Tanzania - Urgent Roads Rehabilitation Support Program - Phase I

Report No. PID9938 Project Name Tanzania-Urgent Roads Rehabilitation (@) Support Program I Region Africa Regional Office Sector Other Transportation Project ID TZPE55120 Implementing Agency Contact Person: Mr. 0. Elleevset, Executive Director, TANROADS Tel: 255-22-2-2150101 Fax: 255-22-2-150022 Email: tanroadshl@cats-net.com Environment Category B Date PID Prepared March 21, 2002 Auth Appr/Negs Date October 10, 2003 Bank Approval Date July 19, 2004 1. Country and Sector Background The Bank has carried out continuous sector discussions and consultations with MOW, the Ministry of Transport and Communications (MCT), the President Office, Regional Administration and Local Government (PORALG) and other sector agencies during the implementation of IRP-I and IRP-II (Cr. 2598-TA). The main sector issues that have emerged include a need to address the following issues: (i) urgent need to restore deteriorated main and regional road networks;(ii) weaknesses in existing institutional capacity for managing the road network; (iii) capacity building of recently established road agency, TANROADS;(iv) development of civil works market and increase in the involvement of private domestic [construction] industry in designing, construction and maintenance of roads;(v) preparation of national roads inventory for planning and managing the road networks (including feeder road network);(vi) assurance of sustainable road maintenance and road program financing; (vii) enhancement of environmental and social impact management and monitoring in road sector; and(viii) need to address poverty reduction and other social objectives.(i) Need to Restore Road NetworksIn recent years the level of financing for maintenance works has been improved, but not to the required level. The cost of fully maintaining the roads currently under the responsibility of MOW has been estimated at about US$65 million/year. The present Road Fund collections for the Mainland, estimated at about US$44 million/year, are well below the required yearly investment, resulting in a backlog of maintenance/ rehabilitation works estimated to cost about US$650 million. The majority of these works are for rehabilitation rather than periodic or routine maintenance.(ii) and (iii) Limitations in Institutional CapacityUnder IRP-II, institutional capacity building were provided to CODAP, which was responsible for all donor coordination related to the IRP. However, CODAP was constrained by a shortage of qualified personnel to carry out its mandate. Given the lack of qualified manpower that can be recruited permanently into the Government establishment, and the volume of work entailed in managing both ongoing  and proposed projects, CODAP has recruited Contract Management, Finance and Accounting, and Project Management specialists for technical assistance under IRP-II. These immediate resource requirements have strengthen CODAP's management capacity. CODAP has been recently absorbed by TANROADS to support the Program implementation until TANROADS becomes fully operational. Zanzibar has also established a CODAP office which is being supported initially by IRP-II in the basic skills of financing and technical management. However, to achieve sustainability and expose staff to actual operations, the support needs to be continued over a longer period. A major restructuring effort has also been initiated in the road sector leading to the creation of TANROADS as a semi-autonomous Road Agency in July 2000. TANROADS has taken over responsibility for road maintenance management from MOW, and is expected to improve Government's road project management capabilities and thus create the conditions for effective implementation of the IRP-II and URRSP. TANROADS has established a dedicated unit on September 7, 2001, under the management of its chief executive. The unit is in charge of IDA and other specific donors funded projects.(iv) Increasing Involvement of the Private SectorThrough IRP-I and IRP-II, the condition of roads in Tanzania has improved to some extent. Capacity building of private contractors has been carried out, and more than 300 contractors have been trained to contribute to the road sector projects. GOT intends to further strengthen the private sector capacity and to ensure a stable construction market for those contractors. The approach taken by GOT is to rely primarily on the private sector for the actual execution of road works, while devoting a much greater emphasis and capacity within Government for planning and management, and within TANROADS for overall supervision of the road program implementation. In this connection, GOT has identified the need to define policies for: (i) developing and expanding the domestic construction sector to progressively take over a higher proportion of the road construction and maintenance works; and (ii) physical implementation of routine and periodic maintenance of the existing network. While Government policy is to encourage private sector participation, the role of overall road management will remain in MOW until TANROADS has become fully operational. This transition of management and implementation roles will be further clarified in the National Transport Sector Strategic Plan.In addition, a strategy needs to be elaborated for the development of public sector capacity at the regional level for the management and execution of maintenance of feeder roads. In this respect, GOT has recently embarked on a Local Government Reform Program (LGRP) with donor support to strengthen the capacity of local government to deliver public services, including roads, and to strengthen their financial capacity. (v) The Need to Build Up Road InventoryCurrently, Tanzania has no systematic road inventory data bank. Road inventories are done on a section by section basis and by observations carried out by regional MOW's engineers. A systematic road condition definition and survey are imperative to utilize scarce resources efficiently, and to apply appropriate interventions in a timely manner to avoid further deterioration of the roads. (vi) Ensuring Adequate and Sustainable Financing for Road MaintenanceThe Government recognizes that road maintenance is critical for the sustainability of the sector and has accorded high priority to maintenance in its proposed sector strategy. Much of the road maintenance undertaken to date has been in response to emergency situations, at the expense of planned road maintenance. The Government recognizes that the need for road maintenance is directly -2 -  related to the extent of road damage, and intends to minimize damage by the introduction and enforcement of appropriate axle-load and vehicle weight regulations. However, even with adequate axle load control, road development and maintenance will represent substantial costs to the economy and it is essential that these costs are financed in an efficient, equitable and sustainable manner. According to the recently updated Study of Tracking of the Roads Fund (April 2001) prepared for the Ministry of Finance by Louis Berger consultants, estimating the total road maintenance needs of Tanzania assumes that the existing network of 80,000 km meets the needs of the economy and that all roads require only routine and period maintenance. The study's estimate of the total annual budget required to meet the road maintenance needs in Tanzania is as follows: Paved Roads (under MOW): US$ million Routine maintenance on the whole network 4.35 Periodic maintenance on 1/10th of the network 16.58Major Unpaved Roads (under MOW): Routine maintenance on the whole network 21.60 Periodic maintenance on 1/20th of the network 30.86District and Feeder Roads (under PORALG): Routine maintenance of the whole network 17.50 TOTAL 90.89/yearA Road Fund for mainland Tanzania has been created to finance, among other things, the backlogged road maintenance works. The 1985 Roads Tolls Act created a toll payable either upon vehicles passing through a point along a public road or upon the purchase of fuel. Until the approval of an amendment in December 1998 which specified that transit fees, heavy vehicle licenses, vehicle overloading fees or any other source as determined by Parliament would also constitute revenue for the Road Fund, the fuel levy was the only source of revenue for the fund. (a) Fuel Levy. The rate of the fuel levy increased from 7 Tanzania Shillings (TShs) per liter in 1991 to 80 TShs in 2000, this rate having been set up in July 2000. In US$ terms, the rate varied between 2 cents in early 1992 and 10.6 cents in late 1998. Since this peak, the rate did not follow the depreciation of the TSh, and now represents 8.8 cents.(b) Transit Fees. Transit fees are paid by foreign vehicles entering Tanzania. The amount collected in FY1998/99 was TShs 800 million. (c) Heavy Vehicle License Fees. The license fee is collected by the Central Transport Licensing Authority, an agency presently under MCT. The amount collected in FY1998/99 was TShs 604 million.(d) Vehicle Overloading Fees. Vehicle overloading fees are fines to be paid by the owners of transport vehicles which exceed the maximum total weight limit of 51 tons or which have axles which exceed the limit of 10 tons, or 8 tons for the steering axle, with the aim of limiting the damage caused by too heavy axles on the road pavements. This control is the responsibility of the Weigh Bridge Units under the TANROADS Regional Managers. The amount collected in FY1998/99 was TShs 658 million. Totals released and utilized are shown below; for details see Annex 1, Attachment 1, Table 6.The Road Fund Board, which will also serve as the Ministerial Advisory Board for TANROADS, consists of a Chairman from the private sector, three Permanent Secretaries of the Ministries responsible for roads, finance and local government, one technical officer, and four private sector road user representatives. Ninety percent of the Road Fund is ring-fenced exclusively for road maintenance; not more than ten percent is to be used for road rehabilitation and upgrading for local costs of compensation and counterpart funds for projects financed by donors. To date, GOT has assured budgetary resources for roads development and maintenance through the Road Fund and the general Government revenue. However, the impact of the expanding road development program on these limited resources still needs to be carefully -3 -  monitored in order to allow the consideration of alternative sources of finance (Annex 1, Attachment 1, Tables 1 to 5).Recently completed "Public Expenditure Review of Trunk and Regional Roads "by COWI and PriceWaterHouseCoopers, in April 2001 indicated that if the road network is to be maintained, the GOT budged for roads cover only 40-49w for recurrent expenditure and about 60t of required development expenditure.In Zanzibar, a Road Fund was established in 1995 to provide a dedicated source of funding for road upkeep and maintenance activities, and a fuel levy was introduced to provide revenue for the Fund. However, the revenue generated from the fuel levy has not been allocated to the Road Fund and road maintenance in Zanzibar suffers from severe under-funding, resulting in most of the primary roads being in very poor condition. The neglect of the roads in Zanzibar is due mainly to the absence of institutional arrangements based on specific legislation or mandatory regulations that would establish and conduct a Road Fund capable of ensuring an adequate flow of funds dedicated directly to long-term road maintenance. The updated ZIROP study for Zanzibar suggested draft legislation for both the Zanzibar Roads Implementation Office and Road Act for exclusive use of Road Fund for management and development of roads.(vii) Environmental and Social Impact Management and MonitoringExperience in the transport sector shows that environment and social issues are integral components of transport projects. Recently, MCT developed National Environmental Assessment Procedures and Guidelines to meet the challenge posed by environmental and social issues in transport projects. Sector guidelines are being further elaborated to address specific environmental and social issues that could result from road development projects. (viii) Need to Address Poverty Reduction and other Social ObjectivesGOT's proposed National Transport Sector Strategic Plan and Transportation Infrastructure Master Plan also incorporate the crucial linkage with overall social sector strategy, especially in addressing the social aspects of road development and maintenance including actions taken to address poverty. These actions are particularly important, since the link between community isolation and the incidence of poverty was recognized. The IMF financed Poverty Reduction and Growth Facility focuses on this issue, along with the Local Government Reform Program (LGRP). The URRSP will take into consideration the outcomes of those programs. The Government has initiated action to address these issues, as detailed in its Letter of Development Policy of [------- , and has prepared a Poverty Reduction Strategy Paper (PRSP), which outlines linkage between poverty eradication and adequate transport. In addition, GOT has also prepared a Public Sector Expenditure Report for Trunk and Regional Roads, outlining its macro-policy and strategy, as well as associated sector strategies, and a 10-Year Road Sector Development Program which will further firm up Government's development policy and create an action plan for poverty alleviation. Improvement of the regional road network under HIPC. A critical constraint to poverty reduction strategy is the inability to move agricultural products in rural Tanzania due to the poor condition of rural roads. The situation is bad because it either limits access to markets or raises the costs of access to products. Improvement in the rural/feeder road network in this context therefore entails establishing links between villages and markets to enhance commercialization and access to input, as well as intra-community links, for which involvement of the rural communities in the identification of needs and maintenance of the network is key for sustainability. Support from the districts should be essentially technical. It is expected that after rehabilitation of the - 4 -  selected rural/feeder roads (see Section A.1), transportation costs, which constitute a large share of the cost of agricultural marketing in Tanzania, will be reduced considerably. Improved road services would (i) raise the producer price of export crops; (ii) reduce the farm-level costs of fertilizer and other inputs; and (iii) reduce spatial marketing margins in good marketing. 2. Objectives The objectives of URRSP, Phase-1 (the Project) are to remove major constraints to transport services on the country's road network, to reduce poverty by promoting economic activities, and to strengthen the implementation and management capacity of TANROADS. The Project comprises (i) feasibility studies and detailed designs of trunk and regional roads; (ii) feasibility study of national feeder roads; (iii) rehabilitation/upgrading of a 115 km trunk road section of the Central Corridor; (iv) road condition survey and road inventory; and (v) technical assistance for road sector management capacity building. The project also includes HIV/AIDS awareness components to minimize/prevent possible adverse effects of the project. 3. Rationale for Bank's Involvement An important source of value added by Bank is its comparative worldwide experience in the preparation and implementation of major capital expenditure programs. This has been acknowledged by the donor community which has recognized the Bank's leadership role during the preparation of URRSP. Bank involvement and experience with developing road management and maintenance systems in Ethiopia, Ghana, Zambia, and Uganda, will be beneficial to efforts aimed at developing road network improvement and administrative improvement in Tanzania. Another source of advantage is the Bank's experience in road sector reform in the region gained over the last 10 years through he steering of he Road Maintenance/Management Initiative (RMI). This has provided the Bank with the good will of the beneficiaries and donors in creating a cooperative framework where sector reform has gradually been shaped, implemented and monitored. It will also help ensure further institutional and financial sustainability of roads management by helping to define and implement efficient, effective and sustainable policy frameworks, institutional arrangements, and financial management systems and financing mechanisms tested and endorsed in RMI practices. The APL instrument would also provide greater flexibility in adopting project design and financing to client needs as they evolve. The Bank's participation thus provides better continuity for the implementation of the long-term national program. The Bank will also help Tanzania to incorporate new concerns in its transport sector, particularly regarding poverty and HIV/AIDS issues. 4. Description Rehabilitation/reconstruction of Tanzam Highway Sections (167 Km) Supervision of Tanzam Highway Sections (167 Km) HIV/AIDS awareness components through project implementation Regional roads study and feasibility study of about 300km Road condition survey and road inventory, and baseline VOC study with - 5 -  socio-economic poverty indicators Technical Assistance for TANROADS and MCT Rehabilitation (mechnical and electricial work) of five ferries Supervision of ferry rehabilitation Fesibility Studies and Detailed Design (PPF or from IRP-II) 5. Financing Total ( US$m) BORROWER $12.48 IBRD IDA $144.84 Total Project Cost $157.32 6. Implementation 1. Institutional Arrangements and Responsibilities. Under the IRP-II, CODAP/MOW has shown modest ability to coordinate and execute projects, but it has also shown its weakness in contract management and financial monitoring resulting in substantial delay of some of the project components. Recognizing the limitations of CODAP/MOW's capacity to manage the expanded road program under IRP-II, GOT has decided to establish a semi-autonomous Road Agency. The establishment of the Road Agency is aimed at fostering improved managerial capability through performance-based management and the contracting-out of services, which can be more efficiently provided by the private sector. The Road Agency is mandated to be in charge of (i) road network development and management; (ii) planning and management of network maintenance; and (iii) overseeing the implementation of the Program, with emphasis on technical and financial monitoring and performance evaluation. The Chief Executive was appointed in February 2000. The framework document pursuant to the Executive Agencies Act, 1997, which defines the functions, aims, objectives, authority, performance standards and any other particulars of the agency, was approved by the Minister of Works on June 5, 2000. Having recruited further key staff, TANROADS was officially established on July 1, 2000, as a semi-autonomous road agency responsible for the whole road network management (including road safety, ferries and axle road control), except formulation of sector policy and strategies. Maintenance works for the trunk and regional road network are being carried out under the management of TANROADS; district and feeder roads are maintained by the district administration. Road sector policy, technical and economic regulatory functions, road sector planning, environmental protection, and budget programming and execution will be under the overall responsibility of MOW, and will be coordinated with the MCT, PORALG, as well as with the Ministries of Finance, Agriculture, and the Department of Environment as appropriate. Donor coordination remains within MOW. The Ministry of Communications and Transport (MCT) continues to exercise overall responsibility for transport policy affecting all modes, as well as telecommunications. It maintains functions relating to the formulation and enforcement of transport regulations. The role of Land Transport Commission will be further elaborated and concretized in collaboration with the Presidential Parastatal Sector Reform Commission (PPSRC). TANROADS has established a dedicated unit who will handle preparation of URRSP, and implement all components of the ongoing IRP-II - 6 -  Project.Government also prepared a framework agreement in 1996, which separates the responsibilities for management of various sections of the road network. Regional rural roads are to be administered by regional administrations and communities under the leadership of the Ministry of Regional Administration and Local Government, while the main classified roads network remains under MOW. These arrangements are to be further clarified under the ongoing LGRP and other related studies.2. Implementation Period for URRSP Phase 1. The implementation period for Phase 1 will be about five years, and about six years for all Phases of the URRSP Program. Pre-contract activities will be carried out with the assistance of consultants recruited with financing provided from the reallocation of proceeds of the IRP-II Credit. Award of contracts for the construction of the various roads included in Phase 1 and subsequent Phases, following international competitive bidding, will be made as and when the detailed engineering designs and environmental and social action plans, bid documents and contractor pre-qualification reports have been completed. 3. Procurement and Supervision. The Project will, in the transitional period, be coordinated and implemented by a dedicated professional unit established capable of technical and financial managment of projects financed by Donors and GOT. Civil works under the project will be awarded to qualified contractors through international or national competitive bidding as appropriate in accordance with IDA Guidelines for Procurement under IBRD Loans and IDA Credits, January 1995, revised January and August 1996, September 1997 and January 1999 and May 2000. All associated supervision, as well as technical advisory consultant services will be awarded to qualifying consulting firms through selection from shortlist of international or national reputable and qualified firms in accordance with IDA Guidelines for the Selection and Employment of Consultants by World Bank Borrowers, January 1997, revised September 1997 and January 1999. 4. Donor coordination. Donor coordination function has been established in MOW directly under the Permanent Secretary of MOW. MOW/TANROADS has the functions of: (i) coordinating the planning and implementation of the Program and the inputs and requirements of the Program; (ii) monitoring and evaluation of the Program's performance; (iii) executing quarterly and annual technical and financial performance evaluation and financial audits; (iv) preparing any required studies and progress reports for quarterly and annual review meetings with stakeholders and donor community; (v) annual reviews with proposals for any required Program structural adjustments, and updating of the Program document including the pluri-annual expenditure and financing plan; and (vi) disseminating plans and progress information to the public and stakeholders; as well as (vii) organizing donor consultative meetings. To further strengthen program management and monitoring, as well as donor coordination, CODAP has procured, as a part of IDA supported TA, additional expertise for contract management and financial management. Since TANROADS has recently of establishment a dedicated professional unit, composed of some experienced specialists, all the functions of CODAP have been transferred to the dedicated unit.5. Financial Management and Auditing (see Annexl, Attachment 5)(i) TANROADS: A dedicated unit established within TANROADS will be in charge of specific projects including IDA financed projects. However, the need for strengthening the financial management capacity is aggravated by the extra responsibilities to be taken on for the new project and the current lack of segregation of financial management responsibilities. The IDA/SDP Unit will take full responsibility for project financial management and reporting in -7 -  collaboration with and support of the Finance and Administration Division (FAD). Currently a significant proportion of the funding for the roads network is received from donors and TANROADS has an obligation to demonstrate at all times to the donors that their funds are being effectively managed and fully accounted. The following summarizes the present status of the financial management system:n Computerized Financial Management System: The specifications of a computer-based financial management system, EPICOR (previously known as Platinum ERA) were developed to be implemented throughout the organization, including the 4 zone offices and 21 regional offices. The computer package had been procured and the hardware installed in two zones consisting of 9 regions. Accounting staff at HQ and these regions have received training in the application of the Computer system and Accounting Procedures Manual The target date for full implementation in the remaining regions is September, 30, 2002. Full implementation will be preceded by installation and training of the staff.n Accounting Procedures Manual (April 2000 version): This manual has been developed with the objective of replacing the current non-commercial and technically limited government accounting systems to a commercial style financial management and accounting system based on the accrual concept of accounting. However, he mission has observed the urgent need for the manual to be updated in the light of practical experience and emerging requirements since the establishment of TANROADS. The manual had been developed on a generic basis and does not provide sufficient guidance in particular for the staff in the remote regionsn Internal Control system: Plans have been drafted for the introduction of a robust system of internal control with specific emphasis on financial control and improved project management. This should go hand-in-hand with the update of the Accounting Procedures Manual.n Banking: Arrangements have been made for opening of bank accounts supported by satellite nation-wide computerized banking facilities for zonal and regional offices at CRDB. (except for one region banking at NBC).n Assets: A preliminary reconciliation of asset inventory from regional offices has been undertaken, along with determination of the remaining useful lives of fixed assets for inclusion in the accounting records.n Internal Audit: An Internal Audit Unit has been established at HQ with independent dual reporting to the CEO. This unit will concentrate on corporate governance and testing compliance with financial regulations.n External Audit: This audit is carried out by the Controller and Auditor General (CAG)or such other person registered as an auditor under the Auditors and Accountants Act, 1972 and approved by the CAG. The audited annual financial statements for the first accounting period ended 30 June 2001 together with the auditors' management letter highlights a number of issues related to weaknesses in the financial management system as well as poor supervision of the roads by both the Consultants and the Client.n Staff capacity: Experience gained over the past financial year and weaknesses identified in the management letter of the Controller and Auditor General points to the need to provide continuous training to staff in the regions in order to enhance their accounting capacity.n Financial Reporting: The Executives Agencies Act states that such institutions should prepare its financial statements in accordance with Generally Accepted Accounting Practice (which inter alia includes the application of the accrual basis of recognition of transactions). Although the financial statements of TANROADS for the year ending 30 June 2001 had originally been prepared on this basis, the management had subsequently been instructed by the Controller & Auditor - 8 -  General to recognise some of the revenues on the cash basis in order to reconcile some numbers with those in Ministries. This approach is highly undesirable as it impedes on the fairness of the financial statements because the basis of preparation is a mix and partial application of both the cash and accrual bases. In addition, this amounts to management having to disregard the compliance with a law of the land. This problem could very easily be overcome by preparing the financial statements on the accrual basis and by way of footnote disclosure a reconciliation can be provided to the actual amounts received/paid in cash for the period.Managerial reports are produced in a fragmented manner. In this regard it has observed that the preparation of the quarterly Financial Report is not integrated with the process of preparing the quarterly Status Report for the Performance of the Road Sector. This would ensure that the quality of information is credible and that the preparation of the latter report is based on the same financial data prepared on the accrual basis and which is being used for financial management purposes.(ii) ROAD FUND BOARD (RFB): Good progress have been made by management of the RFB to ensure that all collected funds is being transferred into its account. For this purpose monthly reports of moneys due and collected, together with copies of the relevant bank statements are obtained from the Tanzania Revenue Authority (TRA) in order to follow up on the subsequent transfer of these amounts into its bank account. The mission took note that the exactly the same issues that arose with the preparation of the financial statements of TANROADS (mentioned above) occurred with the finalization of the financial statements of RFB.A proposed action plan is furnished in Annex 1 which will address the above-mentioned emerging financial management issues by December 2002.6. Disbursement of IDA Funds. Disbursements from IDA would be initially be made on the basis of incurred eligible expenditures (transaction based disbursements). IDA would then make advance disbursement from the proceeds of the Credit by depositing into a Borrower-operated Special Account to expedite Program implementation. The advance to a Special Account would be used by the Borrower to finance IDA's share of Program expenditures under the proposed Credit. Another acceptable method of withdrawing funds from the Credit is the direct payment method, involving direct payments from the Credit to a third party for works, goods and services upon the Borrower's request. Payments may also be made to a commercial bank for expenditures against IDA special commitments covering a commercial bank's Letter of Credit. IDA's Disbursement Letter stipulates a minimum application value for direct payment and special commitment procedures. Upon credit effectiveness, TANROADS would be required to submit a withdrawal application for an initial deposit to the Special Account, drawn from the IDA Credit, in an amount to be agreed to in the Development Credit Agreement. Replenishment of funds from IDA to the Special Account will be made upon evidence of satisfactory utilization of the advance, reflected in SOEs and/or on full documentation for payments above SOE thresholds. Replenishment applications would be required to be submitted regularly on a monthly basis. If ineligible expenditures are found to have been made from the Special Account, the Borrower will be obligated to refund the same. If the Special Account remains inactive for more than six months, the Borrower may be requested to refund to IDA amounts advanced to the Special Account.Strengthening its accounting and financial management capacity will enable TANROADS to establish effective financial management and accounting systems, which should eventually facilitate the introduction of Financial Monitoring -9-  Report (FMR)-based disbursements in periods subsequent to project effectiveness. The adoption of this approach will enable the project to move away from time-consuming transaction based disbursement (voucher-by-voucher) methods to quarterly report based disbursements to the Project's Special Account, based on the FMRs. Report-based disbursements offers more flexibility.7. Monitoring and Evaluation. Initially Finance and Administration Division (FAD) within TANROADS will be responsible for overseeing the implementation of the Project. TANROADS will regularly monitor and report on progress made in accordance with the following framework: (i) a monitoring and evaluation system will be developed under the Project; (ii) semi-annual progress reports will be prepared on the basis of a project implementation plan; and (iii) a completion report would be submitted by the Government to IDA within six months of Credit closing. Annual reviews of project implementation will be carried out before the beginning of each fiscal year to facilitate annual program budgeting; and a mid-term review would be carried out 30 months after Credit effectiveness. 7. Sustainability The critical factor required for sustainability of Program and Project benefits is continued Government commitment. In this regard, the Government has demonstrated its commitment at the highest level by according the road sector the highest priority in its economic development, and has taken a number of actions to confirm this commitment along with necessary institutional strengthening. The President's declaration made on May 31, 2000 at the Road Stakeholders' Conference in Dar es Salaam, highlighting the need for roads as a key instrument in the development of the country, symbolizes the straightforward commitment of the GOT. MCT has taken action to expedite preparation of the National Transport Sector Strategic Plan to further clarify the focus of institutional strengthening. MCT is also now preparing a Transport Infrastructure Master Plan, while MOW is preparing a 10-year Road Sector Development Program, of which the URRP is a priority part. The annual Road Sector Public Expenditure Study indicates the use of funds for each sector, and highlights where there may be shortfalls in some sectors. These actions are expected to contribute to ensuring the availability of the local counterpart financial resources needed to complement IDA and other donor financing of the Program. The establishment of TANROADS further enhances GOT's ability to effectively manage the URRSP implementation. 8. Lessons learned from past operations in the country/sector Experience from past projects indicates that the main risk has been the limited capacity of the implementation agency, in particular, the ability of the agency to effectively address problems related to contract management, contract administration, and financial and technical monitoring. The followings are some of the lessons learnt from recent programs.Key Lessons Learned from IRP (i) Complexity of the Project and Country Absorptive Capacity. Project composition and implementation schedule should match the absorptive capacity of the implementing agency. In design of such large investment, involving several donors, the approach should aim at a phased investment with well-defined triggers with long-term program supported by all donors.(ii) Project Design. The absence of substantially completed detailed engineering for all major roads immediately prior to Board presentation makes variation orders - 10 -  almost inevitable, leading to delays and cost increases. In institutional capacity building, too many demands for simultaneous reforms along with implementation burdens taxed the capacity of the government and implementing agency to deliver budget and outputs on schedule. In this aspect, APL will be the best tool to monitor and proceed based on built-up capacity.(iii) Learning from Past Mistakes. The lessons of experience of past project implementation were to safeguard against future mistakes both for IDA and the borrower. Major flaws experienced in the Sixth Highway Project Credit were also experienced under IRP-I. For example, appropriate technical documentation and provision of adequate resources should be fully completed before commencement of works. In short, more attention needs to be paid to past lessons of experience during project design and implementation.(iv) Donor Coordination. The spirit of cooperation of the donor community in support of the IRP-I and IRP-II was initially satisfactory. However, during the course of implementation, it was not easy to maintain the interests of all donors as each focused on execution of their own program under the parallel financing arrangement. In this regard, strengthening of TANROADS is essential, or alternatively a transport sector coordination unit in MOF could be established.Lessons from neighboring countryThere have been substantial delays in the processing and awarding of contracts, leading to substantially higher costs at the initial stages of commencement and to delayed completion. The structure of road administration in Uganda has been subject to frequent changes, resulting in poorly organized planning and administration, and ineffective long-term institutional development. Therefore, institutional strengthening of road administration, as well as changes in the decision-making process, have been undertaken by the Government. These include already established and fully operational semi-independent Road Agency by FY 2002. Other lessons are that inadequate engineering design and weak documentation resulted in implementation delays and cost overruns. Steps are therefore being taken during Program Phase 1 project implementation to ensure the readiness and availability of completed contract documentation before commencement of works.Lessons from Sector Investment Programs (SIPs) in other countries Several lessons from road SIPs in other East African countries are being considered in the preparation of the URRSP and the Phase 1 Project. These include: (i) the need for ownership and accountability and avoidance of overlapping responsibility (for example, the responsibility/authority of Road Agency in relation to that of Road Fund Board, MOW, and MRALG); (ii) the importance of having in place a sector strategy, institutional frameworks, and stable and sufficient financial resources for counterpart financing which contribute to the effectiveness and sustainability of investments and avoidance of implementation problems; (iii) ensuring that road designs and bidding documents are completed and updated as necessary before bidding; (iv) the need for building up sufficient capacity for project implementation and; (v) the need for effective donor coordination to avoid inconsistency in development objectives. These important lessons would be reviewed with the Borrower prior to appraisal to ensure that action is taken.Based on the above mentioned lessons, the Project will: (i) assist implementing sustainable institutional arrangements, particularly those focused on capacity building of TANROADS; (ii) avoid complexity in project components and adjust the size and pace of project implementation considering the improvement of absorptive capacity of implementation agency, thus by adopting APL; (iii) prepare adequate engineering design and documentation before commencement of works to avoid implementation - 11 -  delays and cost overruns; (iv) adjust the size and pace of project implementation reflecting the available financial resources, thus by adopting APL. The phased approach of the APL will ensure the reasonable Project implementation. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues The following direct and indirect negative environmental impacts can arise from road rehabilitation and maintenance works: land take, dust and noise, generation of sediment, river pollution and scour damage (river damage extraction), safety hazards (quarry faces, blasting, etc.), health hazards, visual impacts. The following socio-economic impacts can arise from road rehabilitation and maintenance works: permanent and temporary land take resulting in involuntary resettlement and/or compensation, land tenure impacts, public health impacts, cultural impacts, and changes in local population's way of life and/or exploitation of natural resources, etc. These will be determined and assessed during the preparation of road specific EAs and SAs, which are currently underway. 11. Contact Point: Task Manager Yitzhak A. Kamhi The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 473-7858 Fax: (202) 473-8326 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending March 29, 2002. - 12 -