Document of

The World Bank W zlE PIY I

FOR OFFICIAL USE ONLY

Report No. 4399a-MAG

STAFF APPRAISAL REPORT

DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGWAY PROJECT

June 2, 1983

Eastern Africa Projects DepartmentTransportation Division 1

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 = Malagasy Franc (FMG)US$1 - FMG 375

Weights and Measures

1 meter (m) = 3.28 feet1 kilometer (km.) 0.62 mile1 square kilometer (ki2) 0.386 sq. mile1 square meter (m2 ) = 10.76 square feet

Acronyms and Abbreviations

AfDF African Development FundBADEA Arab Bank for Economic Development in AfricaBNI National Industrial Development Bank (Bankin' Ny

Indostria)CATP MTP Training School (Centre d7Application des Travaux

Publics)CCCE Caisse Centrale de Cooperation Economique (France)CUM National Tender Board (Commission Centrale des Marches)DGE Directorate of Works (Direction G6n6rale de l'Equipement)DGP Directorate General of Planning (Direction Gen6rale du

Plan)DI Division of Infrastructure (Direction de l'Infrastructure)DMAT Equipment Division (Direction du Materiel)DPCH Road Maintenance Division (Direction des Ponts-et-

Chauss6es)EDF European Development Fund (EEC)EESP National Technical College (PEtablissement d'Enseignement

Superieur Polytechnique)FAC Fonds d'Aide et de Cooperation (France)TFAD International Fund for Agricultural DevelopmentLNTPB National Soils Laboratory (Laboratoire National des

Travaux Publics et du B6timent)MIC Ministry of Industry and Commerce (Ministere de

l'Industrie et du Commerce)MPARA Ministry of Agricultural Production and Agrarian Reform

(Ministere de la Production Agricole et de la ReformeAgraire)

MTP Ministry of Public Works (Ministere des Travaux Publics)MTRT Ministry of Transport, Supplies and Tourism (Ministere

des Transports, du Ravitaillement et du Tourisme)RN National Road (Route Nationale)RNCFM R6seau National des Chemins de Fer Malagasy

Fiscal Year

January 1 - December 31

FOR OFFICIAL USE ONLY

Democratic Republic of Matagascar

Sixth Highway Proje<t

Staff Appraisal Report

Table of ContentsPage No.

I.. The Transport Sector

A. Geographic and Economic Setting ......... ................. 1B. The Transport System ................................. ,., 2C Transport Sector Management .............................. 5D. Planning ...................... 0................... 5E. Coordination ...................... ......... 6F. Transport Sector Investment .............................. 6G. Transport Policy and Issues .............................. 8H. Previous Bank Group Assistance in the Sector ............. 12

Il[. The Highway Subsector

A. The Network . . ............................... 14B. Road Use ................................ 15C. The Road Transport Industry . ................. 17D. Traffic Regulations and Safety ........................... 18E. Administration . . . ........................................ 19F. Staffing and Training ................................... 20G. Maintenance ............................................ 20H. Planning and Financing of Investments ................ .... 21I. Engineering, Construction and Supervision ................ 23

III. The Project

A. Objectives ............................................... 25B. Project Description . . ..............................,.,.26C. Project Cost and Financing ............................... 33D. Implementation and Procurement ...... ..................... 37E. Disbursements ................................................. 39F. Accounting, Auditing and Reporting Requirements .......... 40G. Environmental Aspects .................................... 41

This report is based on the findings of an appraisal mission which visitedMadagascar in November/December 1982; members of the mission were A. Soto(Deputy Division Chief/Economist), P. Sooh (Engineer) and C. Applegate(Technical Editor). M. Le Blanc (Economist), C. Delvoie (FinancialAnalyst) and J. Kipnis (Project Assistant) participated in the preparationof this report.

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.

Table of Contents (continued)

IV. Economic Evaluation

A. General .. . .... . ........................ 41B. Area of influence of the Program,

Benefits and Beneficiaries ................................. 42C. Economic Analysis . ... .. . .. ................. 43

V. Agreements Reached and Recommendation ..... . ................... 48

Annexes

1. Tables2. Bank Group Projects in the Transport Sector3. Road Transport Industry and Spare Parts Requirements4. Highway Design Standards5. Earth Roads to be Maintained by Contractors6. Earth Roads to be Maintained by Force Account7. Highway Equipment for Road Maintenance8. List of Equipment for LNTPB9. Outline Terms of Reference for a Study Furture Pavement

Maintenance and Strengthening Programs10. Study of the Development of Feeder Roads11. Outline Terms of Reference for Technical Assistance for the Trainng

Program and the Management of MTP Road Operations12. Outline Terms of Reference for a Study of the Organization,

Management and Operation of MPT13. Outline Terms of Reference for Technical Assistance in Transport

Planning and Coordination14. Terms of Reference for the National Transportation Plan Study15. Outline Terms of Reference for Technical Assistance to LNTPB16. Project Reporting Requirements17. Economic Tables18. Related Documents and Data Available in the Project File

C1arts:

1. Organization of MTP2. Project Implementation Schedule

INLp

IBRD - 16909

DEMOCRATIC REPUBLIC OF MADAGASCARSIX-TH HIGHWAY PROJiECT

STAFF APPRAISAL REPORT

I. THE TRANSPORT SECTOR

A. Geographic and Economic Setting

1.01 Madagascar, the fourth largest island in the world, covers anarea of about 590,000 km2. The topography is generally rugged with acentral mountain range of up to 2,800 m high traversing the country fromnorth to south. The climate is marine tropical, but varies considerably:cyclones and heavy rainfall are frequent on the east coast which has moreithan 2000 mm of rain annually; rainfall diminishes towards the south andwest to less than 500 mm annually. The combination of heavy rainfall overmuch of the country and rugged topography make the construction and main-tenance of roads as well as transport operation difficult and expensive.

1.02 The population, estimated at 8.7 million and growing at 2.8%p.a., is predominantly rural with roughly 85% living in the countryside.While, overall, the country is sparsely populated (about 14 per km2),population distribution is uneven, with about one half of all inhabitantsoccupying the central one-quarter of the island.

1.03 Agriculture is the dominant economic activity, accounting forabout 35% of GDP and 80% of Madagascar's export earnings. The productionof rice, the country's staple food, is the most important economic activi-ty. Since 1970 production has stagnated, compared to the 2.8% increase inpopulation, causing a jump in imports of rice from about 60,000 tons in1.975 to about 117,000 tons in 1980. The principal export cash crops arecoffee, cloves, pepper, vanilla, cotton, sugar and tobacco. The smallmanufacturing sector is dominated by food processing (including beverages)aLnd textiles; other industries which have shown regular growth over recentyears have been cement, tobacco, leather goods (mainly shoes) and paperproducts.

1.04 During the 1970s the Malagasy economy stagnated. This, combinedwrith the population increase, resulted in a 12% decline in per capita in-come between 1970 and 1980. In 1979 an investment boom took place in allsectors of the economy. As this was financed mainly by foreign borrowing,it left the country with a severe repayments problem; the external re-sources deficit went from 5% of GNP in 1978 to about 17% in 1979. Debtservicing has put a great strain on the economy, acutely limiting foreignexchange for other purposes and consequently sharply curtailing imports.Shortages of new equipment and spare parts have been most acute in thetransport system, the capacity of which has been greatly diminished for themovement of food and crucial supplies.

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B. The Transport System

1.05 Madagascar's transport infrastructure comprises nearly 50,000 kmor roads of which about 4,900 km are paved; two unconnected railway systemstotalling 860 km; 4 main ports and 11 lighterage ports of some signifi-cance; and 56 airfields. The only navigable waterway is the PangalanesCanal along the east coast. The system is inadequate in that it fails toprovide access to all productive areas of the country. The main transportcorridor between the port of Toamasina and the central plateau area -- thecountry's lifeline -- is an inadequate railway line and an old road ofmodest specifications the maintenance of which has been neglected. Thepoor maintenance of the road network during the 1970s has worsened the iso-lation of several areas. In the face of inadequate overland communicationsMadagascar has developed an air transport network that is denser than inmost comparable countries as well as an extensive system of ports andcoastal shipping.

Highways

1.06 The highway subsector is described in detail in Chapter II.

Railways

1.07 The railways consist of two, single tIrack systems. The northernsystem (about 700 km) includes (i) a line between Antananarivo, the capi-tal, and Toamasina, the principal port (376 km); (ii) a line from Antanana-rivo to Antsirabe, an industrial and population center south of the capital(154 km); and (iii) a section north from Moraminga to the agricultural re-gion of Lake Alaotra and the chromite mines (167 km). The southern system(163 km) connects the regional center of Fianarantsoa and the agriculturalareas in the southern plateau to the port of lanakara. The Antananarivo-Toamasina line is the most important link, since it is the only reliablemeans of surface transport between the country's main seaport and the capi-tal city. The railways are operated by the R4seau National des Chemins deFer Malagasy (RNCFM), a parastatal agency reporting to the Ministry ofTransport, Supplies and Tourism (Ministere des Transports, du Ravitaille-ment et du Tourisme, MTRT).

1.08 The rolling stock and locomotive fleet are generally adequate tocarry present traffic, although their condition is poor and their producti-vity is low due to maintenance and operational problems. The track is alsoin very poor condition. Progressive rehabilitation of the track and renew-al of the railway's locomotive and wagon fleet are being undertaken withinthe context of an ongoing project supported by the Bank Group, but progresshas been relatively slow. The railway has also been plagued by financialproblems due to the inadequacy of tariff increases, the lack of financialautonomy and poor financial procedures. As a consequence of all these fac-tors, the railway's transport capacity declinecd during the last few yearsto the point where it has been unable to meet transport demaiid and has be-come a major bottleneck in Madagascar's economy. This deterioration is re-fleacted in the decrease in total freight traffic from 861,000 tons in 1976to 650,000 tons in 1981 (5.8% p.a.).

1.09 The Government hAs recently taken major steps to arrest the dete-rioration of the railways by addressing the most urgent operational prob-lems and resuming a normal flow of spare parts. This enabled the railwayto resume normal operations in 1982 and transport inland the backlog ofgoods which had been piling up at Toamasina port. Following suspension ofdisbursements under the Second Railway Project (para. 1.45), the Governmentmolunted a complete financial recovery program for the railway, which in-cluded (i) the granting of complete financial autonomy to the railway; (ii)a schedule for reimbursement of Government arrears and the establishment ofappropriate procedures for paying current bills; and (iii) significant tar-if f increases. Introduction of this program enabled IDA to resume dis-bursements under the project at the end of 1982.

1.10 These actions need to be sustained by setting up effective proce-dures for operational planning and financial management to ensure a long-term recovery. At the same time, the railway's long-term prospects must beclosely analyzed: the railway will soon lose its monopoly on theAntananarivo-Toamasina corridor, when a parallel road, presently under con-struction, is opened to traffic (towards 1985); the economic viability ofthie smaller lines, particularly the Southern line, is doubtful in view ofthe low level of traffic. The railway will thus need to adapt to increas-ing road competition by improving services, introducing dynamic commercialpolicies and specializing in the types of traffic for which it is mostsuited, mainly containers and bulk traffic.

Air Transport

1.11 Given its size, the distance between population centers, therugged terrain and the poor condition of surface transport, Madagascar hasdelveloped a dense domestic air transport network. Of the 56 airports, 17are built to all-weather standards including 5 suitable for internationalflights; the remainder are gravel or grass strips.

1.12 Air Madagascar, the national airline, is owned 80% by the Govern-ment, 18% by Air France and 2% by private shareholders. It provides inter-national service to Paris, Marseilles and several countries in East Africa;it has a monopoly on all internal service. Its fleet consists of one B-747(combination cargo/passengers) for European service, two B-737s for domes-tic and regional service, and two HS-748s and five Twin Otters for domesticservice. It also has several smaller aircraft for air-taxi and charterservices.

1.13 While the international airport at Antananarivo handles 50% ofalL traffic, 40 of the small airports accounted for only 20% of the traf-fic. Serving the small airports is not financially profitable but is pro-vided to ensure access to otherwise isolated areas. In the past, Air Mada-gascar used its profitable international service to subsidize its money-losing domestic service. As a result of rising costs and a decreasing loadfactor on international operations (from 56% to 33% from 1976 to 1980 dueto increased capacity of the B-747), its financial situation has drastical-ly deteriorated in recent years. To help reduce the losses, in 1982 ser-vices were terminated at 12 small airports handling fewer than 1,500 pas-sengers p.a. and tariffs were increased by 28% in October 1982 and by 15%in early 1983. The Government is reviewing measures to arrest the deterio-

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rating financial situation including (i) sharing Air Madagascar's deficits,initially on a 50-50 basis, with incentive programs for the airline to im-prove efficiency as the Government takes on a greater share of the defi-cits; (ii) as and when other transport alternatives become available, hav-ing Air Madagascar abandon unprofitable services; and (iii) undertaking astudy on the viability and alternatives of providing long-distance interna-tional services (i.e. Europe). Discussion of these measures began with theGovernment during the preparation of a Transport Sector Memorandum (para.1.29) and should be continued during a transport sector review between theBank and the Government scheduled for mid-1983.

Ports and Coastal Shipping

1.14 Madagascar relies almost exclusively on maritime shipping forforeign trade, while coastal shipping is important as the only means oftransporting freight between many areas of the country with no access toall-weather roads. There are four main ports: Toamasina which handles 66%of the total traffic, Mahajanga with 11%, and AnLtseranana in the north andToliara in the south, each with about 4% of total traffic. The remainingtraffic is handled in the coastal shipping ports. Toamasina, the maininternational port, serves the populated and economically important cen-tral highlands via the railway to Antananarivo. In view of the constraintson the railway's transport capacity, some international traffic has beendiverted to Mahajanga. Its capacity, however, is limited as the port re-quires lightering and its use is restricted by the condition of the road toAntananarivo (RN4). The port of Toamasina is adequately equipped to handlepresent traffic, but the equipment of secondary ports is generally old andin poor condition.

1.15 The Societe Malgache des Transports Maritimes (SMTM), the state-controlled international shipping line operating four cargo vessels, car-ried 7% of the country's externally traded merchandise in 1981. Coastalshipping is handled primarily by the Compagnie Malgache de Navigation- -(CMN), 92% state-owned. Its nine ships are relatively modern but CMN isplagued by shortages of spare parts, difficult operating conditions, poorhandling rates in the ports and low productivity. In addition to CMN,there are several private companies operating mainly on the eastern coast;however, they are fast disappearing because of the lack of spare parts andinsufficient tariffs.

1.16 Port traffic has stagnated due to the economic slowdown followingthe political changes in 1972 (Annex 1, Table 1). As a result, there isconsiderable over-capacity in the ports, especially Toamasina. FAC is car-rying out a study on ports and coastal shipping aimed at introducing moreeffective and economic use of infrastructure and consolidating operations.In view of this over-capacity, there appears to be need in the short tomedium term orLly for selective investments in rehabilitation of some faci-lities and modernization of others (e.g. to handle container traffic).

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C. Transport Sector Manag4ment

1.17 Whil.e several ministries and Government organizations share res-ponsibility for the transport sector, the Ministry of Transport, Suppliesand Tourism (11inistere des Transports, du Ravitaillement et du Touirisme,MTRT) and the Ministry of Public Works (Ministare des Travaux Publics,MTP), play the most important role. MTRT is responsible for road, rail,air and water transport, and operates all airports and ports (except thePort of Toamasina), and oversees several autonomous Government agencies,including RNCF'M, Air Madagascar, the Port of Toamasina, CMN and the SMTM.The MTRT has a dual role in road transport: it is responsible for safety,tariffs, regulation and control as well as directing parastatals to trans-port basic goods so as to ensure that no shortages occur anywhere in thecountry.

1.18 MTP is responsible for planning, building and maintaining high-ways, ports and airports. Its operations are described in Chapter II.

1.19) In line with the Government's emphasis on the public sector,numerous other Government agencies have varying degrees of responsibilityfor transport policy, operations and services. The most important are theMinistry of Industry and Commerce (Ministare de l'Industrie et du Commerce,MIC), the Ministry of Agricultural Production and Agrarian Reform (Minis-tare de la Production Agricole et de la R6forme Agraire, MPARA), the Army,the Directorate General of Planning (Direction Gen6rale du Plan, DGP), andthe regional governments. MIC's role includes (i) controlling virtuallyall state-owne,d enterprises responsible for collecting and marketing crops,which represent a sizeable proportion of the road transport capacity, (ii)determining, jointly with the Central Bank, the foreign exchange allocationfor importing road transport, maintenance and construction equipment, andspare parts; (iii) establishing policies on importation and assembly ofmotor vehicles, therefore significantly influencing the supply of transportservices; and (iv) influencing transport tariff's through the control ofprices of basic commodities. MPARA and the Army operate the largeststat:e-owned road transport enterprises, the Socigite d'Int6r6t National pourla Production Agricole (SINPA) and the Rggiment du Train, respectively.Also, each reg:Lonal government (faritany) has established a regional truck-ing company in the last two years.

D. Planning

1.20 Inter-sectoral priorities are decided by DGP. The Planning andProgramming Unit in MTRT's Directorate of Transport is charged with trans-porl: sector planning. Given, however, the low level of this unit withinthe ministry and its small inexperienced staff, it is unable to preparesound plans and programs. Its task is further complicated by agencies out-side MTRT, which prepare project and investment proposals without coordi-nating them wiith MTRT. The Association and other bilateral and multilater-al financing agencies have helped, not always successfully, to improve sec-tor planning. Under the First Railway Project (Credit 488-MAG), a trans-porl: planning unit was established in the then Ministry of Transport andprovided with technical assistance. However, the lack of qualified localstaiff, the low priority accorded the unit by Government and subsequent or-

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ganLzational changes within the Ministry, including the branching off ofthe Ministry of Public Works, considerably reduced the role and impact ofthe unit. FAC is currently providing technical assistance to MTRT forplanning in the coastal shipping and road transport subsectors. During thepreparation of a Transport Sector Memorandum the Association discussed indetail with Government the importance of improving sector planning.Establishment of a new, high-level unit will be provided under the proposedproject with FAC participation (para. 3.27). Beyond that, the recenttransfer of DGP from the Ministry of Finance (MF) to the Presidency and theaccompanying elevation in status of that agency should benefit overalltransport planning.

E. Coordination

1.21 In the past, intermodal coordination was less important since thetransport systems operated relatively independently except where the modeslinked. As the subsectors have developed, intermodal planning and coordi-nation have become indispensible. Moreover, the proliferation of transportorganizations, which began with the separation of the Ministries of Trans-port and of Public Works in 1976, and the continuously expanding role ofthe public sector in all aspects of transport have heightened the need forbetter coordination. The only regular coordination takes place during thepreparation of multiyear investment plans and annual budgets, and even thenthe exchange oiE information and discussion of projects is inadequate. Ef-ficient inter-agency coordinating mechanisms are clearly needed. An im--portant step in this direction has been adopted with the recent upgradingof DGP.

F. Transport Sector Investnent

1.22 Madagascar inherited at independence a transport system which,while sufficient for the evacuation of the country's main products, did notfacilitate national integration and trade. The road network contained gaps-- several regions depended and still depend on a local port and coastalshipping for external communications-- and the specifications of the mainroad network were insufficient for modern road transport demands. TheGovernment therefore invested heavily during the implementation of a1978-80 investment plan in the expansion of its road network. It also ex-panded its air transport facilities and purchased a number of trucks, shipsand aircraft. Even though transport's 27% share in total investment

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outlays during 1978-80 was not excessive, the modal allocations resulted inovercapacity in some areas (coastal shipping, ports) and undercapacity inother vital ones (road transport). Moreover, the new transport equipmenthas contributed to the deterioration of the balance of payments and theworsening financial results of the parastatals which own the new equip-ment. More significantly, maintenance of infrastructure and equipment wasneglected in virtually all modes with a consequent deterioration in thequality and a rise in cost of transport services. A 1980-82 plan onlyaimed at completing the investment started in 1978-80 and contributed lit-tle towards redressing the modal imbalance.

1.23 In view of the failure of previous plans and of the dismal over-all economic situation, the Government, with the support of the Associa--tion, has embarked on a program of economic reform, including the prepara-tion of a 1983-85 public investment program. The program envisages totalinvestments of FMG 417 billion (about US$1.1 billion) distributed as fol--lows: industry (41%), agriculture (30%), transport (16%) and others, mainly'social sectors (13%).

1.24 For the transport sector, the program aLims at completing ongoinghigh priority projects, improving the utilization of existing assets, andrehabilitating transport infrastructure and equipment. The transport sec-tor's share of the program totals FMG 67.8 billion (US$180.8 million), ofwhich FMG 40.0 billion (US$106.7 million) is foreign and FMG 27.8 billion(US$74.1 million) is local costs. Of this, about FMG 46.1 billion (68%) isfor road transport, FMG 9.0 billion (13%) for rail transport, FMG 8.0 bil-lion (12%) for air transport and FMG 4.7 billion (7%) for water transport.Both the overall size and subsectoral composition of the new transport plan.are more in line with the needs and constraints of the country than previ-ous plans. The road transport program includes 18 sub-programs for whichexternal financing has already been obtained and which represent about 77%,of the proposed investment. The remaining 23% includes 10 sub-programs orprojects for which financing must be found or provided by Government. Ofthe 18 financed sub-programs, 7 correspond to ongoing operations being fi-nanced by the Bank Group, African Development Bank (AfDB), Kreditanstaltfiir Wiederaufbau (KfW), Norwegian Agency for Development (NORAD) and China,and 11 to new sub-programs proposed to be financed by the Bank Group, Euro-pean Development Fund (FED), AfDB, CCCE, FAC and USSR. The plan does notindicate order of priority or rates of return for such sub-programs, butthe majority are included within the framework of the proposed project andare justifiable. Given the financial constraints, both in terms of foreignexchange and local resources, a number of the smaall sub-programs or pro-jects not included in the proposed project and which do not have any othersource of foreign assistance will have to be deferred or phased out. Dur-ing appraisal of the proposed project the Government agreed in principle tolimit its highway investments to those defined within the framework of theproposed project and discuss its investment budget annually with theAssociation (para. 2.25).

1.25 The railway investment program includes the rehabilitation ofbridges, track, shops and warehouses; the overhaul of locomotives and thepurchase of tools, materials and spare parts for maintenance of motivepower and rolling stock; and the purchase of new motive power, wagons, mo-bile cranes, radio-telecommunication equipment, vehicles and ancillary

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equipment. Discussion of this program is being pursued in the course ofsupervision of the ongoing Second Railway Project as economic analysis isneeded to determine the justification of parts of this program.

1.26 The program for air transport, essentia:Lly the maintenance of ex-isting facilities and the reinforcement of landing strips to accommodatelargier aircraft as well as the minor improvements at Antananarivo's Inter-national Airport to handle the Boeing 747, is reasonable. Similarly, themodest investments in water transport, mainly mainltenance of existing faci-lities and protection of port structures, are reasonable.

1.27 In summary, although a number of individual components requirecareful scrutiny and the overall program, particularly in road and railtransport, may have to be scaled down, the 1983-85 plan provides a realis-tic framework for investment planning in the sector.

G. Transport Policy and Issues

1.28 Despite a sufficient and broad resource base, Madagascar has beenunsuccessful in achieving an adequate and sustained rate of economic devel-opment. This has been partly due to policies that have often impeded rath-er than facilitated economic development, as in the case of the transportsector. Government policy in the sector during the 1970s was to expandtransport infrastructure, increase the role of the state in providingtransport services, and control transport tariffs and fares as part ofoverall price controls. Because maintenance of transport infrastructureand equipment was given a lower priority than construction of new facili-ties and improvement of existing ones, the transport system deteriorated,particularly in recent years, when imported materials and spare parts wereseverely curtailed due to scarcity of foreign exchange. The expanding roleof the state without adequate technical and adm inistrative foundation, ashrinking private sector, and the difficult financial situation of trans-port enterprises in both sectors, brought about a worsening of transportserviices which threatened to paralyze the economy.

1.29 In order to reassess the situation and help the Government reori-ent its sectoral policy framework, a transort sector review was carried outin 1982. Based upon the findings of this review and discussions with theGovernment a Transport Sector Memorandum (TSM) was published in February1983. The TSM identified in order of priority the following issues:

(a) the need for financial recovery i-or transport enterprisesincluding the railways, the national airline and parastataltrucking companies;

(b) the need for increased efficiency in the road transport in-dustry including the removal of excessive state controls anda clearer definition of the role of public and private sec-tors;

(c) improved pricing policy in the sector;

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(d) the need for a shift of emphasis from new investments to re-habilitation and maintenance;

(e) :improvement of sector planning and coordination; and

(f) the need for increased manpower training and technical assis-tance.

1.30 The dialogue induced by the TSM has generated substantial changein Government's strategy in the sector. Government has stated its inten-tion to enable the private transporters to compete on equal terms with thepublic sector. Its agreement to the proposed US$10 million allocationunder the proposed credit for spare parts purchases exclusively for privatetransporters is a first indication of its seriousness. Government has alsostated its intention to substantially reduce the fleets of the provinciaLtrucking companies by selling their trucks to the private or other morefinatncially viable trucking parastatals. Government has expressedwillingness to move towards deregulation of goods haulage by liftingcontrols on routes and inter-provincial services. Government has alsorecently increased tariffs substantially in air, rail and road transport.Finally, there has already been a marked shift in planned emphasis from newinvestment to rehabilitation and maintenance. Government has, with IDAassistance, selected about 10,000 km of the highest priority component ofthe road network for rehabilitation and -maintenance (para. 2.04). Thesmall part of road components outside the 10,000 km in the Government'sdraft Public Investment Program's (PIP) is expected to be accorded lowpriority or dropped. The PIP's component for other modes is much smallerand contains practically no new investments. Notwithstanding the above im-provements in Government's sector strategy and attitudes, much remains tobe done and is being addressed under the proposed project as discussed be-low.

Need for a Financial Recovery Program

1.31 The financial difficulties of transport enterprises result fromunrealistic, regulated tariffs; shortage of foreign exchange for spareparts and equipment renewal; and the lack of adequate design and prepara-tion of new state-controlled transport parastatals. As a result, severaltransport agencies have had to severely curtail equipment maintenance andare facing short-term cash problems and medium-term operational limita-tions. Accordingly, the TSM recommended that the Government (a) reviewprocedures for allocating foreign exchange, giving the transport sector itsdue priority; (b) consider a moratorium on new investment in the sector andconcentrate on rehabilitating and maintaining infrastructure and equipment;and (c) prepare a financial redressment program for the sector includingthe revision of pricing policy (paras. 1.34-1.36), the rationalization oftransport services and the gradual elimination of subsidies.

1.32 As indicated earlier, the Government has already acted upon anumber of these recommendations. It recently increased tariffs for roadtransport (20% for passengers and 35% for freight), rail transport (20% forpassengers and 50% for freight) and air transport (12% for internationalpassenger service in 1981 and 28% and 15% for domestic service in 1982 and1983, respectively). The railways' new financial autonomy will make future

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tariff adjustments easier, especially after completion of the cost studiesprepared with FAC-financed technical assistance. More increases for roadtransport, especially the state-controled portion, are needed in the shortterm to correct the serious imbalance between ccsts and tariffs; in thelonger term, the Government will need to liberalize road transport tar-iffs. Therefore, the Government has agreed to (i) raise road transporttariffs for passengers and freight by 40% in the immediate future; (ii) byMarch 31, 1984, further raise tariffs to a level acceptable to the Associa-tion taking into account price variations between May 1983 (negotiations)and March 31, 1984, and (iii) by December 31, 1984, deregulate all roadtransport tariffs unless the transport plan study (para 2.12) providesreasons satisfactory to the Association to do otherwise. The 40% increasein passenger and freight tariffs is a condition of effectiveness for theproposed credit.

Need to EnhanLce the Efficiency of Road Transport Industry

1.33 The road transport sub-sector is hampered by lack of autonomy andpoor organization of parastatals, the diminishing role of the private sec-tor and excessive controls and regulations of transport services. The mostadverse regulations include limitations on the routes and commodities to bemoved and restrictions on inter-provincial transport services. Aware ofthe deleterious effects of these policies, the Government has agreed inprinciple to (a) have the private sector compete on equal terms with thepublic sector; (b) rationalize and restructure the! road transport parasta-tals by greatly reducing their fleets and making them operate on a commer-cial basis; and (c) liberalize and deregulate the sector. The adoption ofthese measures should provide an adequate environment for the developmentof the private road transport industry and increase the efficiency of para-statals. The Gcvernment has agreed to deregulate road transport by remov-ing all restrictions on the selection of routes and on commodities carriedby the private sector by December 31, 1984.

AdOption of a Sound Pricing Policy

1.34 The aim of the Government's pricing policy has been to restraininflation and to counteract monopoly and cartel tendencies. Almost all es-sentiial commodities and services, including transport, are subject to someform of price control. In the transport sector, tariffs for road transportand coastal shipping were meant to be set by Government based on costs.However, due to the complexity and variety of factors underlying the esti-mation of costs, the shortcomings regarding assumptions, and the inadequacyof basic data it: has been impossible to fix realistic tariffs. While theprivate truckers generally ignore official tariffs (para. 2.11), the para-statals must comply with them. Both the public and private passengertransport industries, on the other hand, comply with official passengerfares. This seriously affects the financial situation of transport enter-prises, since tariffs are in some cases considerab:Ly below costs. As men-tioned in para. 1.32, the Government has agreed tc increase tariffs by 40%immedLately, followed by an adjustment to compensate for price increases byMarch 31, 1984, and deregulation by December 31, 1984.

1.35 Transport of passengers, priority products and all services inlow density railway lines are heavily subsidized. The preliminary results

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of a recent costing exercise carried out by a consultant confirm this forpassenger traffic, with first class passengers and suburban services payingless than half their marginal transport cost, while second class passen-gers, surprisingly, cover full costs. The ongoing Second Railway Projectprovides for the setting up of a costing system and economic studies of lowdensity lines. These will help the Government define an appropriate levelof tariffs reorganize present operations and close uneconomic lines.

1.36 International tariffs for shipping and air transport are set byconferences or thrcugh competition and adhered to by Malagasy carriers. Inthe case of domestic tariffs for coastal shipping and air transport, tar-iffs are set at unremunerative levels. In many cases, however, these ser-vices are the only reliable means of transport to some small communities.Should they be iaintained for social/developmentall considerations, an ex-plicit direct subsidy should be paid to carriers. The maritime and coastalshipp:ing study being carried out under FAC financing will address the tar-iff issue in that mode. No specific study or action is included under theproposed project for air transport because the Government has already takensteps to correct the tariff issue in this subsector (para. 1.32).

Maintenance vtersus New Investment

1.37 The need for a shift of emphasis away frcm new investments to re-habil:itation and. maintenance is already being tackled in the draft PIP.Moreover, under the proposed project Government will discuss its road sec-tor program over the period January 1984 to December 1986.

Iuprovement of Investment Planning and Coordination

1.38 These two interrelated issues have already been discussed inparas. 1.20 and 1.21, respectively.

Manpower Traiiig and Technical Assistance

1.39 Some of the problems now being experienced in the transport sec-tor are due to the lack of sufficiently experienced and qualified person-nel. The ongoing Fourth and Fifth Highway Projects contain important tech-nical assistance and training components. The proposed Sixth Highway Pro-ject will further reinforce those efforts (paras. 2.17-2.19 and 3.11-3.13).

Outstanding Issues

1.40 Most of the main issues faced by Madagascar's transport sector,especially those dealing with highways and road transport, have been ad-dressed under orgoing operations or will be addressed under the proposedproject. There are, however, a number of issues which, while important,deserve a lesser priority and could be more properly handled in the frame-work of specific operations in other sub-sectors. Such is the case ofpricing policy in the port subsector and operational efficiency of coastalshipping. They wqill be the object of discussions in the course of the con-tinuous sector dialogue between the Association and the Government and willbe addressed in detail in a subsectoral operational context.

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H. Previous Bank Group Assistance in the Sector

1.41 Bank Group lending to the transport sector has amounted to US$128million for eight projects. Lending has comprised five highway projects(Credit 90-MAG, US$10 million, 1966; Credit 134/Loan 570-MAG, US$8 million,1968; Credit 351-MAG/Loan 876-MAG, US$30 million, 1973; Credit 641-MAG,US$22 million, 1976; Credit 938-MAG, US$24 million, 1979 plus an EEC Spe-cial Action Credit of US$10 million), two railway projects (Credit 488-MAG,US$6 million, 1974; Credit 903-MAG, US$13 million, 1979) and a port project(Credit 200-MAG, US$9.6 million, 1970, increased by US$1.8 million in1973). A detailed description of these projects is given in Annex 2. Fur-ther, several Bank Group agricultural projects have included feeder roadsand three proposed projects (Lac Alaotra Rice Intensification Project,Second Village Livestock and Rural Development Project and the CottonDevelopment Project) in that sector call for the construction and/or reha-bilition of additional feeder roads.

1.42 The focus of the first three Bank Group projects in the highwaysubsector was on helping the Government pursue its objective of providingbetter road access to regional economic centers. In total the three pro-jects financed the construction to paved standards of 708 km of roads.Project Performance Audit Reports (PPAR) for the three projects indicatere-evaluated ERRs for individual roads generally acceptable. Design diffi-culties, construction delays and lower than anticipated traffic increasesor benefits from value added to agricultural production have resulted in afew ERRs lower thlan those anticipated at appraisal. The PPAR for the ThirdHighway Project identified the lack of training and maintenance componentsas the main shortcoming in the Bank Group's assistance to Madagascar forhighway development. Roads financed under these projects were alreadyshowing signs of deterioration when the PPAR was written due to inadequatemaintenance and, to a lesser extent, a failure to enforce weight regula-tions.

1.43 The Association's attention was therefore shifted from expansionand improvement of the road network to road maintenance and institutionbuilding. The ongoing Fourth Highway Project was designed to improve roadmaintenance activities, institution building and staff training through astudy to evaluate road maintenance needs (equipment and personnel), pro-curement of road maintenance equipment and weighbridges, and initiation ofa training program, in addition to the construction to gravel standards ofa 370--km secondary road and reconstruction to paved standard of a 67-kmsection of RN 1. The Fifth Highway Project was designed to strengthen roadmaintenance operations. It includes procurement of additional road mainte-nance equipment, improvement of workshops and road regravelling operationsas well as construction of bridges and drainage structures on a 165-km roadand rehabilitation of sections of RN 4 and RN 7.

1.44 The execution of the Fourth and Fifth Highway projects has, how-ever, been hampered by a poor organization and frequent changes in the man-agement and staff of MTP, cumbersome administrative procedures, lack of ex-perienced personnel, and shortage of funds. As a result, the projects havebeen delayed by three years and one year, respectively, and the road net-work has deteriorated further. To solve these problems, the Government hasput in place a more efficient organization, stabilized the management of

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MTP and shortened some administrative procedures. These measures have im-provedl the implementation of the projects with significant results in roadmaintenance operations. Further measures to be taken under the proposedSixth Highway Project include a study to make recommendations on how MTPcan carry out road operations more efficiently and assist rural communitiesin the improvement of rural and feeder roads (para. 3.25), provision of twoexperts to serve as line managers in MTP (para. 3.24), streamling of pro-curement procedures (para. 2.30) and provision of sufficient and timelyfunds for road uaintenance through the establishment of a road fund and arevolving fund (para. 2.25). Also under these previous projects theGovernment has not allocated sufficient foreign exchange to contractors,suppliers and ccnsultants working under Association projects even thoughthe credits covered the foreign exchange costs. This has resulted in de-lays in project execution. To eliminate this problem, the Government willensure that all authorizations required for the importation of goods fi-nanced under the proposed project are given within two weeks of the finalapproval of the related contracts and before notification of these con-tracts.

1.45 The First Railway Project financed a modest increase in capacityand improvements in management and operations. It: also included the set-ting up of a planning unit (para. 1.20). The project had to be reduced inscope due to cost overruns and was completed three years behind schedule;the institution-building objectives of the project were not achievedbecause of the overall political uncertainty in the country, and therecalculated rate of return was less than 10%. The ongoing Second RailwayProject continues the rehabilitation efforts undertaken in the First Rail-way Project; it provides replacement of outdated equipment, track renewal,improvement of telecommunications and workshops, and implementation of therecommendations of the consultants on the management of the railway. Al-though the physical elements of the project have been implemented satisfac-torily, the railway faced severe operational and financial difficulties,and the recommendations of the consultants on financial management couldnot be implemented because of the lack of financial autonomy of the rail-way. This led to credit suspension in June 1982; suspension was lifted inDecember 1982 afiter the Government prepared a complete financial recoveryprogram for the railway, including a change in the railway's statutes giv-ing it complete financial autonomy. The Government also agreed to use theremaining credit funds for technical assistance tco improve financial man-agement and training for a new financial directorate and feasibility stud-ies to be carried out on two lines whose economic viability is in ques-tion. The port project provided for extension of the pott of Toamasina,creation of a pcrt authority and training. The physical components weresatisfactorily carried out, but the revised rate of return was 7% due tothe decline in traffic since 1972 (para. 1.16). In;stitution building even-tually contributed to more efficient management after some initial prob-lems.

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II. THE HIGHWAY SUBSECTOR

A. The Network

2.01 The road network comprises about 49,650 km of roads, of whichabout 4,890 km are paved roads, 5,260 km engineered earth and gravel roadsand 39,500 km feeder roads and tracks. The roads are classified adminis-tratively and technically as shown in the following table:

Table 2.1: The Road Network (1982)(km)

Paved Engineered Feeder TotalEarth/Gravel Roads

& Tracks

National roads 4,350 4,260 - 8,610(Routes Nationales, RN)

Regional Roads 540 1,000 9,500 11,040

Others - - 30,000 30,000

TOTAL 4,890 5,260 39,500 49,650

Nationial roads link regional capitals and major towns while regional roadslink smaller towns and villages within and between regions.

2.02 The paved road network, the most important element of the surfacetransport system, consists of a main north-south artery -- RN4 and RN7 --stretching from the regional center of Mahanjanga in the north, to Antanan-arivo in the center and continuing to Fianarantsoa in the south-central re-gion. Other paved roads branch off from this ce-ntral axis or are foundaround the major coastal towns. The paved and engineered earth/gravel roadnetwork is adequate in length and meets the Governnent's objective of con-nectin,g all regional capitals by all-weather roads, a goal achieved underthe Fifth Highway Project with the construction of bridges, approaches anddrainage structures on the Antsohihy-Abanja road. However, some productiveand potentially productive areas on the east and west coasts are still notconnected to the rest of the country by all-weather roads. Road links tothe southern regiLon are mainly earth roads or tracks, most of which are inpoor condition although, with the dry climate prevailing most of the time,they are passable year round. The Government has obtained financing fromthe Federal Republic of Germany to upgrade to paved standards the road fromIhosy to Sakaraha, which will provide the final link of the north-southroad axis.

2.03 The road network is in poor condition and constitutes a con-straint on econoriic activity. Deterioration of the roads has been causedby a combination of a lack of maintenance and overloading of trucks. About80% of the paved roads show signs of deterioration (uneven surfaces,

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ravelled edges arLd washed away shoulders). Of these, 50% require full re-habilitation to restore the pavement to serviceable condition, while about30% require resurfacing to avoid further deterioration and costly repairs.Most earth and gravel roads are in an equally poor state. Many of theroads which serve rural areas have deteriorated to the point where they arebarely passable to motorized traffic. As a result, many agricultural areascan only be reached on foot or by ox cart. The distribution of agricul-tural input is difficult and collection of crops is seriously hampered.

2.04 In view of the general deterioration of the road network and thelimited resources (organization, manpower and finances), the Governmentselected, with the assistance of the Association, a limited road network,the "Economic Road Network" (see Map) which will be rehabilitated and main-tained within the available resources. This network consists of about10,000 km of roads comprising 4,300 km of paved roads (about 90% of thecountry's paved roads, including the 1,100 km, all-important north-southaxis RX4 and RN7); 3,300 km of engineered earth roads (60%) and 2,400 km offeeder roads and tracks (6%). This network is essential to the country'seconomic development, linking main production centers, market places, prin-cipal cities, and railway, port and airline terminals. Major rehabilita-tion and maintenance operations are being carried out on many of theseroads under the Fourth and Fifth Highway Projects and improvements arenoticeable on some of the major links. The proposed project will assistand expand these efforts.

B. Road Use

2.05 The country's total vehicle fleet is estimated at 30,000 vehi-cles, of which 13,000 are light vehicles and 17,000 are commercial vehicles(11,000 utility, 1,000 buses and 5,000 heavy trucks); the heavy trucks arethe most important element, carrying about 80% of freight traffic. Thegrowth of the vehicle fleet has slowed considerably in the past severalyears due to the stagnation of the economy and the severe shortage of for-eign exchange which has in effect stopped the import of new vehicles. From1977 to 1980, the overall fleet grew by 3% p.a. The largest increase (9.4%p.a.) was in the number of pick-up trucks which are more practical tooperate than heavy trucks on the badly deteriorated roads. Trucks andbuses only grew at about 3.6% p.a. and the number of cars dropped by anaverage of 4% p.a. Since 1980 the severe shortage! of spare parts result-ing from the foreign exchange crisis has led to a drastic decline in thenumber of serviceable vehicles. The composition and. condition of the vehi-cle fleet as of December 1982 are shown in Annex 3, Table 1.

2.06 Traffic counts indicate a wide variation in traffic volumes de-pending on the tylpe of road: average daily traffic ranges from about 1,000vehicles on paved roads near the main cities to about 20 vehicles on earthroads. Traffic has generally stagnated since 1978 and on some secondaryroads :Lt has actually decreased. The decrease in the number of cars as aproport:ion of the total vehicle fleet, the lack of spare parts and the con-dition of the road network have been some of the major reasons trafficlevels have changed little in recent years. Another important factor hasbeen the overall istagnation of the country's economy.

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2.07 Total consumption of motor vehicle fuel (Annex 1, Table 2) hasfluctuated around 290 million litres p.a. during the past eight years, re-flecting the stagnation of the economy and traffic volumes. As shown inthat table, domestic prices of petroleum derivatives increased followingthe suidden hike in world oil prices in 1973, but increases did not keeppace with foreign. levels. It was only after 1978/79 when price increasesaccelerated; between 1978/79 and 1981/82 the price of gasoline rose 132%and diesel 108% in current terms. Accordingly, as shown in Table 2.2 be-low, the pump pr:ice of both products more than covers their internationalprice (i.e., the relevant opportunity cost). Howevrer, the price differen-tial between the two fuels has widened, reflecting a Government policyaimed at encouraging the utilization of diesel-powered transport. Althoughthe general leveL of road user charges is adequate (para. 2.26), and un-doubtedly passenger vehicles pay for the use they make of the roads, it isnot c]ear whether heavy trucks pay their share of road costs given therelatively lower taxes and duties for diesel users. To establish the fairshare of charges in order to avoid possible uneconomic cross-subsidizationof diesel users by consumers of gasoline, the planning unit in MTRT willexamine current road costs and road user charges within the framework ofthe proposed project (para. 2.12).

Table 2.2: Price of Gasoline and Diesel Fuel(USe per US gallon)

Gasoline Diesel

Retail pricel! 307.17 140.75

International Price 128.52 129.93

(C.I.F. Toamasina)2/ (108.00) (1()9.00)

(Transport and distribution) (20.52) (20.93)

Retail price as % ofinternational price 239.01 108.33

1/ Includes a tax component of US$0.63 for gasoliine and US$0.36 for de

sel. No shadow pricing of foreign exchange has been considered nec die-ry following CIFh rcent adoption of a crawling peg System of exchangerate adjustments.

2/ Based On CIF price Of gasoline and diesel at Toamnasina for 1982.

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C. The Road Transport Industry

Freight Transport

2.08 The road transport industry comprises state-owned and private en-terprises, a large number of individual owner-operators and a few coopera-tives. Although the state owns about 40% of existing capacity (about 2,000of the total 5,000 heavy trucks), it controls the tovement of basic commo-dities. Until recently the public sector included only several large trad-ing firms and some parastatals, such as regional development agencies, or-ganizing transport for their own use. At the end of 1980, however, theGovernnent created a trucking enterprise in each of the country's six ad-ministrative regions in line with its policy of expanding its role in thetransport sector. In general, however, these enterprises lack trained per-sonnel and maintenance facilities, and operations have been poor. Privateentrepreneurs, who account for the greater part of freight transport, havesince 'been reluctant to enter the industry or to expand their operations.The acute shortaEre of new vehicles and spare parts has placed additionalstress on the industry.

2.09 As private truckers have been relegated to a secondary positionin the allocation of foreign exchange for the purchase of vehicles andspare parts, the shortage of spare parts has become their most urgent prob-lem. M4TRT recently completed a survey of Madagascar's road transport fleetwith the help of FAC; the major findings are summarized in Annex 3, Tables2-4. The report shows that imports of spare parts fell drastically duringthe last two years: from an average of US$20-25 million p.a. to US$5 mil-lion in 1981 and US$10 million in 1982. (The drop in new vehicle importsfollowed the same trend except for trucks imported directly by the Govern-ment.) As a result, more than half the private trtbck fleet is out of ser-vice for lack of spare parts. The report estimated the emergency spareparts needs, that which is required to overcome the maintenance backlog andto put the entire motor vehicle fleet back in operation, at US$20 million,of which US$10 million constitutes the minimum needed to rehabilitate theprivate truck fleet. Normal annual recurrent needs for the total fleet areestimal:ed at about US$20 million for spare parts, of which US$15 million isrequired for commercial vehicles, both public and private. This amount,however, may be overstated as it includes the Government-owned fleet, mostof which is new and for which spare parts are allocated directly or arestill covered by the purchase contracts for the trucks.

2.10 The proposed project includes a pilot scheme to meet the emergen-cy needs of the private truckers (paras. 3.14-3.20). While the projectwill help meet emergency needs of private truckers, the Government will al-locate a minimum of US$15 million in foreign exchange annually during im-plementation of the proposed project to meet the normal, recurrent spareparts needs of the entire commercial vehicle fleet (para. 2.05), and byDecember 31, 1986 the Government and the Association will exchange views onestimated import programs for spare parts for commercial transport enter-prises for the next three years. Additional external assistance is likelyto be needed to meet normal replacement and expansLon requirements of theentire road translport industry; it is expected to be provided by FAC.

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2.11 There are no barriers to entry into the industry after payment ofappropriate fees, taxes and insurance. By statute the MTRT is responsiblefor regulating the motor transport industry, but in practice its role islimited to setting rates for transport between provinces. Provincialauthorities are responsible for rate-setting within their provinces. Theofficial rate system, however, is not respected as costs have escalatedfaster than MTRT's ability to make rate adjustments. As a result and for-tuitously, tariffs are now generally governed by supply and demand and varyconsiderably according to road condition, season and region, except forthose commodities moved by parastatals.

PassengerpTransport

2.12 Passenger transport is more closely regulated than the truckingindustry. MTRT and provincial authorities regulate passenger transport de-pending on whether the service is between or within the provinces. Indivi-dual carriers may operate independently for only one year, after which theymust join an existing cooperative or form a new one (the law requires aminimum of seven members). Rates are based on the type and condition ofthe road, but they are not reviewed frequently enough to reflect changes inoperating costs, and the methodology for cost analysis could be improved.MTRT's planning unit (para. 3.27) will be responsible for carrying out astudy which will include recommendations on road user charges and fuelprices and taxes, as well as the cost structure of road passenger ser-vices. The terms of reference for this study will be approved by the Asso-ciation. The study will be completed no later than December 31, 1984;after submission of the study and recommendations to the Association, theGovernment shall promptly take appropriate action resulting from the study,taking into accoLnt the Association's comments. In the interim, theGovernment will rsLise tariffs for passenger transport by 40% (para. 1.32)in addition to the 20% increase made recently.

D. Traffic Reulations and_Safety

2.13 Regulations governing truck weight and dimensions are adequate.Weight regulations allow loads up to 10 tons/axle; weighbridges were boughtunder the Fourth Highway Project to help enforce these regulations but en-forcemernt remains poor. Recent spot surveys have revealed that more than60% of trucks are overloaded and many exceed legal dimensions. Since en-forcement has been lax, the Government has agreed to ensure that importa-tion of vehicles is limited to those which meet all weight and dimensionsspecifications for road use. In addition, the Minister of Public Workswill have the sole authority to approve the technical aspects of importlicenses for trucks, the assembly licenses and the road licenses fortrucks.

2.14 While IMSadagascar has adequate laws governing road safety, en-forcement is lacking. Driver education, licensing arnd vehicle registrationare hardly more than formalities. Vehicle inspection is carried out spora-dically and superfEicially. Although statistics on traffic accidents arescattered and inconclusive, the many demolished vehicles scattered alongmajor roads point to a high toll of accidents. The Government will prepareand submit to the Association by December 31, 1983 an action plan to im-

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prove enforcement of safety regulations and, taking into account the Asso-ciation's comments, to implement the plan no later than June 30, 1984.

E. Adiministration

2.15 In pri'nciple MTP is responsible only for the administration ofnational roads; provinces administer regional roads and communities ad-minister feeder roads and tracks. In practice, however, MTP's assistanceis sought for all significant improvement and maintenance works on the en-tire 50,000 km network. This overextension of MTP is one of the problemsimpeding efficient and proper road maintenance. To alleviate this problem,the Government has selected, with Association assistance, a limited networkof 10,000 km (para. 2.04) for which MTP will be responsible. This networkincludes the most heavily used roads in the country, carrying about 90% ofthe traffic, and the most economically important as determined by MTRT,MPARA, and MIC. The road rehabilitation and maintenance program envisagedunder the project: (paras. 3.03-3.09) is confined exclusively to this net-work. The remaining 40,000 km are mostly tracks and serve local communi-ties for administrative services and subsistence agriculture. In the shortto medium term, maintenance and improvement of these tracks will be carriedout within the context of rural agricultural, health and sanitation pro-jects, with technical assistance from MTP. As MTP's capacity increases, itwill gradually assume responsibility for the maintained and improvedtracks In the longer term a study will be carried out under the proposedprojecl: to determine the appropriate means and organization to maintain andimprove these roads (para. 3.25).

2.16 MTP's alministrative organization was set up in 1977 giving con-siderable authority and independence to the regions and districts in linewith the Government's decentralization policy. This organization was amajor impediment to effective road maintenance: regions and districts wereaccountable to no one, and single pieces of equipment were given to smallwork uniits incapable of carrying out maintenance operations. MTP was reor-ganizecl in April 1982 (Chart 1) to bring about greater efficiency and ac-countability. Administrative, financial, planning and training functionsare grouped under the General Secretariat. Technical operations aregrouped under the Directorate of Works (Direction GgnMrale de l'Equipment,DGE). The divisions under DGE responsible for road works are the follow-ing: (i) Division of Infrastructure (Direction de l'Infrastructure, DI)which is in charge of design and construction; (ii) the Road MaintenanceDivision (Direction des Ponts et Chaussges, DPCH) which plans and executesroad muLintenance operations through its seven regional offices correspond-ing to the six regions and the special subdivision of Taolanaro and their42 subdivisions; and (iii) the Equipment Division (Direction du Materiel,DMAT) which purchases road maintenance equipment, spare parts, material andsupplies; maintains equipment; stores spare parts:; and operates work-shops. Although the organizational set-up is still relatively new, it ap-pears t:o be well-adapted to MTP's needs and has already begun to yieldoperational improvements.

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F. Staffing and Training

2.17 A shortage of qualified and experienced staff at all levels ishamper:Lng maintenance operations; in addition, the work force is poorlymanaged. For the administration of roads, MTP employs about 50 engineers,700 technicians and 2,000 skilled and semi-skilled laborers. This staffing:strengt:h is numerically adequate for MPT's current operations and will re-quire only minor increases to cope with future workloads. However, MTP'sengineers and technicians are young and generally inexperienced: about 90%of the engineers and 70% of the technicians ire under 40 years old. Thisproblem became acute after 1972, when a large number of expatriates who hadfilled key positions in MTP left the country and Malagasy nationals withoutadequate preparation filled the vacancies. The proposed project will fi-nance two experts to serve as line managers in MPI for three years and astudy to further improve MPT's organization (paras. 3.24 and 3.25).

2.18 Civil engineering/technical training in Madagascar emphasizes thetheoretical rather than practical aspects. The technical college in Antan-anarivo (l'Etablissement d'Enseignement Superieur Polytechnique, EESP) pro-vides al four-year program in civil engineering; about 20 students graduateannually. EESP's civil engineering department suffers from a shortage ofqualified lecturers, inadequate training equipment,, and a lack of funds.The country's 20 secondary technical schools have two to four year programsto train technicians; they produce about 250 graduates annually. Althoughthe numkber of traiinees is sufficient to fill vacancies in MTP, the theore-tical training is not always complete and practical training is almostnon-existent. The only practical training and refriesher courses availableto MTP staff are given at MTP's own training center (Centre d'Applicationdes Travaux Publics, CATP).

2.19 To improve the training of MTP personnel, a 1978 study by consul-tants Louis Berger (USA) under the Fourth Highway Project recommended: (i)improving EESP's engineering and technical courses by appointing a full-time lecturer for the roads sector and procuring training equipment; and(ii) rehabilitating CATP and giving it the means to conduct a long-term,countrywide program of practical and, to a lessear extent, theoreticaltraining for middle and lower level supervisors and craftsmen. The FourthHighway Project is financing the rehabilitation and equipping of CATP andconsultants are training instructors. Some 32 instructors are enrolled inthis program and are scheduled to graduate by mid-1984. A highway expertis giving refresher courses to 27 MTP engineers at CATP. The proposed pro-ject will continue and expand this program, including the training of en-gineers, technicians and skilled laborers (paras. 3.11-3.13).

G. Maintenance

2.20 During the past decade the Government concentrated on buildingaccess roads to regional economic centers and paid little attention tomaintenance. Consequently, inadequate road maintenance is now the mostserious problem facing the subsector and the effects are being feltthroughout the economy, especially in the agricultural sector where farmersare finding it increasingly difficult to get their crops to the markets.

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The Government has therefore decided to concentrate most of its financialand manpower resources in the subsector on maintenance. Under the proposedproject, rehabilitation and maintenance will be confined exclusively to the10,000-km "economic" network (para. 2.04).

2.21 The main problems preventing proper maintenance have been (i) anexcessively decentralized road maintenance organization, making accountabi-lity iripossible and distributing single pieces of equipment to small unitsincapable of mounting road maintenance operations; (ii) lack of equipmentmaintenance; inadequate workshop facilities, equipmient and tools; and lowequipment availability due to a shortage of spare parts; (iii) cumbersomeadministrative and procurement procedures; (iv) shortage of qualified roadmaintenance technicians; (v) inadequate and untimely allocations of fundsfor road maintenance; and (vi) poor management, budgeting and implementa-tion of maintenance operations.

2.22 Major sl:eps have already been taken to remedy some of these prob-lems under the ongoing Fourth and Fifth Highway Projects. First, in early1982 MTP was reorganized and, as required under the Fifth Highway Project,a central unit was established and given overall responsibility for mainte-nance of national roads. Regional engineers are now accountable to a cen-tral authority and procedures have been simplified. Secondly, equipmenthas been regrouped at the regional level ending the highly inefficientpractice of spreading individual pieces of equipmnent among small workunits. Thirdly, the rehabilitation of maintenance equipment has accele-rated; equipment, spare parts, materials and supplies are being providedunder the Fourth and Fifth Highway Projects to fully equip five earth-roadbrigades and six resealing and patching brigades. Three earth-road bri-gades are fully operational as are two patching and resealing brigades; theremaining brigades are scheduled to be operational in mid-1983. Contrac-tors are carrying out rehabilitation works on sections of RN 4. Fourthly,the workshops in Antananarivo, Mahajanga, Toliara, Fianarantsoa andToamasina are being equipped and improved to maintain equipment effective-ly. Fifthly, a permanent training center has been established and a train-ing program for road maintenance personnel is in operation.

2.23 The proposed Sixth Highway Project would continue and expandthese operations by (i) helping strengthen the management and organizationof MTP by providing technical experts and studies (paras. 3.24-3.25); (ii)providing complementary equipment for seven multi-purpose brigades and con-tinuing to improve workshops (paras. 3.06-3.07); (iii) assisting in simpli-fying procurement procedures (para. 2.30); (iv) ensuring that the trainingneeds of MTP are fulfilled (paras. 3.11-3.13); and ensuring adequate andtimely funds for road maintenance (para. 2.25).

H. Planning and Financing of Investments

2.24 Short- and long-term planning in the road subsector is carriedout by MTP's Planning and External Affairs Unit. In preparing the plans,it gathers data from MTRT, MIC and MPARA to determine individual projectsand the timing of their execution, and to identify and arrange financing.The Unit thereafter prepares annual investment budgets, monitors executionof the plans and produces annual implementation reports. Under the new

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Public Investment Plan, 68% of the investments in the transport sector willbe for the road subsector (para. 1.24). The previous 1978-80 developmentplan called for an overly ambitious construction and rehabilitation pro-gram. Since the end of that period, construction has generally been con-fined to projects for which Madagascar has been able to find outside fi-nancing.

2.25 Road maintenance is financed from the general budget while newconstruction is f:Lnanced from the investment budget which comes mainly fromexternal sources. Thus, funds for new construction do not have to competewith other sectors for scarce local funds. Since [975, an average of FMG1.9 billion (US$5.1 million) per year has been allocated to roadmaintenance, well below the minimum FMG 5 billion required under the CreditAgreement to the Fifth Highway Project to adequately maintain the entirenetwork. This requirement was not met due to a misallocation ofresources. Moreovrer, the disbursement of these funds has often been lateand untimely, thereby interrupting and delaying the works. To solve thedual problem of over-investment in new construction and under-financing ofmaintenance, the Government will (a) by September 30 of each year duringproject implementation exchange views with the Association on investmentsfor highway improvements and construction and (b) set up a mechanism toensure adequate, timely and easily accessible funds for road maintenanceand rehabilitation. As a means to implement (b) above and until aroad fund can can be established, the Government will make FMG 5 billion(US$13.3 million equivalent) available to MTP in 1984 for road maintenanceoperations, and by January 31, 1984 will open a revolving fund in itsTreasury, with an initial deposit of FMG 600 mil]Lion to be replenishedquarterly, which will be used exclusively for road maintenance. ByDecember 31, 1984 the Government will establish a Road Fund in the CentralBank. The nationa,l petroleum company, SOLIMA, will deposit monthly and inapproximately equal installments revenues from taxes and duties on motorfuel into this account. The Government will ensure that for 1985 and 1986a mininium of FMG 5 billion is deposited into the Road Fund, adjustedannually to take into account domestic inflation and the volume ofmaintenance operations. By January 1, 1985 the Government will establish anew revolving fund under the same conditions as the previous one exceptthat this revolving fund will be in the Central Bank and will bereplenished from the Road Fund. In order that provision be made forfinancing road maintenance after project implementatLon, the Government andthe Association will exchange views by December 31, 1986 on the estimatedfunds required for road maintenance for the next three years. TheGovernment will take the measures necessary to ensure that such funds willbe available to MTP as and when they are needed.

2.26 Revenues from road user charges are estimaled to have been FMG 23billion (US$61.3 million) in 1981. This exceeds what was spent on roadsfor both construction and maintenance and is far above what normally shouldhave been allocated for road maintenance. Import duties and sales taxesfrom transport equipment and spare parts totalled FM[G 8.4 billion (US$22.4million) in 1981 and annual license fees, vehicle inspection fees, etc. ad-ded another FMG 1.5 billion (US$4.0 million). Taxes on gasoline and dieselfuel (US$0.63 per gallon and US$0.36 per gallon, respectively) producedrevenues of about FMG 13.9 billion (US$37.1 million) in 1981, or approxi-mately 60% of all road user revenues. The general level of road user

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charges is adequate, even when adding to the road maintenance needs, therehabilitation of a portion of the road network. It is uncertain, however,whether the charges paid by the users are proportional to the damage theydo to the roads (para. 2.07).

I. Engineering, Construction and Supervision

2.27 The DI is responsible for feasibility studies, final engineeringand construction supervision. It follows design and construction standardsdeveloped by the French Ministry of Equipment but adapted to conditions inMadagascar (Annex 4). DI is in charge of preliminary engineering for majorworks and detailed engineering for medium-sized proJects. Most design andconstruction supervision is carried out by foreign consulting firms andtheir aLffiliates. The Government-owned consulting firm DINIKA was estab-lished in 1979. Although it is staffed with young and inexperienced engi-neers, it is participating in road construction design and supervision injoint venture with foreign firms. No other consulting firm in Madagascaris capable of delivering similar services. This arrangement for the devel-opment of DINIKA is acceptable for its participation in the proposed pro-ject.

2.28 MTP's national soils laboratory (Laboratoire National des TravauxPublics et du Batiment, LNTPB) conducts soils investigations for the con-struction of civil structures, assists consulting firms and DI in the de-sign and supervision of these works, and carries out research on the use oflocal materials fc,r construction. Under the proposed project, LNTPB acti-vities will be expanded to assist DPCH in the executLon of road maintenanceoperations. LNTPBfs services are charged to clients on the basis of a costplus formula and its revenues are in general sufficiLent to meet its costs;however, its revenues are remitted to the Government as LNTPB is not finan-cially autonomous and its costs are met from general budget allocations.This is not satisfactory since the allocations are inadequate, untimely,and req[uire lengt'hy approval procedures. Therefore, the Government will,by December 31, 1983, take all actions necessary to establish LNTPB as aseparate legal entity under the responsibility of MTP to be operated on acommercial basis with complete financial autonomy. LNTPB's operationswould be audited by the Government audit services.

2.29 ConstrLction works are almost exlusively carried out by foreigncontractors and their affiliates. The Government-owned construction firmSocigte d'Int6ret National des Travaux Publics (SINTP) has undertaken somemajor construction works, but due to over-extension and mismanagement,these works were not completed and were subcontracted to local affiliatesof foreign contractors. The Government is negotiating a joint venture be-tween SINTP and foreign firms in order that SINTP acquire proper construc-tion management and budgeting techniques. This arrangement would be satis-factory for SINTP participation in the proposed project. Although housingconstruction is dominated by foreign contractors and their affiliates, twodomestic private contractors compete successfully in building construc-tion. One of them, SARA, is building the training center (CATP) under theFourth Highway Project. These domestic firms will be encouraged to parti-cipate in the construction of workshop facilities to be carried out underthe proposed project (para. 3.08) and will be allowed a 7#% preferenceover the bid price of competing foreign contractors.

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2.30 The National Tender Board (Commission Centrale des Marches, CCM)is responsible for all procurement matters in Madagascar, and contracts areawarded following acceptable competitive bidding procedures. Bidding docu-ments are prepared by Government ministries and agencies and forwarded toCCM for approval. Later technical committees of the ministries and agen-cies open and analyze the bids; their recommendations on the evaluated lowbidders are then submitted to CCM for study and approval. CCM-approvedcontracts are signed by managers of the various ministries and agencies be-fore notification to the successful bidders. This process is long and cum-bersome, generally taking 6 to 12 months but sometimes longer from bidopening to notification. Although MTP recently shortened its internal pro-curement procedures, much improvement is still needed in the overall sys-tem. Ihe Government will shorten the procedures by ensuring that (i) a CCMrepresentative assist MTP in the preparation of bids (ii) all interestedGovernment officials attend CCM's decision meetings, and (iii) duly

authorized representatives from all ministries and agencies concernedgather at one meeting during which the contract documents will be agreed

before final signature; contracts will then be approved within 15 days ofthis meeting.

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III. THE PROJECT

A. Objectives

3.01 The proposed project will continue and expand efforts to improvethe condition of the road network started under the Fourth and Fifth High-way Projects. Its principal objectives are to (i) permit efficient and re-liable transportaltion on the country's high priority roads by improvingtheir condition and arresting further deterioration thus reducing a majorconstraint to economic development; (ii) continue the strengthening of theroad administration's capacity to maintain the road network and repair theGovernment's equipment pool; (iii) improve transport coordination and plan-ning; and (iv) begin rehabilitation of the countryl's commercial vehiclefleet.

B. Project Description

3.02 As appraised, the priority road maintenance and rehabilitationprogram includes the following:

(a) a three-year rehabilitation and maintenance program (1984-86)consisting of:

(i) rehabilitation, spot improvement and maintenance of about 900km of rural and feeder roads by contractors, including about150 km of roads in the Highlands Rice Project are.a;

(ii) patching and resealing of about 2,500 lcm of paved roads, spotimprovement and maintenance of about 2,000 km of rural andfeeder roads (including about 150 km of roads in the High-lands Rice Project area) and routine maintenance of the en-tire 10,000 km economic network by force account:, requiringprovision of (1) equipment, spare parts, materials and sup-plies, and (2) workshop facilities and equipment;

(iii) the second-phase (about 400 km) of a rehabilitation programof R.N 4 and RN 7;

(b) improvement of LNTPB;

(c) training of MTP and MTRT personnel;

(d) rehabilitation of the road transport industry through the pur-chase of spare parts; and

(e) consulting services for: (1) supervision and management of worksunder (a); (2) preinvestment studies of future paved road maintenance andstrengthening programs and of the development of about 2,000 km of ruraland feeder roads including about 1,000 km of roads in the highlands RiceProject area; (3) improvement of MTP's management arnd organizaition and theadministration of the feeder road network; (4) imlprovement of transportplanning and coordination; and (5) technical assist:ance for training andfor improvement of LNTPB.

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(a) Road Rehabililtation and Maintenance Program

3.03 The three-year road maintenance program (1984-86) would concen-trate on the rehabilitation and maintenance of the 10,000 km economic roadnetworL (para. 2.04). To reach a double objective of increasing MTP'scapacit:y to effectively carry out road maintenance operations and makingthe neltwork passable year round in the near term, the maintenance opera-tions will be carried out simultaneously by force account and contractorsand the rehabilitation of RN4 and RN7 will be carried out exclusively bycontractors.

(i) Rehabilitat:Lon and Maintenance of Earth Roads by Contractor

3.04 The rehabilitation, spot improvement and maintenance of about 900km of rural and feeder roads will be carried out by contractors and super-vised by qualified consultants. This will include about 150 km of roadslocated within the zone of the Highlands Rice Project, which is financed bythe International Fund for Agricultural Development (IFAD). The remaining750 km of roads, carrying between 20 and 60 vpd, are in the rice-producingregions of AntsohiLhy and Antananarivo where their early reopening is neces-sary to spur production. The roads to be maintained or rehabilitated(Annex 5) will be discussed by Government and the Association by June 30 ofeach year during project implementation. The roads will be selected ac-cording to criteria detailed in para. 4.14. Works to be carried out in-clude (i) rehabiLitation and spot improvements, (ii) regrading and re-gravelling, and (iii) improvement of drainage structures. Bidding docu-ments for the Highlands Rice Project area roads (150 km) have been preparedby consultants Louis Berger (USA). Bidding documents for the remaining 750km of roads will be prepared by consultants under the Fifth Highway Pro-ject.

(ii)) Maintenance by Force Account

3.05 DPCH will carry out (i) patching and resealing operations on2,500 km of paved roads (Annex 17, Table 2); (ii) spot improvement, regrav-elling, improvement of drainage structures and regrading on about 2,000 kmof rural and feeder roads including about 150 km of roads in the HighlandsRice Project area. The roads to be included in the first year's works areidentified in Annex 6. The lists for subsequent years will be discussed bythe Government and the Association by June 30 of each year during projectimplementation. The 1,850 km of roads outside the Highlands Rice Projectarea are located mainly in areas of agricultural and industrial developmentand carry between 20 and 60 vpd; (iii) cantonnage or labor-intensive opera-tions on the entire 10,000 km network consisting of clearing, regravellingand regrading of shoulders, filling potholes, cleaning ditches and drainagestructures, and maintaining bridges.

3.06 Under the Fourth and Fifth Highway Projects DPCH is beingequipped to set ul? 5 brigades for earth roads (spot improvement, regravel-ling and regrading), 6 patching and resealing brigades for routine mainte-nance of paved roads, and 42 'cantonnage' teams (corresponding to thesubdivision of the road maintenance organization) for basic routine roadmaintenance. To carry out the proposed work program, DPGH's brigades willbe regrouped into seven multi-purpose maintenance brigades one of which

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will be based in each of the six regions and the special division ofTolagnaro. The brigades and teams will be under the sole authority of theMinister of Public Works. This set-up was agreed at negotiations. Eachbrigade will include a unit for maintenance of earth roads and another formaintenance of paved roads; the units will share some common equipment.The brigades and teams will have the necessary equipment to give themflexibility to carry out all maintenance works on earth and paved roads.On the basis of present productivity rates, it iLs estimated that eachmulti-purpose brigade will maintain about 400 km of paved roads and 100 kmof earth roads a year and each labor-based team, 250 km a year. DPCH willcoordinate the activities of the brigades and teams. Most of the equipmentand tools for the brigades and labor-based teams has been procured underthe Fourth and Fifth Highway Projects. The proposed project will providecomplementary equipment, the list of which (Annex 7) was discussed andagreed during negotiations.

3.07 Proper maintenance of the equipment will be ensured by seven re-gional workshops. Five workshops (Antananarivc,, Mahajanga, Toliara,Fianarantsoa and Toamasina) are being improved and e!quipped under the FifthHighway Project; the remaining two workshops (Antseranana and Tolagnaro)will be improved and equipped under the proposed project. These workshopswill be run by the DMAT which will also provide all necessary spare parts,materials, supplies, personnel and logistical support to DPCH.

(ii:L) Rehabilitation of RN 4 and RN 7

3.08 Under the Fourth and Fifth Highway Projects, studies were carriedout on the 1,100 km of RN 4 and RN 7, the major road axis of the country.Rehabilitation of 200 km (RN 4) has begun under the Fifth Highway Project.The proposed projoect will continue these efforts by rehabilitating an addi-tional 400 km. Tnese works are divided into five lots for contracting pur-poses (Table 4.]). Consultants INFRAMAD (Madagascar) and BCEOM-LCPC(France) have completed detailed engineering and bidding documents are be-ing prepared. Bidding documents are also being prepared for the remaining500 km, works on iwhich could readily be carried out if additional financingwere found (para. 3.32).

3.09 RN4 and RN7 were built in the 1950s as low volume roads (50 to100 vpd); they ncw carry about 150 to 1,000 vpd, with 50% trucks on RN 4and 25% on RN 7. Axle loads largely exceed the present permissible singleaxle lcads of 10 tons. During the past decades maintenance has been spottyand on an emergency basis. On most sections the pavement has deterioratedto the extent that: reconstruction is necessary. Paveipent widths range from4 to 6 m and some have eroded to 3.5 m; the designed paved width on themountainous sections is 5.5 m and some of these sections will be rebuilt tothis wLdth where economically feasible. The rehabiLlitation works consistof (i) improvement: of drainage structures, (ii) widening of some sections,(iii) rebuilding of subgrades, (iv) regraveling of shoulders, and (v) con-struction of a new base course of 15 cm to 20 cm of crushed rocks and adouble surface treatment or a 5 cm to 8 cm of asphalt concrete wearingcourse. The road design is based on a realistic maximum single axle loadof 13 tons for an economic life of 15 years. It is expected that resurfac-ing will be required after 7 to 8 years. Rehabilitation works will be car-ried out by contractors under the supervision of consultants.

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(b) Improvement of LNTPB

3.10 LNTPB's activities will be expanded to enable it to assist DPCHin planning, designing and supervising road maintenance and pavementstrengthening operations. LNTPB has been receiving support the past twoyears from (a) FAC, in the form of equipment and technical assistance (oneengineer and one technician from CEBTP, France), which will continue toDecember 31, 1984; and (b) United Nations Develol?ment Programme (UNDP),which has provided an expert for exploration and identification of localmateriials for use in road works; his services will end on December 31,1983. The proposed project will continue and expand this support by pro-viding supplementary equipment and qualified persoinel (para. 3.29). Thelist of equipment (Annex 8) was discussed and agreied upon during negotia-tions.

(c) Training of MTP and MTRT Personnel

3.11 Under the proposed three-year (1984-86) training program person-nel will be trained to carry out effective transport coordination and man-agement, and proper and timely road maintenance operations. About 730existinlg employees of MTP will be retrained, including 40 engineers, 180technicians, 180 equipment operators, 270 mechanics' and 60 accounting andadministrative personnel. Another 185 new employees will be recruited andtrained, including 30 engineers, 75 technicians, 18 soils laboratory tech-nicians and 62 storekeepers. The project will also provide training forabout 1i0 transport professionals and technicians of MTRT.

3.12 CATP will run the training program which has been prepared byconsultants Louis Berger; it will also manage the Antananarivo multipurposebrigade for both field training and maintenance of roads in the region.The program will combine classroom and field training with greater emphasison the latter. A competent Malagasy professional, assisted by technicalexperts, will head CATP. The Fourth Highway Project provided for the re-construction of CATP, including equipment and technical assistance; theproposed project will provide additional equipment and experts (para. 3.28)

to implement the training program.

3.13 The expesrts will help select trainees and will conduct classroomand field instruction. Field training will be carried out in CATP's bri-gade, other regional brigades and on construction s:ites. MTP will recruitnew engineers from EESP who will be chosen during the last year of theirformal training. They will follow a combination of classes at EESP andspecialized courses at CATP. During their training period, trainees willreceivE, daily allowances in addition to their salaries as an incentive toprospec:tive trainees and a means to attract personnel from outsideAntanararivo. Successful trainees needing additional instruction will begranted fellowships for short courses abroad or organized in the country.Malagasy instructors, counterparts to the experts, will receive on-the-jobtrainirng in CATP and additional training abroad. The proposed program isdesigned to be the most cost-effective means of providing transport manage-ment, road construction and maintenance skills to MITRT and MTP personnel.The training program will be reviewed every year by the Government and theBank.

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(d) RehabilitaLtion of Road Transport Industry

3.14 In order to help rehabilitate the commercial vehicle fleet andstrengthen private truckers, the proposed project will include a pilotscheme to provide US$5 million in foreign exchange to meet the privatetruckers' emergency need for spare parts, that is, the backlog of mainte-nance accumulated during the last two years. At the same time the Govern-ment will allocate at least US$15.0 million annually in foreign exchange tomeet t:he normal, recurrent spare parts needs of the commercial vehiclefleet during, project implementation (para 2.10) to re-establish a normalflow of spare parts.

3.15 The foreign exchange from this component of the credit will bechannelled through the Bankin' Ny Indostria (BNI), Madagascar's industrialbank and any other bank acceptable to the Association, as a "managed fund"under subsidiary agreement(s) between the Government and BNI. The signingof subsidiary agreement(s), acceptable to the Association, will be acondition of disbursement of credit funds under this component of theproposed project. BNI, which will implement the pilot scheme, has a compe-tent staff and is already familiar with the Association's proceduresthrough an ongoing DFC operation (Credit 977-MAG). Any other bank desig-nated by the Government for this purpose will be required to need the samecriteriLa as BNI.

3.16 BNI will allocate foreign exchange to certified motor vehicledealers on the basis of their share of the market as determined by theirturnover during the previous five years and the composition of the truckfleet they service. The credit funds will be divided into tranches ofUS$250,000; in order to qualify for a tranche, dealers will be required todraw up a detailed import plan specifying the type and quantity of goods tobe ordered, their CIF cost and additional costs expected in Madagascar(taxes, transport and dealer's commission), the delivery schedules, ajustif:ication of the emergency nature of spare parts ordered and of theregional distribution based on a description of the trucking fleet andoperat:ions of their clients, and a guarantee to sell the imported itemsonly to private truckers, i.e., those with at least 51% of pr:Lvate capitalas shown in the "Registre du Commerce". Each import: plan will be submittedto IDA for approval prior to implementation. The dealers would place theorder, provide BNI with the documentation, and BNI, through Government,would submit the application with supporting documents to IDA for directpayment to the foreign suppliers on the basis of t:he approved letters ofcredit by BNI. The initial allocation of the credit among t:he certifieddealers will be reviewed after one year in relation to the rate ofdisbursements.

3.17 The use of certified dealers has the advantage of simplificationand control over the utilization of the credit. There are about six certi--fied motor vehicle dealers in Madagascar, specializing in the distributionand service of specific brands of vehicles. These major dealers havemodern inventory control procedures and client monitoring systems, the ne-cessary warehouse and service facilities, and a relatively extensive dis-tribution system throughout the country. The lack of spare parts in thelast few years has already forced the dealers to set: up priorilties and con-trol orders placed by their clients; thus, the procedure outlined aboveshould be easily implemented.

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3.18 The dealers will sell the spare parts to private truckers at theofficial retail prices (controlled by the Ministry of Economy and Trade) asunder a normal import license. At present there are two markets for spareparts as a result of the shortage over the last two years --one market atthe official price and the other reflecting the parallel market price whichis higher. The parallel market will not affect the pilot scheme as thedealers will deliver spare parts directly to the dlesignated truck owners.In addition, since the pilot scheme and a minimutm import quota of spareparts for the private road transport sector will meet emergency needs andre-establish a normal flow of spare parts into the country, the importanceof the parallel rmarket should diminish.

3.19 Full advance payment in local currency will be required from thedealers at the time of ordering. BNI will retain an administrative fee of3.5% and deposit the balance in a special account which will be used to payfor local costs of the project. For this purpose, the Government will openan account at the Central Bank in the name of the Treasury for the benefitof MTP. The dealers may independently apply to BNI for a working capitalloan to purchase specified items, if their cash flows are insufficient.BNI will be responsible for reviewing and approving the dealers' requests;ensuring that adequate procurement procedures have been followed;maintaining an overall inventory record of the parts procured under theproject; and for monitoring the sales by the dealers and the use of spareparts by the truckers through regular spot checks. These procedures havebeen agreed with the Government and are detailed in Schedule 4 of theCredit Agreement.

3.20 Prior to implementation of this component, BNI and the Governmentwill transmit to the Association: (i) subsidiary agreement between theGovernment and BINI making BNI responsible for implementing this component,setting BNI's comamission, and ensuring that the local currency payments ofthe dealers will be deposited in a special account to finance local costsof the project; (ii) the list of the dealers and the proposed initialallocation of the credit among them with supporting justification; and(iii) agreement between BNI and the dealers setting up the proceduresoutlined above (para. 3.16), and including an overall estimate andjustification by the dealers of the utilization of the credit allocated tothem on the full US$10.0 million.

(e) Consulting Services

(1) Spervision and management of works.

3.21 In view of the staff constraints at MTP, consultants will super-vise rehabilitation works on RN 4 and RN 7 and will lead MTP teams in thesupervision of spot improvement and maintenance works carried out by con-tractors on 900 km of rural and feeder roads. In addition construction ex-perts will be prcvided to manage the seven multi-purpose brigades. The ex-perts will be engaged under a management contract between MTP and qualifiedcontractors.

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(2) Preinvestment studies of future paved road maintenance andstrengthening program and of development of the feeder roanetwork.

3.22 A major aim of the proposed project is to increase MTP's capacityto monitor the condition of the 4,300 km of paved roads in the economicnetwork and to plan and carry out systematic maintenance and strengtheningoperations to prevent premature reconstruction. The project, therefore,includes a study to develop a systematic approach to maintenance andstrengthening of these roads, of which about 2,200 km now need strengthen-ing and 1,500 km resurfacing. The proposed study will be carried out inthree phases: (i) the first phase will include a general survey and inven-tory of the netwTork, systematic pavement testing program on about 2,500 kmof roads which are more than five years old and not undergoing rehabilita-tion, and a study of appropriate road maintenance operations and tech-niques; (ii) the second phase, design of seasonal routine road maintenanceprograms and establishment of a resurfacing program; and (iii) the third,pre-investment studies, detailed engineering and bidding documents forpavement strengthening of roads that can no longer be maintained by routinemaintenance and resurfacing programs. At the end of the first and secondphases, the Government will seek the Association's comments and approvalbefore going on to the next phase; during review oE the second phase, roadswill be selected for pre-investment studies, detailed engineering and bid-ding documents uinder the third phase. The study's terms of reference (An-nex 9) were discussed and agreed upon during negotiations.

3.23 To address the long-term improvement and maintenance needs offeeder roads, the project will include a study for the development of ap-proximately 2,00 km of feeder roads. About 1,000 km of roads in the High-lands Rice Project area and another 1,000 km will be selected from priorityagricultural regions. The study will review the condition of the roads andclassify them inIto three groups: (i) roads needing no improvement but onlyroutine maintenance; (ii) roads requiring emergency repairs or spot im-provements; and (iii) roads needing major rehabilitation works before mean-ingful maintenance can be undertaken. The capacity of small contractors inthe road zones vill also be assessed and recommendations for strengtheningthe local construction industry proposed. Terms of referencefor the study(Annex 10) were discussed and agreed with the Gcvernment during negotia-tions.

(3) Imtprovement of MTP's management and organization.

3.24 MTP is seriously handicapped by a shortage of qualified, experi-enced personnel at management level. While training will be provided underthe proposed project, current and planned operations need effective manage-ment. The Government has requested and the Association has agreed that theproposed project: provide for two experts to serve as line managers in MTPfor three years. One would act as Director General of Works and the otheras Director of Road Maintenance. Outline terms of reference of these ex-perts are given in Annex 11.

3.25 The organization of MTP has also impeded efficient operations(para. 2.15). In April 1982, the Government reorganized MTP to improve itsefficiency. The proposed project will finance a study to assess and recomi-

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mend additional changes needed to (i) carry out efficient road constructionand imaintenance operations and (ii) set up an organization to improve andmaintain rural and feeder roads. The terms of reference of the study (An-nex 12) were discussed and agreed upon at negotiations.

(4) Transport planning and coordination.

3.26 Sector management and coordination need improvement. Most urgentare a critical analysis of the nature and scope of Government operations inthe sector; a reordering of the organization, objectives and activities ofthe agencies participating in the sector with the purpose of streamliningoperations; and the establishment of adequate sectoral management and effi-cient coordinating mechanisms. Moreover, a national transport strategy isneeded on which to base development of the transport sector beyond themedium-term (1983-85) plan. The formulation of a program to achieve theseobjectives should be the function of the planning unit in MTRT's Director-ate of Transport. However, this unit, is understaffed and has a subordi-nate role. Further, the MTRT's Directorate of Supplies has a similar unit,responsible for, inter alia, the analysis and revision of transport tariffsand other transport-related activities. Coordinat:ion between the two unitsand MTRT's two Directorates is very poor. Better coordination within MTRTand with the rest of the transport sector is essential.

3.27 As a basis for proper planning in the road transport and watertransport subsectors, FAC has undertaken studies in both areas (para.1.20). Further studies to complete a national transport strategy arenecessary as well as the upgrading and restructuring of MTRT's planningsystem. Accordingly, under the joint auspices of the Association and FAC,the proposed project will include (a) the establishment by December 31,1983 by December 31, 1983 of a high-level transport planning unit whichwould report directly to the MTRT's minister and/or permanent secretary;(b) the strengthening of the new unit by providing two transport experts(about 48 man-months), one of whom could be seconded by IDA, the trainingof the new unit's staff through courses at CAT]? (para. 3.11) and, whennecessary, through fellowships for specialized studies abroad; and (c) thefinancing of additional modal studies to complete a national transportplan. Outline terms of reference for the IDA technical assistance (Annex13) and for the national transport plan (Annex 14) were discussed andagreed upon at negotiations.

(5) Technical Assistance

3.28 MTP will need technical assistance services to carry out thetraining program and to plan and monitor road maiAtenance operations. Thetechnical assistance team, which will operate under the direction of CATP,will include th.ree labor-intensive experts (one ior 4 years and 2 for 2.5years) and five road maintenance and mechanical experts for 2.5 years. Theexperts will assist in (i) developing appropriate curricula, (ii) selectingtrainees and conducting classroom and field instruction, (iii) selectingappropriate institutions and trainees for short-term fellowships for studyabroad, (iv) monitoring the progress of the trainees and helping to inte-grate them into MTP or other Government services, (vi) planning and moni-toring road maintenance operations, (vii) integrating training operationsinto the norma]. activities of the brigades and iteams, (viii) introducingcost--accounting procedures in DPCH and DMAT operations, (ix) establishing

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unit costs of these operations, and (x) organizing and supervising equip-ment repair in the workshops and in the field. The terms of reference ofthe technical assistance team are given in Annex 11, they have been agreedupon during negotiations.

3.29 The project will also extend the technical assistance being pro-vided to LNTPB by FAC and UNDP. The technical assistance team will includeone soils engineer for exploration and identification of local materialsfor use in road works for three years starting January 1, 1984, and twosoils engineers for two and a half years starting July, 1984 to assistLNTPB in strengthening and expanding its operations. The terms of refer-ence for the experts are given in Annex 15, they have been agreed uponduring negotiations.

C. Project Cost and Financing

3.30 The total program cost, net of taxes, is estimated at US$111.0million equiva:Lent, with local costs of about US$31.0 million equivalent(28%) and foreign costs of about US$80.0 million (72%). Taxes areestimated at US$15.0 million. Base costs are at May 1983 prices; physicalcontingencies of about 10% and price contingencies of about 20% have beenadded to all components except the road transport industry pilot scheme andlabor. Price contingencies are based on recent estimates of inflationrates as follows: 8.0% in 1983, 7.5% in 1984, 7.0% in 1985 and 6.0%thereafter. The same percentage for local and foreign costs has been usedunder the assumption that the differential inflation of Madagascar will becompensated by exchange rate adjustments. Program costs net of taxes areshown below:

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Program Cost Estimates(US$ Million, excluding ta:Kes)

Foreign asLocal Foreign Total % of Total

A. Rehabilitation, and 22.12 45.22 67.34 67Ma:Lntenance Program =

1) Maintenance byContractor (900 km) 3.92 9.15 13.07 70

2) Maintenance byForce account 7.04 10.03 17.07 59

a. Equipment and spareparts 0.43 3.84 4.27 90

b. Materials and supplies 1.39 3.25 4.64 70c. Workshops

and equipm!ent 0.92 2.14 3.06 70d. Office and tele-

communication equip. 0.02 0.13 0.20 90e. Bridges 0.15 0.62 0.77 80f. Labor for rehabilitation 4.13 - 4.13 0

works

3) Rehabilitation of RN 4and RN7 (400 km) 11.16 26.04 37.20 70

B. LN1'PB Equipment 0.09 0.8:3 0.92 90;==

C. TrEaining 0.12 0.85 0.97 87

1) Equipment 0.07 0.64 0.71 902) Fellowships 0.05 0.21 0.26 80

D. Road Transport Industry 1.50 10.00 11.50 90

E. Consulting Services 1.16 6.86 8.02 86

1. Supervision and managementof A(i) + (2) 0.17 0.6,7 0.84 80

2. Supervision of A(3) 0.37 1.49 1.86 803. Preinvestment studies 0.17 0.70 0.87 804. MTP management 0.07 0.59 0.66 905. MTP study 0.01 0.09 0.10 906. Transport planning 0.04 0.40 0.44 907. TA for training 0.24 2.13 2.37 908. TA for LNTPB 0.09 0.79 0.88 90

Base Cost 24.99 63.76 88.75 72

PhysicEal Contingencies 1.95 5.42 7.37 74Price Contingencies 3.87 10.75 14.62 74

Total Cost 30.81 79.93 110.74 72_ _= =

(31.00) (80.00) (111.00)

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3.31 lhe cost of rehabilitation and strengthening averages aboutUS$14,500/km for earth roads and US$93,000/km for paved roads; the cost ofsupervision for rehabilitation works amounts to about 5% of constructioncosts. These costs are in line with those of similar recent and ongoingworks in the country. Costs of equipment, spare parts, materials and sup-plies are based on recent bid prices and quotations in Madagascar. Theman-month cost of consultants' services and technical assistance, estimatedat US$9,200, includes US$6,700 for salaries and overhead (home office ex-penses, expatriate allowance, social costs andl other expenditures) andUS$2,500 for reimbursable expenses (travel, telecommunications, subsistenceand other miscellaneous items); these costs are in line with those for si-milar and ongoing services in Madagascar. The costs of fellowships areestimated at US$10,000 per student per year including tuition and fees,housing, travel and subsistence; average daily allowances of US$4.00 perlocal trainee are foreseen.

3.32 Due to Madagascarts serious budgetary constraint, the Associationand the co-lenders will finance the total foreign costs of total programcosts, or at 'Least US$80.0 million. IDA will provide US$45.0 million, ofwhich US$10.0 million will be made available to truckers through BNI andany other bank acceptable to the Association to purchase spare parts, andUS$35.0 million for financing foreign costs of the remaining components ofthe project. The proceeds of the US$10.0 million through BNI or anotherbank (after repayment by the private truckers) will be made available forfinancing the local costs of the project. Other institutions have showninterest in participating in co-financing this road maintenance and rehabi-litation program. They include AfDF, EDF and Kreditanstalt furWiederaufbau (KFW, Federal Republic of Germany) for the rehabilitation ofRN 4 and RN 7; the UK for road maintenance and bridge repair programs;FAC/CCCE for transport planning; and IFAD for the development of the feederroad network.

3.33 Given the urgent need for the rehabilitation of the road trans-port industry and for the maintenance and rehabLlitation of the road net-work and since other co-financiers (except AfDF) would not be able to pro-vide funds for at least a year, the available funids (AfDF, US$19.2 million;IFAD, US$1.4 million; the Association, US$45 million; and the Government)would be used to support a project, as shown beLow, consisting of the keyelements of the above program. This project has been designed so that asadditional financing becomes available the elements can easily be expanded.The total cost of the project, net of taxes, is estimated at US$81.73million equivalent with local costs of about US$22.16 million equivalent(27%) and foreign costs of about US$59.57 mLllion (73%). Taxes areestimated at US$11.6 million.

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Project Cost Estimates(US$ million, excluding taxes)

Foreign asLocal Foreign Total % of Total

A. Rehabilitation and 15.53 29.79 45.32 66Maintenance Program

1) Maintenance byContractor (470 km) 2.05 4.77 6.82 70

2) Maintenance byForce account 7.05 10.02 17.07 59

a. Equipment and spareparts 0.43 3.84 4.27 90

b. Materials and supplies 1.39 3.25 4.64 70c. Workshops

and equipnent 0.37 0.85 1.22 70d. Office and tele-

communication equip. 0.02 0.18 0.20 90e. Bridges 0.71 1.90 2.61 73f. Labor 4.13 - 4.13 0

3) Rehabilitation of RN 4and RN7 (280 km) 6.43 15.00 21.43 70

B. LNTPB Equipment 0.09 0.83 0.92 90

C. Training 0.12 0.85 0.97 88

1) Equipment 0.07 0.64 0.71 902) Fellowships 0.05 0.21 0.26 81

D. Road Transporit Industry 1.50 10.00 11.50 87

E. Consulting Services 1.13 6.75 7.88

1. Supervision and managementof A(1) + (2) 0.17 0.67 0.84 80

2. Supervision of A(3) 0.34 1.38 1.72 803. Preinvestmient studies 0.17 0.70 0.87 804. MTP managemnent 0.07 0.59 0.66 905. MTP study 0.01 0.09 0.10 906. Transport lplanning 0.04 0.40 0.44 907. TA for traLning 0.24 2.13 2.37 908. TA for LNTPB 0.09 0.79 0.88 90

Base Cost 18.37 48.22 66.59 72

Contingenciesl/ Physical 1.24 3.71 4.95 75Price 2.55 7.64 10.19 75

Total Cost 22.16 59.57 81.73 73

1/ Excluding labor and Road Transport Industry.

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The financing plan is as follows:

Financing Plan

Local Foreign Total----------(US$ million)--

IDA 45.00 45.00IFAD - 1.40 1.40AfDF 6.03 13.17 19.20Government/BNI (and any 16.13 1/ - 16.13other bank)

Total 22.16 59.57 81.73

1/ In addition, the Government will finance any taxes it includes incontracts under the project; total taxes are estimated at US$11.6million

3.i4 This reduced project includes the Highlands Rice Project roads(about 150 km for rehabilitation and 150 km for maintenance), rehabilita-ticon of the private road transport industry which has been kept at US$10.0million, and the rehabilitation of only 100 km cf RN 4 and 180 km of RN 7.AfDF and the Government will finance the rehabilitation and supervision ofabout 180 km of RN 7; IFAD will finance part of the foreign cost ofcorLsulting services and technical assistance for the rehabilitation andmaintenance of rural and feeder roads; the Association and the Governmentwill finance the remaining costs of the project.

D. Implementation and Procurement

3.35 The project will be implemented by the MTP through its DGE exceptfor the improvement of transport planning and coordination, which will beimplemented by MTRT, and assistance to the road transport industry, whichwill be implemented by BNI and any other bank acceptable to the Associa-tion.

3.36 The expected implementation schedule for major activities of eachproject component is shown on the Chart 2. This schedule will be discussedat negotiations. The project covers a three-year period, starting January1984. The rehabilitation of earth and paved roads will start in January1984 and take approximately 36 months to complete. Construction of work-shop facilities will start in January 1984 and take approximately 12 monthsto complete. Equipment for road maintenance, offices, telecommunications,workshops, soLls laboratory and training, should be delivered by June 1984,about six months after notification of contracts to the suppliers. Pro-curement of spare parts for truckers will begin in January 1984 and bespread over two years. Technical assistance for management of MTP opera-tions, soils laboratory, transport planning will be provided for three

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years starting January 1984. Technical assistance for training will con-tinue for two and a half years starting in June 1984. The studies of fu-ture pavemeni: maintenance and rehabilitation programs, and the developmentof feeder road network should start in January 1984 and take about twoyears to complete with a review by the Government and the Bank in thefourth quartier of 1984. The organization study of MTP would take abouteight months, starting January 1984. The project is expected to be com-pleted by December 31, 1986.

3.37 Major civil works for the rehabilitation of earth and paved roadswill be carried out by contractors on the basiLs of international competi-tive bidding in accordance with Bank Group guidelines after suitable pre-qualification. Additional minor civil works, up to an aggregate cost ofnot more than US$1.0 million equivalent, may be carried out through amend-ment of contracts already approved under the Fifth Highway Project by theAssociation. Construction of workshop facilities, which are at two sitesat the extreme ends of the country and estimated at US$2.5 million (includ-ing contingencies), will be carried out by contractors on the basis oflocal compet:itive bidding procedures, which are acceptable to the Associa-tion. Qualii-ied domestic civil works contractors would be allowed a pre-ferential margin of 7+% over the bid price of competing foreign con-tractors.

3.38 Equipment, spare parts, materials and supplies will be groupedinto suitable lots and procured through ICB. Miscellaneous items of equip-ment, spare parts, materials and supplies in lots of less than US$50,000and totalling no more than US$500,000 may be procured from dealers on thebasis of quotations obtained locally.

3.39 Consultants for supervision, technical assistance and studieswill be selected following 1981 Bank Group guidelines; their terms of re-ference and conditions of employment were discussed and agreed upon atnegotiations.. Before awarding the fellowships, the Government will furnishto the Association for its approval, a detailed program for training. Theprogram would include the qualifications of the candidates, type and costof training as well as the training institutions and an indication ofassignments to be given to the trainees on their return to Madagascar.

3.40 The US$10 million line of credit for the pilot scheme willfinance the foreign exchange cost of spare parts to be purchased by certi-fied motor vehicle dealers on the basis of approved letters of credit byBNI and any other bank acceptable to the Association. The spare partswould be grouped in lots of at least US$250,000 and purchased from foreignsuppliers in accordance with established commercial practices inMadagascar. Direct purchase will be required for proprietary spare parts;all other items (tires and routine maintenance items) would be procured onthe basis of limited international tendering, requiring price quotationsfrom not less than three suppliers. BNI would be responsible formonitoring the outlined procurement procedures; specific orders of spareparts and price quotations would be analyzed by BNI in relation to thefindings of the recent MTRT study on Madagascar's trucking fleet to ensurethat the orders placed meet priority needs and are reasonably priced. Alldisbursement requests will be fully documented.

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E. Disbursement

3.41 The proposed IDA Credit of US$45 million would be disbursed on

the following basis:

a) civil works for the rehabiLitation of paved roads,maintenance of earth roads and construction of workshopfacilities:

(i) 100% of foreign expenditure under contracts payableexclusively or partially in curriencies other than FMG;

(ii) 70% of total expenditure under contracts payable exclusivelyin FMG;

b) 100% of foreign expenditure for consultants services, techni-cal assistance and fellowships;

c) 100% of the foreign cost of d:irectly imported equipment,spare parts, material and supplies, or 70% of the cost ifpurchased locally; and

d) 100% of the foreign cost of directly imported spare parts forthe private road transport industry.

All disbursements will be fully documented.

3.42 The estimated schedule of disbursement is shown below. It isbased on the project implementation schedule and the disbursement profileof past highway projects in the country, but modified to take into accountthe quick disbursement during the first two years of the project of theUS$10.0 million for spare parts for the road transport industry. It alsoallows for a year's delay from the end of the physical execution of theproject and the last payment to allow for delays in issuing price indicesgoverning price variations in contracts.

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Estimated Schedule of Disbursements(US$'000)

Bank Group Fiscal Year Cumulative Disbursementsand Quarter ending at: end of Quarter

1984

March 31, 1984 1,000June 30, 1984 3,500

1985

Sept. 30, 1984 7,500December 31, 1984 10,500March 31, 1985 14,000June 30, 1985 17,500

1986

Sept. 30, 1985 21,500December 31, 1985 25,000March 31, 1986 27,500June 30, 1986 30,500

1987

Sept. 30, 1986 34,000December 31, 1986 37,500March 31, 1987 40,500June 30, 1987 44,000

1988

Sept. 30, 1987 44,500December 31, 1987 45,000

Closing Date: June 30, 1988

F. Accounting, Auditing and Reporrting Requirements

3.43 Project accounts will be maintained lby MTP with separate accountsfor each coumponent and will be available for inspection by the Associationduring project supervision. Project accounts will be audited annually bythe Auditing Department in the Ministry of F:Lnance. This arrangement isacceptable to the Association. If the Auditing Department is unable toperform this task due to excessive workload, it will be carried out by in-dependent auditors acceptable to the Association. The auditor's report to-gether with the project accounts will be submitted to the Association notlater than Six months after the end of each fiscal year. The foregoingwas agreed upon at negotiations.

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3.44 During negotiations, the Government and the Association agreed onprogress reporting requirements (Annex 15) and submission of a project com-pletion report, in a form satisfactory to the Association, not later thansix months of the closing date of the credit.

3.45 BNI and any other bank acceptable to the Association would be re-quired to submit quarterly reports which would include the number of appli-cations for loans received, those pending and those aproved, the status ofdisbursements, and a statement of arrears and notes on borrowers encounter-ing operational and financial difficulties. The bank would also be re-quired to submit annual audit reports, prepared by qualified auditors, inaddition to the bank's annual report.

G. Envirormental Aspects

3.46 None of the project's components will harm the environment. Im-provement and rehabilitation works will follow the existing alignment andwill have little or no effect on current land use. In fact, improvement toculverts and drainage structures will benefit adjacent areas, and the reha-lbilitation and maintenance operations will considerably improve road safe-ty.

IV. ECONOMIC EVALUATION

A. General

4.01 The deterioration of Madagascar'Es road network has reached astage where road transport is an impediment to economic activity especiallyithe vital agricultural sector and the developing industrial sector. TheGovernment, in recognition of the importance of protecting its investmentin transport infrastructure and its limitations in manpower and financialresources, is giving priority to the rehabilitation of an "economic net-iwork" of 10,000 km of roads, which includes the most heavily trafficked andthe most important to the country's economy as determined by the Ministriesof Agriculture, Transport, and Industry and Commerce. The economic networkcarries about 90% of the total traffic in the country. By concentrating ona reduced network, MTP is expected to be able to focus its limited resour-ces on those roads which will yield the greatest economic benefits to thecountry. In addition the project will provide for the rehabilitation ofabout 400 km of the RN 4 and RN 7, the principal north-south axis travers-Lng the most populous region of the country and linking the major centersof economic activity.

4.02 The project also develops and supports specific institutionbuilding and policy reforms as follows:

(a) further improve MTP and consolidate the institution-buildingefforts and recent organizational changes introduced withinthe framework of ongoing Fourth and Fifth Highway Projects;

(b) increase the administrative and technical capacity of LNTPB;

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(c) increase the efficiency of civil works construction andmaintenance by introducing private civil works contractorsfor some of those works;

(d) reorganize and upgrade the planning organization of the MTRTand strengthen its staffing and operations;

(e) improve transport planning and coordination;

(f) continue past efforts to improve the road pricing policy, soas to eliminate subsidies anel distortions and optimize theallocation of resources; and

(g) enhance overall transport sector management, planning andorganization.

4.03 The project's impact on the modus operandi of MTP and on the man-agement of the sector would be substantial. It would reinforce the trendbegun with the Fourth and Fifth Highway P'rojects of concentrating theGovernment''s efforts on the maintenance and rehabilitation of the country'shigh priority road network, diverting it from the previous emphasis on roadconstruction. The direct support to improve investment planning and coor-dination would help the Government avoid the misinvestment and duplicationof efforts that occurred in recent years and should provide a valuable toolto improve economic management. The policy objectives would result in en-hanced overall sector efficiency and an increase in utilization of existingvehicles as well as a better overall allocation of resources.

4.04 Similarly, the project, through t'he direct financial assistanceto the private road transport industry, is expected to redress the balancebetween the parastatals and private truckers, and to foster the efficiencyand competition of the country's road transport industry.

B. Area of Influence of the Program, Benefits and Beneficiaries

4.05 As mentioned in para. 4.01, the maintenance program covers a10,000 km network of high priority roads located throughout the country.This network comprises the most important roads in Madagascar, linking cen-ters of economic activity to each other and to their agricultural hinter-land. Since it includes all road classif;'cations --- trunk, rural andfeeder roads, the benefits of improvements would accrue to the whole rangeof users and communities from urban to rural.

4.06 The rehabilitation of the RN 4 and RN 7 has a direct impact on anarea of higrh economic activity and affects about one-third of the country'spopulation. RN 4 links the capital, Antananarivo, to Mahajanga, the secondmost important port in the country. It is an alternate supply route to thecapital and also is the link to the northwestern part of the country. Whenthe bridges, their approaches and the drainage structures financed underCredit 938--MAG linking Antsohihy and Ambanja are completed, it will providethe only all-weather link to the province of Antseranara, via RN 6, whichbranches off from the RN 4. RN 7, on the other hand, links the capital tothe industrial city of Antsirabe and continues south to Fianarantsoa, a re-

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gional center and hub of an important agricultural region. The projectwill rehabilitate about 400 km of the most critically deteriorated sectionsof the 1,100 km road (Table 4.1), of which about 200 km are being rehabili-tated under the ongoing Fifth Highway Project. Both of these roads werebuilt more than 30 years ago and have received little or no maintenanceover the last 15 years.

4.07 The provision of foreign exchange for for the purchase ofspare parts for private operators of commerc:Lal vehicles is a pilot projectand is expected to be supplemented by further assistance for the entirevehicle fleet by FAC. This component is expected to directly benefitproducers, consumers and the entire economy since the current foreignexchange crisis has caused a curtailment in the importation of spare parts,thus severely reducing transport capacity.

4.08 The main benefit of the project will be its impact on reducingvehicle operating costs (VOC), which are given in Annex 17, Table 1. Im-proved road maintenance will also allow better access to productive areas,provide cheaper and more reliable transport:, arrest the deterioration ofroads and improve the MTP's maintenance capacity. Important benefits notquantified in the economic evaluation include reduced freight damage, acci-dents and travel time and better access to social and medical services.The provision of year-round access to areas where transport was previouslyrestricted will encourage increases in agricuiltural production since trans-port will no longer be a bottleneck. Except for the technical assistanceand training and improvement of the LNTPB, for which no separate rate ofreturn has been calculated, all other project components have been subjectto economic analysis. The technical assistance and training component arenevertheless considered indispensible elements of project implementationand the strengthening of the MTP and MTRT.

4.09 The benefits identified above will accrue to owners and operatorsof commercial vehicles in the form of reduced vehicle operating costs.While, in principle, freight tariffs are regulated by the Government, theyare in practice set by competition (para. 2.11) and it is expected thatproducers and consumers alike would benefit from the resulting reducedtransport costs. Owners and operators of pr:ivate vehicles would also bene-fit from these reduced VOC's. Because of the rapid deterioration of vehi-cles and the network, improvement of maintenance will prolong the lives ofboth the vehicles and the roads which should result in savings, mostly inforeign exchange, to Government.

C. Economic Analysis

4.10 Except for the technical assistance and training and improvementto the L]qTPB, all other components of the proposed project have beenindividually analyzed to assess their benefits. These include: (1) theroad maintenance program, (2) the rehabilitation of sections of RN 4 and RN7, and (3) the provision of financial assistance to private commercialtruckers to purchase spare parts. Economic costs 2/ are based on detailedengineering for the rehabilitation of RN 4 and RN 7; for the maintenanceprogram the costs are based on similar ongoing works in the country.

2/ End 1982 prices.

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4.11 The basis for the economic analysis of the project is an assess-ment of costs and expected benefits with and without the proposed works.In the "without" project case it is assumed that the road would continue todeteriorate and that VOC's would increase by 10% p.a. In fact, this is aconservative assumption since the continued lack of maintenance would ren-der most roads impassable in a few years. Only savings in vehicle operat-ing costs are quantified for the analysis. Benefits not quantified such assavings in delays of future reconstruction as a result of the maintenanceprogram, increased value added in agricultural production, time savings andreduced freight damage represent substantial benefits which, if quantified,would enhance the rates of return. The economic evaluation results, there-fore, underestimate the expected rates of return.

4.12 The VOC savings for analysis of all project components are basedon the different road conditions in Madagascar and on the vehicle composi-tion and traffic growth as established by the MTP and consultants who pre-pared the maintenance program.

Rehabilitation of RN 4 and RN 7

4.13 The road sections to be rehabilitated were analyzed according totheir level of deterioration and traffic levels. The required improvementsrange from pavement strengthening to complete reconstruction. The RN 4 inparticular requires major rehabilitation on most sections. For the RN 7where traffic levels are the highest in the country, the improvement workswill conslist of resurfacing and reconstruction which will yield substantialsavings in VOC's. The economic analysis of this project component is basedon (1) a 15-year economic life of the investment; (2) annual maintenancecosts per km of US$2,000 throughout the life of the investment; (3) a 50%residual value at the end of the period; and (4) traffic volumes rangingfrom 150 vpd to more than 1,000 vpd in 1981 and having a proportion of hea-vy vehicles ranging from 15% to 60%. The analysis also assumes a growthrate of 5% annually throughout the period of which 1.5% is considered asrepresenting one half of the benefits of generated traffic which will ac-crue as a result of the proposed investments. Based on these assumptions,the various sections of RN 4 and RN 7 have an economic rate of return rang-ing from 13% to 157%, with the weighted average being 49%. Individualrates of return for RN 4 and RN 7 are given below.

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Table 4.1: Rehabilitationl of Paved loads

RN 4

SensivityPK Cost i/ERR T Z/ C + 10% B - 10% C + 10% + B -10%

10-38 2.5 31 29 28 26 25

38-160* 13.0 23 22 21 21 19

160-350 13.75 32 31 30 29 27

350-436* 8.25 39 37 36 35 32

436-559.5 15.0 35 34 33 32 30

559.5-567.4 0.8 15 14 14 14 12

Overall 32 30 29 29 26

Total km 557.4

1/ US$ million.2/ Using an annual traffic growth rate of 3.5% instead of 5%.* Sections included in the project.

RN 7

SensitivityPK 1/ Cost 2/ ERR T 3/ C + 1l% B - 10% C + 10% + B -10%

6-31 1.8 41 40 38 37 34

31-111* 7.5 157 155 143 142 129

111-164.5* 3.7 51 50 47 46 42

202-262* 4.0 48 46 43 43 39

262-404 11.0 41 40 38 37 34

418-508 4.0 13 11 11 11 9

Overall 67 65 61 61 55

Total km 502

T7-351.5 km of sections excluded as follows: 19.5 km of urban roads and 32km not in need of any rehabilitation.

2/ US$ mLllion.3/ Using an annual traffic growth rate of 3.5% instead of 5%.7 Sections included in the project.

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Road Maintenance Program

4.14 The economic analysis for this program has been done for pavedand earth (rural and feeder) roads separately. On paved roads, maintenanceactivities will consist of patching and resealing at an incremental cost ofUS$2,500 per km with routine maintenance costs of US$250 per km per year.Traffic on these roads ranges from 25 to 600 vpd and is assumed to grow at3.5% p.a. Only direct benefits in the form of VOC savings have been quan-tified. For the paved road component, the overall ERR is 179%, with indi-vidual rates of return ranging from 27% to 356% (Annex 17, Table 2).

4.15 For the rural and feeder roads, the proposed works consist ofspot imaprovements, regravelling and improvement of drainage structures.About 2,900 km of roads will be maintained under this component. About 900km of these roads have been selected as the highest priority sections inlight of ongoing agricultural development projects, combined with a geogra-phically reasonable distribution, to be executed during the first year ofthe proposed project. These roads are located in agriculturally productiveareas with traffic varying from 20 to 60 vpd. The economic analysis ofthese roads assumes a worst case scenario in which a maximum likely cost ofUS$14,500 per km is used combined with the minimum traffic level of 20 vpdas registered on these roads. The VOC savings used are those which wouldresult from the difference between poor earth and good earth roads as shownin Annex 17, Table 1. A threshold analysis at that level with a trafficgrowth rate of 3.5% p.a., a five year economic life and annual routinemaintenance costs of US$250/km, has been used to evaluate the works. Theresults of this analysis yields an ERR of 16%. For the remaining 2,000 kmof the rural and feeder road component, to be improved during the secondand third years of the proposed project, it is understood that they will beselected by Government following preparation of bid documents and cost es-timates to be established by consultants who will also be required to carryout an economic analysis before selection. The Government shall submit tothe Association its proposals for each year not lat6r than six months be-fore the end of each fiscal year, and shall take into consideration the As-sociations's comments, if any, on the yearly program. This was confirmedat negotiations (paras. 3.04 and 3.05). Only those roads exceeding an ERRof 12% will be included in the program.

4.16 The combined return for the entire maintenance program for pavedand earth roads is 63%. The investment is therefore well-justified.

Assistance to Private Road Transporters

4.17 The project includes a US$10.0 million component to provide as-sistance in the form of foreign exchange to private commercial road trans-porters of freight to purchase much needed spare parts. These spare partswould allow better utilization of the existing truck fleet. While thecosts are easily identifiable, the benefits, although likely to be substan-tial, are more difficult to quantify. The principal benefit would be theavoidance of losses to the economy caused by the reduced transport capaci-ty, including time saved for goods in transit, loss of perishable goods andoutput foregone as a result of transport demand not being met. These arevery difficult to quantify under the present circumstances and have notbeen included in the analysis. The current estimate of the trucking fleet

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is 5,000 units of which about 50% are out of service because of a lack ofspare parts. Based on an average util:Lzation of 50,000 km per truck peryear, the total loss without this element of the project would amount toabout 125 million truck-km. Assuming the total cost of spare parts at FMG4,126 million and the cost of labor for installing them at FMG 826 million,the total cost of this program would represent FMG 4,952 million. If theconsunption of spare parts per truck-km is FMG 57.17 (FAC study), then thebenefit of the program amounts to 87 million truck-km per year. This re-presents a 70% increase in the trucking capacity available.

Overall Evaluation

4.18 The overall economic rate of return for the project is 42% for allthe quantitatively analyzed components, which amount to 87% of total pro-ject costs. As is usual for maintenance projects, the rate of return ishigh lbecause of the relatively small investment required in relation to theinitial capital costs of construction. Sensitivity analyses were carriedout for the rehabilitation and road maintenance components. For the reha-bilitation of RN 4 and RN 7 sensitivity analysis of a combined 10% increasein costs and 10% reduction in benefits for individual sections indicatethat the ERR remains above the opportunity cost of capital for all roadsections included in the project (Table 4.1).

4.19 For the maintenance of paved roads where rates of return rangefrom 27% to 356%, increases in costs of 10% combined with benefit reduc-tions of 10% yield ERRs ranging from 15% to 300%. For the earth road com-ponent, a combined cost increase and benefit decrease of 10% would stillyield an ERR of 12% under the most conservative assumptions. The projectis therefore well justified.

Risks

4.20 While the project is designed to reduce as much as possible risksassociated with implementation, there is nevertheless the possibility thatimplementation of the maintenance component would be hampered by lack offunds being made available by the Government in adequate amounts and timelymanner. To overcome this problem, the Government has agreed to establish aa financing mechanism to be used exclusively for routine and periodic roadmaintenance and to ensure that adequate funds are available for thispurpose during project implementation. The other major risk concerns MTP'scapability to manage and execute force account works and the possibility ofpoor quality which would reduce the economic life and thus the benefits ofthe works undertaken. The project includes technical assistance andcontractors to carry out part of the civil works to reduce these risks tothe extent possible.

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V. AGREEKENTS IREACHED ANDWRECMNElT~ION

5.01 The following major items were discussed and agreed upon with theGovernment during negotiations:

(a) the Government will (i) in the immediate future increase roadtransport tariffs for passengers and freight by 40%, (ii) by March31, 1984, further increase road transport tariffs taking intoaccount price variations between May 1983 and March 31, 1984, and(iii) by December 31, 1984 deregulate all road transport tariffsunless the transportation plan study provides reasons satisfactoryto the Association to do otherwise (para. 1.32);

(b) the Government will remove all restrictions on the selection ofroutes and commodities carried by private transporters by December31, 1984 (para. 1.33);

(c) the Government will ensure that all authorizations required for theimportation of goods financed under the proposed project are givenwithin two weeks of final approval of the related contracts andbefore notification of those contracts (para. 1.44);

(d) the Government will allocate a minimum of US$15 million in foreignexchange annually during implementation of the proposed project tocover normal, recurrent spare parts needs of the commercial vehiclefleet, and by December 31, 1986 the Government and the Associationwill exchange views on the estimated import programs for spareparts of transport enterprises for the next three years (para.2.10);

(e) MTRT's new planning unit will carry out a national transport plan-ning study, whose terms of reference will be subject to theAssociation's approval, including recommendations on road usercharges and fuel prices and taxes, as well as the cost structure ofroad passenger services; by December 31, 1984 the completed studyand its recommendations will be submitted to the Association; theGovernment thereafter shall promptly take appropriate action re-sulting from the study, taking into account the Association com-ments (para. 2.12);

(f) the Government will ensure that importation of vehicles is limitedto those which meet all axle weight and dimension specificationsfor road use; further, the Minister of Public Works will have-thesole authority to approve the technical aspects of import licensesfor trucks, assembly licenses and road licenses for these trucks(para. 2.13);

(g) the Government will prepare by December 31, 1983 an action plan forroad safety to be submitted to the Association and, taking intoaccount the Association's comtaents, implemented the plan no laterthan June 30, 1984 (para. 2.14);

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(h) the Government will, by September 30 of each year during projectimplementation, exchange views with the Asociation on investmentsfor road improvements and construction (para. 2.25);

(i) the Government will make FMG 5 billion available for roadmaintenance in 1984 and will set up a revolving fund in theTreasury by January 31, 1984 with an initial deposit of FMG 600million to be replenished quarterly (para. 2.25);

(j) the Government will, by December 31, 1984, set up a Road Fund inits Central Bank to be used exclusively for road maintenance;revenues for the Road Fund will be provided from revenues fromtaxes and duties on motor fuel; the Government will also set up anew revolving fund under conditions similar to the previous one,except it will be in the Central Bank and financed from the RoadFund; the Government will, by December 31, 1986, exchange viewswith the Association on estimated funds required for roadmaintenance for the next three years and will take measures toensure that such funds are available to MTP as and when needed(para. 2.25);

(k) the list of roads to be maintained by contractor and by force ac-count during the each year of project implementation will be agreedupon with the Association by June 30 of the preceding year (paras.3.04 and 3.05);

(1) the regrouping of existing bridges into seven multi-purposemaintenance brigades, one of which would be placed in each regionand the special division of Tolagnaro under the sole authority ofMTP (para. 3.06);

(m) the lists of equipment for road maintenance and for LNTPB (paras.3.06 and 3.10);

(n) BNI and any other bank acceptable to the Association will implementthe pilot scheme following procedures and criteria acceptable tothe Association (paras. 3.19 and 3.20);

(o) the Government will, by December 31, 1983, open a separate accountat the Central Bank for deposit of repayments to BNI and any otherbank acceptable to the Association (para. 3.19);

(p) the terms of reference for preinvestment studies, the study of theorganization of MTP and the national transpo~rt plan (paras. 3.22,3.23, 3.25, and 3.27);

(q) the Government will establish a high-level transport planning unitwithin MTRT by December 31, 1983 (para. 3.27);

(r) consultants will be employed in accordance with Bank Group guide-lines and under terms and conditions acceptable to the Association(para. 3.39);

- 50 -

(s) the Government will furnish the Association, for its approval, thequalifications of candidates for fellowships, the type and cost oftraining, the institutions selected and the probable assignments ofthe trainees upon their return (para. 3.39);

(t) accounting and auditing requirements (para. 3.43);

(u) reporting requirements including a completion report (para. 3.44);

(v) reporting requirements for BNI (para. 3.45).

5.02 A condition of disbursement of the credit funds for therehabilitation of the private road transport industry component will bethat subsidiary agreements, acceptable to the Association, between theGovernment and BNI and between the Government and any other bank acceptableto the Association have been signed (para. 3.15).

5.03 A condition of effectiveness of the proposed credit is that theGovernment has increased road transport tariffs for passengers and freightby 40% (para. 1.32).

5.04 Agreement having been reached on the items listed in para 5.01,the proposed project is suitable for a credit of SDR 41.7 million (US$45million equivalent) under standard IDA terms.

June 1983

- 51 -Annex 1Table 1

DEMOCRATIC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECT

Maritime and Coastal Shipping Traffic('000 tons)

1977 1978 1979 1980 1981

Maritime 1,448.3 1,436.9 1,441.3 1,528.4 1,305.5

GeneralCargo 787.2 866.3 894.5 951.2 747.7

PetroleumProducts 661.1 570.6 546.8 577.2 557.8

Coastal 842.9 853.9 888.1 932.0 857.9

GeneralCargo 494.9 504.2 586.0 526.0 544.3

PetroleumProducts 348.0 349.7 302.1 406.0 313.6

Total 2,291.2 2,290.8 2,329.4 2,460.4 2,163.4

Source: Service de Douanes

- 52 -

Table 2

MADAGASCAR

SIXTH HIGHWAY PROJECT

Motor Fuel Consumption and Price - 1974-82

GASOLINE DIESEL TOTAL

YEAR CONSUMPTION PRICE CONSUMPTION PRICE CONSUMPTION

('000 m 3) (FMG) (FMG) ('000 m3)

1973/74 113 56.6 176 37.7 289

1974/75 111 74.6 170 39.6 281

1975/76 107 N/A 117 N/A 224

1976/77 110 86.0 151 48.6 261

1977/78 117 N/A 151 N/A 276

1978/79 116 139.0 181 71.0 297

1979/80 111 165.0 183 85.0 294

1980/81 101 263.0 176 122.0 277

1981/82 86 323.0 155 148.0 241

Source: Institut National de la Statistique et de la Recherche Economique& Solima

N/A - Not available

- 53 -

Annex 2DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECTSTAFF APPRAISAL REPORT

Bank Group Projects in the Transport Sector

1. The First Highway Project (Credit 90-MAG, US$10 million, 1966)provided for construction to paved standards of two sections of theAntananarivo-Mahajanga road (145 km). The Project Performance Audit Report(PPAR, No. 1409), dated January 3, 1977, found that the cost of the roadconstruction was far below original estimates and the recalculated economicrate of return (between 15% and 20%) was greater than that estimated atappraisal (11%). Surplus funds were used to finance supplementary worksand studies, which necessitated a delay in project completion.

2. The Second Highway Project (Credit 134-MAG/Loan 570-MAG, US$8million, 1968) helped to finance construction of 146 km of two major trunkroads and construction of three bridges. The project did not completelymeet its objectives, and completion was delayed by about one year due todifficulties of the contractors who carried out the project. Actualproject cost was US$15.2 millicn in contrast to the appraisal estimate ofUS$11.5 million, including contingencies. This represented an overrun of30%, of which about half was due to price increases and half to increasedquantities. The cost overrun wras financed in large part by the Government,but savings under the First Highway Project also contributed to financing.PPAR No. 811, dated July 18, 1975, found that the economic justification ofone of the project roads, Ambilobe-Ambanja (91 km), was doubtful in view ofits low rate of return--8%--primarily caused by higher construction coststhan foreseen at appraisal. The ERR on the individual components of theSecond Highway Project ranged from 4% to 21% compared to the 8% to 16%estimated at appraisal.

3. The Third Highway Project (Credit 351-MAG/Loan 570-MAG, US$30million, 1973) provided for construction of 417 km of primary roads, de-tailed engineering of the Antschihy-Ambanja road and a review of the traf-fic counting system. In 1975 the project had to be modified due to sub-stantial cost increases as a result of price and quantity increases notanticipated at appraisal, as well as the develuation of the US dollar. Asupplementary credit of US$5.6 million was therefore provided while con-struction was reduced by 67 km. PPAR No. 2143, dated July 27, 1978, foundthat while the overall recalculated rate of return of 14% was acceptableand in line with appraisal estimates (or slightly below the originallyestimated 16%), two road sections had individual rates of return of 10% orless, since expected agricultural benefits failed to materialize due to thedeteriorating political and economic situation of the country. The PPARoutlined the project's deficiencies, including insufficient provision offunds for road maintenance and a failure to train Malagasy nationals whichwould have contributed to institution building.

4. The Fourth Highway Project (Credit 641-MAG, US$22 million, 1976)helped finance construction of 370 km of secondary roads betweenTsiroanomandidy and Maintirano and the 67 km of primary roads betweenArivonimamo and Analavory deleted from the Third Highway Project. A road

- 54 -

maintenance component provided for a study to evaluate maintenance needs,including equipment and technical assistance for training local staff inroad maintenance. The project's road construction component is partiallycompleted but the largest section, Tsiroanomandidy-Maintirano, encounteredmajor difficulties due to poor management and organization of works by thestate-owned construction company (SINTP). Bridges have been completed butearthworks and approaches have yet to be finished. The maintenance studyis complete; implementation of the recommended training program has beendelayed. Since training of local staff was essential to improving mainte-nance operations under the Fifth Highway Project, the Government agreed totake measures to allow an early start of training.

5. The Fifth Highway Project (Credit 938-MAG, US$24 million, 1979;plus a US$10 million EEC Special Action Credit) is helping finance urgentlyneeded resurfacing on about 200 km on RN4 between Mahajanga and Antananari-vo, construction of bridges for the Antsohihy-Ambanja road, continuation ofimprovement of maintenance operations begun under the Fourth Highway Pro-ject, a feasibility and detailed engineering study, and training of MTPstaff by technical assistance. The project is about two years behind sche-dule due to mismanagement and lengthy Government procurement procedures.However, since early 1982 implementation has greatly improved with allmajor components underway.

6. Bank Group assistance has also helped finance construction offeeder roads under agricultural and rural development projects. TheVillage Livestock and Rural Dievelopment Project (Credit 506-MAG, 1974)financed the construction of about 170 km of secondary roads in Mahajangaprovince and maintenance of about 280 km of roads. The Mangoro ForestryProject (Credit 525-MAG, 1974) provided for construction and maintenance of56 km of gravelled service roads, 840 km of plantation truck roads and 910km of tracks. The Morondava Irrigation and Rural Development Project(Credit 332-MAG, 1972) included the improvement of 24 km of secondary ruralroads and construction of about 90 km of feeder roads. Construction offarm roads was also included in the Lake Alaotra Irrigation Project (Credit214-MAG, 1970). The Second Village Livestock and Rural Development Project(Credit 1211-MAG, 1982) will help in the construction and maintenance ofabout 100 km of rural access roads, continuing the work begun under thefirst project.

7. A port project (Credit 200-MAG, US$9.6 million, 1970) providedfor extension of Toamasina Port, creation of the Toamasina Port Authority,and technical assistance for management personnel and training. In 1973the credit was increased by US$1.8 million to cover a shortage of fundsresulting from a currency realignment. PPAR No. 2299, dated December 22,1978, concluded that (i) the physical objectives of the project were satis-factorily carried out; (ii) a lower, revised economic return of 7.0% wasdue to lack of traffic growth resulting from adverse local and internation-al political and economic conditions that could not have been foreseen atthe time of appraisal, and (i.ii) although the technical assistance for in-stitution building did not achieve satisfactory results initially because

- 55 -

8. Bank Group assistance has included two projects to aid the ReseauNational des Chemins de Fer Malgache (RNCFM). The First Railway Project(Credit 488-MAG, US$6 million, 1974) assisted RNCFM in replacing outdatedequipment to provide a modest increase in transport capacity, improving therailway's managerial and operational capacity, and setting up a frameworkfor transport planning. The project had to be reduced in scope due to costoverruns and was completed with a three-year delay. Although a transportplanning and coordination unit was created in the Ministry of Transport, itdid not succeed in setting up a general framework for transport policies

mainly because the Government failed to integrate this team into thedecision-making process. The recalculated rate of return on the projectwas less than 10%. The major problems faced by the project resulted fromdeteriorating economic conditions and from general political uncertaintyregarding transport policy formulation and the overall institutionalenvironment. Management of the railway was, however, considered generallyefficient. No audit report is yet available on this project.The Second Railway Project (Credit 903-MAG, US$13 million, 1979) continuesthe rehabilitation efforts undertaken in the first project and provides forreplacement of outdated equipment, track renewal, and improvements intelecommunications and workshops. It also provides for implementation ofmeasures to strengthen the railway's financial management. Most of thephysical elements of the project have been implemented satisfactorily;however, in view of the deterioration in the management of the railway dnnon-compliance with a number of covenants, the credit was suspended in June1982. It was later reinstated (December 1982) following implementation bythe Government of a complete financial program for the railway.Reallocation of the remaining funds under the credit is presently envisagedto help strengthen the financial and operational management of the railway.

- 56 -Annex 3

DEMOCRATIC REPUBLIC OF MADAGASCAR

Sixth Highway Project

Road Transport Industry and Spare Parts Requirements

Table 1: Estimate of Madagascar's Road Transport Fleet

Total Fleet Estimate of Of whichOperational Fleet Operating ----Immobilized-------

Needing Needing____________ __________________ _________ repairs rehabilitation

Light vehicles 13,420 10,720 59% 36% 5%

Utility vehicles 11,210 9,060 61% 33% 6%

Buses 740 560 1] 61% 28% 11%

Heavy trucks 4,620 3,880

Table 2: Annual Imports of New Vehicles

AnnualAverage1972-1977 1978 1979 1980 1981 1982

Light vehicles 1,550 1,035 1,390 1,220 195 275

Utility vehicles 1,200 1,135 1,470 1,095 165 160

Buses 60 50 145 135 20 5

Heavy trucks 350 405 410 600 780 310

(of which Govern-ment: EBRO/IFA) (30) (92) (269) (621) (142)

- 57 -Annex 3

Table 3: Estimate of Recent Imports of Spare Parts:Turnover of the Main Motor Vehicle Dealers

(FMG million)

1978 1979 1980 1981 1982

Spare parts 2,920 2,500 4,055 1,775 925

Tires 2,435 3,665 4,410 135 2,920

Total 5,355 6,165 8,465 1,910 3,845

Table 4: Estimate of Emergency Spare Parts Needs(FMG million; CIF prices)

Spare Tires Routine US$parts maintenance TOTAL equivalent

Itemsl/ (million)

Light vehicles 1,137 415 113 1,665 (4.5)

Utility vehicles 1,164 659 128 1,951 (5.4)

Buses 355 259 38 652 (1.8)

Heavy trucks 1,207 1,532 130 2,869 (7.8)

Total 3,863 2,865 409 7,137 (19.5)

1/ Batteries, oil and air filters; braking fluid; spark plugs

SOURCE: FAC study, Februaryt 1983

- 58 -

Annex 4MADAGASCAR

SIXTH HIGHWAY PROJECTHighway Design Standards

Primary SecondaryRoad Network Road Network

1. Roads

Maximum design speed (km/h) 80 50

Minimum radius for

horizontal curves (m) 200 (30) 1/ 70 (25)

Maximum radius for

vertical curves

crest (m) 2,000 (1,500) 1,000 (750)

sag (m) 1,000 (750) 500

Maximum grade (%) 8 12 (14)

Transversal slope

Pavement (%) 3 3

Shoulders (%) 4 3

Pavement width (m) 5.5 to 7.0 4.50

Platform width (m) 8.8 to 10.3 6.50 (4.00)

Maximum Permissible

Axle load (t) 10 10

2. Bridges

Carriageway widt:h (m) 3.5 and 7.0 3.0

Sidewalks (m) 2x0.75 to 1.00 2xl.0

Design load:

in accordance with fascicule 61 61 B

1/ Figures in parent:heses indicate values adopted in exceptional casesfor specific short sections located either in very mountainous terrainor in other part:icularly difficult conditions.

Source: Ministry of Public Works, 1982.

- 59 -

Annex 5

DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECT

Earth Roads to be Maintained by Contractors

Road Description Length

(km)

Lot 1 - North

RN 32 Befandirana - Mandridsara 110*

Off RN 32 Abararata 45

Off RN 32 Tsaraonenana 20

Off RN 32 Antsakabary 75

RIP 116-RN 32 Andohajango 35

RIP 119 Manditsara - Marotanarana 35

Sub-total 320

Lot 2 - Center

RN 43 Soavinanavian - Sambaira 110*

RIP 91 Fenoarivo -Mahitsy 135

RIP 91 Feneorivo - Kiranomera 115

RIP 92 Miarinarivo - Soavin 50

RIP 108-RN 1 Mahasolo 20

Sub-total 430

* Roads to be maintained in the first year.

- 60 -Annex 5

Road Rehabilitation Program in the Highlands Rice Project Area

Designation Length(km)

Ambositra-Imerin-Imady- 25Ambalasoaray

Ambalasoaray- 10Ambohimandrosa

Ambatolahy-Amboniriana 5

Anjanamasy-Behena 10

Ivato-Antoetra 24

Anjoma-Ambovombe 19

RN34-Alakamisy-Mahaiza 19

Talata-Tritriva-Alakamisy 18

Ambohibary-Soahazo- 20Kelivozona

SUB-TOTAL 150

- 61 -

Annex 6

DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECT

Earth Roads to be Maintained by Force Account

Road Description Length

RN (km)

5. Maroantsetra - Soamiana Ivongo 200*

5a. Sabamva - Antalaha 90*

5a. Sambava - Vohemar 45

8. Marofototra - Tsirihihana 95

10. Andranovory - Ambovombe 105

11. Manjagara - Nosy Varika 100

12a. Taolagnaro - Manatenina 120

13. Ihosy- Ambovombe 380*

27. Ihosy - Furafangama 270

44. Ambatonarazaka - Vohitraivo 70

55. Tanandara - Revoay 15

Sub-total 1,550

Selected Feeder Roads 1/ 300

I/ To be detailed for execution in the second and third years.

* To be maintained in the first year.

- 62 -Annex 6

Road Maintenance in the Highlands Rice Project Area

Designation Length(km)

Ambositra

Ambositra-Andina 17

Soavina-Ambondromisotra 10

Ambatondradama-Vinaninony 15

Faratsiho-Andranomiady 25

Anstrabe

Antokefoana Ambohimasina 23

Nordtsarazaza-Ambatolampikoly 15(passarit par lalatsara)

Fandriana Ambehibary 20

Anovy-Mahazoacivo 25

SUB-TOTAL 150

- 63 -

Annex 7

DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECT

Highway Equipment for Road Maintenance

Equipment Quantity Unit Price Cost

(US$'000) (US$'000)

Batch A (5th Highway Project)

Hand compactor 37 14.7 543.9

4-wheel-drive vehicles 8 16.0 128.0

Miscellaneous tools 194.4

866.3

Batch B (Sixth Highway Project)

Grader 1 81.3 81.3

Truck 8 20.0 160.0

Water tank truck (6000 1) 7 21.4 149.8

Service truck 5 80.0 400.0

Pneumatic compactor 2 60.0 120.0

Van 8 9.3 74.7

Light vehicles 15 9.3 140.0

Road patching truck (Camion PAT) 1 58.7 58.7

Bitumen melting furnace 1 42.7 42.7

Mechanical shovels 7 85.7 599.9

Miscellaneous tools 387.1

2,214.20

- 64 -

Annex 8

DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECT

List of Equipment for LNTPB

Equipment Group 1/ Cost

(US$'000)

1. General 70

2. Soils and foundation testing 300

3. Material testing 200

4. Supervision of civil works 330

Total 900

1/ Equipment will be bought in order of priority as determined byconsultants CEBTP (France).

- 65 -Annex 9

DEMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECT

Study of Future Pavement Maintenance and Strengthening ProgramsOutline Terms of Reference

Introduction

1. The Malagasy Government intends to carry out a study on systematicmethodologies for maintenance, conservation and betterment of its pavedroad network. The Government will need the services of experiencedconsultants to carry out this study in collaboration with LNTPB, theGovernment's soils laboratory.

Objectives

2. The objectives of the study are:

(i) to review the different pavement structures' capacity to withstandpresent and future traffic conditions and their adaptability toregional, topographic, climatic and geotechnical conditions and, ifnecessary, design a new set of typical cross-sections;

(ii) to design appropriate maintenance operations for the differentpavement structures;

(iii) to prepare short- and long-term programs of pavement resurfacing androad improvement; and

(iv) to prepare economic and engineering studies for the improvement ofroads requiring reconstruction.

Scope of Consultant Services

Phase I

3. Consultants should carry out:

(i) an inventory of the paved road network including existing conditionsof the roads (alignment, grades, pavement structure, drainage,etc.);

(ii) an estimate of traffic based on the existing data (traffic countincluding its composition, loads and projection);

(iii) an inventory of construction materials including quantities andqualities (existing borrow pits and quarries);

- 66 -

(iv) deflection tests of the existing pavements (about 2,500 km);

(v) pavement evaluation in light of the existing conditions.

Phase II

4. They should:

(i) review the existing pavement design and construction practices and,if necessary, design appropriate typical sets of pavementstructures;

(ii) design appropriate maintenance operations for each type of pavementstructure and regional setting;

(iii) prepare short- and long-term programs of pavement resurfacing;

(iv) prepare a program of improvement works for roads that can no longerbe economically maintained by (ii) and (iii) above.

Phase III

5. Following agreement between the Government and the Bank, consultantsshould prepare feasibility studies, detailed engineering and biddingdocuments for roads that need immediate resurfacing and/or reconstruction.

A. Feasibility Study

6. The objective of the feasibility study is to define the optimumeconomic solution for the improvement of the identified road section. Thechoice will be based on a comparison of alternatives and the optimumsolution will be based primarily on:

(i) determination of the scope of the resurfacing and/or reconstructionto be undertaken;

(ii) the technical characteristics to be given to the sections to bereconstructed and/or resurfaced; and

(iii) the cost of executing the works.

7. The feasibility study will include:

(a) Traffic studies. Additional traffic counts and load distributionshould be carried out on the selected road sections. The followingvehic.Le types should be used: heavy trucks (greater than a 5 tonload) and buses, light trucks, vans and land rovers, and cars. -Foreach section of road studies, forecasts of traffic shall beestabLished for each five-year period during the economic life ofthe proposed investments. The forecasts should be established withthe help of origin-destination surveys of typical users of theexisting corridors.

- 67 -

(b) Study of road transport costs. For each technical solutionconsidered, the operating costs for each type of vehicle as well asits evolution during the economic life of the investment will bestudied. The costs of routine and periodic maintenance will beincluded, as well as the costs of resurfacing and/orreconstruction. The interrelationship between traffic, the vehicleoperating costs, maintenance costs and the cost of reconstructionwill be considered.

(c) Technical investigations. Consultants should undertake allpertinent topographic, soils and hydrological surveys and testing ofthe performance of the existing pavement to determine new technicalcharacteristics of the identified road sections. All bridges anddrainage structures to be repaired or reconstructed will also beexamined and the necessary works defined. The documents necessaryfor the execution of these works will be prepared, includinginvestigations for foundation studies and hydrological surveys fordrainage works. The consultants should also study with specialattention the materials best adapted for the construction of thesubgrade, sub-base, the base and wearing courses. They shouldidentify and carefully evaluate the quality and quantity ofmaterials of the borrow pits and rock quarries within economicalhauling distance of the road. They should also, if necessary, carryout soils surveys and identify quarries and borrow pits for roadmaintenance in the regions where these needs are identified in PhaseI.

(d) Economic comparison of the solution examined. To define theeconomically most advantageous solution, a comparison will be madeto the total transport costs on the road (including all vehicleoperating costs) for the economic life of the proposed investment,as well as the costs of investments and maintenance associated withthe different solutions considered. The comparison is to determinethe optimum technical characteristics as well as the timing of theinvestment. Normal, generated and diverted (if foreseen) trafficwill be separately identified. Other benefits to be quantified are:the economic savings due to time-savings for the transport ofhigh-value goods, and reduction in spoilage of perishable goods.

8. The various solutions will be compared to a reference solution(without case), which is defined as the continued use of the existing road,on its preserLt alignment, without major investments and with maintenance asrequired. The economic rate of return and the net present value using a12% discount rate will be determined for each solution, as well as thefirst-year return (comparison of costs to benefits for the first year aftercompletion). A sensitivity analysis will be performed to account foruncertainty in any of the cost and benefit parameters entering into thecalculation. Any possible interdependence among the variables should beconsidered.

9. The costs to be taken into account are economic costs, i.e., net oftaxes and adjusted to reflect the scarcity or surplus of the resource.

- 68 -

B. Detailed Engineering and Bidding Documents

10. This step will include the preparation of detailed engineering, costestimates and bidding documents for the works selected by the Governmenton the basis of the feasibility studies' recommendations. It will includethe final detailed topographic surveys and geotechnical studies tocomplement the work done during feasibility studies.

11. The bidding documents will be prepared for internationalcompetitive bidding with prequalification of contractors, in accordancewith the Guidelines Concerning Procurement under World Bank Loans and IDACredits. The consultants will recommend the grouping of the contract worksaccording to the directives of the Government and the best way to enhanceinternational competitive bidding.

12. As soon as the necessary elements for the detailed definition of theworks are shown, the consultants will prepare a prequalification dossier.It will include an invitation to apply for prequalification as well as abrief descriptive notice on the nature of the works. The consultants willalso prepare the newspaper publicity and the circulars for informing theembassies of Bank member countries, Taiwan and Switzerland.

13. The bidding documents shall include:

(a) all sections necesary for staking out the road centerline,cross-sections and grades and for construction of sub-grades, basecourse, ditches, shoulders and the pavement, as well as for alldrainage structures and bridges and the associated equipmentfitting;

(b) the general conditions of contract, especially concerning the rulesabout performance bond, price adjustment, insurance to be providedand advance payments;

(c) the special conditions of contract, including the technicalspecifications of the construction methods and materials and thecontrol and measurements procedures;

(d) schedule of unit prices; and

(e) the quantity estimates.

14. Consultants should also prepare a confidential report which shouldcomprise the detailed cost estimate, broken down into foreign costs, localcosts and taxes. The foreign costs will include, in particular, thefollowing: depreciation of imported equipment, imported materials andsupplies, salaries and benefits for expatriate personnel, overheads andprofits of the contractor, as well as the main foreign exchange cost-ofgoods produced in Madagascar which are used in the project.

- 69 -Annex 10

DEMOCRATIC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECTDraft Terms of Reference

Study of the Development of Feeder Roads

Introduction

1. The purpose of the proposed study is to provide a basis for theintegrated planning of rural road improvements in the agricultural projectsareas. A second major objective is to establish criteria and methods forroad maintenance activities following such improvements. Finally, thestudy will specifically consider ways and means of supporting the growth ofsmall contractors capable of undertaking road works in these areas.

2. The first criterion in planning rural road improvements should beto provide all-weather or nearly all-weather access to the maximum numberof people and the maximum amount of productive areas within the limitsimposed by aailable resources. The second criterion is to establish asystem of priorities relfecting national and local development objectives,both economic and social in nature. A third criterion is the capacity toprogram improvement works and subsequent maintenance in such a way as tomake the most effective use of available resources.

Road Network Inventory

3. It should cover about 2,000 km, including 1,000 km located in thearea of the Highland Rice Project, financed by IFPD, and 1,000 km inpriority agricultural areas identified by local agricultural extensionstaff. The inventory should include length, surface type and condition,major structures, and general geometric characteristics (width, slope,etc.). Each road should be described in summary fashion, at about thelevel of detail given in the pre-feasibility study for this project.Information concerning the socio-economic potential of the zone served byeach road should also be collected. These data should include, bkut neednot necessarily be limited to the following:

- population served

- collectivities served

- schools, clinics, etc. served (present and planned)

- present traffic levels (including oxcarts, bicycles andmotorcycles, and pedestrian traffic)

- agricultural area served (may be divided into rice paddies,rain-fed crops, and pasture)

- other development resources (forest, minerals, rural industries,tourism potential).

- 70 -

Based on this information, each road should be assigned to one of threegroups: (1) roads in good condition, requiring only regular maintenance toremain that way; (2) roads which could be restored to an acceptablecondition through spot improvements and subsequently aintenance; and (3)roads which will require major reconstruction before a meaninfulmaintenance program can be undertaken.

Local Resource Inventory

While carrying out the road inventory, the study team should alsoinvestigate the availability and quality of local resources for carryingout maintenance and minor improvement works. These would include, in eachcommunity:

- availability of labor to work at half time throughout the year onroutine road maintenance (one person per 2 km of road);

- willingness and ability of community to donate group labor forroad maintenance, three or four times a year;

- availability and capacity of skilled workers/small contractors;

- availability and location of road bulding materials (stone,lateritic soils, wood)

- availability of local means of transport for materials;

- willingness and abilityh of community to assume supervisory andfiscal responsibility for the routine maintenance of improvedroads.

5. This information would also be used in developing the system forsetting priorities for future road improvements and maintenance activities.

Maintenance, Planning and Programming

6. Bas(ed on the technical characteristics of the roads to bereconstructed and the roads receiving spot improvements, the study willdefine minimumn maintenance requirements for each improved link as well asfor roads presently in good condition. The planned maintenance activitiesshould be, in3ofar as possible, those capable of being carried out bylabor-intensive methods with a minimum of technical supervision, using onlyhand tools andl non-motorized means of transport, and depending to themaximum extent: possible on the use of local construction materials. Themost important routine maintenance tasks to be carried out would be:

Routine Maintenance

a) keeping drainage structures and roadside drainage free fromobstructions;

b) cutting and clearing vegetation which presents a potentialdanger to traffic safety and/or the structural soundness ofthe road;

- 71 -

c) repairing damage to the road surface (potholes, deformations)and initial erosion to any part of the road;

d) minor repair to drainage structures.

Periodic Maintenance

e) resurfacingof earth or gravel roads (every 10 years);

f) resurfacing of sections paved with water-bound macadam (every25 years).

Emergency Maintenance

g) reconstruction or major repairs to road surfaces or structuresdamaged by rain or floods or for any other reason.

7. It is envisaged that routine maintenance activities would becarried out using the "cantonnage system, supported by occasionalcommunity effcrts for tasks (c) and (d) above. The study should specifythe types of tools and transport to be provided and should investigatelocal costs and sources of supply, including spare parts.

8. Periodic and emergency maintenance is expected to be carried outby small constractors, with possible support from the local subdivisions ofMTP (in the case of provincial roads) and MPARA/Genie Rural (in the case oftertiary roads). Community contributions of funds, food, labor, materialsand/or transport may also be mobilized for item (g) under unusualcircumstances such as the recent cyclone damage.

9. The study should provide an initial estimate of recurrent costsfor maintenance under different conditions of soil type, terrain (slope),surface type, and traffic. These estimates can then be tested againstactual experience.

10. Using the inventory data and priorities established above, thestudy should estimate the necessary funds and local resources to rodmaintenance and spot improvement activities, according to the principle ofassuring a maximum of all-weather access throughout the area. Areconstruction, maintenance, and spot improvement program will be drawn forthese roads. The study should be coordinated with the organization studyof MTP to find an appropriate institution(s) to carry out the developmentand maintenance of feeder roads.

Support for Small Contractors

11. The local resource inventory described above will identify anumber of skilled individuals or small enterprses capable of undertakingminor road works or suporting activities such as stone crushing, culvertmanufactur, materials transport, too, repair, etc.

12. The study should investigate in detail the present capacity andconstraints facing these small contractors, and should propose a program toincrease this capacity and overcome these constraints. The following

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information, at a minimum should be obtained:

- level of formal education

- ability to read contract documents and technicalspecifications, including plans and drawings;

- ability to make formal calculations;

- years of experience in road work;

- lBvel of technical skill;

- nmmber of employees;

- inventory of tools and equipment, including means oftransport;

- contacts with suppliers of raw materials, tools, spare parts,and repair facilities;

- experience with credit (formal and informal);

- cash flow constraints affecting ability to perform work asrequired.

Based on this information, the study should present an analysis of generalproblems facing small construction enterprises in these areas and recommendan individualized program of support for contractors who appear to have thecapacity to assume increased responsibility in the future. Such supportcould include:

- subcontracting of minor works;

- individual contracts to carry out spot improvements under thedirect supervision of the project technical assistance andcounterpart staff;

- field demonstrations of improved techniques and/or use of newtools and materials;

- basic education, if required, to improve literacy andnumeracy;

- group or individual instruction in subjects such as workorganization and payment procedures, financial and costaccounting, bid prparation, equipment procurement, managementand maintenance, and use of credit;

- possible establishment of a small equipment pool available tocontractors on a rental basis (light trucks, roller, smallcrusher);

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possible establishment of a revolving fund to provide shortterm credit to contractors undertaking spot improvements.

Implementation

The study will be carried out in a year by an experiencedengineering firm.

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Annex 11MADAGASCAR

SIXTH HIGHWAY PROJECT

Technical Assistance for the Training Program and theManagement of MTP Road Operations

Outline Terms of Reference

Objectives

1. The objectives of the technical assistance for the trainingprogram are:

(a) installation of a permanent training center inAntananarivo;

(b) design of appropriate courses for the specialtiesrequired;

(c) continuation of training of transport sector personnel,including engineers, technicians, skilled andsemi-skilled laborers;

(d) implementation of training and seminars for road sectorchiefs and other skilled personnel required for the roadmaintenance brigades;

(e) management, administration and supervision of roadmaintenance brigades and workshop operations;

(f) assistance to MTP and MTRT in recruiting and trainingaddition.al skilled staff needed for the management ofroad and transport sector operations.

2. Since MTP is seriously handicapped by the shortage of experiencedand qualified personnel especially at the managerial level, while thetraining program is underway, MTP will be provided with in-line experts toefficiently manage road construction and maintenance operations.

Composition of the Training Team

3. The center will be headed by a Malagasy professional. A team ofseven technical experts will be assigned to the center. Composition of theteam and the length of each expert's assignment is summarized below:

Consultants Man-Months

(a) highway engineer (chief of mission) 30(b) two road maintenance and construction experts 60(c) one mechanical engineer specializing in heavy

equipment for gasoline- and diesel-powered machinery 30(d) one expert in training equipment operators 30(e) three labor-intensive experts 108

TOTAL 258

Qualifications

4. Each expert should have:(a) fluency in spoken and written French;(b) training experience in his field in order to facilitate

professional and technical instruction;(c) work experience in a developing country; and

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(d) education commensurate with the position to beoccupied.

Particular qualifications and functions of the team members are describedbelow:

Chief of Mission

5. The chief of mission should be a highway engineer with experiencein operation and maintenance of road equipment. He should have at least(a) ten years' experience in road administration, construction andmaintenance, as well as in budget matters and cost price accounting; and atleast (b) five years' experience in technical and professional training,preferably on-the--job training. Experience in administration and financialmanagement of a construction firm and/or in manpower planning and personnelmanagement is desirable. His duties will include:

(i) coordinating all mission activities and maintainingliaison with MTP;

(ii) preparing professional ability tests to be used as abasis for recruiting personnel, and recommending thepersonnel to be recruited; and

(iii) training.

Road Maintenance and Construction Experts (2)

6. They should be road engineers or senior road work foremen with atleast five and ten years' experience in the field respectively. Inparticular they should have extensive knowledge of and experience in (a)road maintenance and construction and maintenance of equipment; (b) use ofheavy equipment;(c) various elements of road construction management, contract andspecifications; and (d) soils engineering. They should:

(i) train the road engineers, construction foremen andlaborers;

(ii) assist in training equipment inspectors and operators;and

(iii) provide technical, on-site training of regional roadchiefs.

Heavy Equipment Mechanic (1)

7. He should have at least eight years' professional experience inthe use of heavy equipment for public works. His qualifications should beas follows: (a) specialization in both diesel and gasoline engines; (b)experience in operation and maintenance of equipment used in maintenancework; (c) knowledge of vehicle electrical systems; and (4) basic knowledgeof general mechanics. He should:

(i) train and give refresher courses to diesel- and gasoline-engine mechanics;

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(ii) train and give refresher courses to mechanics andmechanic-helper/greasers for workshops and mechanizedroads units;

(iii) train spare-parts storemen; and

(iv) assist in training equipment inspectors.

Expert in Training Equipment Operators

8. This expert should have at least five years' experience intraining equipment operators. He should be familiar with the major typesof heavy equipment currently used in road construction and maintenance. Hewill:

(i) train and give refresher courses to operators of varioustypes of road machinery; and

(ii) supervise the mechanics and greasers assigned to worksites.

Labor-intensive Experts (3)

9. They should be highway engineers with at least five years'experience. In particular they should have extensive knowledge of andexperience in (a) construction and maintenance of roads; (b) organizationof labor intensive execution of road construction and maintenanceoperations; (c) use of tools and light equipment; and (d) soilsengineering. They should assist (i) DPCH and regional services heads inplanning and supervising "cantonnage" or routine labor-intensive operationsfor road maintenance; and (ii) the chief of team in executing thoseoperations.

MTP Management

Composition of the Management Team

10. A team of two in-line managers, a road organization manager and aroad maintenance manager, will be assigned to MTP for three years to assistin the management oi- road construction and maintenance operations.

Qualifications and Functions

11. Each expert should: (a) be fluent in French; (b) have experiencein a developing country; and (c) have education commensurate with theposition to be filled. Specific qualifications and functions of thedifferent team members are described as follows:

Road Organization Manager

12. The expert will serve a line function in MTP; he will act asDirector General of Works. He should be a highway engineer with at leastten years' experience in the field and in management of road operations.His duties will include:

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(i) coordinating all activities of the Directorate General ofWorks, including road construction and maintenance, workshop andsoils laboratory operations;

(ii) planning of road operations;

(iii) preparation and implementation of contracts and specifications;

(iv) assistance in hiring technical assistance and personnel for roadoperations; and

(v) supervision of work.

Road Maintenance Manager

13. The expert will serve a line function in MTP; he will act asDirector-of Road Maiatenance. He should be a highway engineer with atleast ten years' experience in the field of organization and execution ofroad maintenance operations. His duties will include:

(i) planning and coordination of road maintenance operations;

(ii) organization of brigades and teams, and choice of technicians forthe execution of road maintenance operations;

(iii) selection of chiefs and personnel for the brigades and teams; and

(iv) supervisioni of the execution of road maintenance operations.

Reports:

14. Consultants should prepare:

(a) monthly progress reports;

(b) a yearly project review, its accomplishments,shortcomings,, and future orientations submitted tothe Government and the Bank for their assessment; and

(c) a draft and/final project completion report andevaluations.

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Annex 12I)EMOCRATIC REPUBLIC OF MADAGASCAR

SIXTH HIGHWAY PROJECT

Outline Terms of ReferenceStudy of the Organization, Management

and Operation of the MTP

I. Objectives

1. The MTP intends to carry out an analysis of its workingefficiency with the object of improving the overall effectiveness of itsoperation and assist the communities in the improvement and maintenance ofthe feeder road and track network. To this end, the MTP intends to seekthe assistance of an expert to review its present organization, personneland workload, and to make recommendations for optimizing its efficiency.

II. Scope of Consulting Services

A. General

2. In order to attain the objectives detailed above the NTP proposesto invite an expert to provide about eight man-months services for theanalysis of MTP's organization, staff, workload and management, itssufficiency to meet the specific requirements of the MTP, both in terms ofnumbers and skills, the day to day functioning of the MTP in terms of itspresent responsibilities and structure, and to make recommendations forimproving the basic efficiency of the MTP in terms of organizational setup,staff performance and iLnternal management. The expert shall perform theservices herein described. In performance of the services, the expertshall cooperate fully with the Government which may assign counterpartpersonnel to provide liaison with the MTP and other Government agencies asnecessary. The expert shall, however, be solely responsible for thefindings and recommendations contained in their reports.

B. MTP Operations/Organization

3. In order to make a meaningful analysis of present operation ofthe MTP, the expert shall review the basic structure of the MTP, itsresponsibilities, internal regulations, relations with other Governmentagencies and ministries, and personnel regulations under which itoperates. Within the context of this framework the expert will assess thefunctional efficiency of the MTP in its day-to-day operations at alllevels. he will assess the efficiency of the operating structure andorganizational structure and note areas, setups and specific procedureswhich could increase the effectiveness of the operation of the componentparts of the MTP and the MTP as a whole.

4. All aspects of the organization and management of the MTP will bereviewed and the expert will be expected to make recommendations for theimprovement of management policies, system organization, coordination andimplementation of works, and simplified procedures for efficientimplementation.

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C. MTP

5. Concurrently with the analysis of the operation and organizationof the MTP the expert will. study the staffing of the MTP and any relatedpersonnel, in terms of skills, working efficiency and working conditions.The expert will also review job descriptions, personnel policies (includinghiring practices). On the basis of this staff study and the review of NTPoperation and organization (see "B" above) the expert will make an analysisof the actions required to provide the staff necessary conditions toultimately meet the recommended improvements in MTP operations. Theseactions shall include the incentive and promotion of MTP staff.

D. Program for Improvement of MTP Operation

6. On the basis of the study of MTP operations and organization (see"B" above) and in the context of staffing (see "C" above) and otherconstraints, the expert will develop a program to optimize efficiency ofMTP operations.

III. Timing

7. The study is to be carried out over a period of eight months byone organization expert . It is expected that the expert will remain inMadagascar at least six months of the eight month period.

IV. Reports

8. The expert shall submit the following reports in French:

(a) An inception report three months after the starting date. Thereport shall include details on the expert's schedule. Thereport shall give the methodology and possible solutions andrecommendations, specific areas of concentration, and necessarydata and cooperation to properly carry out the tasks. TheGovernment and IDA should comment on this report within one monthafter it is submitted;

(b) A draft final report within two months after receiving comment onthe inception report. The report will detail the results of thestudy and the recommendations made. Ten copies should be givento Government, of which the Government shall send two to theAssociation. This will allow one month for review anddiscussion; and

(c) A Final Report within a month of receipt by expert of comments ondraft final report from Government, incorporating all revisionsdeemed appropriate by the expert.

V. Data to lbe provided by the Government

9. The Government wi:Ll make available to the expert all apropriatedata on the organization, responsibility, structure and regulations(internal and external) under which the MTP operates as well as personnel

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data including pay scales, recruitment policies and practices, jobdescriptions, skills and training of employees and other pertinent data.These data will be treated as strictly confidential by the expert and willappear in his reports only in such form as to preclude any identificationof an individual nature. The Government will also make available to theexpert any reports, studies etc. which deal with the overall function andoperations of the MTP and will advise the expert of any likely change inthe present structure or function of the MTP. Such probable change will betaken into account by the expert when developing his recommendations.

10. When, in connection with the work by the expert cooperationand/or data from other Government agencies is required, the Government willprovide liaison to ensure that such cooperation and/or data is forthcoming.

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Annex 13

DEMOCRATIiC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECT

Outline Terms of Reference for Technical Assistancein Transport Planning and Coordination

1. In order to assist the Government of Madagascar and in particularthe Ministry of Transport, Supplies and Tourism (MTRT) to expand andimprove its transport planning capability, the project will include twoexperts to work closely with Malagasy officials in this respect.

2. The team of experts will include:(1) an economist planner (mission head) to be responsible for

overall transport coordination within MTRT and with otherministries; and

(2) an engineer-economist specialized in road transport.

3. The experts shall be attached to the Transport Planning andCoordination Unit in the MTRT, such unit to be elevated to a levelreporting directly to the permanent secretary. The consultants may alsoassist the Directorate General of Planning in the Presidency, as requiredby the Government, but they shall report in all cases to the PermanentSecretary of the MTRT.

4. The unit will be responsible for establishing the properinter-ministerial coordinating imechanisms and will work closely with theDirectorate of Planning in establishing transport demand models based onmacroeconomic projections.

5. In addition, the expert will:(i) determine and assist iin collecting and compiling the data

required to implement a continuous and effective transportplanning mechanism in the country;

(ii) recommend and assist in setting up an effective system ofintersectoral development information enabling transport planningto be made responsive to priorities developed for other sectors(interministerial meetings or through the Direction du Plan), andimproving the level and effectiveness of intersectoral investmentcoordination;

(iii) train Malagasy nationals in matters related to transportationplanning and coordination so that once these services arecompleted the Malgasy staff will be capable of taking over fullresponsibility for transport planning in Madggascar, includingthe preparation, evaluation and supervision of transport projectsand policy formulation;

(iv) advise and assist the Government and the MTRT on currenttransportation problem3 and issues, including planning, reviewingand coordinating transport studies and evaluating majorinvestment projects proposed for transportation;

(v) assist the Government and MTRT in preparing coordinated trans-portation investment programs including budgeting of investmentand operating funds for the entire transport sector; and

(vi) advise and assist the Government in transport policy formulationsuch as pricing and regulation.

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DEMOCRATIC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECT

Transportation Plan of MadagascarTerms of Reference

INTRODUCTION - PURPOSES OF THE STUDY

The inadequacy of transportation planning and coordination inMadagascar is one of the major causes of the poor functioning of thetransportation sector, which is a serious constraint on the country'seconomy.

Conscious of the need to improve transportation planning, theGovernment, aided by French cooperation, supplemented later by that of theInternational Development Agency, proposes to upgrade and strengthen theexisting transport planning unit in the Ministry of Transport, Supplies andTourism and to engage the services of a consultant to develop a program ofaction to support the activities of such unit, comprising three phases:

In Phase 1 the task will be to obtain a better knowledge ofpresent and foreseeable transportation demand in Madagascar, the effectivecspacities offered by the various modes of transportation, and theconditions and true costs of existing transportation supply.

In Phase 2 a comparison will be developed between foreseeabletransportation demand and foreseeable supply, taking into account thepresent situation and the projects under execution. A detailed analysis ofroad user charges and taxes, including the taxes and pricing policy ofpetroleum derivatives used by the transport sector, as well as an analysisof regulation policies affecting the movement of passengers andcommodities, will be carried out to prepare recommendations to optimize theeconomic use of resources in all modes. The object is to formulate atransportation coordination, pricing, regulation and planning policy andidentify the development projects to be selected, together with a timetableof the related investments. This phase of the study is to be carried outin close liaison with the Administration, at the highest level.

Finally, Phase 3 would comprise the implementation of thetransportation plan following upon the formulation phases, to be undertaken-under the aegis of the upgraded traLnsportation planning unit within theMalagasy Administration reinforced with the assistance, if necessary, offoreign experts.

The planning study will cover the various modes of transportationin Madagascar. It will take into account all previous or ongoing studies,particularly the study of Madagascar's mkaritime transportation servicestndertaken with the support of French cooperation.

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SERVICES TO BE PROVIDED BY THE CONSULTANT

I. PHASE 1: COMPILATION OF DATA

(a) Transportation Demand

The purpose of this part of the study is to assess thetransportation demand that the various modes will have to satisfy at theprojection horizons adopted, i.e. five years and ten years after 1984. Tothat end, present demand will first be determined and then extrapolated.

Present demand will be determined in the form oforigin-destination matrices between traffic zones and will then beallocated to the various networks to produce flow charts. This set ofmatrices and flow charts will furnish the base for development of theprojections in phase 2.

To establish this base, the consultant will need to:

(i) collect and analyze all the existing statistics on maritime,rail, air and road transportation;

(ii) prepare monograph studies for the major products to betr.nsported, placing special emphasis on the localities of production,c.onsumption or export;

(iii) carry out an origin-destination survey based on interviews ofdrivers, in stations judiciously distributed over the roads network, eachof which shall have been operating for a sufficient time to ensuremeaningful results. Special attention will be paid to the problem ofseatsonal variations, due mainly to the farm calendar;

(iv) conduct a survey, based on interviews and sampling, among themajor road carriers, Madagascar Railways (RNCFM), and Air Madagascar, andthe major users, such as agricultural and industrial production andmarketing agencies.

To be able to analyze the origin-destination surveys and express thetransportation demand in the form of matrices, the consultant will need todivide the country into traffic zones. These zones will have to behomogeneous and consistent with the transportation networks and, at thesame time, limited to a reasonable number to keep the data manageable.This involves difficult but unavoidable choices, to ensure that present andfuture traffic can be allocated satisfactorily.

Once this base has been set up, the next step will be to projectdemand to the reference horizons, i.e. five and ten years, in order toarrive at future demand in the form of a set of origin-destinationmatrices. A number of methods are available for this purpose, which willbe applied case by case and in combinations, depending on the types oftraffic, goods, etc. involved.

For this purpose the consultant will need to:

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(i) prepare a general economic study embracing the macroeconomic anddemographic aspects and yielding growth prospects and a set of indicatorsof that growth, at both the national and the regional levels, on the basisof the division into zones adopted;

(ii) perform analyses supplementing the monograph studies, with theobject of projecting production and consumption, by zones, for the majoragricultural, mining and industrial products. These analyses will have toreview and take into account those mining, industrial and agriculturalprojects, already started or firmly committed, whose effects ontransportation flows will not be felt until later;

(iii) prepare matrix projections, i.e. estimates of theorigin-destination matrices to the five-year and ten-year horizons, usingthe basic matrices and employing projection methods selected case by case,the principal methods being as follows:

- correlation with macroeconomic parameters or with the indicatorsresulting from the monograph studies, either globally for theentire matrix, or reasoning zone by zone and calculating thefuture matrix with the aid of a FRATAR-type model, whichconsists in adjusting the matrix line by line then column bycolumn iteratively;

- direct projection, flow by flow, on the basis of the monographstudies;

- projection on the basis of a gravity-type model.

(1b) Transportation Supply

The effective capacity of the various existing modes oftransportation, and its foreseeable trend of development, depend both ontechnical factors, associated with infrastructure and equipment conditions,and on internal factors, associated with the degree of organization and thefinancial soundness of the transportation enterprises.

It is accordingly necessary to prepare (a) an overall diagnosis ofthe enterprises, and (b) an inventory of existing infrastructures andequipment.

This inventory is already provided for in the case of the ports;the above-mentioned study of Madagascar's maritime transportation service.In the cases of roads, railways, and airports, the pertinent services andagencies already possess certain data, whiich will have to be assembled,checked and amplified following field reconnaissances, then classified andsummarized to make them usable at the top decision-making levels. Theroad network inventory will cover the roads open to public traffic,excluding the roads reserved exclusively for use by agricultural, forest,mining or other specific indistrial operations. The roads will beclassiEied into homogeneous categories on the basis of their technical andgeometric characteristics(nature of the roadbed, width, and curve andgradient characteristics) and their present condition.

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An inventory of main structures .nd ferries will also be prepared.The road inventory will be supplemented by an inventory of ongoing projectsand an analysis of road-maintenance technical and financial capacities.

In the case of the railways, a detailed analysis will be performedof the state of the infrastructures, superstructures and rolling stock, andof track and equipment maintenance capacity.

On the basis of the inventory of airport infrastructures, thesites will be classified according to nature of runways, service andnavigat:ion equipment, and operations buildings. An analysis will also beperformed of physical development and improvement needs, ranked in order ofurgency, from the standpoint of the safety of the infrastructures andequipment and their suitability for the types of aircraft used by AirMadagascar.

The diagnostic study of road transportation industry willbeperformed by means of a questionnaire survey, supplemented by anin-depthsurvey, by sampling, among the most representative enterprises invarious categories (freight, passengers, public/private, size) andsingle-c,wned, single-operated trucking and busing services. The surveywill cover (a) quantitative and qualitative state of rolling stock, andmechanical maintenance capacity, and (b) the financial situations andperformances of the enterprises.

Special attention will be paid to energy consumption. Thediagnostic study of the road transport industry will be supplemented by ananalysis of existing tariff regulations, tax situations and how theseeffect te efficiency of the country's road transport industry. The studyof the road transport industry will furnish the basis for estimatingtransportation costs (including all taxes; excluding taxes; and foreignexchange costs), according to the various types of vehicles and roads, aswell as provide the data to assess the level and adequacy of road usercharges.

On the basis of the previous analysis, recommendations will beprepared to improve the efficiencly of the road transport industry in thecountry.

Similarly, a diagnostic study will be carried out of the operationof the companies Air Madagascar and SNCFM, together with an assessment ofair and rail transportation costs.

This supply inventory must provide the basis for definition of thenetworks, by modes, at present and at the five-year and ten-year horizons;in the case of the roads and railways, the network will be defined byhomogeneous segments to which the traffic can be allocated.

(c) Comparison of Transportation Supply and Demand

This third stage of phase I of the study consists in comparingtransportation supply and demand, as previously determined -- not, at thispoint, in order to judge their suitability and adequateness and to studyany needed modifications of supply (which will form the subject of phase II

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of the study), but in order to analyze the assignment of transport demandto the network, i.e. the transition from the origin-destination matrices toflow charts for each mode.

It is thus a matter of analyzing the rules of modal competitionand of taking into account all the special features of the situation inMadagascar, so as to express properly the rules of traffic assignmentapplicable to Madagascar. The flows arrived at in this way must then becompared with the measured traffic in order to calibrate this assignmentmodel, if necessary by successive iterations. This comparison ofcalculated traffic and measured traffic will also furnish an importantcheck on the hypotheses made in the monograph studies and duringconstruction of the matrices.

(d) Analysis of Basic Costs

For the purpose of the comparative analyses to be performed inphase II, it will be necessary also to study the transportation costs andto group them together in the form of grids for (a) motor vehicle operatingcosts (by type of vehicle, type of relief, arnd type of road), railwayoperating costs , air transport costs, and port costs, with respect totransportation costs proper; (b) capital costs, taking into account thepossibilities forsuccessive improvements and therefore calculating the costof transition from a given development level to the next higher level, andthis for each of the modes; and finally (c) maintenance costs, which willbe detailed according to the levels of maintenance.

(e) Composition of the Team Responsible for Phase I

The bulk of phase I of the study constitutes a task more ofcompilation than of analysis. It is desirable that it be carried out bythe consultant in close collaboration with the Malagasy Administration.

However, the staff that will be appointed to participate in thisfirst phase of the study may not be of the same level of competence andresponsibility as those who have to participate very closely in formulationof the recommendations of phase II, which involve choices of transportpolicy.

II. PHASE II -- COMPARISON OF TRANSPORTATION SUPPLY AND DEMAND: ANALYSIS

OF PROBLEMS, AND FORMULATION OF RECOMMENDATIONS

Phase I of the study will have provided information on foreseeabletransportation demand, expressed by flows defined in terms of direction andvolume, and also the capacity offered by the existing transportationsystem. The task in this second phase of the study is to comparetransportation demand and supply and to propose solutions for meetingdemand at lowest economic cost and, in partictLlar, at lowest energy cost.In the event that the shortfall of resources requires that implementationof the recommended solutions be spread over time, a set of priorities willbe drawn up, together with an execution timetaLble.

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It is essential that the analysis work done during phase II beperformed iri close association with the responsible authorities, at veryhigh level, so that the officials subsequently responsible for applying therecommendations of the Transportation Plan will have been involved veryclosely in formulating them. They will then be aware of and perfectlyunderstand the reasons and circumstances underLying the recommendations.Since a number of ministries are involved, it will be advisable to set upan inter-ministerial committee and to pay careful attention to thedistribution of the tasks and responsibilities of each one in the MalagasyAdministration.

Participation in this phase is also necessary of a small number ofMalagasy experts, who will later form the core of the transportationplannig unit responsible for monitoring implementation of theTransportation Plan during phase III. Finally, it is desirable that theforeign experts who will later furnish advisory, assistance to this planningunit, or at least some of them, also participate in this analysis andrecommendations phase.

Phase II wilL comprise the following major tasks:

(a) Assignment of Transport Flows

The task here is to assign the projected transportation demandflows to the various transportation modes in light of potential capacitiesand ofeconom:Lc costs including the relevant energy costs.

In practice, competition between two or more modes arises only incertain cases, the most important of which are the links Antananarivo-Toamasino, Antananarivo-Antsirabe, and Manakara-Fianarantsoa, for which thequestion arises of the choice between rail and road investments.

Other cases of competition could arise between road and coastalsea transportation or the use of canals (Pangalanes) or between road andair transportation (passengers and certain types of freight). All thesecases will be studied by comparing the updated balance sheets ofgeneralized costs, including investment, maintenance and operating costsand also, where appropriate, the value of time, for each mode. Specialattention will be paid to the foreign exchange iand energy balance sheets.

(b) Programming of Investments and Developmnent Activities

The task here is to determine for each transportation mode:

- the list of infrastructure and equipment investments to beprogrammed, together with their timetable;

- the infrastructure maintenance programs;

- the personnel training programs; distinguishing first between theprivate sector, the public sector and the administration, andsecond between personnel levels: manage!rs, supervisors andforemnen, and operatives;

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the programs of financing of the transportation enterprises;possible programs of technical assistance to the transportationenterprises.

This programming will take the form of a precise priority programfor the short term, and of guidelines for the longer term. It will besupported by the results derived from the previous phases of the study:

- quantitative shortfalls, revealed by the comparison between

foreseeable tra!nsportation supply and demand;

- qualitative deficiencies, reflected in high costs detected duringthe diagnostic study of the transportation sector;

- recomniendations concerning modal allocation of traffic, derivedfrom comparison of the updated balance sheets of total,foreign-exchange and energy costs.

The composition of the programs will have to be such as to ensureconsistency and. complementarity between the development of the variousmodes of transportation.

(c) Tariff and Fiscal Policies

The study will also review road transport costs in light ofcurrent and adjusted tariffs and will assess the impact of a completeliberalization of tariffs.

In light of information gathered on present and future roadtransportation costs an the associated costs of building and maintaining therequired infrastructure, th study should make recommendations on therequired levels and sources of road user charges and methods of ensuringtheir adjustement on a timely basis.

(d) Coordination and Organization Policy

Cohesive and harmonious development of the transportation systemcalls for coordination of the investment and mainlenance programs of thevarious modes and also of tariff and fiscal polic:Les.

To this end it will be necessary to assemble the whole of themeasures recommended for the various transportation modes in a singlesummarizing document so as to demonstrate their cohesion andcomplementarity. This document will also serve as action guidelines forverifying that this cohesion is duly observed in the execution of theprograms.

III. PHASE III -- IMPLEMENTATION OF THE TRANSPORTATION PLAN

The transportation planning study (phases I and II above) willhave to provide the basis for setting up a planning unit within theMalagasy Administration, responsible for monitoring and implementing therecommendations of the Plan.

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The composition of this unit and its integration into the existingadministrative structure pose institutional problems. Thus, it isnecessary to know what the respective roles will be of the ministriesinvolved and how the tasks and responsibilities wLll be distributed. Thisis not the place to go into these questions, but it may nevertheless bestressed that one of the major roles of the unit will be to act as theveritable permanent secretariat of the Inter-Ministerial TransportationPlanning Committee (Comitg Interministeriel de Planification desTransports). The Committee will already have been involved very closely inthe analyses conducted in phase II and will have to continue to monitorimplementation of the policy defined.

This unit will have to consist of a number of Malagasy engineerswho have participated in the previous phases, together with two permanentexpatriate experts who, so far as possible, will also have participated inphases I and II. The unit will also have to be provided with the means tocall on high-level experts in highly specific fields to perform shortmissions.

This implementation of the recommendatiorns concerning coordinationand organization, together with monitoring of execution and evalution ofresults, will involve mainly the following tasks:

development of a system of compilation and processing ofstatistical data for keeping track of chEnges in the situations ofthe transportation enterprises and in the various kinds oftraffic;

- development of system of monitoring of the evolution oftransportation costs;

- monitoring of execution of the investment and developmentactLvities programs of the various transportation modes;

- preparation of all measures for adjustment of the aboveprogyrams and of the tariff or fiscal policies found to benecessary;

- preparation of all desirable supporting measures.

REPORTS TO BE PRESENTED

1. Report on transportation demand, presented upon completion of thestudies described under task 1 (a) above, within five months followingnotification of the order to start the study.

2. Report on the diagnostic study of the transportation sector,presented upon completion of the studies described under tasks 1 (b), (c)and (d) above, within seven months following notification of the order tostart the study.

3. Provisional report on the transport organization and planningproposals, presented upon completion of the studies described at 2 (a), (b)and (c) above, within ten months following notification of the order tostart the study.

- 90 -

This report will constitute, to some degree, the putting into formof the decisions of the Inter-Ministerial Transportation PlanningCommittee.

4. Final report, presented within two months following receipt of thecomments on the provisional report (referred to at 3 above), containing thesummarizing document referred to at 3 (d).

5. Progress reports, presented every three months during phase III.

- 91 -Annex 15

DEMOCRATIC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECT

Technical Assistance to LNTPB

Outline Terms of Reference

Introduction

1. The MTP intends to strengthen and expand the operations ofLaboratoire National des Travaux Publics et du Batiment (LNTPB), theGovernment SoiLs Laboratory for road construction and maintenance. To doso, MTP will need the assistance of consultants experienced in soils,materials and Eoundation engineering and soils laboratory management.

Objectives

2. The objectives of LNTPB are to: (i) participate in running roadconstruction and maintenance works and carry appropriate soils andfoundation studies in design and implementation of these works; (ii) carryout research on the utilization of local materials for the construction andmaintenance of civil works; and (iii) assist in the supervision of theexecution of these works.

Team composition

3. A team of three experts will be assigned to LNTPB. One for threeyears to carry out soils exploration and identification of local materialsfor use in road works; and two for two and a half years to assist instrengthening and expanding CNTPB's operations in road construction andmaintenance.

Qualifications

4. These engineers should hold degrees in civil engineering with aspecialty in soils and foundation engineering; in addition they should haveat least ten years' extensive experience in management of soils labora-tories. They should have worked in a developing country, preferably inAfrica, and should be fluent in French.

Scope of Services

5. The consultants will assist LNTPB in (a) selectlng and procuringlaboratory equipment; (ii) planning soils testingr and evaluation programs;(iii) designing structures and maintenance; (iv) supervising the executionof these works; and (v) carrying out material research programs.

- 92 -Annex 16

DEMOCRATIC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECT

Project Reporting Requirement

A. Project Progress Reports

1. The borrower will prepare Progress Reports that should be sub-mitted semi-annually in triplicate, no later than one calendar month afterthe end of each six-month period. The first report should cover the half-year period ending June 30, 1984.

2. The information that Progress Reports should contain is describedbelow:

(a) General Information: This should include the following:

(i) the physical progress accomplished during the reportingperiod;

(ii) actual or expected deviations from the project implementa-tion schedule;

(iii) actual or expected difficulties or delays and their effectson the implementation schedule, and the steps planned ortaken to overcome the difficulties and avoid further delay;

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

(v) key personnel changes in the staff of the administration,consultants or contractor;

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

(vii) any development activity likely to affect the economic via-bility of project components.

(b) A bar-type progress chart, based on the project implementationschedule should show the progress in each project component.

(c) A financial statement should be set out in tabular form andindicate for each project component:

(i) original estimated cost;

(ii) revised cost, if appropriate;

(iii) actual expenditure;

(iv) projected expenditure; and

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

- 93 -

(d) Finally, Progress Reports should state the status of action oneach covenant of the Credit Agreement.

3. Progress Reports will be an important input in the preparation ofthe Project Completion Report.

B. Project Completion Report

4. The borrower will prepare a Project Completion Report (PCR) to besubmitted to the Association not later than six (6) months after the Clos-ing Date.

5. The primary objective of the PCR is to reinforce self-evaluationby the borrower and the Association's operating departments and to facili-tate dissemination of lessons learned through the project:

(a) the performance by the borrower and the Association of their re-spective obligations under the Credit Agreement and whether theAssociation could have been more helpful;

(b) the results that can be expected from the project, as comparedwith expectations at appraisal, and whether the original expecta-tions were realistic; and

(c) whether in retrospect the project was worth doing or could havebeen done better.

6. For those components of the project for which a rate of returnwas estimated during appraisal, the PCR should contain a new estimate ofthe return the project is now likely to yield and analyze the reasons forphysical or economic deviations. However, the new rate of return calcula-tions should be as simple as possible under the circumstances and shouldabsorb only a minor portion of the time devoted to the preparation of thePCR. An annex with the relevant information supporting this analysisshould be included.

7. The basic documents to be referred to are:Credit ApplicationFeasibility studies, Appraisal RelportCredit Agreement documents, supplementary letters, etc.Semi-annual Progress ReportsProject Correspondence FilesMiscellaneous Evaluation Reports.

8. The Eastern Africa Transportation Division 1 will review andcomment on the PCR. After approval by the Highway Division Chief, the PCRis sent Ito the Bank Group's Operations Evaluation Department (OED) which isresponsible for conducting an audit of the project. This audit can lead tosuggestions for changes or additions in the PCR as OED prepares the ProjectPerformance Audit Report (PPAR) for submission to the Bank Groups, Board ofDirectors. Before going to the Board, the draft PPAR, which includes thePCR, is sent to various Bank Group diviLsions, to the Government, andoccasionally to consultants.

- 94 -

Amnex 17

DEMDRATIC REPUBLIC OF MADAGASCAR

SDXH IEEGIAY PROJEC

Vehicle Operating Costs (RMV/km)

Type of Road

Iype of Vehicle Good Paved Poor Paved Bad Paved Earth Gbod Earth Fair Earth Poor(1) (2) (3) (4) (5) (6)

Car 124.93 143.67 157.15 201.40 241.68 271.02

Bus 176.96 205.27 2214.82 312.36 390.45 464.61

Pickup 189.22 221.39 247.14 344.06 447.28 532.14

Heavy Tnuck 257.91 304.33 339.41 471.61 636.67 742.88

Source: linistry of Trareport, Supplies and Tourism and mlssion estimates.

- 95 -

Annex 17Table 2

Economic AnalysisPaved Road Maintenance

RN From To Km Cost 1/ ERR

6 Ambanja Ambilobe 102 255 250

5a Vohemar Sambava 107 263 191

3b Sambava Andapa 99 248 83

31 Antsohiny Antsanabe 60 150 38

32 Antsohiny Befandriana 75 188 127

6 Ambondromamy Antsohiny 298 745 165

5 Toamasina Fenerive 140 350 164

22 Fenerive Manatenina-Anjahambe 55 138 60

2 Antananarivo Moramanga 115 288 264

3 Antananarivo Anjozorobe 90 225 355

51 Ivato Ambohimanga 5 13 245

3a Vohidiala Vohitraivo 105 263 124

33 Moramanga Ambakireny 40 100 30

35 Ivato-Mahabo Morondava 109 273 54

34 Antsirabe Miandrivazao-Malaimbandy 323 808 356

4b Analavory Tsiroanomandy 94 1,067 177

1 Antananarivo Analavory 124 310 146

43 Analavory Soavinandriana 75 202

12 Manakara Vangaindrano 177 443 109

13 Ambovaombe Ta:Loagnaro 110 275 27

7 Toliary Sakaraha 135 338 147

55 Morombe Tanandava 62 155 268

1/ (US$'000)

- 96 -Annex 18

DEMOCR&TIC REPUBLIC OF MADAGASCARSIXTH HIGHWAY PROJECT

Related Documents and Data Availablein the Project File

1. Etude de Reforcement et de Reconstruction des Tranqons Bitum6ssur les Routes Nationales RN 4 et RN 7: Etude de Factibilitg(Fevrier 1983);

2. Elements d'Evaluation (Entretien Routier) du 6eme Projet Routier(Decembre 1982);

3. Projet FIDA-FAO de Developpment Rizicole sur les Hauts Plateaux,Volet Routier (D4cembre 1982);

4. Etude des Besoins de Formation du Personnel pour l'EntretienRoutier et les Travaus en Regie;

5. Laboratoire National des Travaux Publics et du Batiment (LNTPB):Projet du Developpement des Activities (AoGt 1982); and

6. Evaluation des Besoins en Piaces de Recharge de Parc AutomobileMalgache (Fevrier 1983).

MADAGASCAR SIXTH HIGHWAY PROJECT

OR.GANIZATION OFMrTP

rMinister of |Pol,lic Works

Inpector (5) Secretariat

| eoter of Policy j

soad Tecnimcol Studies }

|Generfl Dtrectorate | -iGeneral Secretarnto|of Wor-k (DGE) (Adininstration)

|Contracts | Off ice of Geosnall

Read Architectors. Disisioo of 4ntipmsnf Directorate ofat Coaputing Maintenance ijekantemsoad Gofrastructare Hivisiso | inance lDvso

= -~~~~~~~~~~~~~If tr.Disision (PCR) MacnEn Disision(DIIe (DMA?)

kbn Planning ||Publicso DSevelap.ent | |ulidions|

Regionsl Road Aotoneinous Regional Financial |AccoonmtiOn Segiotatios Planning andMlaintenance Snkdivieion of SnppiePs Services Office and Legal Frternast Pernsonnsl Training

Divisions (6) Tolagnaro j ivinlon (6) Division Affairs

EqupetfoetSply pr at n

MADAGASCAR

SIXTH HIGWAY PROJECT

PROJIBCT rIPLEENTATION SCHEDUL 1/

C.lendar Year

1983 1984 1985 1986Item It-m Comonents Ac-tivity Action By _ - - - _ - - _ - - _

3 4 1 2 3 4 1 2 3 4 1 2 3 4

Credit Signing Government/IDAEffectiveness Government/IDA

Road mainte- Equipment, Materials and Preparation of Bids Suppliersnance Supplies Evaluation and Award Government/IDA

Supply Suppliers

Workshop Construction Preparation of Bids ContractorsEvaluation and Award Government/IDAWorks Contractors

HTP Management Proposals ConsultantsEvaluation and Award Government/IDAServices Consultants

Works by Contractors Preparation of Bids ContractorsEvaluation and Award Government/IDAWorks Contractors-

Rehabilitation RN 4 and RN 7 Preparation of Bids ContractorsPaved Roads Evaluation and Award Government/IDA

Works Contractors _ - _ _ - _ _ - _

Improvement Equipment Preparation of Bids SuppliersLNTPB Evaluation and Award Government/IDA

Supply Suppliers

Technical Assistance Proposals ConsultantsEvaluation and Award Government/IDAServices Consultants - - - - - _ _

Transport Technical Assistance HTRT Proposals ConsultantsPlanning Evaluation and Award Government/IDA

Services Consultants _ _ - _ - _ -

Training Equipment Preparation of Bids SuppliersProgram Evaluation and Award Government/IDA

Supply Suppliers

Technical Assistance Proposals ConsultantsEvaluation and Award Government/IDAServices Consultants - _ _ - - _

Transport Spare Parts Government/BNI/IDA = = = = _ _Industry

Preinvestment Pavement and Feeder Roads Proposals ConsultantsStudies Evaluation and Award Government/IDA

Feasibility Studies ConsultantsReview Government/IDADetail Engineering Consultants

MTP Organiza- Organization Studies Proposals Consultantstion Studies Evaluation and Award Government/IDA

Studies Consultants

1/ All Bidding documents and short lists of consultants will have been completed by September 1983.

I

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