Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 4592

PROJECT COMPLETION RFPORT

SUDAN

DOMESTIC AVIATION

LOAN 1287-SU AND CREDIT 643-SU

June 30, 1983

Eastern Africa Projects YTransportation II

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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SUDAN

PROJECT COMPLETION REPORT

DOMESTIC AVIATIONLOAN 1287-SU AND CREDIT 643-SU

TABLE OF CONTENTS

CHAPTERS Page Nos.

Preface i

Basic Data Sheet ii

Highlights iv

I. Summary 1

II. The Project 2

III. Evaluation of the Project 3

IV. Conclusions 5

Annex 1: Borrower's Comments 7

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SUDAN

PROJECT COMPLETION REPORT

DOMESTIC AVIATIONLOAN 1287-SU AND CREDIT 643-SU

PREFACE

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The following is a Project Completion Report on an AviationProject in Sudan for which Loan 1287-SlJ in the amount, of US$20.0 millionand Credit 643-SU in the amount of US$9.0 million was approved by the Boardon June 15, 1976. The Loan and Credit were closed on September 30, 1981.

The Completion Report was prepared by the Bank's Eastern AfricaReqional Office and is based on information obtained from the files of theBank's Record Center, the Eastern Africa Information Center, Appraisal andSupervison reports.

In accordance with the revised procedures For project performanceaudit reporting, this completion report was read by the OperationsEvaluation Department. but the project was not audited by OED staff.. TheDraft Completion Report was sent to the Borrower, who responded withadditional comments by letter dated May 14, 1983, attached as Annex I.

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SUDAN

PROJECT COMPLETION REPORT

DOMESTIC AVIATIONLOAN 1287-SU AND CREDIT 643-SU

* BASIC DATA SHEET 1/

* AppraisalEstirnate

Total Cost of Project as appraised (US$ millions) 81.6Loan Amount (third window) 20.0

Amount disbursed _Amount cancelled 20.0

Credit Amount 9.0Amount disbursed as of September 30, 1982 0.63Amount cancelled 8.37Amount repaid 0.00Borrowers obligation 0.63

Date Physical Components Completed project not implementedProportion of time overrun (°O)Economic Rate of Return 1 8%

Cumulative Estimated & Actual Disbursments(US$ million)

FY78 FY79 FY80 FY81 FY82

(i) Estimated 2.9 11.9 25.8 25.8 29.0(ii) Actual 2/ 0.07 0.39 0.40 0.63 0.63

1/ Project Cancelled--No Actual Project Costs.2/ Expenditures for consultant services.

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Other Project Data

First mention in Files September 14, 1972Negotiatons Date February 24, 1976Board Approval Date June 15, 1976Loan Agreement Date July 7, 1976Effectiveness Date January 11, 1977 (original Oct. 5, 1976)Closing Date September 30, 1981Borrower Government of SudanExecuting Agency Department of Civil AviationFiscal Year of Borrower July 1 to June 30

Mission Data

No. of No. of Staff Date ofMonth/Year Weeks Persons Weeks Report

Identification 11/72 1 1 1 12/21/72Preparation 01/74 1 1 1 12/21/74

11/74 1 3 3 03/19/75Appraisal 05/75 3 3 9 06/03/76Supervision I 09/76 1 1 1 09/28/76

II 06/77 1 2 2 07/14/77III 06/78 1 2 2 07/11/78IV 12/78 1 2 2 01/23/79V 06/79 1 1 1 07/06/79VI 11/79 2 2 4 02/13/80VII 04/80 1 2 2 07/03/80

Country Exchange Rates

Name of Currency Sudanese Pounds (S£)At appraisal US$ 1.0 = SE 0.40At Closing Date US$ 1.0 = SE 0.68

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SUDAN

PROJECT COMPLETION REPORT

DOMESTIC AVIATIONLOAN 1287-SU AND CREDIT 643-SU

HIGHLIGHTS

The project was the result of a study carried out by consultantsfor the Government of Sudan to improve communications between centers inthe country. In 1972, the Government requested the Bank to participate inthe financing and as a result, four airports - Port Sudan, Wau, Juba andMalakal - were selected. Funds were included in the Third Railway Project(Credit 457-SU) for engineerinq studies and design for the four airports.

Tenders were called for Port Sudan, Wau and Malakal in March1979. Juba was excluded due to EDF financing. Port Sudan was included butwas to be financed by the Saudi Fund. Due to the high bid prices, thecontractors were asked to rebid on a reduced civil works program. Theresults of the second round of bidding were still so high that the Loan/Credit funds were not sufficient and, in addition, the project airportswould not be economically viable (Paras. 1.01-1.02).

The concept was sound as it was designed to provide a foundationfor initial improvements leading to further improvements in the future butthe Government's delays in expediting matters and the high costs in thebids resulted in the abandonment of the two airports, Wau and Malaikal, tobe financed by the Loan/Credit. The remaining two airports, Port Sudan andJuba, with the larqest traffic potential will still be constructecl underother financing (Paras 3.04-3.05).

No civil works were carried out at Wau and Malakal and noequipment procured. Engineering services, financed under Credit 643-SU,amounted to US$512,291 and for accountancy consultants US$114,525 (Para2.03). Although the accounting consultants completed their assignment, thesystem was not implemented as the Government could not be persuaded toadopt the accrual system which differed from the existinq Government budgetcontrol system.

The Loan/Credit was closed on the closing date, September 30,1981 and action was taken to cancel the remaining undisbursed balances.

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SUDAN

DOMESTIC AVIATIONLOAN 1287-SU AND CREDIT 643-SU

PROJECT COMPLETION REPORT

I. SUMMARY

1.01 In 1972, the Government of Sudan requested the Bank toparticipate in financing a domestic civil aviation project as a step inimproving the communication between centres in the c--ntry. The firstmission visited the Sudan in October 1972 to review a study, carried out byDutch consultants, of twelve airports. As a result of the missiorl reviewand discussions with the Government, four airports, Port Sudan, Wau, Jubaand Malakal (in that order of priority) were selected for furtherinvestigation and ultimately constituted the airports included in theproject. Funds were included in the Third Railway Project (Credit 457-SU)to finance engineering studies and design for the project airports.Consultants were appointed in January 1974. Their final report was issuedin February 1975 and included technical, economic and financial analyses.The project was appraised in May 1975, approved by the Executive DirectorsJune 15, 1976, signed on July 7 and became effective January 11, 1977.

1.02 At the time of presenting the project to the Bank's Board,financing for the project had not been finalized. Co-financing was soughtby the Bank from the inception of the project. Saudi Fund financing wassecured for Port Sudan airport in January 1976 but EEC/EDF financingnegotiated by the Sudan for the Juba airport was not finalized until1981. Final engineering and design were essentially complete in July 1977.Tenders were called for Port Sudan, Wau and Malakal airports in March 1979and bids were opened in July 1979. Juba was excluded due to proposed EDFfinancing. Due to the high bid prices, the contractors who had submittedbids were requested to rebid on a revised and reduced civil works programthat still provided most of the essential elements. The results of thesecond round of bidding were still so high that the Loan and Crecditproceeds would still be insufficient for construction of even one of thetwo airports. More significantly, with increased construction cost (by 130percent compared with appraisal estimates) construction of either Wau orMalakal would not be economically viable. The Bank and Associati,ontherefore suggested in a letter of January 19, 1981 from the Director ofPrograms that the Government initiate cancellation of the Loan and Credit.The Bank Group, moreover, advised the Government that it could not aqree tothe Government's proposal for a negotiated contract for Malakal airportonly. Thus further withdrawals for actual construction were precluded andafter the closing date, September 30, 1981, action was taken to cancel theremaining undisbursed balances. The Saudi Fund and the Civil AviationDepartment (CAD) were still negotiating the Port Sudan airport in February1982. The Juba airport work is now being implemented with EDF financing.

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The failure of this project raises issues that are discussed briefly laterin this report. The general conclusions are:

(a) The project overall was basically sound in terms of fillinga transportation need, specifically as a step in providingfaster, more reliable transport between cities;

(b) If the Bank portion of the project had been implemented asplanned, it would have been underutilized under presentconditions; and

(c) Development of domestic air services is still required but anew more comprehensive approach to improving Sudanese airtransport would be necessary. Transport sector work in theSudan should examine the overall situation in detail.

II. THE PROJECT

2.01 The total project cost was estimated at US$86.0 millionequivalent with a foreign exchange component of US$65.0 million. The Bankapproved a third window loan of US$20.0 million and the Association acredit of US$9.0 million on June 15, 1976 to finance foreign exchange costsof Wau and Malakal Airports, plus the foreign exchange costs of airportequipment, engineering desiqn, project supervision, accountancyconsultants, technical assistance and training. At the time of appraisal,it was olanned that the civil works at Port Sudan would be financed fromthe Saudi Fund and the civil works of Juba by the Government. Later theGovernment secured financing for Juba from the EEC.

2.02 The project included:

(a) the construction of two new regional airports, at Port Sudanand Wau; the reconstruction of the runway at Malakal and theconstruction of a new passenger terminal building and relatedworks at Juba 1/.

(b) supervision of construction works;

(c) the provision of airport maintenance equipment;

(d) the procurement and installation of communication andnaviqation equipment for the project airports; and

(e) technical assistance and staff training for the CivilAviation Department primarily in financial management andengineering.

The works, as bid, for Port Sudan, Wau and Malakal included parts(a), (c) and (d) of the above.

1/ Subsequently, the EEC redesigned the Juba component and the works nowbeing financed by the EEC includes the terminal, runway, taxiway andaircraft parkinq apron.

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Loan/Credit Disbursements Consultant Services

2.03 Feasibility and desiqn studies for the civil works were financedfrom the Third Railway Project (Credit 457-SIW) and US$986,411 wasdisbursed. Engineerinq services financed from Credit 643-SU amounted toUS$512,291 for final design and tender evaluation. US$114,525 wasdisbursed for accountancy consulting services from Credit 643-SU. Studieswere carried out and financial management systems devised but there was noimplementation of the systems since they were not compatible with theexisting overall government system (i.e. cost accounting vs moregeneralized government budget control). The Government could not bepersuaded to make the necessary changes. No civil works were carried outat Wau and Malakal and no equipment procured. The Government is makingother arrangements for the financing of project supervision at Juiba andPort Sudan.

III. EVALUATION OF THE PROJECT

3.01 The Sudan is a large country with long distances between thelarger population centres. For example, the direct line flying distancefrom Khartoum to Nyala is 925 km, Wau 1000 km, Juba 1150 km, Wadi Halfa700 km and Port Sudan 700 km. The road journey from Khartoum to Port Sudantakes about 12 hours or a 24 hour journey by rail compared with 1-1/2 hoursby air. In 1972 when the original air transport study began, surfacetransportation to the Southern Region was extremely slow and unreliable andremains so to this day. The timely movement of entrepreneurs, governmentofficials, critical parts, supplies and equipment can still best be met byan efficient and reliable air transport system. In terms of overall cost,when capital, operating time, loss and damage are taken into consideration,the transport of goods by air would be attractive and the economic cost tothe Sudan due to the lack of reliable surface transport is far fromnegligible.

3.02 The air transport system essentially includes 5 units (a) theairport network to the north, Wadi Halfa, Karima, Port Sudan, Dongola etc.;(b) the western network Nyala, El Obeid, El Fashir etc.; (c) the Southernregion, Wau, Malakal, Juba (d) the Civil Aviation Authority which, as partof its duties, operates the airports and (e) Sudan Airways which providesthe air service. In concept the project addressed only the Southern regionplus Port Sudan airports and Civil Aviation Departments technica:l problemsin airport engineering and financial management. At the time of projectpreparation, Bank staff felt that by beginning with a relatively smallproject the outlook was good for rapid implementation and possibly furtherproject work. The situation evolved not so much by deterioration as byparalysis and the project failed.

3.03 The questions that arise include:

(a) should the Bank have attemoted this project;

(b) was the project concept reasonable;

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(c) what went wrong; and

(d) could the Bank have done more to assure success?

3.04 The Bank was justified in undertaking the project as a first steptowards rationalizing the air transport mode in the Sudan. A definiteproblem was identified and the Bank took the initiative to alleviate partof the problem. Unfortunately, today the problem still exists and, ifanything, is even more serious. For example, the Bank has found itnecessary to procure aircraft to provide adequate access to agriculturalprojects in the Western Sudan.

3.05 In view of the CAD's capacity to absorb the project, the conceptwas sound as it could have laid a solid foundation for initial improvementleading to further improvements, possibly through a second project.Unfortunately, due to the low economic justification relative to the costsinvolved, the Bank/IDA portion of the project had to be abandoned. The twomost important airports with the largest traffic potential will beconstructed, at Port Sudan and Juba. However, the economic justificationfor Juba and Port Sudan will remain marginal unless the airline can providea more reliable service. With respect to the technical assistance it wasfound that there was great resentment on the part of CAD personnel towardsthe Bank's insistance on the need for technical assistance. Unless therecipient organization is eager to profit from technical assistance therewill be no benefit. In this case the Bank failed to "sell" the ideaadequately.

3.06 Two major factors that affected implementation were Governmentdelay in expediting matters and the high costs prevailing in the bids.

3.07 No satisfactory explanation for the delays has been obtained.The reasons for the high bid prices submitted by the few contractors whoresponded are also not entirely clear. Very little reliable cost data wasavailable when the consultants prepared their estimates but these didappear reasonable at the time. The inclusion of a special risk contingencyin the appraisal report is evidence of uncertainty. The works involvedwere straightforward with no unusual features but they were not largecontracts and the plant required was substantial. Therefore thetransportation of the plant and logistical support was a significant item.The Government refused to provide or ensure provision of fuel ortransport. With no reasonable certainty of being able to obtain fuel andtransport to the work areas (e.g. by rail or river) the contractors builtvery high contingency factors into their prices. Concern aboutamortization of plant, payment of claims and delays in the work, asperceived by the contractors, also apparently affected their costinq of thejobs. It would have probably been better to have had the plant andmaterials supplied under separate contract so as to reduce the perceivedrisk to the contractors but the Government at that time wanted to have thecontractor take full responsibility.

3.08 It became clear as time went on and the airport situation was notimproved that this did affect Sudan Airways performance. In addition, andpossibly more important, fuel shortages, lack of foreign exchange foraircraft maintenance, and inept management also had a severe impact on theimpact on the airline. The airline would not have been able to utilize the

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airports properly if they had been built on time. Therefore it is arquableif the Bank could or should have tried harder. Our evaluation is that thelack of an adequate air transport system will impede the economic recoveryof the country but the problem can now only be resolved by a systematicproject that would coordinate Sudan Airways manaqement 3nd onerations withan appropriate airport infrastructure proqram.

3.09 Since the Saudi Fund and the EEC were independently negotiatingthe works at Port Sudan and Juba respectively, there was no evident needfor IDA to continue the supervision of this aspect of the project or tomaintain the Credit in force for that purpose. Similarly, there appearedto be no progress to be made in technical assistance. With respect to theelectronic equipment, the CAD was negotiating a separate arrangement withJapan which in large measure has met the need for communications andnavigation equipment. There is an apparent anomaly in Para. 2.05 in sayingon the one hand that the project was and still is sou while at the sametime noting a lack of economic justification for proceeding further. Thereis a very definite need to provide adequate, regular and reliable airtransport in the Sudan but, while Port Sudan and Juba can stand alone, theeconomics of the excessive cost of Wau or Malakal airports versus thebenefits were not favorable. It would have been possible to try adifferent approach but the fundamental restructuring of the entire projectwould have been so time consuming and problematic that this alternative wasnot seriously considered. An entirely new project aporaisal on a quitedifferent premise appeared to be a more rational approach. Under thecircumstances, IDA was entirely justified in seeking termination of theCredit.

IV. CONCLUSIONS

1. The consultants performed satisfactorily, at times underdifficult conditions;

2. The impact of the project on the CAD was virtually nilinsofar as institution building was concerned;

3. Bank performance was not outstandinq but it is difficult tosee where anything more could reasonably have been done;

4. The project was sound in concept, particularly with respectto the airports of Wau, Malakal and Juba. It was realized atthe outset that this was a difficult project due tologistics. The very fact of the difficulty of access to thispotentially useful area was the key to the project. The Bankdid not shrink from a difficult project simply because it wasdifficult and this is a source of some satisfaction. Thesouth has not developed in the intervening years, in part dueto a lack of easy access and the steadily deterioratingperformance of Sudan Airways. The problems of lack of fuelsupplies in the interior and the lack of foreign exchanqe foraircraft maintenance have played a part in Sudan Airwaysperformance. Hence even if the airports had been provided asplanned, service would have been inadequate. In our view theoroblem of access to the Southern Sudan remains and

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development will lag unless more adequate air transport canbe provided. Adequate road construction would be a morecostly alternative;

5. The unacceptably high construction costs were due in part toproblems anticipated by contractors, e.g. inadequatetransport and no certainty with respect to fuel supplies. Atthe time the road route to the area through Kenya and Ugandawas unreliable and the Government would qive contractors noassurances as to availability of rail or water transport orfuel supply, via Port Sudan and Khartoum. The consultantsand Bank staff did not fully appreciate the total lack ofloqistical support by the Government and in that senseunderestimated the problems and costs of the project;

6. No satisfactory reason for the procrastination of theGovernment in implementing the project has been obtained.Lack of fully committed financing for all the works, fear ofincurring foreiqn exchange costs, the possibility that theGovernment. was not fully commited to helping the south andthe fact that the civil airport operations functioned as anoffshoot of the Ministry of Defense rather than the Ministryof Transportation are factors that may have contributed tothe unnecessarily long delays in preparation andimplementation of the project;

7. Working relationships with the Government were and still aregood. Staff still keep in touch with the CAD when in theSudan. However, this was not enough to move the project;

8. It is now evident that full financing of the project shouldhave been assured prior to Board presentation; and

9. More serious government commitment should have been obtained,particularly in logistic support, as the Government'sattitude was reflected in the Contractor's very high bidprices.

10. In retrospect, the project was too infrastructure orientedand did not adequately consider the entire transport system.

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TUM DZOCRATIC REULIC OF TMEE S1U Annex I

idt3ry of Fainace & Eeonowi Plannin

UNDER SECRETARY'S OFFICEM 6LJ3 "P. 0. Box 2092, KHASTOUM - T.S -

Cable (EmAs)

TELEX: 324

f~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. .... ,, ,...._

Khartoum: ,1 4h., .My,' t

Ref : ...... 14FEP/33(Q/ 1,01 - ., .., ....... .......

'hiv. S. Kapur

Director,

Operations ievaluation Department

World BankI8M8 Street, N.W.,WaEhington D.C. 20433U.S,A.

Subject: 5udan Domestic Aviation ProjectCredit 643-ZU/ Loan I287 - (CC)

Dear `ir,

Re. your letter dated Il:arch 18, 1983 regarciing project completionreport on the above nentioned project, I would like to highlight somepoints mentioned in the draft report which may clarify some facts.

The report has neglected the Ministry of Finance and EconomicPlanning proposals submitted to World Bank either to postponf. one ofthe two projects for future implemientation or to reduce the two projectscomponents to meet the credit and loan ceili•igs; but the World Bank hasdisagrced to those proposals and insisted that the GUS should indure thefinancial gap.

The amount of Us$ 8CUFA4 O allocated for techrical assistant onwhich World sarn strictly insisted was not sufficiently enough to meetrecruitment of high cqualified experts required by CVI). Also the WorldBank has disagreed to reduce the number of experts according to availablebalance so as to enable CVD to recruit high qualified experts and recommen-ded to choose some Pakistanians experts whose CV were regreted by CVD asbeing of lower qualifications than it's local staff.

We regret that para5raph (6) of conclusions, particularly thatreads "The possibility thct the Government was not fully committed tohe'ping southl".

All points mertioned above are also CVO's views.

^ st regards. <~

UNC2JP &z? _nT'. Y OF f'L_I.INGNIXWISlT±Y uPF IFIN,/..'CE & LC( IXtIIC PLAKVJING

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