Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 11249-ET

STAFF AFPRAISAL REPORT

ETHIOPIA

ROAD REHABILITATION PROJECT

OCTOBER 29, 1992

Infrastructure Operations DivisionEastern Africa Department

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENT

Currency Unit Ethiopian Birr (Birr)USS 1.00 Birr 5.0Birr 1.00 USS 0.20

FISCAL YEAR

July 8 - July 7

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

AADT - Average Annual Daily TrafficADC - Animal Drawn CartADT - Average Daily TrafficAfDB - African Development BankBATCODA - Building and Transport Construction Design AuthorityBNCE - Blue Nile Construction EnterpriseEASC - Ethiopian Audit Services CorporationEEC - European Economic CommunityERA - Ethiopian Road AuthorityERR - Economic Rate of ReturnERRP - Emergency Recovery and Reconstruction ProjectESA - Ethiopian Standardization AuthorityETCA - Ethiopian Transport Construction AuthorityICB - International Competitive BiddingLLT - Local Level TransportMOTAC - Ministry of Transport and CommunicationsMOPW&UD - Ministry of Public Works & Urban DevelopmentONCCP - Office of the National Committee for Central PlanningPMS - Pavement Management SystempTA - Preferencial Trade AgreementRRD - Rural Roads DepartmentRRP - Road Rehabilitation ProjectRTA - Road Transport AuthorityTCDE - Transport Construction Design EnterpriseTGE - Transitionsl Government of EthiopiaUNCTAD - United Nations Conference for Trade and DevelopmentUNDP - United Nations Development Program

This report is based on the findings of a Bank appraisal mission which visited Ethiopia in September/October 1990,comprising Mr. E. Irgens, Sr. Highway Engineer and mission leader, Mr. D. Jovanovic, Sr. Economist, Mrs. 1. Holt, Sr. Financial Analyst,Mr. J. Howe (Consultant-Intermediate Means of Transport) and Mr. O.K. Sylte (Consultant-Highway Engineer) who reviewed the design for thecivil works in the project. Mr. J. Brown, Division Chief, joined the mission for its final discussion with the Government. The processing of theProject was delayed as s result of the change of government in March 1991. The report was updated in March 1992. Ms. V. Neric-Nyberg,Mr. Aviraj Chakranarayan, Janine Littleford and Erlinda Maliksi provided secretarial suppon in the preparation of the report. Mr. S. Weissmanand Mr. Francis Colago are the managing Division Chief and Department Director respectively for the operation.

FOR OMCIAL USE ONLY

ETHIOPIA

ROAD REHABILrrATION PROJECT

Table of Contents

Page

Project Summary. i

I. The Transport Sector

A. Country Background .1B. The Transport System. 2C. Role of Transport in the Economy. 3D. Transport Infrastructure and Operating Entities. 4E. Transport Sector Issues and Govermnent Policy. 8F. Past Bank Group Operations in the Sector .11G. Bank Strategy .12H. Rationale for the Bank's Involvement .12

II. The Highwav Subsector

A. The Road Network .. 14B. Traffic .15C. Vehicle and Axle Load Regulations .. 15D. Road Safety .. 17E. Road Administration .17F. Planning and Financing .19G. Road Engineering and Construction Supervision . .19H. Road Construction .. 201. Road Maintenance .20J. Training ......................................... 21K. Accounting and Auditing .22

Ell. Project Concept and Composition

A. Project Origin and Preparation .. 23B. Project Objectives .. 23C. Project Description .. 24D. Cost Estimates .. 27E. Financing .28F. Implementation .30G. Procurement .. 30H. Disbursements .. 32I. Reporting and Auditing .35J. Environmental Impact .35

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

IV. Economic Evauation

A. General ........................... 37B. Traffic on Addis Ababa - Asab Road ....................... 37C. Economic Analysis ..................... 38D. Risks ......... ............ 40

V. Agreements and Recommendation

A. Actions Already Taken .................... 41B. Agreements Reached .......... .......... 41C. Conditions of Effectiveness .......... .......... 42D. Recommendation .......... .......... 42

ANNEXES:

1 Vehicle Fleet2 Consumption of Petroleum Products3 Volume of Cargo Transported by Road4 Actual Recurrent Expenditure on Road Maintenance5 Capital Expenditure on Roads6 Revenue from Road User Charges7 Structure of Fuel Prices8 Organization Charts: ERA, MOHUD&C9 PMS - Terms of Reference10 Implementation Schedule1 I Timetable for Implementation of New Axle Load Loegation12 Summary of Economic Analyses13 Project Progress Reporting Requirements and Supervision Plan14 Road Maintenance Equipment15 Training Program

MAP IBRD 22830

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ROAD REAIITTO PRaE

CREDIT AND POETSUMMARY

Borower, The Gowernment of Ethiopia

Credit Amouxt: SDR 66.4 mUlion (USS 96.0 million equivalent)

Crdit Terms: Standard IDA terms with a marity of 40 years

anLt D rWgot The Project consists of:

(a) Road Rehabilitation: widening and strengthening of 196 Am ofthe main road betwwen Milk and Asa4b.

(b) Pavement Management System. Design and implementation ofa pavement management system induding provision oftechnical assistance, training and equipment.

(c) Training, sector related studies and technical assistance toMO TA C for the introduction of an efficient axle load controlsystem and to MOPW&UD for the detailed engineering forcivil works to be included in the next highway sector project,andfor instftutional development.

The main benefitsfrom the road rehabfitation component will besaWing in vehicle operating costs, maintenance cost savings, and anincrease in transport capacity. The Govermnent wUl also benefit byavoiding otherwise costly road reconstruction In the future. The directbeneficiaries of reduced transport costs and improved road safety willbe truck and bus owners/operators and passenger car users on theproject assisted part of the country's transport ltfdlne, the AddisAbaba -Assab road LI The pavement management system will enablethe Ethopia Roads Authority to better monitor and plan roadmaintenance of its paved road systenL

Security remains a problem In Ethiopia and there Is a possibility thatimplementadon of the civU works might be offectd. Otherwise, thereis only limited risk connected with thde imlementation of the civilworks component of the Project, since the wor, wiU be carried out bycontracts awarded under ICB. Wth dth support of consultants for

LI Anodhr Jecwiou 010 Adl Ababa-Asab road Li bein relkabed wit de asaaw 0' about US$42 mUequivwknafrcmse Ajkai Dewlppme Bank

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procurement and saqerWision the ERA should have no dffWlculy Inmanaging the project. With respect to extending the lffc of the entireroad and the Project's objective of rehabUitating sectons In need ofurgent repairs, there is a risk that secions not Included in the ProjectmightfaU and require investment sooner than antdicpated (MiUle-Awash). This risk, howewer, is reduced by the inclusion in the Projectof the PMS with appropriate technical assistance during the itiWstage. Also, the Project ncludes a componentfor the procurement ofroad maintenance equipment which will inprove ERA's capacity tocarry out routine and periodic maintenance.

Another risk to the Project relates to the Implementation of a newAxle Load Control System. The Axle Load Control System, khfchaims at reducing overloading and preventing premature deteriorationof the reconstructed roads (as well as other sections of the paved roadsystem), may not be successful due to possible waknesses of RTA toenforce filly the proposed system, or due to general soclo-behavioralfactors. Some risk is associated with the Pavement ManagementSystem wich may not be successfully Implemented because ofpossible organizational waknesses. These risks are reduced by thefact that technical assistance will be provided under the Project. Inadditon, Government has already in place the basic ifrastruaure forvehicle axieload control-even if results are presently only used togather statistcal data.

US$ milions*awQmonUnts Lacal Foreiagn La

avil Works 20.3 68.1 88.4Technical Assitance and

Training 1.9 8.4 10.3Equwpment 0.3 10.3 10.6

Total (net of taxes & duties) 22.5 86.8 109.3

Government 13.3 - 13.3IDA 9.2 86.8 96.0

Total 22.5 86.8 109.3

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Economic Rate of Return: 21.7%

sdmatd IDA Disbursemet

IDA FISCAL YEAR (VS$ Mllon)

LM 11 199S 1: 292z.

Annual 2.0 17.0 19.0 30.0 22.0 6.0

Cumulative 2.0 19.0 38.0 68.0 90.0 96.0

A. C

1.01 Ethiopia, with an area of about 1.22 million km2, is one of the largestcountries in Africa. The topography of the country is rugged with the altitude ranging frombelow sea level to 4,600 m. About 90 percent of the population lives in the rural areas, themajority deriving their livelibood from settled peasant agriculture. Large parts of the countryare not suitable for cultivation andlor are vulnerable to drought. Under-exploited resources,inappropriate economic policies and decades of disorder and civil war resulted in Ethiopiabeing one of the poorest countries in the world with a per capita income of only S115 in1990.

1.02 Annual GDP gowth averaged below 2 percent in the 1980s, compared with apopulation growth rate of 2.9 percent p.a.; thus per capita income has been decliing. Slowgrowth was primarily a result of droughts (1981/82, 1984/85 and 1987/88), nd anintensifying civil war and increasing military expenditure. At the end of May 1991, thepolitical situation within Ethiopia changed with the overthrow of the Mengistu regime and theinstallation of the Transitional Govenment. The end of the civil war provides the opporunityto rebuild the devatated esonomic an social structures but has also fundamentally alteredEthiopia's external transport systems with the de facto separation of Eritrea/ .

1.03 The agricultural sector dominates the economy through its size and itsinfluence on most other sectors. The sector has shown no growth in real value added duringthe 1980's: cultivated area and yields have stagnated and output, even in years with normalrainfall, has failed to moot growing domestic deman. Food imports have sharply increased,mainly transported through Assab, and food security has become a major issue. An importantfactor in the poor performance of the mral sector has been the inadequate coverage andquality of the road infrastructure uan the generad dependence on traditional means of transport- walking and horses for personal mobUiity, headloading and pack animals for freighttransport. Heatloading is one of the most burdensome chores affecting women in the ruralareas and the time that ha to be devoted to transport is a critical constraint to increasedproduction.

1.04 While the Meagistu regime adopted an economic reform package in 1989/90with the objective of developing a market orientated, mixed economy, little was actuallyachieved. The new Trasitional Government aims to bring about a major restructuring of theeconomy. Its now economic policy stament calls for a significant reduction in the role ofthe state in production and trd, the development of the private sector and a progressive shiftfrom adminitative regulation to marikt-determined decisions. The new government, havinginherited the insdtutions, struc ad regulations of a centrally plannd economy, lacesmajor tasks. Th3 hUg st ctor hu suppressed the development of the private sector adhas failed in many areas to respond to the priority development needs of the country.

1.05 The Bank's overal objectve is to asist the Government to restructure theeconomy, accelerate economic growth and improve living conditions. In the short-term

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however there is the urgent need to help the country restart essential economic activities,rebuild vital social services and repair the infrastructure and facilities upon which theydepend. The Bank, together with other donors, has, therefore, responded with an EmergencyRecovery and Reconstruction Project (ERRP, Cr. 2351-ET). This, it is hoped, will providesufficient support to economic reactivation to allow the Government to take the next stepsnecessary for the major restructuring of the economy through an adjustment program.

B. The Transport System

1.06 Recent political developments have introduced considerable uncertainty overthe coming years into Ethiopia's overall transport system with the effective loss of controlover the Red Sea ports of Assab and Massawa. At present, therefore, Ethiopia has become,de facto, a landlocked country and is only now developing the necessary legal andadministrative agreements with Eritrea which are essential for the development of an efficienttransit system. As with other landlocked countries in Africa, it is unlikely that Ethiopia wIllbe prepared to accept total reliance on a single transit route or transit country and thusincreased use of other outlets to the sea, such as Djibouti but also possibly Port Sudan,Berbera and for Mombasa, must be expected.

1.07 The Ethiopian road network is characterized by three features: i) the existingnetwork is old, ii) there is lack of low volume roads iii) traffic volume is low on about 80percent of the network. Even before the recent disruption to traditional routes and facilities,Ethiopia's transport system was inadequate to support efficient production or distribution andrepresented a serious obstacle to the country's economic and social development. Thehighway network is underdeveloped; with 19,020 km of classified roads (of which only 4,100km are paved) and an additional 15,000 km lower standard rural road, roads average only 0.3km per 1,000 people, virtually the lowest in Africa. Moreover, most of the existing primaryroad network is old and needs rehabilitation or upgrading. Vehicle operating costs are highand traffic flows are low. Other problems contributing to the inadequacy of the transportsystem include: a shortage of road transport; insufficient port, rail and customs' capacity,inappropriate government policies that have supported parastatals rather than the private sectorin road transport, freight forwarding and trade facilitation; and operational and managerialproblems within a number of transport entities themselves.

1.08 In addition to its highway network, Ethiopia's transport system includes roadaccess to two ports (Assab and Massawa, both in Eritrea) and road and rail access to the Portof Djibouti, a small maritime shipping operations, some incidental river and lake transport,and air transport operations at three international airports (Addis Ababa, Dire Dawa andAsmara which is now in Eritrea) and approximately 30 scattered airfields and airstrips.Transport operating entities in the sector include a road transport regulatory authority, a roadfreight transport parastatal, a passenger transport parastatal, a jointly owned (with Djibouti)railway, a port authority which has no longer an effective function, a freight forwardingparastatal, a national shipping line and a national airline.

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C. Role of Transport In the Economy

1.09 Development of surface transport in Ethiopia has been seriously limited bywide topographical variations, extremely rugged terrain, severe climatic conditions and awidely-dispersed population, factors which make construction of transport infrastructure notonly physically difficult but also extremely costly. The primary highway network consists ofradial extensions from Addis Ababa, there are few interconnecting links between adjacentregions and the feeder road network is grossly insufficient. Large parts of Ethiopia remainisolated and depend entirely upon pack animals or human carriers for transport. Nearly three-quarters of all farms are more than a half-day walk from an all-weather road. Roaddevelopment has been especially deficient in the agriculturally rich west of the country. Sinceabout 89 percent of the total population is rural and 85 percent employed in agriculture, thelack of roads, particularly rural and feeder roads, is a significant economic and socialconstraint.

1.10 As mentioned previously, an increasingly large proportion of the roadnetwork needs rehabilitation or upgrading. The condition of the country's main route, the861 km road which connects the capital of Addis Ababa with the Port of Assab on the RedSea, gives rise to the greatest concern. Due to age, overloading and inadequate maintenance,sections are now deteriorating and the road has become a serious bottleneck to economicrecovery. Since about 2.6 million tons, including 82 percent of Ethiopia's total exports andimports, are transported annually on the road, its importance cannot be over-emphasized.UInless action is taken in the very near future, continuing deterioration will substantiallyincrease vehicle operating costs and the cost of eventual road reconstruction. Furtherdeterioration in the road condition would exacerbate the present chronic shortage of transportwhich already constrains the movement of petroleum, food relief and other critically neededimports. Rehabilitation of this vital transport link is thus urgently needed and is the focus ofthe proposed Proiect.

1.11 Traffic volumes are low on all but the busiest trunk roads, reflecting the poorextent of market integration of rural Ethiopia, the lack of feeder roads, and most particularly,chronic shortages of road transport, a problem which has become increasingly serious.Ethiopia's vehicle fleet is insufficient to meet demand and the import of new vehicle has noteven matched normal replacement needs. The present shortage is the consequence of: (i)past Government policies that favored public trucking over the private sector; (ii) a centralizedtransport allocation system that led to rigidities in the supply of transport services, loweredutilization of vehicles and roads and discouraged new investment; (iii) control of tariffs andfailure to update tariffs to ensure cost recovery by truck operators; (iv) very limited allocationof foreign exchange, particularly for the private sector, for spares and for new vehicles; and,more recently, (v) the destruction of trucks during the war.

1.12 The shortage of truck transport has contributed very substantially to the verysevere cargo congestion at the Port of Assab where port operations are critically constrainedby the lack of available space in the port and the shortage of port handling equipment.Increasing the effective capacity of the trucking sector, through the provision of additionalvehicles, spares and tires, is a major objective of both the Transport Project (CR 2002-ET)and the ERRP.

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1.13 The extension of the road system and access to motorized transport will be aslow process and it is likely the majority of the rural population will remain dependent uponnon-motorized transport for many years to come. The human and economic costs ofdependence upon these traditional forms of transport is high. An average Ethiopian ruralhousehold is estimated to spend about 2600 hours per year on transport, 60 percent for fueland water. More than 70 percent of this transport is undertaken by women. Time spent ontransport is a major factor limiting the effectiveness of efforts to expand agriculture andestablish a market economy. As population expands and sources of firewood and waterbecome more scarce, rural transport will become an even greater development constraint.Animal transport in Ethiopia could be vastly more productive if trails were improved, cartsbetter designed, skills of local producers enhanced, and the supply of parts and raw materialsfor the manufacture and repair of carts and other intermediate means of transport, expanded.Government is adressing these issues in their Policy paper on Rural Roads and Transport,presently under preparation.

1.14 The transport sector only contributes about six percent to GDP and itsinadequacy is very costly to the country. This received world wide attention during thedroughts when food aid put enormous strains on the port and inland transport resulting insignificant delays in distribution. The economic repercussions from the inadequateinfrastructure and reliance on inefficient parastatals are not, however, limited to periods ofdrought; they represent an enormous obstacle to economic development, integration ofmarkets, export development and the efficient use of imports.

D. Transport Infrastructure and Oerating Entities

1.15 Roads. The highway sector is discussed in detail in Chapter II.

1.16 Road transport on the main corridor and throughout the country was, formany years, tightly regulated and controlled by the Govermnent. Tariffs were set andenforced by the Road Transport Authority (RTA), under the Ministry of Transport andCommunications (MOTAC). This situation is now changing and control, under theTransitional Government, has been relaxed if not eliminated. Road transport is in atransitional stage toward market-orientated, private sector industry. RTA also determinesroutes, approves vehicle licenses, promulgates and enforces safety and axle load regulations.

1.17 Freight Transport by Road. Commercial freight transport (there are also truckfleets operated by relief agencies, carrying food aid) is undertaken by a government-ownedtrucking parastatal, the Ethiopian Freight Transport Corporation (EFTC) and by a fairly largenumber of private owner-operators, called "Associates' (about 4,500). Together, public andprivate trucks transported about 5.0 million tons in 1990/91, 91 percent of all inlandtransport in the country (Annex 3). In an effort to prevent abuses related to the shortage ofvehicles in the country, the previous Governrnent established a cargo allocation system bywhich EFTC controlled the allocation of commercial road transport in Ethiopia. The countrywas divided into six zones, or 'ketanas." EFTC allocated trucks, both its own and those ofthe private sector, to each of those zones and within those zones, allocated loads and routes toindividual trucks. EFTC was paid 5 percent of the Associates' contract price for thisbrokerage role. While well-intentioned perhaps, the rigid system led to significant economicdistortions and discouraged entry of new capacity into the sector.

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1.18 This central control of the private sector has weakened in recent months andin its draft economic statement the Transitional Government has stated that it will no longerbe compulsory for private truckers to be members of ketanas. Increasingly specific contractsfor the movement of cargo are being negotiated between shipper and transporter, althoughEFTC often acts as the intermediary and still collects its commission. Although de factoderegulation of road transport has taken place for some traffics it is not yet universal andfurther action by Government is necessary (para 1.43).

1.19 In terms of capacity, the combined fleet of EFTC and the private sector isinadequate for the size of Ethiopia's population and does not meet Ethiopia's present transportneeds (Annex 1.) The problem is compounded by the age of the private sector fleet (averageage over 18 years), and the shortage of spares and tires which all lead to low rates of vehicleavailability and limited vehicle utilization. EFTC itself operates a fleet of over 1,000vehicles, standardized to 3 - 4 makes, with an average age of 8 years but with a vehicleavailability of less than 50 percent. The privately-owned Associate fleet totals 6,400 trucks ofassorted makes. Replacement of private sector vehicles, in particular, has been extremelylimited due to lack of foreign exchange and to the fact that earnings are insufficient to coverinvestment costs.

1.20 Lack of foreign exchange has prevented both EFTC and the private sectorfrom being able to renew its fleet, much less expand it. EFTC has budgeted the purchase of300 vehicles per year in each of the last five years but has only been able to acquire a total of214. Only 30 tankers out of proposed purchases of 400 have been bought in the same period.Meanwhile attrition and loss of vehicles to hostilities have reduced the vehicle fleet. Lack offoreign exchange for spare parts has also harnpered operations. Actual purchases for sparestotalled Birr 10.7 million in the last three years versus planned average annual expenditures ofBirr 32.0 million. The private sector has imported virtually no vehicles as the import tariffswere, until recently, Birr 300,000 or US$ 140,000 per vehicle. Due to the shortage ofeffective trucking capacity, there is an enormous backlog of registered freight waiting to bemoved.

1.21 The Bank is assisting Government in its efforts to increase trucking capacitythrough the ongoing Transport Project Cr. 2002 - ET and the ERRP. It is now agreed byGovernment that trucking is most effectively undertaken by the private sector. Most of theadditional capacity is targeted at growth in the private sector and the Government hasannounced that it intends to restructure and privatize at least part of EFTC. Investment by theprivate trucking industry will be very limited if operators cannot earn enough to continueoperating. Currently, in the remaining controlled sector, truck operators are transportinggoods on a ten year old tariff that was considered insufficient to cover total costs in 1986. Tocover costs, truckers operate in the deregulated sector or overload. The overloading ofvehicles has contributed significantly to the premature deterioration of the Addis Ababa -Assab road as well as other sections in the network, adding significantly to the cost of roadmaintenance. On paved roads it has been estimated that the official tariff would need to bedoubled to reflect full vehicle costs in the present operating evnironment and even highertariffs would be necessary on unpaved roads. In conjunction with the ERRP the Governmentraised tariffs by 70 percent on main road and agreed to complete deregulation of tariffs by 31December 1992.

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1.22 Passenger TransDort by Road. Bus service is by far the most important meansof motorized passenger transport in Ethiopia. Otherwise, in urban areas, travel is done byfoot, taxi or car; in rural areas, where roads are few, trips are made on foot or by horse ordonkey. Rail and air passenger travel is small compared to the number of passenger tripsmade by bus. Commercial bus transport is undertaken by both public and private sectors butall services are controlled by the Ethiopia Passenger Transport Corporation (EPTC). Themajority of services are provided by private operators; long distance bus transport is 70 - 75percent private sector, over 90 percent on the Addis Ababa-Assab road. EPTC establishesbus routes and schedules and dispatches buses owned and operated by independent bus ownersand by the Governrnent. Commercial bus transport in the private sector consists of about 160owners with approximately 2,600 buses of various sizes; about 300 large buses are for longdistance routes. EPTC owns a fleet of about 400 buses providing city transport in AddisAbaba, Jimma and Asmara as well as some intercity services.

Other Transport Modes

1.23 Railway. An old and rather rundown railway supplements road capacity tothe Red Sea, connecting Addis Ababa with Djibouti, about 150 Ikm south of Assab. Jointlyowned by Ethiopia and Djibouti, the Chemin de Fer Djibouti-Ethiopia (CDE) is operatedunder the provisions of a 1981 treaty. The 781 km, meter gauge, single line has almost noballasting and is characterized by sharp curves, steep gradients and low embankments. Railcapacity is limited by track conditions, operating difficulties and managerial problems.Imports carried include fertilizer, iron and steel, and containers while exports includemolasses and sugar and some containers of textiles and hides and skins. The CDE operateswith a small deficit and has been trying to improve operations with the help of a limitedrehabilitation program financed by the EEC and France. Without additional investment and,more important, changes in the treaty that would permit better management, it is doubtfulwhether traffic on the rail route could increase much beyond the present level of 300,000tons. The ERRP is providing limited assistance to CDE to maintain existing capacity untillonger-term plans and assistance are agreed.

1.24 Pr. Ethiopia is served by three major ports: Assab, Massawa and Djibouti.In the late 1980's approximately 85 percent of Ethiopia's foreign trade was handled by Assab,8 percent by Massawa and 7 percent by Djibouti. The port of Assab and the main roadinland to Addis Ababa, therefore, represents Ethiopia's most important outlet to the sea.Gradual extension of the Assab port started under the Port Engineering and ConstructionProject (Cr. 1676-ET) in 1986. By early 1989, when the construction of the tug berth underthe Credit was completed, Assab had seven berths available for commercial shipping with anannual capacity of about 1.6 million tons of dry cargo. To handle general traffic growth anddrought relief cargo, major expansion of the port was assessed to have high priority and,under the on-going Transport Project (Cr. 2002-ET), African Development Bank (AfDB) wasproviding funds to construct two multipurpose berths which would increase capacity to about3 million tons per year. The berths were expected to be completed in late 1992. Theassumption of power by the Provisional Government in Eritrea and their control of Assab andMassawa has brought construction to a halt and this project has now been terminated.

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1.25 The Ethiopian parastatal, Marine Transport Authority (MTA), used to beresponsible for the operation, management and development of Assab and Massawa. MTAwas well managed and operated with considerable administrative autonomy. The port ofAssab is now managed by an Eritrean parastatal, created after the de facto separation ofEritrea. A port agreement has been made between the Provisional and TransitionalGovernments but unfortunately the port has no international legal persona and this maycontinue to deter the conference line from calling at Assab. In recent months the TransitionalGovernment has organized a major effort to clear the back log of cargo from the Port andcongestion has been substantially reduced. Port capacity at Assab remains, however, a weaklink in Ethiopia's international transport network. The new top management is notexperienced in port operations and many of the decisions are centralized in Asmara. Theessential ancillary services necessary for port operations, such as banking andcommunications, are still being created. Labor productivity in the port of Assab continues,however, to be better than average for East African ports.

1.26 In view of the legal and operational problems at Assab it is probable thatgreater use will be made of the Port of Djibouti. The port is efficient and, even before thepresent expansion, had excess capacity. The port is also served by the major shipping lineswhich have ceased operating to Assab. Use of Djibouti has, in the past, been restricted bythe limited capacity of the railway and regulations effectively preventing the use of roadtransport. It is unlikely that there will be major expansion in rail capacity, at least in theimmediate future, but efforts are being made to facilitate the use of road transport. The trackfrom Dire Dawa to Dewale on the Ethiopia/Djibouti border has been improved by theEthiopian Roads Authority (ERA) and is under constant maintenance as there are nopermanent structures. A second link via Dubi on the Mille-Assab road is paved but wouldneed strengthening if heavy commercial traffic increased. Inside Djibouti the roads are goodand well maintained. Restrictions on the use of trucks are being lifted and road transitformalities streamlined. As soon as the security problems within both Ethiopia and Djiboutiare settled a rapid increase in the use of Djibouti, especially for non-bulk cargo, can beexpected.

1.27 The Maritime and Transit Services Corporation (MTSC), a parastatalcompany operated under the responsibility of MOTAC, is presently the sole shipping andtransit agency in Ethiopia. An amalgamation of more than 30 forwarding agencies thatoriginally operated in the private sector, MTSC was put in place after the revolution and hasproved to be a significant bottleneck to the efficient movement of goods. The situation hasfurther deteriorated with the creation of an 'Eritrean MTSC' in Assab which handles theclearance of cargo while 5 employees from "Ethiopian MTSC' operate from a hotel playing acoordinating role. The Bank's Transport Corridor Analysis (Report No. 6554-ET), publishedJune 1987, detailed the inadequacies of the previous system and equipment and technicalassistance were to be provided under Transport Project (CR 2002-ET) to assist in reform.Under the new circumstances in the ports there is the urgent need to allow private clearingand forwarding agents to provide services in the ports and within Ethiopia. The ending ofMTSC's monopoly was recommended in previous studies and this reform has now beenagreed by the Transitional Government.

1.28 The Transport Project (CR 2002-ET) also includes assistance to streamlineprocedures within the Ethiopian Customs and Excise Administration (ECEA). Fortunatelycustoms clearance has not been very significantly affected by the change in circumstances at

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Assab. Although ECEA no longer has an office in the port, it is permitted to clear cargo atthe same time that it is being examined by Eritrean customs officials. Improvement tocustoms procedures are still necessary, however, and there is also now the need to establishan efficient transit arrangement for the use of the Red Sea ports.

1.29 Inland Waterways. Some minor inland water transport (there are three lakesand two navigable rivers) supplements road and rail transport in the country but tonnagecarried by water is relatively insignificant.

1.30 Air Transport. Air transport is fairly well-developed and the best performingtransport mode. Ethiopian Airlines and a number of foreign carriers serve two of theinternational airports (Addis Ababa and Dire Dawa) and Ethiopian Airlines also provides anextensive domestic service. Management of the airports and airfields is undertaken by theCivil Aviation Authority, under the aegis of MOTAC. Ethiopian Airlines, a parastatalcompany under MOTAC, has been in service for over 40 years, provides scheduled servicesto about twenty countries and is currently in the process of expanding, particularly in freightoperations. Excellent management combined with financial and managerial autonomy hasresulted in the company operating profitably and earning its reputation as one of the bestairlines in Africa.

1.31 Ethiopian Shippine Lines. Ethiopian Shipping Lines Corporation, a parastatalcompany under MOTAC, was established in 1964, began operations in 1966 and currentlyowns 11 vessels with a capacity of about 80,000 dwt. Operating at a profit, it transportedabout 500,000 tons in 1989/90, or 20 percent of Ethiopian external trade.

E. Transport Sector Issues and Government Policy

1.32 Government Strategy. Both the present and previous Governments haverecognized the importance transport can and should play in developing the economy and haveplaced high priority on transport investments. In its last public investment program, theprevious Government gave transport investment the highest priority and roadmaintenance/rehabilitation and increased transport capacity are two of the major componentsof the ERRP. Despite the emphasis given to transport-the total length of the road networkdoubled between 1970 to 1986-inadequate infrastructure and transport operating capacityremain major constraints to economic and social development.

1.33 While the Transitional Governmnent continues to place great emphasis on thetransport sector there has been a significant shift in policy toward greater reliance on theprivate sector for the provision of road transport services. The previous regime was slowlymoving toward liberalization of the sector but had achieved relatively little change. TheTransitional Government has not yet developed a full strategy for the sector and is primarilyconcerned, at present, with the repair of the existing infrastructure and increasing truckingcapacity to meet emergency needs. Sector work, such as that proposed for a Rural RoadStrategy, is continuing. Many major policy decisions taken within the context of the overallstrategic commitment to reduce the role of the state in the provision of transport and relatedancillary services have yet to be fully implemented.

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1.34 Capital Expenditures. During recent discussions with IDA, Governmentindicated that its road investment policy will continue to give high priority to (i) therehabilitation of the road network, particularly of the Addis-Assab road; (ii) improvingintermediate means of transport for the rural population; (iii) judiciously increasing the trunkroad network; and (iv) developing the rural and feeder road network.

1.35 Actual investments in the sector in the 5 year period (1984/85 - 1988/89 wereabout Birr 950 million (US$459 million); investment in roads (including periodic maintenanceand rehabilitation) was about 61 percent; the balance was spent on air transport,ports/shipping, trucking and the CDE railway. Investment in new road construction was onlyBirr 225.5 million (US$109 million) relatively little in view of the low density of the roadnetwork. A new road program is being prepared by ERA and will be reviewed withEthiopian authorities in conjunction with the preparation of a Third Road Sector Project. Anincrease in the rural road program is of critical importance to achieving agriculturaldevelopment objectives.

Recurrent Expenditures. Pricing and Cost Recovery

1.36 Rod. Despite the Government's commitment to the funding and carryingout of road maintenance, the actual resources allocated have been insufficient to maintain thenetwork. Road maintenance expenditure in 1989/90 was about Biff 51 million or US$25.0million, about US$1,315/km. This expenditure is within the range of needs for 'normal'maintenance, but the age of the network and past neglect create much greater needs.Unfortunately, the problems of underfunding is compounded by the allocation of the funds:the ERA is overstaffed and too much is spent on salaries and too little on equipment andmaterials. ERA recognizes the inadequacy of maintenance and has asked Government toincrease substantially the allocation for maintenance (para. 2.16).

1.37 In terms of cost recovery, the revenues from road users are greater than totalannual expenditures on roads including investments. Revenues from road users have been onthe rise and in 1990/91 reached Biff 230.3 million (Annex 6). The increase in revenues wasdue to Government's efforts to mobilize additional resources. Total road expenditures, bothcapital and recurrent, have also increased to about Biff 93.5 million in 1989/90. While totalroad user revenues are sufficient to meet total road expenditures it would appear that morespecific road user charge revenue (revenue in excess of the level that would be generated byapplying the average rate of import duties and other taxes to vehicle operating cost inputs) areneither sufficient to meet total road costs nor to meet the attributable costs of specific vehiclecategories. User charges are thus lowest on commercial vehicles which impose by far thegreatest road costs. The issue of appropriate road user taxation policies will be raised withinthe context of on-going transport strategy discussions.

1.38 Road Transport. Pricing of road transport has not been cost based and theexisting road tariffs go back to 1981. Under the Transport Project (CR-2002-ET) theGovernment agreed to introduce by mid-1990 new commnercially based tariffs in transport.By the beginning of 1992, the new tariffs had, however, been neither introduced nor agreed.Therefore, during negotiations of the ERRP, it was agreed that, in view of the size of thetariff increases required, the intrinsic shortcomings of administered tariffs and the fact thatmarket-set prices in the deregulated sectors reflect operating costs, deregulation of all roadtariffs was a much better policy than raising the official tariffs (see para 1.21).

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1.39 In the road transport sector, scarcity of foreign exchange and insufficientearnings have resulted in inadequate expenditure on spares. Private truckers earnings arenot sufficient and EFTC's trucking operations have been operating at a substantial loss.EFTC managed to remain financially solvent only because trucking operations were cross-subsidized by revenues associated with operations of the ketana system and from the sales offuel and spare parts to the private sector. For the fiscal year ended July 7, 1990, EFTC lostabout Birr 17 million (US$8.5 million) on revenues of Birr 76 million (US$38 million). Theloss reflects the facts that its tariffs were too low and its labor costs were too high (Birr 25million). The Transitional Government has announced its intention to privatize all or part ofEFTC's operations, but no decisions have been taken on the form that such privatization willtake.

1.40 Fue. Government's policy is not to subsidize fuel and currently fuel pricesare based on a price of about US$30 per barrel. Fuel taxes, however, are relatively low, 20percent of the sale price (Annex 7).

1.41 Axle Load Control. Heavy overloading contributed substantially to pavementdeterioration especially on the Addis Ababa - Assab road. Ethiopia does not have an axleload control system fully operating despite such a requirement having been a covenant in theongoing Second Highway Project. New axle load legislation which set more appropriate axleload limits was passed in 1990 and Government must now begin enforcing it. Procurement ofneeded weizhbridge equipment is a component of the proposed Proiect.

1.42 Functional Classification System. Ethiopia does not have a functionalclassification system for the road network and, as a result, there is confusion regardingmaintenance standards and responsibilities. The establishment of such a system has beenagreed under the pronosed Proiect.

1.43 Need To Increase Support of the Private Sector. Past support of publiclyowned parastatals rather than private sector companies has inhibited the growth of efficienttransport in Ethiopia. In particular, there is a need to open up freight forwarding and toincrease competition in the transport sector. Additionally, private sector involvement in roadconstruction and periodic maintenance should now be encouraged. Development of Ethiopia'sdomestic construction industry was an objective of the ongoing Second Highway SectorProject but lack of access to foreign exchange, inability to open a foreign account overseas,lack of autonomy over its staff and hiring, have handicapped private sector performance andhurt its ability to survive over the long term. Additionally, the extent of Government'scontinued use of force account units within the Ministry of Construction and UrbanDevelopment for highways and other civil works projects reflects a lack of commitment toprivate sector development. In view of the Government's new commitment to private sectordevelopment, it is hoped that serious efforts will be made to privatise firms such as Blue NileConstruction Enterprise or, at the very least, give them real autonomy and open the sector tocompetition. Provisions are made in the Proiect to finance technical assistance to carry outrelated studies.

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F. Past Bank Group Operations in the Sector

1.44 In the transport sector, the Bank Group has committed about US$282 millionfor eight road projects, one port project and one transport project. In addition, support forroad maintenance also forms an important component of ERRP. The first three road projectsconcentrated on main roads, while the subsequent ones emphasized institution building andconstruction of secondary and rural roads and road rehabilitation and maintenance. The lasttwo road projects have been sector projects supporting the government's overall road sectorprograms. Bank Group lending in the roads sub-sector has been generally successful,particularly in achieving physical targets. The First Road Sector Project (Cr. 708-ETapproved in 1977) was carried out over the 1977-84 period. The main components were:strengthening/upgrading of selected sections of the road network (650 kIm), construction ofrural roads (1,350 km), assistance to domestic construction industry and technical assistanceand training. While the road construction targets were generally met, the Project did not meetits objectives of increasing road maintenance and improving sector policy in regard to vehicleweight regulation and adjustments in road user charges. The on-going Second Road SectorProject (Cr. 1404-ET approved in 1983) includes a sizeable program for roads to beconstructed or strengthened; however, the program targets were revised to respond better tonew priorities and needs arising from the drought and to take account of reduced Governmentand external resources available for the Project. With regard to policy issues addressed in theProject, the Government has complied with the majority of covenants agreed upon. However,the axle load legislation was enacted late in 1990 and is just being applied; and a new roadclassification system is still under review. The Project is four years behind SAR estimates,due to initially slow implementation on the main civil works component, the Nekempte-Bureroad which is now nearly completed. The quality of work is good and valuable transfer ofknow-how has taken place during project execution. The Project will be completed bymid-1993.

1.45 The Port Project (Cr. 1676-ET approved in 1986), which includedconstruction of a tug berth in Assab, procurement of equipment and studies, was consideredto be an emergency operation as port congestion was so severe during the drought of 1985that it was necessary to make more room for ships. By constructing a new tug berth (1989)and by implementing other project components aimed at reducing transport bottlenecks andimproving the flow of goods along the main transport corridor in Ethiopia the congestion wassomewhat reduced.

1.46 The Transport Project (Cr. 2002-ET approved in 1989) was designed to take acomprehensive sectoral approach to addressing the most urgent needs in the port, in roadtransport, in freight forwarding and in customs and trade facilitation. To this end, theproject included port expansion, provision of additional trucks for EFTC and the privateowner-operators, measures to improve EFTC and a multi-modal transport facilitation programto be implemented by UNCTAD. Implementation of the project has been interrupted by therecent political changes. Some restructuring of the project has taken place to meetemergency needs in conjunction with the ERRP and to reflect changes in the sector andfurther restructuring is now under discussion with the Government to bring the project intoline with its emerging private sector oriented policies for transport.

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1.47 The ERRP incude support for the periodic maintenance of the priority roadnetwork (IJS$50 million), the replacement of civil aviation communications and safetyequipment destroyed in the war (USSS million) and limited assistance to road passengertransport (US$4 million).

G. Au's Stratea

1.48 The Bank's overall country strategy is to assist in 'jump-starting' the economywhile discussions take place on a major economic adjustment program. The Bank's strategyin the transport sector, within this program, is to maintain and strengthen a functioning basictransport network with the capacity to meet the transport demands which will be generated bya reviving economy and to improve the overall transport system within the rural areas ofEthiopia.

1.49 To this end, the Bank has been supporting rehabilitation and improvement ofcritically needed investments in highway and port infrastructure, promoting more efficientoperations within Ethiopia's transport operating companies both through institutionaldevelopment measures (such a technical assistance, training, development of cost accountingand tariff systems) and provision of equipment (such as cargo handling for the port and trucksfor road transport). At the same time the Bank has promoted implementation of policymeasures that would enhance transport operations including: (i) tariff reform to ensure costrecovery of port, road transport and freight forwarding operations; (ii) measures to improveroad maintenance and establish an axle load control system so as to preserve investments inthe road sector; (iii) intermodal and trade facilitation measures to reduce paperwork andcumbersome procedures in customs and cargo handling in general; and (iv) followingGovernment's recent major decisions on economic policy, support for deregulation of roadtransport and development of private sector operations in road transport and freightforwarding.

1.50 In addition to rebabilitating a critical element of Ethiopia's road network, theproposed Project is designed to build upon some institutional measures in the on-going SecondRoad Sector Project (Cr. 1404-ET). Implementation of a Pavement Management Systemshould enable ERA to optimize the use of limited road maintenance funds by improving itsoverall road maintenance planning. Provision of technical assistance and training to assist inimplementation of an axle load control system should reduce premature deterioration of thisand other roads in the country.

H. Ratdile For lb. Bank's Involvement

1.51 The primary purpose of the Project is to finance urgently needed rehabilitationon Ethiopia's main transport lifeline to ensure that it remains open and functional. Arrestingdeterioration of the Mille-Assab road and upgrading selected portions where capacity is aconstraint is essential to Ethiopia's economic recovery. Timely rehabilitation also will avertthe need to make investments in more costly reconstruction at a later date.

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1.52 The need to repair this road is crucW becaue there is lite doubt that theroute will remain a primary link between Addis Ababa and the Red Sea. Though trffic onroutes to Djiboud will probably increae, Asuab Is likely to continue as Ethiopia's main portfor bulk traffic. Rehabilitation of some sections of the Addis Ababa - Ausb road wuincluded in the on-going Second Highway Sector Project but funds were insufficient toundertake more than a small section.

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II. THE HIGHWAY SUB-SECTOR

A. The Road Network

2.01 In terms of surface standard, the classified road network in Ethiopia consists of19,020 km of all weather roads, of which 4115 km are paved, 8,943 km are graveled, and thebalance 5,962 km are unsurfaced roads. With a total land area of 1.22 sq.km., this road network hasone of the lowest density in Africa (15.2/1000 sq.km). A large proportion of these roads was built inthe 1930s and 1940s and it is remarkable that these roads have been able to serve the increasinglyheavy traffic for such a long period. The functional road classification system (which should havebeen revised under the on-going Second Road Sector Project), divides the network into Primary (1000km), Feeder (4000 km) and Rural Roads (5000 km). "Rural Roads' refers to the lowest class of theclassified network. In addition there are some 20,000 km non-classified rural roads - mainly farm-to-market roads 1/. There is in the present system some confusion between the classification of roadsand the type/geometric standard of the road. A proper functional classification system will enableGovernment to define responsibilities, maintenance standards and development strategies for thevarious classes of roads. The types of road should be defined in the Design Manual and reflect thegeometric design and the bearing capacity governed by the Average Daily Traffic (ADT) and thevehicle distribution. At negotiations it was agreed that ERA will adopt a new road classificationsystem by December 31. 1993 (Para 5.2).

2.02 Road transport is the dominant form of moden transport in Ethiopia, but due to thelow density of modern roads, large parts of Ethiopia remain isolated and dependent upon packanimals or human carriers for transport. Road development has been especially deficient in theagriculturally rich areas in the West. In terms of ton/km and passenger/km, the bulk of the transportis carried outside the formal road system.

2.03 As a result of age, overloading and deficient road maintenance, both routine andperiodic, over many years, a large backlog of periodic maintenance work has accumulated and theroad network is now approaching the stage where a large proportion will need rehabilitation orstrengthening in the next three to five years if costly reconstruction work is to be avoided.

Table 2.1: CLASSIFIED ROAD NETWORK BY SURFACE CATEGORY

Year Bitumen Gravel Earth TotaL ChangeKm Km Km Km x

1982/83 3768 8790 3609 16167 -1983/84 3821 8903 4162 1688& 4.41984/85 3977 8455 4079 16511 -2.21985/86 3957 8524 4539 17020 3.11986/87 4072 8715 5266 18053 6.11987/88 4095 8849 5712 18656 3.31988/89 4115 8943 5962 19020 2.01989/90 4115 8943 5962 19020 0.0

SOURCE: ERA, Addis Ababa, 1991

LI 77Te terms Rural Roads tends to be used in at least 3 different senses:

OT) The lowest class of classified roads.fii) As a Standard of road in terms of geometry.(iii) The general &sefor describing all non-classif/ed; farm-to-market roads.

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B. Trafri

2.04 Regular traffic surveys have been carried out since 1957. Counts are carried out byERA (previously ETCA) at designated counting stations on a regular basis; they are taken about threetimes a year for seven consecutive days covering about 80 percent of the all weather road network.Relatively high traffic volumes have been observed along most of the road sections radiating from thecapital especially along the import/export corridor. The vehicle fleet (Annex 1) in 1989/91 amountedto 58,738 vehicles; that is about 1.15 vehicles per 1,000 people - the lowest in Africa. Due to oldage of the fleet and virtually no replacement, its size has been declining over the last five years.

2.05 The most trafficked road in the country is the Addis Ababa - Assab road with sectionsbetween Addis Ababa and Nazreth carrying over 2,000 vehicles per day (Table 2.2). The unusuallyhigh proportion of heavy vehicles on the road between Addis Ababa and Assab on the Red Sea is dueto the fact that about 85 percent of the total export/import trade is carried on this route, and fewprivate cars use the road for security reasons. Between Mille and Assab the ADT is about 500v.p.d.. Here, truck-trailer combinations is significant and constitute about 60 percent of the ADT.

Tabe 2.2: TRAFFIC ON ADDIS-ASSA8 ROAD(ADT) *

- --- 1988 1989-ROAD SECTION LENGTH CA BUSES TRUCKS T/T TOTAL CARS S TRUCK$ T TOTAE

Addis-Nazareth 98 668 394 679 263 2004 795 482 911 427 2615

Nazareth-Awash 125 86 75 217 312 690 89 77 228 328 722

Awash-Mille 308 32 14 97 282 425 51 19 108 396 515

Mitle-Assab 368 22 11 162 278 473 23 11 170 292 496

SOURCE: ERA, Addis Ababa, 1990* - Average daily traffic.

C. Vehicle and Axle Load Regulations

2.06 The RTA is responsible for enforcing axle load regulations as well as vehicledimensions and overall weight restrictions. Axle load weighing equipment has been in use at variouslocations on the paved network, but due to inadequate legislation in the past, overloading did notresult in prosecution. New axle load legislation was introduced through the Council of MinistersRegulation No. 11/1990, dated September 4, 1990. These regulation generally conforms to the PTA(Preferential Trade Agreement) recommendations, and allows up to 10 tons loads on axles with twintires, and 8 tons on axles with single tires. It should be noted that implementation of the newregulations will take time and that drastic reductions in the overloading problem cannot be expected inthe short term. Enforcement of these new regulations will become even more important as theGovernment proceeds with deregulating the road transport sector. An implementation schedule forthe introduction of the new regulation has been agreed upon (Annex 11). Priority will be given tostations along the Assab-Addis Ababa road where most of the overloading is taking place. Iuringnegotiations it was agreed that starting January 1. 1994. Government will submit to IDA for review,annual prozress reports on the implementation of the new axle load legislation (para. 5.02).

2.07 Table 2.3 shows the axle load distribution at the Assab weighing station where 61percent of axle loads are more than 10 tons and 30 percent are more than 12 tons. This demonstrates

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clearly the need for stronger measures by Government in curbing the overloading that is currentlytaking place. The proposed pavement management system (PMS) - consultancy will includeassistance to Government in its efforts to implement the new axle load legislation.

Table 2.3: RRP-MILLE ASSAB ROAD AXLE LOAD DISTRIBUTION

RRP MILLE-ASSAB ROADAXLE LOAD DISTRIBUTION

% OF ALL AXLES

10---- - - -

Lgo Ii it

0--I

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

AXLE LOAD IN TONS61% OF AXLES OVER 10 TONS

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D. Road Safet

2.08 The RTA is responsible for road transport services regulations and road safety. Roadaccidents are recorded and analyzed by RTA and the police. The fatality rate per 10,000 inhabitantsis only 0.3 or 1/7th of the rate in the United States, whereas Ethiopia has one of the highest fatalityrates in relation to its vehicles population, about 60 times higher than the US and more than twice theaverage rate in Africa. This indicates that the condition of the roads and the vehicles using the roads,as well as the general driver behavior, is such that should a larger proportion of the population comein contact with the modem transport system, road safety could become a much larger problem than isrecognized today. The Bank is supporting road safety measures through the on-going Second RoadSector Project. The rehabilitation of the Mille-Assab road will, through geometric improvementscontribute significantly to improve the road safety situation. Additional initiatives such as generaleducation of the public, better vehicle inspection systems and driver training schemes, will also beneeded as the traffic develops and may be considered under a follow-up project. Accident statisticsare shown in Table 2.4.

Table 2.4: ROAD ACCIDENTS

Totat of Rate per 100 mitlion veh./bnsaccidents Numter of Number of

Year involvins lnlor Persons personsiniury to Iniured K_iled Accidents Injured Kilpersons

1984 2595 1796 799 3.6 2.5 1.1i985 5334 4119 1215 2.5 1.9 0.61986 5643 4385 1258 2.4 1.8 0.51987 5996 4795 1201 2.7 2.1 0.51988 3985 3075 910 1.7 1.3 0.41989 4045 2993 1052 0.7 0.2 0.41990 4578 3909 1169 - -

SOURCE: RTA, Addis Ababa, 1990/1991

E. Road Administration

2.09 The highway administration in Ethiopia was organized with assistance from the UnitedStates Federal Highway Administration in the early 1950s. The organization was gradually built upto a standard which compared favorably with sister organizations, both in Africa and elsewhere.With minor changes, this organization, under the Ministry of Transport and Communications,continued to function until 1980 when the Ethiopian Transport Construction Authority (ETCA) wasestablished under the Ministry of Construction. At that time, the legal framework for the highwayadministration in Ethiopia was changed by a Government proclamation that declared the Ministry ofTransport and Communication (MOTAC) as the body responsible for the highway network. Thesame proclamation stated that MOTAC was responsible for road planning and for 'causing the roadnetwork to be constructed and maintained". Consequentdy, ETCA in theory, was reduced to aconstruction enterprise only. ETCA, however, maintained its position as the de facto highwayauthority for the country, despite the change in the legal framework.

2.10 In 1987, Government decided to divide ETCA's responsibilities between the newlyestablished Building and Transport Construction Design Authority (BATCODA) and ETCA. Designand construction supervision of new roads were transferred to BATCODA, which also becameresponsible for developing specifications and design standards. BATCODA was divided into twodepartmnents: the Transport Construction Design Enterprise (TCDE) dealing with roads, ports, airports

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and railways, and the Building Construction Design Enterprise (BCDE) dealing with buildings. Thereorganization resulted in unclear definitions of duties and legal responsibilities, especially in the roadsector. Urgently needed maintenance work on bridges was neglected since no single institution wasfully in charge of design and execution of the work. Since 1987, Government and IDA havecontinued discussions about the legal framework for the highway administration. In November 1990,Govermnent issued a new proclamation establishing a unified highway authority under the Ministry ofPublic Works & Urban Development (MOPW&UD). The new organization, the Ethiopian RoadAuthority (ERA), has now taken over the role of ETCA, and is responsible for all planning, design,construction administration and maintenance of roads, including rural roads.

This responsibility has been recognized by ERA in principle, but the actual transfer of TCDEto ERA has not yet taken place. At negotiations. it was agreed that the design department in ERAwill be re-established, by March 31. 1993 at the latest. either as a new departmnent or as a transfer ofTCDE (Para 5.02).

2.11 To date, there has been little coordination of Government's efforts to develop andmaintain the rural roads network. Construction has taken place under a number of different umbrellaagencies, the Ministry of Construction through ERA, the Rural Infrastructure Main Department of theMinistry of Agriculture, the Ministry of Coffee and Tea Development and the Relief andRehabilitation Commission. There is no one agency to determine which roads are built, where, inwhat order of priority, and to what standard. Nor is there a consensus on how much of the totalexpenditure on roads should be spent for maintenance and how much for expansion of the network.Moreover, since design standards and construction methods have varied, many roads have never beenofficially handed over to ERA for maintenance or included in the classified network. Even whenERA's standards have been met, since recurrent sources of financing for maintenance were notidentified or developed by those doing the construction, ERA has not been in a position to acceptresponsibility for these roads. When there has been no handover, or the road has been built to an"unacceptable" standard, the responsibility for maintenance is unclear; as a result, many rural roadshave become impassable. A Bank mission visited Ethiopia in May 1992 to assist Government indeveloping policies for the rural roads sector and a comprehensive strategy is now being prepared.

2.12 The organizational structure for ERA is shown in Annex 8. Under the GeneralManager, there are a number of technical and administrative divisions. The Chief Engineer isresponsible for both the Rural Roads Division and the Operations Division. The Rural RoadsDivision uses both machine intensive and labour intensive techniques for construction andmaintenance of the rural roads. The Operations Manager is responsible for maintenance andconstruction of main roads mainly through force account and for contract administration.

2.13 The Road Construction Section under the Operations Manager undertakes constructionby force account. The quality of work is generally good, but the force account operations arevulnerable to shortages of spare parts and construction materials. At present there are 10 brigadescomprising of five gravel brigades, four asphalt brigades and one bridge brigade. Each brigade isheaded by a project manager, and is a self contained construction unit consisting of engineers,technicians, operators, and clerks, skilled and unskilled laborers, equipment, workshop/stores,laboratory and office facilities necessary to function efficiently in the field. The Road MaintenanceDepartment supervises all maintenance operations implemented by the eight districts, headed by theDistrict Managers. The RRD is responsible for construction and maintenance of low cost, lowstandard, unclassified roads. The Rural Road Department should be the key institution for promotingthe rural roads sub-sector.

_~~~~~~~~~ - - - - - - - -_-

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F. Planning and Financing

2.14 The Planning and Programming Division (PPD) in ERA is responsible for roadplanning. PPD is staffed by professional staff with adequate experience, training and skills. ThePPD is also responsible for the preparation of budgets and road sector programs. When the programsare finalized, the proposals and budgets are reviewed by the Board of ERA and after approval,submitted by the Ministry of Public Works & Urban Development (MOPW&UD) to the Governmentfor its approval.

2.15 Expenditures on road maintenance are financed from the recurrent budget. Capitalexpenditures for road construction are financed mainly from external sources (Annex 4 and 5). In the1988/89 fiscal year, an increase in the budget for maintenance brought the allocation up to a levelwhich would enable the Government to keep its total road network in a reasonable condition. Thiswas maintained in 1989/90 but declined somewhat in 1990/91. The lack of foreign exchange topurchase new equipment and spare parts for the aging equipment fleet, represents a more seriousproblem. Other donors (AfDB, Japan, EEC and Finland) are assisting Government with equipmentand spares, IDA funded some equipment under the Second Road Sector Project and additionalequipment will be included in the ERRP.

2.16 The revenue generated from road user charges (Annex 6) increased from Birr 85.3million in 1982/83 to Birr 230.3 million in 1990/91 with an average annual growth rate of 6.6percent. The annual amount of total revenues from road user charges is sufficient to cover funding ofroad maintenance. If, however, road use revenue is adjusted for the average level of import duty,attributable to general revenue generation, it is not clear whether specific road use charge revenue issufficient to meet the total needs of the roads sector. The share of taxes on petroleum was 50 percentof total road user revenues. In the same year, i.e. 1990/91 total Government expenditures on roadswere about Birr 77.1 million-Birr 48.0 million for road maintenance and Birr 42.5 million for roadconstruction (Annexes 4 and 5); the share of rural road construction was about 32 percent of allinvestments in roads. While the revenues generated are sufficient, it is important, that an appropriateallocation of funds for road maintenance is made. It was agreed at negotiations that starting withFY93 ERA will submit yearly to IDA for review and comment its draft annual road maintenanceprogram and budget (para. 5,02).

G. Road Engineering and Construction Supervision

2.17 Since the reorganization of the roads administration, ERA has been responsible for alldetailed engineering and contract administration for new road construction. ERA has its ownContracts Administration Department. Detailed engineering is still performed by TCDE despite thetransfer of responsibility for design and supervision work back to ERA (Para 2.10). The re-establishment of ERA's own design capacity is a condition of the proposed credit (Para 2.10).

2.18 Although ERA has qualified technical staff, it has little experience in dealing withcontracts awarded under International Competitive Bidding (ICB). For that reason, that the design ofthe main civil works component of the Project has been reviewed by experienced internationalconsultants, and consultants will be used also for the construction supervision. Actual contractadministration will be carried out by ERA itself.

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H. Road Co

2.19 Prior to the 1974 change of government, most major road construction was carriedout by international contractors. The domestic contractors were at that time also expanding theirparticipation. Since 1974, very little interest has been shown by international contractors in roadworks in Ethiopia. Presently, most of the road construction activities in the country are undertakenby MOPW&UD own forces. Some of the old private contractors have been taken over byGovernment and transformed into public enterprises, and Government has assisted in strengtheningtheir capacity through the transfer of equipment to enable them to carry out major road constructioncontracts. These are Blue Nile Construction Enterprise (BNCE), Berta Construction Enterprise andBatu Construction Enterprise. BNCE is presently in the process of finalizing the construction of a250 km long feeder road between Nekempte and Bure on a contract which was awarded throughinternational competitive bidding in 1985 (Second Road Sector Project, Cr. 1404-ET).

2.20 The TGE has as one of its stated objectives to encourage private participation in theconstruction industry. Bank's experience with BNCE on the Nekempte - Bure project indicate thatthe Enterprise is technically well qualified to take on large and complex contracts. However, thefinancial and managerial autonomy required by Bank guidelines for qualification may be lacking atpresent.

1. Road Mintennce

2.21 The day-to-day road maintenance operation for all classified roads is handled by ERAthrough the Road Maintenance Department. Most of the road network suffers from neglect in routineand periodic maintenance (about 80 percent of the paved roads are characterized as poor). This isparticularly noticeable on the paved roads that are subjected to high traffic volume and heavy loading.Potholes occur frequently and are left unattended for long periods of time, resealing work is delayedand shoulders and side-drains are not maintained. In addition, the roads, especially in the northerndistricts, were badly damaged during the civil war that ended in 1991. In total, a backlog of about7500 km of periodic maintenance work (resealing and regraveling) has accumulated. The ERRP willaddress this issue but will only cover 20% of roads in need of periodic maintenance work.

2.22 Under the First Road Sector Project (Cr. 708-ET of 1977), financed by IDA, ERAintroduced a road maintenance management system to enable it to plan and schedule its maintenanceoperation better. Lack of equipment, management skills and the effects of the civil war in thecountry, have resulted in a situation where the maintenance management system, has not operated asexpected. ERA should update and modify the system in view of recent developments in computer andsystems technology, such as geographic information systems. Furthermore, the management systemmust be improved to give sufficient early warning through a monitoring and evaluation system. Theintroduction of a pavement management system (PMS) that will alert ERA to take the necessarycountermeasures in time and thereby reduce the risk of premature road failures, is part of theproposed Project.

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2.23 The major constraints encountered in carrying out both routine and periodicmaintenance on the road network are three-fold: (i) shortage of foreign exchange effectingreplacement of equipment as well as supply of spare parts and materials; (ii) institutionalshortcomings; and (iii) the fact that ERA is responsible for airports as well as roads. This is reflectedin the aging and inadequate fleet of road maintenance equipment, the lack of spare parts includingtires and the shortage of road maintenance materials including bitumen, cement and steel.

2.24 The proposed pavement management system (PMS) will enable the Government tomonitor the entire paved road network (and if considered necessary, portions of the non-paved roadsas well) on a continuous basis so that deterioration of the scale that is now taking place on portions ofthe Addis Ababa-Assab road would not be allowed to occur in the future, assuming that the physicalcapacity is re-established. ERA will be able to alert itself in time and properly program its roadmaintenance operations. The PMS will supplement other management systems already in place andunder preparation (supplies, construction, equipment, etc.)

2.25 The Supply and Equipment Department (SED) provides centralized support to ERA'soperational divisions. Due to budgetary constraints and lack of foreign exchange to purchase spareparts, the SED has been unable to meet the demands from the various districts. The result is a lowrate of availability of equipment (40 percent). The AfDB Road Maintenance and RehabilitationProject, signed in 1989, includes new equipment and spares for rehabilitation of old equipment. Theon-going Finnish aid program is assisting road maintenance operations with new equipment andtechnical assistance in the Alemgena District. Prior to negotiations ERA submitted to IDA for reviewa detailed list of specialized eguipment needed for maintenance units on the Addis Ababa - Assabroad(nra. 5. After analyzing the results of the ERRP, IDA's next highway sector operationshould review the overall equipment situation and assess the need for renewals, rehabilitation andscrapping.

J. Trainine

2.26 ERA's personnel at various levels have participated in on-the-job training as well asformal training through its training center at Alemgena and through both short and long term trainingoverseas. Alemgena Training Center began its operation in 1956. Since then, the Center hasprovided training courses and trade tests for about 40,000 people. The training staff at AlemgenaTraining Center include 28 instructors.

2.27 Under the Second Road Sector Project (Cr. 1404-EI) consultants were employed torevise, update and prepare new training courses, and train the trainers. Workshop and engineeringequipment, tools and instruments were also provided through the Credit. The training provided atAlemgena is now satisfactory. An acceptable detailed training programn for ERA was-submittedtQIDA at negotiations (Annex 15).

2.28 In addition to the classroom instruction at Alemgena, the center operates a trainingproduction unit (TPU) for highway maintenance and construction. The training facility at Ginchi isresponsible for training rural roads construction and maintenance personnel, especially in labour basedmethods. Generally the training of staff at foreman and technician level is adequate both in quantityand quality. Additional training to professional staff for special purposes, such as the proposed PMS,etc., is provided for in the Project.

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K. Accounting and Auditing

2.29 The financial and accounting responsibilities in ERA are entrusted to the FiscalServices Division. The Division has four branches: General Accounting, Cost Accounting, PropertyRecords, and Pre-Audit and Data Control. There are about 55 employees working in the Division;however, only seven have university level degrees in accounting. The Division functions adequately,but should make an effort to attract more university graduates in accounting and also by providingfurther training in accounting and finance to existing staff. The University of Addis Ababa offerssuitable training opportunity, and ERA has included such training in the proposed training program.(Annex 15).

2.30 Accounting records are maintained in accordance with generally accepted accountingprinciples, legal requirements and Government guidelines. These are detailed in ERA's FiscalInformation System Accounting Manual which was prepared by a consultant (under the Second RoadSector Project) in cooperation with the Fiscal Services Division and has been in effect since June1984. Accounts are closed yearly and three financial statements, namely, a balance sheet, a sourceand application of funds and a revenue statement are prepared and submitted to the Ethiopian AuditServices Corporation for auditing. Despite difficulties with computer hardware, ERA has been ableto eliminate the backlog of Project audit reports that had been built up over the last three to fiveyears. To improve ERA's accounting capacity, the present computer system in ERA is beingreplaced with a higher capacity and recent generation computer with a number of terminals installedin the Fiscal Services Division for direct access by accountants of the Division. The installation ofthe new computer system will require the services of a consultant for a short time to train theDivision's employees in the use of the system. The cost of this service is included in the on-goingSecond Road Sector Project (Cr. 1404-EI).

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III. PROJrECT CONCEPT AND COMPOSMON

A. Project Origin and Prenaration

3.01 The original route from the port of Assab to Addis Ababa went via Combolcha in theWelo Region. Under the Fourth Road Project, 1976, the link between Mille and Awash wasconstructed (280 kIm), and the Nazareth to Awash section (125 kIm), was paved (see Table 3.1 and theattached map). The upgrading of the section between MUle and Assab was to be included in the on-going Second Road Sector Project (Cr. 1404-ET). In 1985, however, the Government experienced asevere shortage of counterpart funds and requested IDA to increase the disbursement percentage onother components in the Project, (mainly the Nekempte-Bure Road), and consequently the upgradingof the Mille-Assab section-except for the Mille-Logia segment-had to be deleted. Deterioration ofthe road, however, has continued, and Government has obtained a loan/credit from the AfricanDevelopment Bank to rehabilitate about 134 km between Semera and Elidar (total cost US$42million). Work on this section is now beginning. Government is also concerned about other sectionsof the road between Addis Ababa and MUle and is carrying out detailed pavement surveys, especiallybetween Nazreth and Awash and between Awash and Mille.

3.02 The TCDE finalized the design for the rehabilitation of the Mille-Assab section in1989 and prepared contract documents and cost estimates have been prepared. Since TCDE lackedexperience in preparing complete bidding documents suitable for projects to be carried out throughinternational competitive bidding (ICB) in accordance with Bank guidelines, Government engaged aconsultant to review the design and assist in the preparation of bidding documents and to update costs.This was completed in April 1992.

B. Poect Objectives

3.03 The primary purpose of the proposed Project is to finance urgently needed repairs andupgrading on a section of Ethiopia's main transport artery, so that it remains open to traffic andfunctional, and to extend the service life of the road for a period of 15 years. In addition, the Projectseeks to assist Government in putting into place institutional measures aiming at preventing suchemergencies from arising in the future through the introduction of better road monitoring andmanagement tools and better axle load control.

3.04 The specific objectives of the proposed Project are:

(i) To improve the bearing capacity, geometry, safety and riding quality on sectionsbetween Mille and Assab on the Addis Ababa-Assab road;

(ii) To improve Government maintenance capacity on the road between Addis Ababa andMille, not included for rehabilitation in the Project, and to finance the review of thedetailed engineering for the eventual full rehabilitation of this section at a later date;

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(iii) To institute a pavement management system to enable ERA to better assess potentialproblems and plan future road maintenance and reconstruction needs in a timelyfashion;

C. Pro3ed Description

3.05 The Project for which an IDA credit of SDR 66.4 million (US$ 96.0 million)is proposed, includes:

(i) road rehabilitation of sections of the road between Mille and the Port ofAssab, including construction supervision;

(ii) design and implementation of a pavement management system includingprovision of technical assistance, equipment and other consultancy services;

(iii) consulting services for sector related studies;

(iv) training and technical assistance; and

(vi) road maintenance equipment.

The Project components are discussed in more detail below.

Road Rehabilitation

3.06 Mille-Assab Road Rehabilitation. The main component of the proposed Project willbe the rehabilitation of sections of the Mille to Assab road, part of the Addis Ababa-Assab road (seeTable 3.1). The Bure-Assab section lies within Eritrea. The Transitional Government of Ethiopiaand the Provisional Government of Eritrea have provided the Bank with assurance that there will beunhindered access to the construction sites. The African Development Bank has agreed to finance therehabilitation of 134 km between Semera and Elidar section, and IDA is financing rehabilitation of 25km between Mille and Logia under the on-going Second Road Sector Project (Cr. 1404-ET). Thissection is scheduled for completion by mid-1993. Both sections will be constructed through forceaccount by ERA. Under the Project, the balance of the Mille-Assab road will be rehabilitated,totalling 196 km. Government has also carried out deflection measurements to identify the residuallife of the Addis Ababa - Mille road to define where and what measures are required to extend theuseful life of the road. The Project includes assistance to ERA to increase its maintenance capacityon this road to enable Government to keep the road in a reasonable condition until funds can bemobilized for rehabilitation.

3.07 Overall, the Project is designed to rehabilitate all damaged sections and to widensubstandard sections so that the residual life of the entire road becomes 15 years as measured inequivalent standard axles (ESA 80). The pavement width is presently 6 to 6.5 m and the shouldersare 0.5 m, either side. The surface itself shows various types of surface failure: cracking,depressions, potholes, uneven patching and other types of repair works carried out over the years.Rutting is not pronounced, indicating that the overall bearing capacity of the subbase and subgrade isgenerally sufficient. The visual failures can broadly be associated with base and surface failurescaused by overloading. The general increase in tire pressure on the heavy goods vehicles using the

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road has most likely contributed to the failure of the basecourse. Tire pressures that used to be 70 to80 KN/cml are now reaching up to 120 KN/cm2 . This makes a significant difference in imposedstresses, espocially in the upper part of the pavement structure.

Tabhle 3.1: ETHIOPIA ROAD REHABILITATION PROJECT DATA SUMMARY

COMBOLCHA N ASS

MILLE

Logia D ;ure

AWASH ' DJIBOUTI

MILLE- LOGIA- SEMERA- ELIDAR- BURE -LOGIA SEMERA ELIDAR BURE ASSAB

LENGTH KM 25 41 134 80 75

COST 8.0 24.9 41 .4 42.6 37.4U S $ M ILL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

DONOR IDA IDA AfDB IDA IDA

PROJECT RS II RRP RRP RRP

COMMENTS Force ICB Force CB ICBCOMMENTS Account OBAccountlB B

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3.08 To improve the geometric standard and rectify the pavement failures, the followingworks are proposed: (a) reconstruction of sections where the pavement structure is especially weak;(b) widening of the carriageway, base and sub-base from the present 6 or 6.5 m. to 7 m. andproviding 1.5 m. shoulders either side; (c) strengthening the existing pavement by adding a granularbasecourse layer; (d) relocating the road where the horizontal alignment is substandard (this wouldapply to about 6.5 km in total); (e) constructing a new wearing course of 40 to 50 mm asphalticconcrete on the entire length of road, 7 m. wide; (f) improving drainage, both longitudinal and acrossthe road, including culverts and structures; and (g) constructing parking/service lanes through built-upareas.

3.09 A design life of ten years was originally proposed by ERA apparently to reduce thecost of rehabilitation. A fifteen years design life involves a stronger and more costly pavementconstruction (to cater for 15 mill. ESA as opposed to 9 mill ESA for ten years). The present patternof overloading has been taken into account in the pavement design. From the statistical material itappears that the risk of extreme axle loads in excess of 20 ton that might cause the road to fail isminimal. The pattern of overloading is not likely to change adversely in the future. In fact it shouldbe expected that improved axle weight enforcement in the future would improve the situation. It canbe concluded that the risk represented by overloaded vehicles, is taken care of in the pavementdesign.

3.10 The choice of design life should also take account of the reliability of futuremaintenance. The risk that fully adequate routine and periodic maintenance will not be providedfavors a longer design life. Factors such as traffic level, percentage of heavy traffic, and the discountrate used will determine the optimum design life. Given the data from the Mille - Assab road, withADT of about 850 projected for the year 2000, about 90 percent heavy vehicles and at a discount rateof 12 percent, a 15 years design life would be economically justified.

Design and Implementation of a Pavement Management System

3.11 To enable ERA to monitor its paved road system, so that road deterioration of thescale taking place today on the Project road between Addis Ababa-Assab is not allowed to continuewithout adequate provision for repair or reconstruction and to assist the Government in betterprogramming its road maintenance operations, the Project will finance the establishment of apavement management system (PMS) for the whole bitumenized network in Ethiopia (para. 3.13).The system will be designed and implemented with technical assistance to the extent required, inaccordance with the outlined terms of reference contained in Annex 9. Such technical assistancemight be provided through a twinning arrangement with a road organization famniliar with suchtechniques, through a reputable consulting firm or a combination of both. The Project componentwill include the cost of training staff to operate the pavement management system, including computertraining.

3.12 The Project will also provide equipment sufficient to equip the pavement managementunit that will be established. Such equipment will consist of vehicles, Benkelman beam, Dynamiccone penetrometer (DCP), computer equipment, etc. During negotiations it was agreed that ERA willestablish by June 30. 1994 and thereafter maintain a Pavement Management System to program themaintenance of the paved road network (para. 5.02).

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Technical Assistance and Training

3.13 The domestic construction industry is weak and for large civil works contracts, thereis virtually no capacity in the country apart from a few parastatals. The Project will cover the cost ofsector related studies and training.

3.14 The Project also includes provision for technical assistance to GOE for specializedsupport during the implementation of the Axle Load Control system. Such assistance could take theform of consultancy services, through twinning with sister institutions familiar with the techniquesrequired or through an overseas training program. Details will be agreed upon between GOE andIDA during the implementation of the enforcement of the new regulations as set out in Annex 11.

Equipment

3.15 Under the Project, ERA would procure specialized road maintenance equipmentsuitable for patching and resealing work along the whole stretch of road from Addis Ababa to Mille(Annex 14) and improvement of the Awash section maintenance depot. In addition, the Project willfinance equipment needed for the implementation of the PMS and the Axle Load Control Systemfollowing the consultants recommendations and MOTAC's review of the weigh-bridge stations andtheir need for replacements and spares.

Other Consultine Services

3.16 It is anticipated that during Project execution, preparation work for the next roadsector project will start, and the Project provides for funds to cover consultancy services to reviewGovernment designs for components to be included in such a new sector project. Consultants willalso be engaged to prepare a new Design Manual and a new Standard Specifications for roads as wellas to assist in other sector related studies.

D. Cost Estimates

3.17 The total Project cost, including physical and price contingencies, but net of taxes andduties, is estimated at USS109.3 million with a foreign exchange component of USS86.8 million asshown in Table 3.2.

3.18 The estimates are based on 1991 prices. For the main civil works component, thecost estimates are based upon ERA's estimate as reviewed and agreed upon with consultants in April1992. As there have been no ICB contracts awarded in Ethiopia on roads for many years, unit ratesfrom similar work in neighbouring countries have been analyzed and used to assist in establishingrates in the estimates. Estimates for equipment and technical assistance are based on price experiencein Ethiopia. For consultancies, the estimates include cost of accommodation, transport and fieldallowances for local staff. Cost estimates for the technical assistance components are based on recentERA man-month rates. The estimates include cost of accommodation, transport and allowances forlocal staff. To determine the price contingency allowance for foreign costs estimated in US Dollars,an expected price increase of 2.8 percent for 1992, 3.9 percent for 1993, 3.9 for 1994, and 3.8percent for 1995 to 1998 has been used. These rate have also been used for local costs on theassumption that the difference between domestic and international price inflation wDI be offset byequivalent adjustments in the foreign exchange rate. Physical contingencies of 15 percent have beenadded to the base cost. Price and physical contingencies total US$28.7 million or 26 percent of totalProject cost.

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Table 3.2: Project Cost Estimates

- US S MUIioiZ -

PFoin IDADescription Local Foeip Toal as S of

Total * USSM

1. CIVIL WORKSMille-Assab

Logia - Semer (41 kin) 3.09 12.37 15.46 80 a5 13.14Elidar - Bure (S0 kin) 5.15 20.17 25.39 so S5 22.01Bure - Assab (75 kln) 4.73 1.94 23.67 so S5 20.12

Awash Section Depot: 0.07 0.07 0.14 50 S5 0.12Subtotal CivU Works 13.01 52.0 6S.1? 53.39

11. TECHNICAL ASSISTANCE/TRAININGSupervision of 1 0.59 3.32 3.90 85 100 3.90PMS Consultancy 0.14 0.82 0.97 35 100 0.97Design review, Addis-MiLie 0.06 0.45 0.53 a5 100 0.53Training/Twinning 0.06 0.45 0.53 a5 100 0.53Design review, HSIII Projects 0.11 0.62 0.72 25 100 0.72Design Manual/Standard Specs. 0.11 0.60 0.70 a5 100 0.70Sector Related Studies 0.04 0.21 0.24 I5 100 0.24Subtotal T/A & Training 1.14 6.46 7. 60

Ill. EQUIPMENTMtc Equipment 0.00 7.32 7.32 100 100 7.32PMS-Equipment 0.00 0.24 0.24 100 100 0.24Weighbridge Equipment 0.00 0.24 0.24 100 100 0.24Subtotal Equipment 0." 7.06 7* 7.80

BASE COST 1991 14.2 6.35 U1SJ 88 70.79

IV. CONTINGENCIESPrice 6.15 10.45 16.60 14.59Physical 15% 2.13 9.95 12.09 10.62

Subtotal 3.28 20.40 28.69 25.21

GRAND TOTAL (Net of Taxes and Duties) 22.90 3.75 10626 79 88 96.00

Taxes and Duties 12.42 0.00 12.42GRAND TOTAL Inl. Taxes and Duties 34.92 56.75 121.66 96.00

E. F_

3.19 IDA's contribudon would be USS96.0 million or 88 percent of the total project costnet of taxes. The Govermment of Ethiopia will finance pant of the local costs, and the total value ofthe Government contribution is estimated at USS13.3 million, or 12 perct, not including taxes andduties, which are estimated at US$12.4 million equivalont. Tho details of the financing plan areshown in Table 3.3.

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Table 3.3: FINANCING PLAN

(US$ MUllion)

I ~~FundingDescription Total Cost

_________________________ _ mIncl. Cont. MIA GOE

I. CIVIL WORKSMille - Assab:

Logia - Semera (41 kim) 20.96 17.82 3.14Elidar - Bure (80 kIm) 35.11 29.85 5.27Bure - Assab (75 kIm) 32.10 27.29 4.82

Awash Section Depot: 0.20 0.17 0.03

Subtotal Civil Works 8837 75.12 13.26

L. TECHNICAL ASSISTANCE/TRAININGSupervision of I 5.29 5.29 0.00PMS Consultancy 1.31 1.31 0.00Design review, Addis-MUle 0.72 0.72 0.00Training/Twinning 0.72 0.72 0.00Design review, HSI-project 0.98 0.98 0.00Design Maunal/Standard Specs. 0.95 0.95 0.00Sector Related Studies 0.33 0.33 0.00

Subtotal T/A & Training 10.30 10.33 0.00

HI. EQUIPMENTMtc. Equipment 9.92 9.92 0.00PMS-Equipment 0.33 0.33 0.00Weighbridge Equipment 0.33 0.33 0.00

Subtotal Equipment 10.58 10.58 0.00

GRAND TOTAL INCL. CONTINGENCIES 109.26 96.00 13.26et of axes and Duties

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F. ImRlementatlon

3.20 The General Manager of ERA under MOPW&UD will be responsible for executingthe Project. Consultants will be used: (i) to review ERA's design; (ii) to assist in the preparationand carry out supervision of the civil works components; (iii) to assist ERA in the design andimplementation of a pavement management system; (iv) to assist ERA in preparing new projectcomponents for a possible Third Road Sector Project; (v) and to assist MOPW&UD to carry outsector related studies. The time schedule for implementation of the Project is based on a five yearperiod starting actual construction in March 1993 (Annex 10). This time schedule is consideredrealistic, since the Project has been given high priority by Government and since the bulk of theProject consists of works to be carried out by international firms and supervised by internationalconsultants. To better monitor progress on institutional reform there will be a comprehensive mid-term review of the Project. including a review of road maintenance operations. the establishment ofthe PMS and compliance with axle load controls. It will also cover overall proiect implementationand. compliance with legal covenants. The mid-term review would take place by mid-CY1995. TheProject is expected to be completed by March 31, 1998.

G. Procurement

3.21 Procurement arrangements for the Project are as shown in Table 3.4. The civil workscontracts for the Mille-Assab road will be awarded on the basis of international competitive bidding(ICB) and limited to prequalified contracting firms according to Bank Guidelines. Due to the smallamount involved (US$120,000) and because it is only improvement to existing structure,improvements to Awash Section Depot will be carried out through force account (ERA or EthiopianBuilding Construction Authority (EBCA)). Procurement of consultancy services will be as per BankGuidelines. Road maintenance equipment, vehicles, PMS and weighbridge equipment and spares willbe procured through ICB. All contracts greater than US$100,000 equivalent (which constitutes over95 percent of all procurement), will be subject to prior review by IDA before final award of suchcontracts.

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Tabk 3.4 PROECUJRE ARRANGEMENIS

(US $Million)

PROCUREMENT METHOD

Decriptin ICB OTHER

TOTALTOTAL IDA TOTAL IDA VALUE IDA

1. CIVIL WORKSMill - A_b:Lo& - Semm (41 kn) 20.96 17.32 20.96 17.82EWdar - Bure (0 km) 35.11 29.85 35.11 29.85Bure - Asb (75 km) 32.10 27.29 32.10 27.29

Awash Section Depot: 0.20' 0.17 0.20 0.17Subota CIi Werks 33.18 74.95 0.20 0.17 88.37 75.12

U. TECHNICAL ASSISTANCEMlRANINGSupervision of 3 5.29 5.29 5.29 5.29PMS Cosultancy 1.31 1.31 1.31 1.31Design review, Addis-Mille 0.72 0.72 0.72 0.72Training/Twinning 0.72 0.72 0.72 0.72Design rview, HSM-projects 0.98 0.98 0.98 0.98Design Manual/Stadard Specs. 0.95 0.95 0.95 0.95Sector Related Studies 0.33 0.33 0.33 0.33Subtotal T/A & Tr 10.30 10.30 10.30 10.30

m. EQUIPENTMtc. Equipmet 9.92 9.92 9.92 9.92PMS-Equipmen 0.33 0.33 0.33 0.33We4hbridp Equipmsut 0.33 0.33 0.33 0.33Subtotal Equ"t 10.53 105os 10.58 10.58

GRAND TOTAL INCL. CONTINGENCIES 96.76 85.33 10.50 10.47 109.26 96.00

/ force account

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H. Di_

3.22 Overall, 88 percent of total cost will be covered by the proposed Credit. Forindividual components, the Credit will be disbursed as follows:

Table 3.5: DISBURSEMENT

COMPONENT DISBURSEMENT IN X FORLocal Coati/ Foreign Cost!/

(a) Civil Works 25 100

(b) Tmchn1cal asmfstwice and TrainingSuPervision of civit works 100 100FM con ultancy 100 100Design Review wnd Design ganual 100 100Training 100 100Sector Related Studies 100 100

(c) EquipmntRoad mintenrnce Equipment and Spares 100 100PNS Equln int 100 100we f Sgh-brl *quipeent 100 100

N/ Nt of taxes nd duties.

3.23 The Project is expected to be completed by March 31, 1998, and the Credit ClosingDate will be September 30, 1998. An estimated schedule of disbursement of funds is set out in Table3.5. All disbursements will be fully documented to the satisfaction of the Association. Paymentagainst contracts for equipment and technical assistance less than US$50,000 will be disbursed understatement of expenditure (SOE). Documents verifying expenditures for the SOE are to be kept in acentral location for review by IDA supervision missions. During negotiations it was agreed that aspecW account to facilitate Project payments for all expenditures in the amount of US$1,000,000 beopened in the National Bank of Ethiopia in the name of ERA (para. 5.02).

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Table 3.: ESTIMATED SCHEDULE OF DISBURSEMENT

lank FY *nd Slibured CwutuatIvQuarter Ending In Curtcr Axouit...... .......... ... . . . .. . . . . . .. . .. . . . . . .. . . . . . . . . . . . . . . . . . .

1993June 30, 1993 2.0 2.0

1994S.pte. r 30. 1993 9.0 11.0DceS=er 31 1993 2.0 13.0March 31, 1494 3.0 16.0Jure 30, 1994 3.0 19.0

1995S.pteee r30, 1994 4.0 23.0Dceccb r 31 1994 4.0 27.0March 31, 1 9 5.0 32.0Jure 30, 1995 6.0 38.0

1996S.pt.a~.r 30. 199 6.0 4.0Dceciber 31 1995 7.0 51.0March 31, 14i 5.0 59.0June 30, 1996 9.0 68.0

1997Septe r SO, 1996 7.0 75.0D*ce=r 31 1996 6.0 81.0March 31, 147 5.0 86.0Jurn 30, 1997 4.0 90.0

1998S=pt. r 30, 1997 3.0 93.0Dec.b r 31. 199 2.0 95.0March 31, 1496 1.0 96.0June 30, 1996 0.0 96.0

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Table 3.7: SCHEDULE OF DISBURSEMENT CHART

ETHIOPIA RRPSCHEDULE OF DISBURSEMENTS

100 -……

80- jj4

60 _ - 1- te! 101-AW8;w

U* 40-…… -- S-

C20

1993 1994 1995 1996 1997 1998 1999

Fiscal Year and Quarter

SAR Estimate Actual

CLOSING DATE: September 30, 1998

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I. Re=orting and Audldngr

3.24 Project accounts will be maintained by ERA with separate accounts for chcomponent. Auditing of ERA is the responsibility of the Ethiopian Audit Service Corporation(EASC). For the Project the auditor will furnish the Association certified copies of the ProJect'sfinancial statements for each year and a report of such scope and in such detail as the Asoc onshall have requested.

3.25 The audit provided by the auditor would make specific referenco to the spoeclaccounts operation and to expenditures withdrawn under the SOE procedures and expres a separaeopinion on these matters. To avoid bottlenecks in auditing, the project accounts will, if ready, butnot audited by EASC within three months of being submitted, be audited by private uditors. Tneaccounts will be audited not later than six months after the end of each fiscal year (starting withFY93).

3.26 The executing agency, ERA, will be responsible for overall Project reportn asfollows:

(i) Inception, progress and final reports on technical assistance by consultan for thePavement Management System, and any sector relatd studies agreod upon;

(ii) Quarterly progress reports and completion report on all Project components by ERA;

(iii) By January 1 of each year an audit report on the Project accounts for the previousfiscal year by the EASC or an independent auditor; and

(iv) Progress reports on compliance with agreed action plans regarding:

a) Axle load control system.b) Pavement Management system.c) Annual Road Maintenance Program.d) Classification system.

3.27 During the negotiations Government agreed with theso reportig requirements (pam.5.02), including a project completion report by ERA in a form satisfactory to the Association not laterthan six months after the Project Closing Date (September 30, 1998).

J. in_l 1

3.28 The Project is expected to have both positive and negative impact on the environment.Table 3.8 summarizes the impact from the main components. Overall, the environmental impact ofthe civil works component will be very limited.

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Table 3.8:

ASPECIb POSITIVE NEGATIVE

1. DURING Employment opportunities Detours will reduceCONSTRUCTION / operating speed.

Rescue vehicles availableSingle lane traffic.

Enhanced maintenanceon critical sections. Dust and noise from

construction activities.Medical facilities available

Soil erosion.

2. LONG TERM(i) Civil Works Improved riding quality. Higher speeds could result

in an increase in theImproved road safety due accident rates and theto wider pavement, improved severity of accidents.geometry and better ridingsurface. New quarries will be

opened. Visual intrusion.Reduced risk of bridgefailures.

Possible to perform propermaintenance.

(ii) PMS Early warning of pavementfailure will reduce riskof having to repeat majorconstruction works.

More economical use ofscarce road buildingmaterials.

1' The contract document will limit the length of detours in operation at any one time and specify howthe clean-up of quarries shall be done to limit the visual impact and eliminate safety hazards.

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IV. ECONOMI EVALATION

A. General

4.01 The proposed Project will make a major improvement to vehicle operations on thecritical route, Addis Ababa - Assab, by rehabilitating 196 kms of the road in the poorest condition.The project will improve about 23 percent of the total route which is the main corridor to the port ofAssab and acts as the lifeline for the country and its population. During the period of droughts, theroad is particularly crucial for relief cargo.

4.02 The great majority of traffic on the project sections is long distance, heavycommercial vehicles. In recent years, most of the traffic passing through Mile is travelling betweenAddis Ababa and Assab. Vehicles serving Combolcha and Northern Ethiopia connect with the routeat Mille; in the past this traffic was a small proportion of the total flow but its importance willincrease with the end of the civil war and the opening of the Northern districts.

4.03 The Awash - Addis Ababa portion of the road traverses populated and economicallyactive areas in the country and is essential for local traffic. The economic rate of return for theproposed road works (about 80 percent of the total Project base costs) is about 22 percent. Thebenefits of the remaining Project components (PMS, technical assistance and training) are difficult toquantify but are expected to be important; improving the life and physical condition of paved roadnetwork and upgrading the quality of local level transport which is directly linked with agriculturalproduction.

B. TraMc on the Addis Ababa - Assab Road

4.04 The road is the most trafficked in the country, carrying annually about 2.5 - 3.0million tons of cargo. Wheat, rice, petroleum products, fertilizers and construction materials are theprincipal imports transported on the road while coffee, hides and livestock are the most prominentexports. There is a major imbalance in cargo flows on the road with a 3:1, import:export ratio. Thisimbalance results in low average vehicle load factors and high toanage costs. In addition to the longdistance traffic, there is also some local freight traffic and sizeable passenger traffic on sections of theroad nearer Addis Ababa.

4.05 Systematic traffic counts have been undertaken on the road by ETCAIERA. Theresults of the 1989 census show that, as expected, the heaviest traffic is on the road section closest tothe capital, Addis - Nazareth (2,615 vpd); traffic on the remainder of the road is more uniformranging between 650 - 475 vpd. The proportion of trucks in the traffic flow is extremely high, 77percent - 93 percent. The 1989 traffic flow on the Mille - Assab section is shown in Table 4.1,together with base projected traffic for 1997 and 2002. In assessing future traffic growth andprojecting average daily traffic (ADT) for 1997 and 2002 (Table 4.1), a gradual modest increase oftraffic is assumed. Taking also into account past development of the road traffic, fuel consumption,development of export/import trade and passenger transport, it is estimated that the underlying annualtraffic growth will be 3.0 percent for passenger traffic, and 5.0 percent per year for the freighttraffic.

- 38 -

4.06 To an extent, however, traffic flows recorded in 1989 may be an inadequate basis forforecasting future traffic demand as the overall geopolitical situation has altered with the end of thecivil war. Ethiopia is now, de facto, a landlocked country (LLC) and like all LLC will not wish tobe dependent on a single transit route or transit country. Northern Ethiopia may again be servedthrough Massawa and even Port Sudan and much greater traffic may be routed through the port ofDjibouti, especially if a paved road is constructed between Dire Dawa and the border. Mombasa maybecome an important entry point for goods destined for Southern Ethiopia and Berbera for EasternEthiopia. All these developments would suggest the possible diversion of traffic away from Assab.To take this possible diversion into account the flow of trucks has been reduced by 25 percent as thebase case. The sensitivity of the projects to different traffic assumptions has also been tested. Withregard to the CDE Railway it was assumed that CDE will continue to operate during the estimatedlife of the Project. Even an eventual doubling of the traffic (from 300,000 tons at present to 600,000tons) in the 1990's would not have any significant impact on the economic viability of the project.

Table 4.1: ROAD TRAFFIC FLOWS ON THE MILLE - ASSAB ROAD(ADT)

... ........ .....................................................................................................

Actuat Pro iected12ol 1°°7 Z22Z

ADT Trucks ADT Trucks ADT Trucks............................................................................................................

Mills - Assab 496 (435) 558 (491) 889 (799)

4.07 An analysis of the potential traffic capacity of the Mille - Assab section wasundertaken to estimate the residual geometric life of the present road. If the present trafficcomposition does not change, the road has a capacity, translated into ADT, that varies between 2,900and 3,700 vehicles per day. This capacity is sufficient to meet traffic demands to, at least, 2023.Investment in additional traffic lanes is thus not necessary.

C. Economic Analysis

Civil Works

4.08 The economic analysis is based on late 1990 prices and an exchange rate of USS 1.0= Birr 5.0. Construction for the three sections will be spread over four years (1993-1996). Giventhe nature of the traffic using the road and its present all-weather standard the proposed improvementsare unlikely to generate significant additional traffic on the road. For the purpose of economicanalysis the road was divided into three sections: Logia-Semera (41 kim), Elidar-Burie (80 kln) andBurie-Assab (75 kim).

4.09 The economic analysis compares 'with' and 'without' the Project cases. In the"without' case, the road will continue to deteriorate and vehicle operating costs (VOC) will rise as theroad deteriorates. The rising VOC will, however, have a negligible effect on traffic flows: a verylow demand elasticity is implicity assumed which is reasonable given the nature of the traffic. In the"with' case, the improvements to the road (reconstruction, resealing, pavement strengthening, somewidening, reconstruction of shoulders and improvement of roadside drains and structures) willsignificantly reduce present VOC and will postpone the need for reconstruction during the estimated15-year life of the proposed project.

- 39 -

4.10 The main benefits of the rehabilitation of the Mille - Assab section (196 kim) will beVOC savings. Additional benefits will result from passenger time savings and possibly also fromimproved road safety. These are difficult to quantify and were not included in the analysis. Themajor direct beneficiaries of the project will be truck and bus owners/operators and passenger carowners. It is expected, however, that with the growth of competition within the trucking sector, partof these benefits will be passed on to bus passengers and the consumers/producers of the goods beingtransported. The Government will also benefit from some reduction in road maintenance costs and byavoiding the future costs of road reconstruction (the benefits of deferred reconstruction costs were notincluded in the economic analysis).

4.11 VOCs have been calculated separately for each road section and for each year, takinginto account the changing roughness of the road surface (dependent on the structural strength of thepavement and the effects of climate and traffic). VOCs were calculated from appropriate studies onVOCs carried out by consultants (Annex 12). Four typical vehicle types were selected for theanalysis Oight vehicles, medium trucks, heavy truck trailers and buses).

4.12 The economic analysis was carried out in economic prices, net of taxes and duties.The major assumptions and inputs in the fifteen-year costlbenefit analysis are as follows. The totalcosts included in the economic evaluation comprise: (i) the cost of civil works; (ii) the cost ofsupervision; (iii) 10 percent physical contingencies; (vi) cost of preparatory studies; and (v) costs ofroad maintenance. The benefits considered in the economic analysis include savings in VOCs for thenormal traffic growing at 3-5 percent per year (para. 4.06).

4.13 The immediate need for the proposed improvements is illustrated by a First-YearReturn of 16.9 percent. The economic analysis, based upon the assumptions outlined previously,shows that the overall ERR for the proposed civil works for the Mille - Assab Road is almost 24percent; the ERRs per section range between 17.3 percent - 24.3 percent. The ERR would have beeneven higher had the additional benefits (para. 4.10) been taken into account. In the sensitivityanalysis, which varied construction costs by 15 percent and benefits by 25 percent the Project remainsjustified. (Annex 12).

Table 4.2: SUMMARY OF ECONOMIC ANALYSIS

Road Section KIM E NPV(1296)

1. Logia-Semera 41 17.3% Birr 25.52 million2. Elidar-Burie 80 22.2% 88.01 million3. Burie-Assab 75 24.3% 89.92 million

TOTAL 196 21.7% 203.45 million

Pavement Management System and Maintenance Eguipment

4.17 The introduction of a Pavement Management System and provision of roadmaintenance equipment (about 8 percent of project costs) will allow the ERA to focus and implementhighly needed improvements in the maintenance of paved roads, particularly on the Addis-Awash andAwash-Mille sections. Since these roads carry the highest traffic volumes in the country, theproposed assistance to PMS will yield substantial benefits. Based on an indicative calculation of the

- 40 -

benefits of more efficient periodic maintenance on the two sections the investment is expected to yieldan ERR exceeding 35 percent.

Other Sector Related Studies

4.18 The private sector has not been involved in the road contracting sector for manyyears. Road construction and maintenance has either been undertaken by force-account or by publicsector construction companies. Experience from many other countries suggests that construction andperiodic maintenance costs can be significantly reduced by contracting the work to competent privatesector contractors. This component in the Project is included to enable Government to carry outstudies on this and other sector related issues, if the need should arise during Project implementation.

D. Risks

4.19 Security remains a problem in Ethiopia and there is a possibility that implementationof the civil works might be affected. Otherwise, there is only limited risk connected with theimplementation of the civil works component of the Project, since the work will be carried out bycontracts awarded under ICB. With the support of consultants for procurement and supervision theERA should have no difficulty in managing the project. With respect to extending the life of theentire road and the Project's objective of rehabilitating sections in need of urgent repairs, there is arisk that sections not included in the Project might fail and require investment sooner than anticipated(Mille-Awash). This risk, however, is reduced by the inclusion in the Project of the PMS withappropriate technical assistance during the initial stage. Also, the Project includes a component forthe procurement of road maintenance equipment which will improve ERA's capacity to carry outroutine and periodic maintenance.

4.20 Another risk to the Project relates to the implementation of a new Axle Load ControlSystem. The Axle Load Control System, which aims at reducing overloading and preventingpremature deterioration of the reconstructed roads (as well as other sections of the paid road system),may not be successful due to possible weaknesses of RTA to enforce fully the proposed system, ordue to general socio-behavioral factors. Some risk is associated with the Pavement ManagementSystem which may not be successfully implemented because of possible organizational weaknesses.These risks are reduced by the fact that technical assistance will be provided under the Project. Inaddition, Government has already in place the basic infrastructure for vehicle axleload control-even ifresults are presently only used to gather statistical data.

- 41 -

V. AGREEME AND RECOMMENDAQI

A. Actions Already Taken

5.01 Prior to negotiations, Government provided IDA with the following:

(i) A detailed list of specialized equipment needed for road maintenance units onthe Addis Ababa - Assab Road (para. 2.25); (Annex 16).

(ii) A detailed training program for ERA staff (para. 2.27) Annex 17; and

(iii) An action plan for the implementation of the axle load control system (Annex11).

B. eements Reached

5.02 The following agreements were reached during Project negotiations:

(a) ERA will adopt functional road classification system by December 31, 1993.Such a classification system should clarify, inter alia, issues pertinent to ruralroads and recent decentralization of Government institutions (para. 2.01);

(b) Starting June 1, 1994 the GOE will submit to IDA for annual review,progress reports on the implementation of the new axle load legislation (para.2.06);

(c) Starting with FY93 ERA will submit to DA for its review and comments onthe proposed annual road maintenance program and budget (para. 2.16);

(d) ERA will establish by June 30, 1994 and thereafter maintain a PavementManagement System to monitor the paved road network and to assist in theprogramming of paved road maintenance (para. 3.13);

(e) There will be a mid-term review of the project implementation by mid 1995(para 3.20);

(f) A Special Account for ERA of US$1,000,000 equivalent will be established inthe National Bank of Ethiopia (para. 3.24);

(g) ERA will, by March 31, 1993 have established its own design department(Para 2. 10).

- 42 -

C. Conddons of EfftIvenm

5.03 (a) GOE has sent the legal opinion to IDA stating that the execution and deliveryof the Development Credit Agreement has been duly authorized or ratified byall necessary governent actions.

(b) GOE has submitted to IDA all outstanding audit reports for the Second RoadSector Project (cr. 1404-El).

D. Recommendation

5.04 Subject to the above, the Project is suitable for an IDA Credit of SDR66.4 million(US$96.0 million equivalent) at standard IDA terms. The Borrower would be the Government ofEthiopia.

-43- Annex 1

ETHIOPIA

RpAD REHABILITATION PROJECT

Vehicl- Fleet

TvDes of Vehicles 1985/86 1298§/87 1987/88 1988/89 1989/90 1990/91

1. Passenger cars 37,969 29,649 28,329 27,357 28,952 28,004

2. Land Rovers - 9,401 10,020 8,364 8,438 8,811

3. Taxi 4,307 3,454 3,530 2,582 1,104 984

4. Small Suses 3,507 2,948 3,027 2,796 3,570 5,275

S. Large Buses 1,071 1,114 1,080 1,075 890 724

6. Mini Truck 7,151 4,501 5,314 5,129 5,036 6,717(up to 7t)

7. Trucks (7-14t) 6,843 5,226 6,192 5,284 3,956 4,733

8. Trailer 2,475 1,338 1,745 1,766 1,413 1,529

9. Truck-tractor - 958 783 763 692 584

10. Semi-trailer - 958 701 803 522 228

11. Tanker (liquid) 879 972 1,128 836 855 715

12. Trailers (liquid) 624 401 431 461 474 366

13. Semi-trailer - 64 67 21 83 68(liquid)

TOTAL 64,826 60,984 62,347 57,237 55,985 58,738

SOURCE: Ministry of Transport and Communications, Addis Ababa, 1990

-44' ANN.X 2

,THIOPrA

ROAD REHABILITATION PROJECT

Consum tion of P-troleum Products(in '000 of MT)

PRODUCTS 1986/87 1987/88 1988/89 1929/90 1990/91

Gasoline Regular 172.491 170.164 127 120 125

Diesel Oil 439.551 453.770 399 385 349

puel Oil 129.336 134.377 138 117 70

Aviation Fuels 126.354 154.219 124 116 l15

Lubricants 15.00 17.02 19 18 -*

Kerosene 62.980 80.440 74 77 40

* Not AvaLlable

SOURCEs ZthiopLan Petroleum Corporatlon, Addis Ababa, 1990

-45- -45- ~~~~~~ANNEX 3

ETHIOPIA

ROAD REHABILITATION PROJECT

Volume of Caroo Tranrnorted by Road(in million)

Dry Cargo Fual TotalYear tonr ton-km tons ton-km ton-

1984/85 5.1 1,707.7 0.8 551.5 5.9 2,259.2

1895/86 5.3 2,050.2 0.9 572.5 6.2 2,622.7

1986/87 5.3 2,048.6 1.0 635.5 6.3 2,684.1

1987/88 5.2 1,898.7 1.1 680.6 6.3 2,579.3

1988/89 5.3 1,937.9 1.1 787.5 6.4 2,725.4

1989/901/ 5.4 2,269.1 1.2 910.6 6.6 3,179.7

1990/91 4.0 1845.3 1.0 638.3 5.0 2,483.6

SOURCE: Ministry of Transport and Communications, Addis Ababa, 1990

j/ Total transport by all modes (excluding international shipping) was7.07 million tons

-46-

,ZTHIOPIA

ROAD REHABILITATION PROJECT

Actual Recurrent Exoenditure on Road Maintenance(in Birr '000)

------------------------- FISCAL YEAR-------------------------

1985/86 1986/87 1987/88 1298/89 1989/902 1990/91

Administrative and 3,313 2,400 2,800 3,100 4,447 3,490General Services

Engineering and 10,369 5,400 5,700 6,300 3,579 4,385Technical Services

Road Maintenance 24,797 26,703 27,494 33,430 34,550 31,654

Rural Road 4,777 3,899 6,S88 8,341 8,475 8,422Maintenance

TOTAL 43,256 36,903 42,582 51,171 51,051 47,951

SOURCE: Ethiopian Road Authority, Addis Ababa, 1990

_47_ ~~~~~~ANNEX - 47-.

THIOPIA

ROAD REHABILITATION PROJECT

Capital Expenditur* on Roads(in Birr '000)

A. Inv-stm-nts In N-w Road Constructionl/

YEAR C~~~OVERNMENT FOREIGN TOTAL

1984/85 35,620 - 35,620

1895/86 26,439 10,923 37,362

1986/87 38,204 16,749 54,953

1987/88 41,413 17,056 58,469

1988/89 45,900 18,149 64,049

1989/90 42,500 - 42,500

1990/91 29,125 29,125

B. Investmgnt in Road Eauiment

1984/85 1,649 1,649

1895/86 2,608 - 2,608

1986/87 16,529 32,966 49,495

1987/88 - - _

1988/89 359 5,483 5,842

1989/90 6,814 5,440 12,254

1990/91

SOURCE: ERA, Addis Ababa, 1990

.;/ Includes Rural Roads Construction

-48- ANNEX 6

ETHIOPIA

ROAD REHABILITATION PROJECT

REVESUE FROM ROAD nUER CHARGES

(In Mittfons)

SOURCE 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91........... .... ....... ...... ...... . ......... ....... .......... ....... .......... ....... .......... ....... ......... ....

1. Vohiel Inspection and 5.9 6.3 6.1 6.9 7.3 7.8 0.30 8.20 7.95Registratfon fees

2. Driving Lfcense fees 1.3 1.3 1.8 2.2 2.0 1.6 2.30 2.37 2.48

3. import dutflo an Motor 43.3 39.4 39.8 28.2 49.3 * 59.5 * 46.73 * 54.67 123.20VehicLes mnd accessories

4. Tax on Petroleta Products 34.7 40.4 41.2 43.5 40.2 a 43.7 * 44.67 * 66.80 71.50

S. Tax on Imported Potroleum 0.1 - 1.3 1.0 1.5 * 1.4 * 1.20* 1.40 25.20Products

..... -----. ..... ..... . ...... -----. . ..... ..... . ..... .....

TOTAL 85.3 87.4 90.2 81.8 100.3 114.0 95.20 133.44 230.33Mumama MauazM mamma. a amas.a=a= amsasa .ans an mann==

SOURCE: Road Transport Authority and Ministry of Finance

NOTE: *Proelminary Istimtes.

-49- ILX 7

RTIPIA

ROAD REHABILITATION PROJZCT

Structurg of Fuel Pric-cl/(in Birr per liter)

DZIHEL.* GASOLINZ*(Regular)

Ex-Refinery Price 0.52 0.86

Excise Tax 0.06 0.41

Municipality Tax 0.02 0.02

Distribution Margin 0.04 0.05

Retailers Margin 0.03 0.04

Selling Price (Arsab) 0.68 1.28

Selling Price (Addis)j/ 0.79 1.50

SOURCE: Ethiopian Petroleum Corporation, Addis Ababa, 1990

)A/ Am of October 1990

/ Addis price higher due to transport costs

ERA Organization GhartGEiNER-AL|

L EGC3AL M AN AG E R ADMINISTRATS}ERVICES ________________AND TRfWNING

I _ I l l l l~~ I IPRRAMING ESN | CHIEF SUPPLIES AND FINANCIAL AUDIT AND RURAL_ PROGRAMM#ING _ DESI N t ENGINEER EQUIPMENT SERVICES METHODS ROADS

-Planning - Survey Procurement General ComputingProgramming - Road Design Parts and Accounting Auditand Budgetting - Bridge Design Supplies - Methods

- Monitoring - Materials and -Equipment Cost Accounrinsand Evalualion Research Properq Records

OPERATIONS|

MANAGER|

ROAD ROAD CONTRACT | TECNICAL 4 OEAINTENANCE CONSTRUCTION | ADMINISTRATION |FCSSERVICES OFC

District | Force Accr Contract Castr. U n RegionalManagers (8) Construction oContact L Constr.Unit (14)Road Safety -Bailey Bridges r C URoad Markings _.uarry Operations Contract Constr. Unit i Regional

Mtc. Offces

n 0ox

0

MOHUD&CORGANIZATION CHART

MINISTER

Auditand Inspectora

VICE V,IC

MINISTER, CONSTR MINISTER. URS3AN|

Psemkq~~~~~~~~~~~

aATU Wheonl | EFn TAX m X E |t i l

ElA MeuSifig

aa. f~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Aowrt ionm

- 52- Annex 9Page 1 of 3

ETHIOPIA

ROAD REHABILITATION PROJECT

Outlined Terms of Reference for theDevelopment and Implementation of a Pavement Management System

A. Backi!round

1. The road network in Ethiopia consists of 19,020 km of all weather roads, of which 4,115km are paved. The paved roads primarily radiate from Addis Ababa, the capital, to the major provincialcities and to the port of Assab. As a result of age, overloading and insufficient road maintenance, overmany years, the road network is now showing signs of rapid deterioration. A large portion of the pavedroad network will be in need of rehabilitation and reconstruction in the near future. As part of a strategyfor dealing with this problem, Government intends to introduce a country specific Pavement ManagementSystem (PMS) that will enable the ERA to monitor the performance of the paved roads and provide thebasis for guiding the allocation of resources for road maintenance.

2. For this purposes, the Government require the services of an engineering consultant withrelevant experience to advise ERA on the form and operation of an appropriate PMS and to assist withthe implementation of the system.

B. Obiective

3. The objective of the consultancy is to institute a Pavement Management System, so thatERA can better assess, alert itself to potential problems and plan its road maintenance, rehabilitation andreconstruction needs in a timely and optimal fashion.

4. The system will be based on regular, objective assessments of pavement conditionparameters. Data on pavement condition will be compared with data on traffic volumes, axle loads andweather conditions to provide the necessary inputs for assessment of future maintenance needs andnecessary funding. The system will further provide a basis for a long term monitoring of pavementperformance and residual life of the pavement, as a background for an optimum maintenance program.

C. Services to be Provided by the Consultant

5. The PMS will cover the whole of the paved road network in Ethiopia and should allowfor the likely extension of this network over the next decade. The work of the consultant will fall underthe following main headings:

Annox 2-53- Page 2 of 3

(i) Establish Procedures.

6. The consultant will review the existing organizational and financial arrangements for roadmaintenance and rehabilitation, including maintenance planning and budgeting. The consultant will reviewpresent maintenance practices and identify standard maintenance activities.

7. The consultant will design and establish procedures for monitoring pavement condition,by carrying out regular measurements and inspections. It is envisaged that the parameters to bemonitored will be: deflection, cracking, potholes, rut depth and shoulder defects. The consultant shouldintroduced/recommend parameters in addition to the above, if considered desirable.

8. The consultant will assess the available equipment in the country for pavement monitoringand recommend additional equipment and spare parts needed. He will assist in the procurement of suchadditional equipment if requested to do so.

9. It is envisaged that the monitoring will be carried out by a special unit to be set up andtrained for this purpose within ERA. The consultant will provide the necessary guidance and trainingfor the establishment of this unit.

11. The consultant will determine the program for the data collection, i.e., the portion of thenetwork to be included, the division of the network into sections and subsections, the frequency of datacollection for each section and the distance between points where data will be monitored. He willdetermine the criteria for implementing the various maintenance tasks (threshold values).

12. The consultant will specify guidelines for estimating future maintenance cost of paved roads, andunit costs of various pavement maintenance tasks.

13. The consultant will also develop methods to predict future maintenance requirements andresidual life of the various sections of pavement.

14. The consultant will advise Government on the operation of the new axle load controlsystem.

(ii) Implementation

15. It is envisaged that data collected as part as the monitoring process will be processed inmicrocomputers. The consultant will develop a system for data handling suitable for local condition, andtrain local staff in the process of both data collection and data processing. He will establish suitablereport forms that can be of particular assistance to ERA's management at different levels in long termplanning, short term maintenance programming and in budgeting annual maintenance operations.

16. The consultant will carry out preliminary testing of the computer program, and will develop thenecessary modifications that may be needed.

Annex 9- 54- Page 3 of 3

17. The consultant will design a long term field testing program to review the empirical functionsused in the program to estimate the residual life of the pavement, and to predict future pavementdeficiency parameters, such as cracking, rutting, etc., in order to improve the forecasting accuracy of thepavement management system.

18. The consultant will assist ERA in the start-up of data collection and processing of data for aperiod of 3 months and shall carry out the final modifications of the program that may become necessary.

(iii) Reortinz

19. The consultant will prepare an inception report within three months of starting hisassignment. The inception report will give an outline of the study program for approval by the client.Every two months, during the study, he will prepare progress reports. The assignment will end up witha manual that describes the system in detail and can be used as instruction manuals for local operatorsboth in the field and in the data handling process at Headquarters. The consultant will also be calledupon to organize workshops for maintenance personal both at Headquarters and in the field, so that staffcan become familiar with the new procedures.

D. Services to be provided by the Client

20. Government will provide local staff to operate all components of the pavementmanagement system, both during the study phase and for future operations. Government will alsoprovide the relevant equipment that is already in the country and assist in the procurement of additionalequipment if needed. Funds for the recurrent budget necessary to operate the pavement managementsystem will be budgeted for.

E. FOllOW-Up

21. Consultant might be called upon to assist Government in the operation of the PavementManagement System. For that purpose, the consultant should make suitable staff available on a shortterm basis for the next three to five years to assist when and if called upon.

22. The consultant shall assist in the maintenance of software, i.e., correcting anyprogrammning deficiencies which may become apparent during the use. Any software royalty charge shallbe considered full and sufficient compensation to cover such maintenance responsibilities.

Annex 1 0-55- Page 1 of 1

ETHIOPIA ROAD REHABILITATION PROJECTImplementation Schedule

COMPONENT 1993 : 1994 1995 : 1996 19971. CIVIL WORKS I .

. . . . . . . . . . . . . . . . . . . . .... . . . . ...I L .

Logia - Semera I _

Elidar - Bure I

Bure - Assab _ _|_ __l

11. TECHNICALASSISTANCE

Supervision ,

PMS Consultancy

Design Reviews l_l

Training and Twinning .

Design Manual/Specs.

III EQUIPMENTMaintenance Equipment i

I. I I

-56- AnnexmLliPage 1 of 1

ETHIOPIA

ROAD REHABILITATION PROJECT

Timetable for the Implementation of New Axle Load Legislation

The following action plan for the implementation of the new regulations hasbeen agreed upon:

(i) GOE to start enforcing the new July 1, 1993regulations.

(ii) GOE to start repair existing June 1, 1993weighbridge stations.

(iii) GOE to prepare a plan for the March 1, 1994introduction of mobDle units,including civil works andequipment.

(iv) GOE to design and implement an March 31, 1993information campaign on thenew regulations.

(v) GOE to submit to IDA for June 1, 1994review and comments annualreports on program implementation.

Annex1-57- Page 1 of 2

ETHIOPIA

ROAD REHABILITATION PROJECT

Summary of Economic Analysis

A. Estimated Vehicle Ogerating Costs on Mille-Assab Road1'(in Birr/km)

Vehicle Rolling Terrain Hilly TerrainTy2e

1. Light Vehicle 0.759 + 0.000089*R 0.760 + 0.000101*R2. Bus 1.898 + 0.000139*R 2.038 + 0.000179*R3. Truck 1.656 + 0.000274*R 1.898 + 0.000364*R4. Truck/Trailer 4.363 + 0.000774*R 4.898 + 0.001377*R

1/ In 1990 price. Over the economic life of the project the VOCs rise as a function ofthe estimated road roughness.

B. Estimated Road Maintenance Costs '

(in Birr per km/year)

Without the Project With the Project

1. Routine maintenance 14,703 5,3962. Periodic maintenance No difference in costs is assumed

2/ Intensity of road maintenance/repair in "without the project case") is assumed toincrease as a function of road roughness, according to the relationship:

Routine Maintenance Costs (Birr/Km) = 5.02*R - 4419

C. Estimated Road Surface Roughness

Road roughness is estimated to increase as a function of the damaging effect of traffic,measured by the number of equivalent standard axles, and the structural strength of thepavement. The project will both reduce initial roughness and provide a stronger pavement,thus reducing the impact of heavy commercial traffic.

SOURCE Based on experience and estimates of ERA and relevantconsultants reports, Addis Ababa, 1991.

ETNIOPIA

OM UENIILITATION PSOJECT

5UMIW OF ECaIC MALTSISREMUAILITATION: IILLE - AS N

LOGIA- SEmA (41 m) ELIUU -IE (80 KM) *UIE AS (7SA KN) NILLE -ASSATtetl

Capital Voc Naintnce Not Capital Voc Naintnce met Capital Voc Usilatne lbt NotCosts Sving Saving Sanf its Costs sving Saving Iawfits Costs Saving Saving 6unaf its Isif its

1993 29.100 -29.800 26.212 -26.212 -56.0621994 44.690 -. 690 45.994 -45.994 24.042 -24.042 -114.726199s 9.575 0.511 10.066 59.134 -59.134 42.074 -42.074 -91.1201996 10.403 0.531 10.934 27.419 0.737 2a.206 54.094 -54.094 -14.954197 11.30M O.SSO 11.8a8 29.09 0.796 29.as 27.999 0.766 28.764 7O.s181a 12.296 0.570 12.868 30.896 0.305 31.700 29.719 0.774 30.493 75.061199 13.381 0.590 13.971 32.817 0.814 33.630 31.55? 0.7M3 32.340 79.9422000 14.S66 0.612 15.17B 34.872 0.624 35.696 33.524 0.792 34.316 as.1892001 1S.862 0.635 16.497 37.072 0.034 37.906 35.628 0.802 36.430 90.a332002 17.282 0.658 17.940 39.430 0.845 40.274 37.882 0.812 38.694 96.90s2003 18.836 0.683 19.520 41.956 o.856 42.812 40.296 0.822 41.119 103.4512004 20.539 0.710 21.249 44.666 0.868 45.534 42.A85 0.833 43.718 110.S01 ao2005 22.405 0.737 23.142 47.573 0.881 48.454 45.t66 0.845 46.56 118.1022006 24.449 0.766 25.216 50.695 0.894 51.89 4.641 o.asr 49.496 126.3022007 26.690 0.797 27.487 54.049 0.907 54.956 51.841 0.870 52.711 13515S42008 29.148 0.829 29.977 57.654 0.922 56.576 55.279 O.W84 56.163 144.71S2009 31.843 0.862 32.705 61.532 0.937 62.469 s8.976 O.896 s9.874 155.0472010 6s.705 0.953 66.6s5 62.952 0.913 63.865 130.5232011 67.233 0.929 68.162 68.162

1 R 17.3 X 22.2 Z 24.3 X 21.7 IMPV (121) Birr 25.S2 miltion 88.01 million 89.92 .itlin 203.45 million

Sewitivity Analys(IRA)

LOGIA - SERA ELIDA - OUIE OURIE - ASSA NILLE - ASSAS

(a) Costs +151 15.01 10.61 21.61 19.21(b) lenfits -25X 12.8X 11.11 19.01 16.7X(c) (a) * (b) 10.81 14.91 16.6X 14.51

Source: Based on Report prepared by ERA, December 1990 o Zand IDA 1992 mission estimates. NX

oN

Annex 13-59- Page 1 of 4

ETHIOPIA

ROAD REHABILITATION PROJECT

Proiect Progress Reporting Requirements and Supervision Plan

L. Progress Reports shall be submitted quarterly in triplicate no later than one calendar monthafter the end of the quarter. The first report should cover the quarter ending December 1991.

11. The Report should contain the following information:

1. General Information

(a) Physical progress accomplished during the reporting period in respect of:

(i) Road Rehabilitation

- prequalification of contractors- invitation to bid- bid receipt and evaluation- contract award- preliminaries to mobilization- construction progress

(ii) Procurement of Road Maintenance Equigment

- preparation of bidding documents- invitation to bids- bid receipt and evaluation- contract award- delivery of goods

(iii) Procurement of Materials

- assessment of needs- calling quotations- receipt and evaluation of quotations- contract award- delivery of goods

(iv) Technical Assistance

- calling proposals- receipt and evaluation of proposals- contract award- arrival date of staff- man-months expanded

Annex 13-60- Page 2 of 4

(vii) Training

- preparation of training program- selection of trainees- course(s) held with dates- numbers and categories of staff trained

(b) actual or expected deviations from the project implementation schedule;

(c) actual or expected-difficulties or delays and their effects on the implementationschedule, and the steps planned or taken to overcome the difficulties and avoidfurther delay;

(d) expected changes in the completion date of the project;

(e) key personnel changes in the staffs of the ERA, consultants or contractors;

(t) matters which may affect the cost of the project; and

(g) any development activity likely to affect the economic viability of projectcomponents.

2. A bar-type progress chart, based on the project implementation schedule, showing theprogress on each project component.

3. A financial statement set out in a tabular form showing for each project component:

(a) original estimated cost

(b) revised cost, if appropriate;

(c) actual expenditure;

(d) projected expenditure; and

(e) actual and projected withdrawals from the Credit Account.

4. The status o[ compliance on each covenant of the Credit Agreement.

III. Project Supervision

1. Bank Supervision Input into Key Activities. The staff input indicated in the table below isin addition to regular supervision needs for the review of progress reports, procurement actions,correspondence, etc.

-61 - Annex 13Page 3 of 4

2. Borrower's Contribution to Supervision

(a) Project monitoring and coordination will be the responsibility of the ERA.

(b) ERA will be responsible for coordinating arrangements for Bank supervisionmissions, and for providing information required by missions.

(c) Mission briefing meetings on arrival, and wrap-up meetings will normally be chairedby the General Manager, ERA.

Annex 13-62- Page 4 of 4

Bank SuDervision Input into Key Activities

Approx Activity Skills Required Staff InputDates SW

10/92 Supervision mission TM, RRE, EC 5Discuss strategy paper onRural Roads

04/93 Supervision mission TM, 4Discuss progress on axleload control

10/93 Supervision mission TM, RRE, ENV, TRG 9Review progress on RRactivitiesReview Mtc Program

1994 2 Supervision missions TM, EC, 7Review Mtc. ProgrameReview PMS implement

1995 2 Supervision missions TM, EC 8Review Mtc ProgramMid-term review

1996 2 Supervision mission TM, EC, 6Prepare PCRReview Mtc Program

1997 2 Supervision mission TM, 8

1998 1 Supervision mission TM, EC 8

TM = Task ManagerHE = Highway EngineerEC = EconomistRRE = Rural Roads ExpertENV = Environmental ExpertTRG = Training Expert

-63- Annex 14Page 1 of 1

ROAD REHABILITATION PROJECT (RRP)

ROAD MAINTENANCE EQUIPMENT

ITEM TYPE NUMBER UNIT PRICE TOTAL COST ERA ERA

No. USS '000 PROPOSAL TOTAL

1 Grader 5 150 750 7 1050

2 Dozer 3 225 675 4 900

3 Dumptruck 10 75 750 10 750

4 Flat Truck 3 55 165 3 165

5 Distributer 2 100 200 2 200

6 Crusher 1 955 955 2 1910

7 Loader 3 140 420 4 560

8 Roller 3 65 195 4 260

9 Pickup 5 30 150 7 210

10 Spreader 3 80 240 3 240

11 Boiler 3 35 105 5 175

12 Compressor 3 40 120 4 160

13 Drill 2 55 110 4 220

14 Broom 2 50 100 2 100

15 Water Truck 3 70 210 4 280

16 Generator 3 30 90 2 60

17 Water Pump 3 10 30 2 20

18 Minor Items 1 45 45 1 45

TOTAL 5310 7305

-64- ~~~~ANNEX 15-64,- Page 1 of 1

ROAD REHABILITATION PROJECT (RRP)

ETHIOPIAN ROADS AUTHORITY

TRAINING PROGRAM

COST ESTIMATE USSAREA OF SPECILIZATION NO. DURATION PER PERSON GROUP

Financial Management 3 6 months 8,000 24,000

Auditing Practice 2 6 months 8,000 16,000

Equipment Management 3 12 months 12,000 36,000

Personnel Management 2 6 months 8,000 16,000

Transportation Planning 2 12 months 12,000 24,000

Highway Engineering (Design) 3 12 months 12,000 36,000

Contract Management 2 6 months 8,000 16,000

Road Maintenance Management 6 6 months 8,000 48,000

Workshop Management 4 6 months 8,000 32,000

Road Maintenance Budgeting 2 6 months 8,000 16,000

Transport Economics 3 9 months 10,000 30,000

Rural Roads Labor Based Techn. 6 3 months 6,000 36,000

Training of Trainers 4 6 months 8,000 32,000

Highway Costing 2 6 months 8,000 16,000

Project Evaluation 3 3 months 6,000 18,000

Computer Science 3 12 months 20,000 60,000

50 456,000

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