organized in the region. 3.12 The technical assistance and training programs extended to GHA and DFR have substantially improved the capacities of these agencies to manage projects and to plan and prioritize road maintenance programs. The advance pavement management systems introduced in DFR and GHA are helping in rationalizing the expenditure and work programs of these agencies. Railway Subsector 3.13 In the railways subsector, institutional development efforts had a negligible effect in improving the capacity and managerial culture of the railways. Technical assistance proved ineffectual. Because policy dialogue to reform the railways did not start in earnest until toward the end of the second TRP, no meaningful reforms have yet been taken to improve the operations and management of the railways. The experience of the Ghana railways suggests that support for organizational strengthening and improvement is more effective when the railway operates in a conducive institutional environment with appropriate incentive structures. Organizational and system improvements need to be accompanied (or preceded) by reforms directed at improving the incentive structure and the institutional environment governing railway operations. Technical Assistance 3.14 The technical assistance program in Ghana has provided significant benefits in the areas of project management, and has improved sector agencies' managerial and organizational capacities to maintain and improve the road network. However, it has also created dependency on costly expatriate staff, and disguised Ghana's institutional weaknesses. The Bank needs to work with the GOG and other donors to develop a process to minimize the use of technical assistance. Monitoring and Evaluation 3.15 As the management and financing of the transport sector becomes more complex and many actors are involved, the monitoring and evaluation function of the agencies needs to be strengthened and strategically organized to evaluate the many-faceted performance requirements of the transport sector. Currently, there is a Directorate for Monitoring and Evaluation in the 9 MORT. The road agencies and Road Fund Secretariat also carry out some monitoring and evaluation. Nevertheless, there is inadequate capacity within the sector institutions, and the economic and institutional values of evaluation are not widely appreciated. There is a need to increase the evaluation capacity of the agencies, and develop a process to allow them to learn from evaluations. 4. Ratings Outcome 4.1 The PAR rates project outcome for TRP-I and II as "satisfactory, " and the outcome for the National Feeder Roads project as "highly satisfactory." The outcome of the roads component under all of these projects is deemed highly satisfactory. The projects substantially achieved their objectives to remove the transport bottlenecks in support of the economic recovery program. They also promoted market-oriented reforms, improved public sector management, and improved resource allocation. The projects' relevance to the economic recovery program and poverty reduction in the rural areas was highly significant. Project objectives were achieved with high economic rate of return. There were some cost and time overruns, but these did not affect the projects' outcome. 4.2 The outcome of the railway component, on the other hand, which made up 22 and 33 percent of the credit amount for TRP I and II respectively is judged as unsatisfactory. The projects failed to bring improvement in the operations of the Ghana railways. A recalculation of the economic rate of return for the railway component of TRP II showed that the project had a zero percent ERR (versus 29 percent at appraisal), while the ERR for TRP-I was not reestimated. Sustainability 4.3 The sustainability for TRP-I and TRP-II is rated as "uncertain." While the sustainability of the roads component is guaranteed by the reformed Road Fund and the improved sector capacity, the sustainability of the railway is unlikely without significant institutional changes, which have yet to materialize. Therefore, the overall sustainability of the project is uncertain. 4.4 The sustainability of the National Feeder Roads project is rated as "likely." Resource allocation for feeder road maintenance has significantly improved since the establishment of the reformed Road Fund. However, the decentralization process has introduced a new variable whose effect on the management and financing of the roads is not yet known. In particular, district assemblies have yet to make a political commitment to maintain the improved feeder roads and establish an institutional arrangement to carry out the maintenance and improvement of the roads. Institutional Development 4.5 The institutional development impact of all three projects is rated as "substantial." Market-oriented reforms and organizational strengthening efforts have significantly improved public sector management and resource allocation in the road subsector. The introduction of advanced pavement management systems in GHA and DFR has helped the agencies to improve their work programming. Training extended under these projects has increased the skills of staff in GHA, DFR, and the MORT. Technical assistance and training to private sector contractors have improved the industry, which has in turn encouraged the agencies to use the private sector more in the design and implementation of civil works. 10 4.6 In the railway subsector, technical assistance and training programs were carried out, but they were unsuccessful in improving the operation and management of the railway system. Bank Performance 4.7 Bank performance is rated as "satisfactory" for TRP-I and TRP-II, and "highly satisfactory" for the National Feeder Roads project. The Bank's project management style and policy dialogue with the client were exemplary and represent a "best practice" in the road subsector. The Bank provided timely and relevant sector assistance. It responded to the needs of the economic recovery program early on, and proceeded to design projects to address both the emergency needs of the ERP and the long-term needs of the sector. The policy dialogues in the road subsector were in particular highly beneficial to the outcome of the projects and to the improved sector organization. 4.8 The Bank continues to provide support for the road subsector through the ongoing Highway Sector Investment project and the Village Infrastructure Project, which has a feeder roads component. The Bank, however, does not have an investment project focused on feeder roads, although policy dialogue continues with the GOG under the umbrella of the Rural Transport and Travel program (RTTP) of the Sub-Sahara Africa Transport Policy program (SSATP). The policy dialogue is designed to promote, inter alia, a national strategy for rural transport, improve financing and management of feeder roads, articulate the decentralization program, address gender issues in rural transport, and improve income-generation opportunity of the rural population. 4.9 In the railway subsector, project management and policy dialogue were deficient, but improved toward the end of TRP-Hl. Borrower Performance 4.10 Borrower performance for all three projects is rated as "satisfactory." Both GHA and DFR excelled in implementing the projects and showed strong "ownership" during all stages of the project cycle. However, the client was slow in meeting the counterpart funding requirements for these projects, and needed to improve its contract management processes. 4.11 The Ghana Railway Corporation, and its line ministry, failed to implement the project expeditiously and improve the management of the system. 5. Outstanding Issues and Challenges Ahead 5.1 The Bank has made significant contributions in improving Ghana's transport sector, especially the road subsector. Ghana's road network is better managed and maintained today than it was at the start of the transport rehabilitation program. Notwithstanding these successes, there are still some outstanding issues and challenges ahead. In fact, the Bank's work from here on will be more difficult, as the issues are getting finer and more sophisticated. This section outlines three topics the Bank is likely to be engaged in while providing continuing support to Ghana's transport sector: contract management, decentralization, and road fund. Contract Management 11 5.2 Private contractors currently carry out the majority of road works in Ghana, including maintenance and rehabilitation. This has brought significant development in the domestic construction and consultancy industry and a reduction in unit costs when contracts are competitively let. However, the benefits of contracting out with the private sector have not been fully realized, because of the institutional weaknesses on the part of the public road agencies to manage contracts and reduce the transaction costs embedded in obtaining and supervising contracts. 5.3 The GHA and DFR have not yet reoriented their institutional arrangements to enhance their capacity to manage contracts and to meet the demands of an industry dominated by the private sector. Both agencies are organized under a deficient institutional environment, dominated by the traditional roles of road agencies. Their wage structure and compensation packages are, for example, not competitive enough with the private sector to allow them to attract and retain a skilled labor force to improve their institutional capacity to manage contracts. Many trained engineers and other skilled staff instead opt to go to the private sector, creating an asymmetry of skills between the contracting agencies and the contractor. The contractor staff is more sophisticated and has better knowledge of what needs to be done than the staff in the contracting agencies. This gap in skills between the agencies and the private contractors increases the transaction costs of contracting and hinders the effective management of contracts. 5.4 Using outside consultants and contractors to design and implement civil works incurs ex- ante and ex-post transaction costs. Before the contract is awarded, the contracting agency needs to draw the contract, determine the tasks that need to be done, and develop a mechanism to supervise the works and resolve disputes. After contract award, the transaction costs of contract management include the costs incurred in supervising the private contractor, to make changes and adapt to unforeseen circumstance, and the haggling costs to resolve disputes between the government and the contractor. 5.5 Therefore, the contracting agencies need to develop an efficient institutional arrangement to minimize the transaction costs of contract management. In particular, contracting agencies need a specialized managerial and organizational capacity to draw and supervise the contract and develop a mechanism to make sequential changes when unforeseen contingencies arise,and resolve disputes between the government and the private party. This makes the institutional capacity requirement to carry out the design and implementation of civil works by contract unique, and in many ways, more complex than if these tasks were done in-house. 5.6 The inadequate skilled labor force and deficient incentive structures in GHA and DFR have, however, prevented the emergence of an institutional mechanism to minimize the transaction costs of managing contracts." If these conditions persist, the problems with contract management are unlikely to improve. Therefore, the institutional framework within which the contracting agencies are organized needs a fundamental reorganization. The road agencies need to be corporatized to allow them to develop incentive structures akin to that of the private sector, so that they can attract and retain qualified staff. Parliament has enacted a legislation to provide autonomy to GHA. However, its implementation has not yet taken place and needs to be expedited. 5.7 Having autonomy is a necessary, but not a sufficient, condition to improve contract management. A number of other measures need to be taken concurrently. First, the procurement process in Ghana needs to be streamlined and strengthened. Second, an institutional mechanism has to be developed to ensure transparency and efficiency in adapting and making changes to 11. Rent-seeking and patronage politics are also major problems that complicate the efficient management of contracts. These topics are not treated here, as they are beyond the scope of the audit. 12 variation orders and other unforeseen circumstances. Finally, an improved and institutionalized arbitration mechanism has to be developed to resolve disputes between the government and private parties. Decentralization 5.8 As part of the ongoing political and economic decentralization program in Ghana, the management of feeder roads is slated for decentralization to the district level. Ten districts are already decentralized as part of a pilot scheme. The experience thus far suggests that the capacity at the district level is extremely low, and management and financing of roads is significantly more political at the district level than it is at the central level. 5.9 Decentralization is a political decision governments adopt to delegate power to lower- level governments. If done properly, it can increase democratic governance and allow greater participation by the polity. Decentralization also has some economic advantages. It enhances the use of local knowledge in the decision-making process, and encourages competition and the transfer of "best practices" among jurisdictions. Hence, policy decisions and resource allocations reflect the needs and constraints of the local people. 5.10 The decentralization program in Ghana is still evolving, and many of the intended benefits have yet to materialize, without eroding the achievements made thus far in improving sector institutions. The early indication of the decentralization program in Ghana is that the program (i) is excessively political and orchestrated by a powerful central government ministry, (ii) does not delegate the accountability dimension of decentralization to local constituents, and (iii) suffers from weak organizational capacity at the district level. 5.11 The central government, through the Ministry of Local Government, exerts substantial control on district governments. Many important executive positions and one-third of the seats in the district assemblies are appointed by the President under the recommendation of the Ministry of Local Government. This erodes the benefits of decentralization, as the arrangement makes the appointed officials and members of the district assembly more responsive and accountable to the central government than to their local constituents. Moreover, the appointment and promotion process in the district sector departments is vulnerable to political influences, and does not give adequate attention to technical qualifications. 5.12 In feeder roads, the DFR is required to transfer its technical responsibilities to district governments, but the Ministry of Local Government controls administration and funding issues of district governments. In effect, MOLG contradicts the decentralization process by engaging in what could be regarded as re-centralization. This contradiction between the decentralization of technical responsibilities and the tightly controlled MOLG direction of administration and funding is the core problem in the decentralization process that frustrates institutional development efforts at the district level. 5.13 Notwithstanding the above, the weak organizational capacity at the district level also hampers the effectiveness of a decentralized system of governance. The 110 districts in Ghana that are supposed to assume responsibilities for their own feeder roads suffer from a severe shortage of skilled workers and lack the organizational capacity to carry out with efficiency and economy the maintenance and improvement of feeder roads. Their small size prevents them from exploiting economies of scale, and because of their inability to get qualified engineers, they are not able to adequately plan and manage the maintenance and improvement of the feeder roads. 5.14 There is now a proposal to combine feeder roads with two other departments (Department of Rural Housing and Public Works Department) to create a Works Department at 13 the district level. Another proposal is to combine three to four districts into a "district road area" with a district engineer looking after feeder roads in those districts. Both models of organization have some strengths and weaknesses. The first proposal allows districts to exploit economies of scope in the management of district infrastructure, and maintain their political identity. The problem with this arrangement is the danger that the management of feeder roads will be vulnerable to political and bureaucratic problems, akin to the problems faced when the management of trunk roads was organized under the Ministry of Public Works in the 1970s. 5.15 The second proposal to have "district road area" comes from the current practices of DFR to have field engineers to be responsible for a group of districts. This arrangement has allowed DFR to use its scarce resources more efficiently. However, under a decentralized system, the "district road area" concept conflicts with the political and administrative identity of districts. Under the Constitution, each district is intended to have its own identity and be responsible for its own affairs. Developing district areas, therefore, entails stepping on district prerogatives and may prove politically difficult to achieve. 5.16 The Ghana reality however suggests that it is not possible (or economical) to have a dedicated road department for each district. Therefore, there is a need to reconcile the economic realities with the political constraints. One way to do this is to de-politicize the management of feeder roads by making the "district road areas" autonomous road departments, analogous to what is being done with the GHA. The district road departments then could be governed by a board drawn from officials and representatives of the private sector and users in the respective districts. 5.17 An autonomous district-area road department can address both the political concerns of districts and the economic constraints in the management of feeder roads. The membership in the board provides district officials with a forum to reflect their needs and goals in the programming and management of feeder roads. But the arrangement also minimizes political and bureaucratic interference in the day-to-day management of feeder roads. In addition, the fact that the road department will be an amalgamation of different districts will allow districts to exploit economies of scale in the maintenance and improvement of feeder roads. Moreover, having private sector and user representation in the board will encourage more transparency and accountability, and decisions will reflect more the needs and constraints of the constituency. 5.18 Whatever organizational model is chosen, the setup must be accompanied by a clear functional and administrative classification of the road network to know who is responsible. Concurrent to hammering out this agreement, transparent methods should be developed for allocating the funds between different functional and administrative classes and between regions. In addition, the roles and responsibilities of the regional and district tender boards in procuring contractors need to be clarified and the bidding process aligned with their jurisdictional responsibilities. The bidding process needs to reflect the management of the road network, where the entity responsible for the management of the road should be responsible for the bidding process. Road Fund 5.19 Ghana has had a Road Fund since 1985 when it was first established under the terms of Credit Agreement for the Road Rehabilitation and Maintenance Project (Credit 1610-GH). The Road Fund, however, proved ineffectual, as were many of the so called "first generation" road funds in Africa. The Ghana Road Fund failed to provide a stable flow of funds for maintenance, and the revenues were not adequately collected or appropriately allocated. An audit repor2 on 12. Commercializing of Roads: Annex 4: Extracts from Audit Reports Carried Out on Conventional Road Funds http://www.worldbank.org/htrn/fpd/transport/roads/rd_fnds.htn 14 the Ghana road fund revealed that "(i) certain vehicle examination and licensing fees have been paid to unauthorized accounts; (ii) transfers from certain commercial banks have failed to appear in the bank statement; and (iii) payments made to district treasuries and commercial banks have not been transmitted to the Fund Account". In addition, the audit revealed that control of the toll collection on some of the toll roads was inadequate and susceptible to revenue leakage. 5.20 Many of the problems with the first generation of road fund in Ghana and elsewhere in Africa are attributable to the lack of oversight and accountability; government's discretionary power to divert road funds for other use; deficient revenue generation and collection mechanisms; and lack of an independent secretariat to manage the funds. 5.21 In addition to its internal management problems, the Ghana Road Fund was criticized by the IMF as inconsistent with effective expenditure control, as distorting the allocation of public sector resources, and as incompatible with efficient financial management. The IMF staff proposed abolishing the user tax on fuel by merging it with a new excise duty on fuel, which would indirectly cause the termination of the Road Fund. The Bank responded strongly to this criticism by arguing that the road fund was a means to put roads on a fee-for-service basis, and not to earmark tax revenues for road expenditure. 5.22 The combination of the weaknesses in the first-generation road fund and the IMF challenge led the Bank to promote a reform of the road fund in Ghana.'4 Under the terms of the Highway Sector Investment Credit (C2858-GH), the government agreed to take measures to reform the road fund. The measures included enacting the creation of an autonomous road board, drawn from the government and representatives of the business community and user groups, and establishing an independent secretariat to manage the funds. In addition, the act allowed for improved revenue sources and an annual increment on the fuel levy. 5.23 The reformed road fund went into effect on January 1997. Since then, cost recovery and allocation of the fund for road maintenance have vastly improved. The revenue of the road fund increased from 62 billion cedis in 1996 to 180 billion cedis in 199815. The 1999 projection is for 219 billion cedis. 5.24 The challenge for the road fund from now is to ensure that (i) government's discretionary power continues to be checked; (ii) the allocation of resources is aligned with the decentralizing and liberalizing economy of Ghana; and (ii) the revenues keep up with the increasing needs of the road network. Sustaining the Road Fund 5.25 The passage of an act by Parliament to establish an autonomous Road Fund Board is intended to limit the government's discretionary power to divert funds for other uses, to improve the oversight of the road fund, and to encourage stakeholder participation. When the earlier road fund was managed by the MOF, MORH, and the Accounts General, the executive branch of the government enjoyed substantial discretionary power to divert the funds for other use. The 1997 act, on the other hand, limits executive branch's power by establishing an institutional mechanism that is independent of the executive branch. However, whether the limit on the government's discretionary power is sustainable has yet to be tested. 13. Ghana Road Fund: Discussion with the IMF. World Bank Office Memorandum, October 23, 1986. 14. Elsewhere in Africa, the Bank also encouraged the establishment of the "second generation" road funds under the Road Maintenance Initiative in Africa to redress the problems in the "first generation" road funds and to respond to the challenges of the IMF and some macroeconomists in the Bank. 15 .Ghana Road Fund Secretariat. Financial Statement and Commentary. January 1999. 15 5.26 The paradox in Ghana's political economy is that the government is both strong enough to pass an act limiting its power, and equally strong enough to reverse this act. This is because the party that controls the executive branch of the government also commands a sizeable majority in parliament, making the constitutional checks-and-balances system inadequate to veto the discretionary behavior of the executive. The executive could always guarantee the passage of a bill to either reverse the act or erode some of its statutes. The political process therefore does not guarantee the sustainability of the Road Fund in Ghana. 5.27 The sustainability of the Road Fund in Ghana depends on favorable public opinion and a healthy macroeconomic environment. If there were an adverse macroeconomic shock, the Road Fund would be highly vulnerable from government incursions. In particular, fiscal problems and declining government revenues could tempt the government to find ways to use the Road Fund for other purposes (e.g. social services) that it sees should get priority over road maintenance. In these situations, some ad hoc mechanisms have to be found to ensure that resources are available for road maintenance during macroeconomic shocks. Rationalizing the Allocation ofResources 5.28 The Road Fund in Ghana is allocated to the different Regions and Districts based on predetermined criteria and the work program of the three recipient road agencies (GHA, DFR, DUR), subject to availability of funds and approval by the Board. The allocation does not take into account each region's contribution to the Fund, nor does it explicitly address regional disparities that may have arisen because of past under investment in the region. The current practice is in some ways contrary to a fee-for-service road system. The establishment of a Road Fund is only the first step in managing roads in a decentralized market economy. To truly commercialize roads, resource generation needs to be aligned with resource allocation. If there is a mismatch between the two, an explicit arrangement has to be made to set aside a part of the fund to pay for regions and districts that do not generate enough resources to meet their expenditure requirement. Increasing Road Fund Revenue 5.29 The allocation of resources for road maintenance has significantly increased since the establishment of the reformed Road Fund. However, there is still a large unmet need, and this will increase when the entire road network is brought to a maintainable condition. For example, in 1997 GHA, DFR, and DUR proposed a program for routine and periodic road maintenance totaling US$119 million, but the approved budget was US$82 million (69 % of the proposal). The final releases were US$52 million, representing only 44 % percent of the planned program. Similarly, in 1998 the approved budget only covered 81% of the total maintenance program (although it covered 100% of routine maintenance) of the three road agencies (Table 5.1). Table 5.1 Road Maintenance: Planned vs. Actual Allocation (In US$ Millions) Planned Program Approved Program Actual Releases 1997 119 82 (69%}* 52(44%)* 1998** 120 98(81%)* N/A Source: MORT: Road Subsector Strategy and Investment Programme. 1998 Review Report * As % of planned program ** As of September 1998 16. The Board could presumably sue the government, but Judiciary decisions could also be reversed by an act of parliament. 16 5.30 The foregoing shows that there is a need to find additional means to augment the Road Fund. GOG is planning to expand its road and bridge toll program to increase the revenue base for the maintenance of roads. These and other public-private partnership arrangements should be encouraged. 6. Lessons Learned 6.1 The following lessons emerge from the projects: * The transaction costs of contract management need to be adequately considered when moving to a private-sector dominated institutional arrangement for the design and implementation of civil works. The benefits of contracting out with the private sector are eroded if the public road agencies lack adequate capacity to manage contracts and minimize the transaction costs embedded when the design and implementation of civil works are carried out by contract. * The corporatization of road agencies and the establishment ofa dispute resolution mechanism need to precede (or be done alongside) the institutional change to contract out with the private sector. * The decentralization of feeder road management to the district level needs to be preceded by a clear definition of ownership and a classification offeeder roads, and requires a coherent strategy to devolve power and accountability for resource allocation and generation to the district level. * Road Funds can be an important step in managing roads in a market economy. To complete the commercialization of roads, the Fund should generally allocate funds in proportion with a region's contribution to the Fund, but should also have a mechanism to explicitly address regional disparities and inequity because of unbalanced allocation of resources in the past. * The Second Generation Road Funds are an important improvement over the First Generation Road Fund in improving the oversight responsibility and limiting the government's discretionary power to divert funds for other use. 17 Annex A Basic Data Sheet TRANSPORT REHABILITATION PROJECT (CREDIT 1858-UG) Key Project Data (amounts in US$ million) Appraisal Actual or estimate current estimate Total project costs 222 200 Loan amount 46.9 60 Cofinancing 100.5 85.97 Cancellation - - Date physical components completed Dec. 31, 1993 June 30, 1995 Economic rate of return 61 42 Institutional performance - - Cumulative Estimated and Actual Disbursements FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate (US$ 3.87 27.87 48.60 54.82 58.04 59.65 60.00 0.00 0.00 thousands) Actual (US$ thousands) 2.80 6.72 10.80 23.50 30.93 44.85 52.94 58.75 65.8 Actual as % of estimate 72.4% 24.1% 22.2% 42.9% 53.3% 75.2% 88.2% 97.9% 109.7% Date of final disbursement: April 24,1995 Project Dates Steps in project cycle Date plannedl Date actual Identification NA September 1986 Preparation NA March 1986 Pre-Appraisal November 1986 November 1986 Appraisal February 1987 April 1987 Negotiations October 1987 October 1987 Board presentation November 1987 December 1987 Signing February 1988 February, 1988 Effectiveness May 1988 May 1988 Project completion December 1993 June 1995 Credit closing June 1994 December 1995 Staff Inputs (staff weeks) Stage of project cycle Actual Weeks US$ Through appraisal 78.4 156.2 Appraisal-Board 86.5 203.1 Board-Effectiveness 12.8 34.4 Supervision 169.7 429.1 Completion 0.4 0.6 Total 347.8 823.4 Annex A 18 Mission Data Stage of project No. of Staff days in Specializationed staff Performance rating * Types of cycle Month/year persons field skills represented a/ Impplementation Development problems Status Objectives Through appraisal Feb. 1986 4 15 FA,EC,STS,RE n.a. n.a. May 1986 4 16 SEC,RE,HE,CONS n.a. n.a. Nov 1986 7 19 SEC,SFA, STS, WES n.a. n.a. CONS,RDCONS,RR Jan 1987 4 9 HE,RR, 2-CONS n.a. n.a. Appraisal through Apr. 1987 10 15 SEC,SRE,SFA,STA, n.a. n.a. Board approval Aug.1987 1 10 STS,HE,3-CONS,OA Nov. 1987 1 3 STS n.a. n.a. SEC n.a. n.a. Board approval Mar 1988 2 8 SEC,SFA n.a. n.a. thru' effectiveness Supervision 1 Jun 1988 4 9 SEC,SFA,2-CONS 1 1 AF,PMP Supervision 3 Feb. 1989 1 5 TRS - -- Supervision 4 Mar 1989 3 21 SEC 2 HE 1 1 Supervision 5 Oct. 1989 3 10 SEC, RE, HE 2 1 Supervision 6 Apr.1990 3 9 SEC, HE, TS 2 1 Supervision 7 Oct. 1990 4 10 SEC, TS, 2 HE 2 1 Supervision 8 Jan 1991 5 10 TS,HE,RE,2-CONS 2 1 Supervision 9 Apr 1991 1 7 SEC - -- Supervision 10 May 1991 5 6 DC,TS,HE,RE,PTS 2 1 Supervision 11 Oct. 1991 1 8 RE - - Supervision 12 Dec 1991 1 17 PTS - -- Supervision 13 May 1992 1 8 PTS - - Supervision 14 Jun 1992 3 10 DC,HE,TS 2 1 Supervision 15 Dec 1992 2 12 STS, CONS 2 2 PP Supervision 16 Feb 1993 1 7 RE - -- Supervision 17 Jun 1993 3 7 STS,CONS,YP 2 2 AF,PP Supervision 18 Nov. 1993 1 7 STS 2 2 AF,PP Supervision 19 Feb 1994 1 5 STS 2 1 AF Supervision 20 Jul. 1994 1 6 STS S S Supervision 21 Oct. 1994 2 10 STE, MUNE S S PP Supervision 22 Mar 1995 2 5 STE, MUNE S S Completion a/ Key to Specialization FA= Financial Analyst DC Division Chief STA Senior Training Advisor EC = Economist STS = Senior Transport Specialist STS = Principal Transport Specialist RE = Railways Engineer SEC Senior Economist TRS = Training Specialist HE= Highway Engineer SHE = Senior Highway Engineer CONS Consultant RR= Resident Rep. SFA Senior Financial Analyst STE = Senior Transport Engineer OA = Operations Assistant WES Workshop Equipment Specialist MUNE = Municipal Engineer TS = Transport Specialist SRE Senior Railway Engineer RDCONS Road Safety Consultant b/ Probem free; 2 - Moderate problems; S-Satisfactory l= Problem Free 2 = Moderate problems 3 Major Problems HS = Highly Satisfactory S = Satisfactory U Unsatisfactory c/ Key to Problems CLC = Compliance with Legal Cov. PMP Project Management Perf AF = Availability of Funds PP = Procurement Progress TP Training Progress TAP = Technical Asst. Progress SP S Studies Progress EA Environmental Aspects FP = Financial Performance 19 Annex A Basic Data Sheet SECOND TRANSPORT REHABILITATION PROJECT (CREDIT 2192-GII) Key Project Data (amounts in US$ million) Appraisal Actual or estimate Current estimate Total project costs 230 223 Loan amount 96 97.98 Cofinancing 65.99 96.87 Cancellation - 1.2 Date physical components completed March 31, 1996 June 30, 1997 Economic rate of retum 38 16 Institutional performance - - Cumulative Estimated and Actual Disbursements FY91 FY92 FY93 FY94 FY95 FY96 FY98 FY99 Appraisal estimate (USS 2.88 14.40 29.76 56.64 83.53 96.00 0.00 0.00 thousands) Actual (US$ thousands) 0.0 4.77 12.55 30.33 56.14 80.45 91.99 97.98 Actual as % of estimate 0% 33.1% 42.2% 53.5% 67.2% 83.8% 95.8% 102.1% Date of final disbursement May 14, 1998 Project Dates Steps in project cycle Date plannedl Date actual Identification Aprril 22, 1988 Preparation October 15, 1998 Pre-Appraisal October 1989 October 10, 1989 Appraisal March 1990 April 18, 1990 Negotiations October 9, 1990 Board presentation August 1990 December 13, 1990 Signing December 21, 1990 Effectiveness March 1991 June 18, 1991 Project completion March 31, 1996 June 30, 1997 Credit closing September 30, 1996 December 31, 1997 Staff Inputs (staff weeks) Stage of project cycle Actual Weeks US$ Through appraisal 56.1 145.2 Appraisal-Board 106.1 261.0 Board-Effectiveness 19.4 47.1 Supervision 125.6 321.1 Completion 9.1 16.7 Total 316.3 791.1 20 Mission Data Stage of project No. of Staff days in Specializationed staff Performance rating Types of cycle Month/year persons field skills represented Implementation Development problems Status Objectives Through appraisal Oct-88 1 5 SEC Mar-89 3 5 SEC, Cons Jun-89 3 12 SEC, SFA, Cons Oct-89 5 9 SEC, SFA, RE, OA, Cons Appraisal through Apr-90 8 12 SEC,SFA,TS,HE,RE Board approval TrS,OA, Cons. Board approval Feb-91 3 6 TS,HE, RE 1 1 thru' effectiveness Supervision 1 July 91 4 4 TS, PTS, HE, RE 1 1 ARPP Sept-92 N/A 2 1 ARPP Sept-92 N/A 2 1 Supervision 3 Oct-91 1 4 TS N/A N/A Partial Spn Supervision 4 May-92 1 3 PTS N/A N/A Partial Spn Supervision 5 July-92 5 5 DC, PTS, TS, HE, 1 1 Cons. ARPP Sept.-92 N/A 2 1 Supervision 6 Dec-92 2 3 STS,HE 2 1 No spn found Supervision 7 Feb-93 1 4 RE N/A N/A Partial Spn Supervision 8 June-93 4 14 STS,2 CONS, RE 2 2 AF ARPP Aug-93 N/A 2 1 AF Supervision 9 Nov-93 2 12 STS,RE 2 1 AF Supervision 10 Mar-94 2 5 STS,CONS 2 1 AF Supervision 11 July-94 4 18 STS,RE,ME, CONS S S ARPP Aug-94 N/A S S Supervision 12 Oct-94 2 5 STE,ME Partial Spn Supervision 13 Mar-95 2 STE, ME S S ARPP June-95 N/A Supervision 14 Mar-96 4 12 SIE,EC,IE,HE S S Supervision 15 Sept-96 8 9 SIE,TEC,EC,IE,FA S S SRS,PE,SPS Supervision 16 Feb-97 4 5 PE,TEC,IE N/A Partial Spn Supervision 17 June-97 4 5 PE,STEC,IE,PO S S a! Key to Specialization SEC = Senior Economist SFA = Senior Financial Analyst RE = Railway Engineer HE = Highway Engineer OA = Operations Assistant Cons. = Consultant PTS = Principal Transport TS = Transport Specialist STS = Senior Transport Specialist pecialist ME = Mechanical Engineer TrS = Training Specialist EC = Economist IE = Infrastructure Engineer TEC = Transport Economist FA = Financial Analyst SIE = Senior Infrastructure SPS = Sr. Ports Specialist PO = Project Officer Engineer SRS = Senior Railway DC = Division Chief STEC = Sr. Transport Specialist Economist b/ Key to Status 1 = Problem Free 2 = Moderate problems 3 = Major Problems HS = Highly Satisfactory S = Satisfactory U = Unsatisfactory c/ Key to Problems AF = Availability of Funds 21 Annex A Basic Data Sheet NATIONAL FEEDER ROADS REHABILITATION AND MAINTENANCE PROJECT (CREDIT 2319-GH) Key Project Data (amounts in US$ million) Appraisal Actual or estimate Current estimate Total project costs 106 102.5 Loan amount 55 54.5 Cofinancing 42.6 42.4 Cancellation Dec. 31, 1996 Dec. 31, 1997 Date physical components completed Dec. 31, 1996 Dec. 31, 1997 Economic rate of return 36 54 Institutional performance - - Cumulative Estimated and Actual Disbursements FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 Appraisal estimate (US$ 0.5 12.0 26.9 41.2 51.6 55.0 thousands) Actual (US$ thousands) 0.0 2.6 7.2 13.5 30.2 45.2 54.8 56.3 Actual as % of estimate 0% 21.7% 26.8% 32.8% 58.5% 82.2% 99.6% 102.3%* Date of final disbursement: November 16, 1998 *Note: SDR Appraisal Estimate equaled SDR 40.5 million, however only SDR 39.3 million were disbursed, hence SDR 1.2 million are undisbursed and have been canceled. Project Dates Steps in project cycle Date plannedl Date actual Identification January 31, 1990 Preparation November 5, 1990 Pre-Appraisal January 1991 January 15, 1991 Appraisal June 1991 June 14, 1991 Negotiations October 1991 October 28, 1991 Board presentation January 1992 December 19, 1991 Signing February 7, 1992 Effectiveness April 1992 July 22, 1992 Project completion December 31, 1996 December 31, 1997 Credit closing June 30, 1997 June 30, 1998 Staff Inputs (staff weeks) Stage of project cycle Actual Weeks US$ Through appraisal 67.7 101.8 Appraisal-Board 24.7 54.4 Board-Effectiveness 11.8 23.5 Supervision 83.3 195.3 Completion 6 17.0 Total 193.5 392.0 Mission Data 22 Annex A Performance rating1 Stage of project No. of Staff days in Specializationed staff Implementation Development Types of cycle Month/year persons field skills represented status Objectivest problems Through appraisal 06/90 4 PTS, TE, HE, Cons - - -- 09/90 1 21 Cons. - -- -- 10/90 3 3 PTS, TE, HE - -- -- 01/91 4 10 TE, HE, 2 Cons. -- -- -- Appraisal through 06/91 5 8 TS,HE,PS,LGS,TE, -- - -- Board approval Board approval 02/92 3 4 TS,HE, PO NR NR Initial summary thru' effectiveness 06/92 3 5 TS, HE, PO 1 1 Supervision 1 12/92 1 8 TS 1 1 -- Supervision 2 06193 1 9 STS 2 1 Counterpart Fund ARPP 08/93 -- -- -- 2 1 Counterpart Fund Supervision 3 11/93 1 20 STS 2 1 Counterpart Fund Supervision 4 03/94 1 8 STS 2 1 Counterpart Fund Supervision 5 07/94 1 7 STS S S Supervision 6 03/95 1 14 SME U S Procurement ARPP 06/95 -- -- -- U S Procurment Supervision 7 12/95 3 11 SME, IE, labor-based U S Procurement Const.Spec. Supervision 8 2/96 2 3 EC, PO - -- Partial SPN Supervision 9 6/96 2 18 SME, IE U S Procurement Mid-Term Review Supervision 10 02/97 3 13 PE, IE, Decntr. Spec. S S Financial Covenants Supervision 11 12/97 2 4 PE, IE S S Financial covenants Supervision 12 6/98 2 4 PE, IE S S Financial covenants Completion 11/98 3 4 PE, IE, EC S S Financial covenants a/ Key to Specialization PTS = Principal Transport TE = Transport Engineer HE = Highway Engineer Specialist PE = Principal Engineer Cons.= Consultant PS = Procurement Specialist LGS = Local Government Spec. TS = Transport Spec. STS=Senior Trans. Spec SIE = Sr. Infra. Engineer IE = Infra. Engineer ME = Sr. Mun. Eng. C = Economist PE = Princ. Engineer PO = Project Officer b/ Key to Performance Rating 1 = Problem Free 2 = Moderate problems 3 = Major Problems HS Highly Satisfactory S = Satisfactory U = Unsatisfactory I - Problem free; 2 - Moderate problems; S-Satisfactory