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The World Bank

Report No. 13439-AL

STAFF APPRAISAL REPORT

DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

SIXTH HIGHWAY PROJECT

JANUARY 6, 1995

Private Sector Development, Finance andInfrastructure Operations DivisionMaghreb and Iran DepartmentMiddle East and North Africa Regional Office

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EXCHANGE RATECurrency Unit: Algerian Dinar (DA) = 100 Centimes

Eguivalency of I US$ in DA since 19851985 5.031986 4.701987 4.851988 5.921989 7.461990 8.601991 17.351992 22.491993 22.001994 (DECEMBER) 43.70

FISCAL YEARJanuary I - December 31

GLOSSARY OF ACRONYMS AND ABBREVIATIONSANA : Agence Nationale des AutoroutesAPC : Assemblee Populaire CommunaleAPW : Assemblee Populaire (le WilayaBAD : Banque Algeriennc de DeveloppementCC : Chemins CommunauxCNAN : Compagnie Nationale Algerienne de NavigationCNP : Conseil National de PlanificationCTTP : Organisme de Contr6le Technique des Travaux PublicsCW : Chemins de WilayaDEER : Direction de I'Exploitation et de l'Entretien Routiers'DRHR : Direction des Ressources Humaines et de la RechercheDPAE : Direction de la Planification et des Affaires EconomiquesDR : Direction des RoutesDTP : Direction des Travaux PublicsEPA : Entreprise Publique AdministrativeEPE : Entreprise Publique EconomiqueEPIC : Etablissement Public Industriel et CommercialERL : Economic Rehabilitation LoanFPC : Fonds de Participation "Construction"IMF : International Monetary FundMEAT : Ministere de l'Equipement et de l'Amenagement du TerritoireMIRP : (Ministry of Infrastructure and Regional Planning)MF : Ministere des FinancesMICLERA : Ministere de l'Interieur, des Collectivites Locales, de l'Environnement, et de la

Reforme AdministrativePCD : Plans Communaux de DeveloppementPW : Public WorksRN : Routes NationalesSAETI : Societe Algerienne d'Etudes d'InfrastructuresSNTF : Societe Nationale de Transport FerroviaireWILAYA : Province

I/ The French word "entretien routier" connotes routine and periodic maintenance only, while the Englishword "maintenance" includes road rehabilitation.

ALGERIASIXTH HIGHWAY PROJECT

STAFF APPRAISAL REPORT

TABLE OF CONTENTS

Loan and Project Summary ................... i - iv

I. COUNTRY AND SECTOR BACKGROUND . .A. Country Background .1B. Recent Economic Performance. 2C. Medium Term Economic Outlook. 2D. The Transport System. 3

Overview .3Transport Institutions. 4Status of Transport Deregulation. 5Transport Investments in Recent Years. 5

E. Transport Sector Issues. 7F. Previous Bank Involvement and Strategy in Transport. 8

II. THE HIGHWAY SUB-SECTOR ....................... 11A. The Road Network ............................. 11B. Road Administration .12C. Planning and Programming .13D. Engineering and Controls .14E. Human Resources Development .15F. Implementation Capabilities .16G. Road Budgeting and Financing .17

The Project was prepared on the basis of an appraisal mission in June 1994 led by Michel Ray (Pr.Highway Engineer) and comprising Michel Loir (Senior Transport Economist) Luc Cosyn,Mohamed Ayadi, Claude Fevre, Charles Parey. Bernard Heritier, Patrick Morissey, Jean-LucDelorme (Consultants). Peer Reviewer was Luis Pinilla (Senior Highway Engineer). Secretarialassistance was provided by Amelia Williams. The processing of the project was supervised by A.Amir Al-Khafaji, Chief, Private Sector Development, Finance and Infrastructure Operations Division(MNIPI) and Daniel Ritchie, Director, Country Department (MN1DR).

III. THE PROJECT .................................. 21A. Background and Objectives ....... ................. 21

Rationale for Bank Involvement .... ............ 21Project Objectives .......... .. .. . .. .. .. . .. . 21

B. Project Description ............. ... .. .. ... .. .. . 22Pavement Strengthening of High-Traffic Roads ..... . . . . . . 22

Policy .................. .... .... .... . . 22Objectives ............... .. ... ... ... .. . 23Description .............. ... ... ... ... .. . 23

Rehabilitation of Medium-Traffic National Roads ..... . . . . . 23Rehabilitation of Priority Bridges ........ . . . . . . . . . . . . 24Periodic Maintenance of National Roads ...... . . . . . . . . . . 25Rehabilitation and Maintenance of Saharan Tracksand Purchase of Equipment for Traffic Counting ..... . . . . . 26Pilot Program for Municipal Roads ....... . . . . . . . . . . . . 27Audit of Enterprises from the Public Works Sector ..... . . . . 29Technical Assistance and Studies for ANA ...... . . . . . . . . 30Modernization and Training Actions ....... . . . . . . . . . . . 31Studies, Research and the Ministry's Accessto Foreign Technical Expertise ........ . . . .. . . . . . . . . 33Urban Transport Study ........... .. .. .. .. .. .. .. . 33

C. Cost and Financing ............. ... .. .. ... .. .. . 35D. Procurement ................................ . 37E. Disbursements .................. .... ... .... . . 39F. Reporting and Auditing ........... .. .. .. .. .. .. .. . 41G. Environmental Impact ............ .. .. .. .. ... .. . . 42

IV. ECONOMIC EVALUATION .............. ... ... .. ... . 44General ................................... 44Project Benefits .............................. . 44Non -Quantified Benefits ............. .. .. ... .. .. . 45Sustainability ............................... . 46Risks ................................... 46

V. AGREEMENTS AND RECOMMENDATION ....... . . . . . . . . . 47

TablesEstimated Project Cost.. iiiFinancing Plan.. iiiEstimated Disbursements .. ivTransport Investment Expenditures over 1990-1994 .. 6Structure of the Algerian Highway Network in 1992 .. 11Paved Road Condition - Evolution between 1987 and 1992 .12Evolution of Road spending in Recent Years .. 18Cost and Financing .. 35Procurement Method .. 38Allocation and Disbursement of the Bank Loan .. 39

List of Annexes

1. Detailed Project Costs .................................. 482. Project Implementation

2.1 Implementation and Procurement Time Schedule .. ........ . . . 492.2 Preparation of Project Implementation Volume .. ......... . . . 56

3. Letter on Road Sector Policy ........... ................. . . 584. Action Plans on "Quality", "Public Works Laboratories"

and "Acceleration of Payments and Disbursements" . . .655. Action Plans on "Bitumen Supply and Quality"

and "Granular Materials" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 676. List of Studies on Road Sector Policy and Technical Guidelines . ....... . 697. Coordinated Action Program for the Modernization of the

Ministry in Charge of Infrastructure ....... . . . . ............ . . 708. Economic Evaluation ........... .. . .. .. ............... . 76

- and list of road sections for strengthening/rehabilitation9. Maintenance Strategy and Development of Network-Based Maintenance . .. . 8410. Funding of Municipal Road Maintenance ....... . . ........... . . 9011. Technical Background on Road Strengthening

and Rehabilitation ............ .. .. . .. ................ . 92- Strengthening/Rehabilitation/Maintenance Handbooks- Pavement Evaluation Measurements

11(a) Maintenance and Rehabilitation of Unpaved Roads in Southern Algeria . . . . 9512. Organization Chart of Ministry of Infrastructure and Regional Planning . . . . 10413. Key Performance Indicators ......... . ............ . . .. . . . . 10614. Status of Road User Charges ............................. . 10815. Environment Mitigation and Monitoring Plan .................. . 11416. Supervision Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11517. Previous Bank Involvement in Transport ....... ............ . . . . 11618. Selected Documents and Data Available in Project Files .. ....... . . . . 11919. Map - IBRD 26124

ALGERIA

Staff Appraisal ReportSixth Highway Project

LOAN AND PROJECT SUMMARY

Borrower: Democratic and Popular Republic of Algeria

Beneficiary: Ministry of Infrastructure and Regional Planning

Amount: US$ 130 million equivalent

Terms: Seventeen years, including a five-year grace period, at the Bank's standardvariable interest rate.

Objectives: The objective of the Project is to enhance the capabilities of the Borrower tomanage its road sector by:(i) reducing the backlog of roads and bridges in need of rehabilitation and

maintenance;(ii) strengthening the Borrower's agencies responsible for the management

and maintenance of roads;(iii) providing sustainable solutions to finance road rehabilitation and

maintenance works; and(iv) creating an environment conducive to the efficient utilization of human

and financial resources in the Borrower's road sector, in particularthrough increased competition, participation of the private sector andimplementation of a quality improvement strategy.

ProjectDescription: (a) road rehabilitation works (44% of project costs):

(i) strengthening high-traffic basic economic network pavements(ii) rehabilitating medium-traffic national roads with appropriate low-

cost technologies(iii) rehabilitating priority bridges(iv) related design and supervision

(b) road maintenance (41% of project costs):(i) periodic maintenance by contract for national roads(ii) purchasing of equipment for current and emergency maintenance

of Saharan tracks and for traffic counting

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(iii) providing technical assistance for and executing a pilot programfor maintenance of municipal roads

(iv) related supervision, general studies and training

(c) Training. Technical Assistance and Studies (15% of project costs):(i) auditing road enterprises(ii) providing technical assistance to the National Agency for

Motorways (ANA)(iii) launching economic, financial, environment and engineering

studies for motorways(iv) supporting the Ministry's modernization and training of road

administration professionals(v) financing road related studies, research of general interest, and

urban transport rehabilitation study(vi) facilitating the access of Ministry's Directorates to foreign

technical expertise

ProiectBenefits: The main benefits are the following: (a) direct benefits will accrue to road

users, as reduced vehicle operating costs, and to central and localGovernments, as avoided reconstruction costs of roads and bridges.Economic rates of return are expected to be 18-89%, with a weightedaverage of 59.5%; (b) secondary benefits are to come from the moreenabling environment created; streamlining of input supplies to work sites,and enhancement of quality control will reduce road maintenance costs andextend durability of pavement works; (c) moreover, better road managementwill result in much more efficient uses of scarce resources. These secondarybenefits are significant albeit hard to measure.

Project Risks: Restoration of peace in the country is an essential condition for smoothproject implementation and Bank supervision. More controllable risks are(a) the opposition of vested interests to reforms; action plan implementationwill help overcome this risk; (b) a possible failure in the pilot municipalroads program implementation preventing its replication nationwide, a riskminimized through careful project supervision; and (c) insufficientcounterpart funds, a lesser risk when a road fund is established.

SCHEDULE A

DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA


Estimated Project Costs and Financing Plan

A) Estimated Cost Local Foreign Total--------------US$ Million-----------

ITEMA. Strengthening and Rehabilitation

1. Strengthening 20.4 25.1 45.6

2. Road Rehabilitation 8.7 10.7 19.5

3. Bridge Rehabilitation 5.4 8.1 13.5

4. Control of Works 2.6 1.7 4.4

5. Technical Studies 0.8 1.6 2.4

Subtotal Strengthening & Rehabilitation 38.1 47.3 85.3

B. Road Maintenance

1. Periodic Maintenance by Contract 22.9 28.1 51.0

2. Equipment for Current Maintenance and

traffic counting 4.3 8.1 12.4

3. Municipal Road Maintenance 6.0 7.3 13.34. Supervision, General Studies

& Training 0.9 1.7 2.5

Subtotal Road Maintenance 34.1 45.2 79.3

C. Training, TA and Studies

1. Audit of Road Enterprises 0.7 1.3 2.0

2. TA to ANA and training 1.2 2.2 3.43. Economic, Financial, Environment and

Detailed Engineering Studies

(Motorways) 3.0 5.7 8.84. Modernization and Training

Actions (MIRP) 3.9 7.4 11.35. General Studies and Research 2.2 4.1 6.3

6. Specific Technical Assistance for

MIRP 0.7 1.3 2.0Subtotal Training, TA and Studies 11.7 22.1 33.8

Total Investment Costs 83.8 114.6 198.4

Total BASELINE COSTS 83.8 114.6 198.4

Physical Contingencies 7.4 9.3 16.7Price Contingencies 6.5 8.5 15.0

Total PROJECT COSTS 97.7 132.3 230.0

B) Financing Plan

IBRD 9.6 120.4 130.0

Government 88.1 11.9 100.0

Total Sources 97.7 132.3 230.0

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ESTIMATED DISBURSEMENTS

Bank FY 1995 1996 1997 1998 1999 2000 2001 2002

Annual 0 20.8 31.0 26.4 20.0 15.6 15.6 0.6

Cumulative 0 20.8 51.8 78.2 98.2 113.8 129.4 130.0

Economic Rate of Return: Weighted average 59.5%

Staff Appraisal Report: 13439-AL

MaD: IBRD 26124

M:\R&y\Algeria\Loanprog.sum

THE DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA


I. COUNTRY AND SECTOR BACKGROUND

A. Country Background

1.01 With an area of about 2.4 million square kilometers and some 29 million inhabitants,Algeria is by far the largest of Maghreb countries. Its geography unfolds from North toSouth in a succession of three contrasted zones, namely: (a) the northern coastal area,covering barely 4 percent of the national territory, but home to 70 percent of the populationand a base for most of Algeria's agriculture and industrial production; (b) the "HighPlateaux", comprising 7 percent of the national territory and 22 percent of the population,which sustains small-sized economic activities; (c) the Saharan South, covering 89 percent ofthe national territory and 8 percent only of the population clustered in sparse oasessurrounded by sand and stone deserts, but holding the oil and gas fields and mineral depositsfrom which Algeria draws most of its export revenue. Local geography makes transport akey condition to economic development and international competitiveness. Its GNP percapita of US$ 1,830 in 1992 ranks Algeria second in Maghreb after Libya.

1.02 For 25 years after independence in 1962, Algeria followed a socialist modelemphasizing centralized planning and heavy industrialization. Large resources generated bysteep oil price increases in the seventies were sunk into industrial projects, which rarelyachieved their objectives. Most of the industrial plants are running at below 50 percent ofcapacity. Collectivization of lands has been one factor which dampened agricultureproduction and yields, raising Algeria's dependence on food imports to about two-thirds ofits needs. Sweeping policy reforms are now promoted by the Government to transform theAlgerian economy into a market economy, with the private sector to become the principalsource of growth and employment generation. Agriculture currently contributes around 11percent of GDP, industry about 47 percent (of which 21 percent for hydrocarbons andmining, but only 10 percent for manufacturing), and services 42 percent. Although itdeclined from over 3 percent annually in the early eighties to 2.7 percent in 1992, populationgrowth remains high, and demographic pressures have been especially strong in urban areaswhere severe housing shortages have developed. The urbanization rate of less than one-thirdin 1962 has grown to over two-thirds at present.

B. Recent Economic Performance

1.03 GDP growth averaged about 0.5 percent p.a. over 1985-92. The collapse of oilprices in 1986 caused a 50 percent drop in Algeria's terms of trade, and jolted the economy.Borrowing was used to absorb the shock, with the result that the country's external debtsoared to US$ 25 billion in 1987. This led to the imposition of import restrictions and aslowdown in investment triggering output stagnation and a decline in private consumption. A

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far-reaching program of macroeconomic stabilization and structural reforms towardliberalization was initiated, and supported by the Bank which had lent about US$ 350 millionannually to Algeria over 1987-91. The falling oil prices, and efforts by the Government tokeep servicing the external debt without rescheduling brought a significant slowdown in thepace of reforms, and trade and payment restrictions were tightened in 1992. Financialdiscipline was also relaxed, translating into higher wages and subsidies to public enterprises.The budget deficit rose to 9.2 percent of the 1993 GDP, itself falling by 2 percent fromprevious year. Inflation shot up, and the unemployment rate reached nearly 25 percent.Deterioration of the Bank's dialogue with the Government on reforms showed up in adecreased annual lending amount of US$ 200 million during FY92-94.

1.04 In the first quarter of 1994, weak world oil prices, growing macroeconomicimbalances, rising inflation, and accumulation of external debt arrears forced the authoritiesback onto the path of reforms. A stabilization program was launched to correct economicdistortions, adjust the exchange rate, promote trade liberalization, reduce the fiscal deficit,and move to positive real interest rates which would then play a greater role in the allocationof credit. The Algerian dinar was devalued by some 50 percent by April 1994 and the ad-hoc inter-ministerial committee overseeing foreign exchange allocation was abolished. At thesame time, the administered prices of essential food staples were raised in March 1994 inorder to reduce the burden of consumer price subsidies which still represented 5.8 percent ofGDP in 1993. A one-year Stand-by arrangement was approved by the IMF Board. It willlikely be followed by a three-year Extended Fund Facility covering 1995-98. TheGovernment also reached agreement with the Paris Club on the rescheduling of interestpayments, and has approached the London Club debt for the same purpose, which should bea considerable relief. With other active loans, Bank disbursement in 1994 may reach US$600 million. The other international donors provide additional financial support to theStabilization Program.

C. Medium-tern economic outlook

1.05 Accompanied by a deepening of structural reforms, the stabilization program willprovide a solid basis for a medium-term macroeconomic framework geared to supportingadjustment and setting the economy on a permanent high growth path. The authorities havedeveloped medium-term projections for the period 1996-98, endorsed by the IMF and theBank, indicating continued expansion of the economy with annual GDP growth rates of about6 percent through 1998. Foreign exchange earnings will be boosted by larger gas exportsand expected recovery of oil prices. Public expenditures will be trimmed down, andchannelled to priority projects with high economic rates of return. The income policy willfocus on restraining real wage growth as a way to contain inflationary pressures and promoteemployment. A key objective is to facilitate exchange rate unification by reducing the excessdemand for domestic credit which is driving, in part, the excess demand for foreignexchange. Further multilateral debt rescheduling will be sought to maintain the external debtservice burden at a sustainable level.

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1.06 Macroeconomic stabilization will help the transition to a market economy, and thereforms proposed will facilitate the emergence of the private sector as the engine ofsustainable growth over the medium term. The action program being implemented in thecontext of the Economic Rehabilitation loan emphasizes some aspects highly relevant to theproposed project:

(a) development of the private sector: the dominance of public enterprises onmany sub-sectors presents a challenge to promotion of the private sector, essential tostimulate competition among domestic firms. The strategy focuses on development oflabor-intensive small to medium-scale enterprises. This offers the best prospects forjob creation. A legal framework to support free competition has been drafted and thepan-territorial pricing requirement has been dropped for all but a small number ofessential commodities. Actions to support small and medium-scale enterprises includethe authorization of imports of used equipment. Specialized financial institutions willaddress financing needs of the nascent private sector.

(b) Public expenditure reforms: improving the efficiency of public expenditures isa key objective of the stabilization program. Specific measures focus on consolidatingthe withdrawal of the Treasury from the financing of the public enterprises (PEs)investments, and the completion of the financial restructuring program for PEs. Theauthorities have established a transparent framework for future expenditures of the PERestructuring Fund, as well as a calendar for phasing it out.

(c) Public enterprise sector reform: The action program deepens PE reformthrough, inter alia: (i) the establishment of a legal and institutional framework forprivatization and (ii) the implementation of a market oriented framework for PErestructuring.

D. The Transport System

Overview

1.07 The transport network is relatively well developed and provides good geographicalcoverage of transport needs. The infrastructure at present comprises some 95,000 km ofroads, 10 major ports, 5,100 km of railroads, 28 airports of which 11 are at internationalstandards, and about 5,000 kilometer of oil and gas pipelines. Road transport is thedominant mode for domestic passenger and freight transport: recent surveys estimated to 93percent its share of total intercity passenger traffic, compared to 3.8 and 2.8 percent forrailways and air transport respectively. For international freight, most of the traffic goes bysea, but oil and gas pipeline transport is on the rise. About 83 percent of total domesticfreight traffic is hauled by road. Rail transport specializes on bulk traffic, where it holds a45 percent market share against 55 percent for roads. Coastal shipping takes no more than 2percent of total domestic traffic. Road transport demand, which had grown at an annual rateof 10 percent between 1975 and 1985, seems to have stagnated, if not receded, in recent

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years as a result of deteriorating macroeconomic conditions. The transport sector as a wholeis estimated to contribute 5-7 percent of GDP.

Transport Institutions

1.08 Main responsibilities for infrastructure management and operations are split betweentwo ministries.

(a) The Ministry of Infrastructure and Regional Planning (MIRP) handlesinfrastructure maintenance and development, excluding railroads, through specializeddirectorates for ports, roads, and airports. This Ministry is now also in charge of RegionalPlanning. The investment program is coordinated by the "Direction de la Planification et desAffaires Economiques"(DPAE). Few semi-autonomous public entities are still supervised byMIRP, like the "Agence Nationale des Autoroutes" (ANA). Most public contracting andconsulting firms took advantage of the 1988 reform law to become autonomous as"Entreprises Publiques Economiques" (EPEs) owned by "Fonds des Participations" (FPs).

(b) The Ministry of Transport (MOT) is more directly involved in transport policymatters and prepares through the "Direction de la Planification et de la Cooperation" (DPC)the national transport plan which is approved by the Government. Five directorates forshipping, ports, land transport, road traffic and urban transport, and civil aviation prepareand monitor implementation of transport regulations. MOT supervises those of the some 30transport public enterprises, such as ship-owner and the railroad company, not yet establishedas EPEs.

1.09 Other institutions actively involved in the highway sector are as follows:

(a) The "Conseil National de la Planification"(CNP) provides planning guidelines totechnical ministries and local Governments, and reviews and clears their investment plans.CNP plays a key role in transport capacity development through its infrastructure division;

(b) The Ministry of Finance (MOF), in charge of the current budget, has a say ontransport budgets, especially for periodic and routine maintenance and transport subsidies;

(c) The Ministry of Interior. Local Authorities. Environment and AdministrativeReforms (MICLERA) oversees 48 Wilayas and 1,541 municipalities most of which have littlecash available. It can influence their road budgets by setting conditions for access toGovernment subsidies. MICLERA is also involved in road safety and law enforcement;

(d ) The Wilava, an intermediate tier of the deconcentrated organization, makesdecision on its road budgets, and oversees the municipalities and local transport parastatals;and

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(e) The Municipalities, currently managed by executive appointees nominated by theWali under transitory measures, have their own road networks and budgets, and regulatelocal transport.

1.10 A Ministrv of Industrial Restructuring and Participation has been created to activatethe PE restructuring program, and will play a key role in the privatization of the contractingand transport industry, both included in phase 1 of the Government's divestiture program.Under the current organization, autonomous public enterprises are jointly owned by the FPsacting as fiduciary agents for the State. One of them specializes at the sector level and exertsleadership. The public road construction firms, for instance, are under the "Fonds deParticipation pour la Construction" (FPC). These funds are overseen by shareholdercommittees which only include high-ranking Government officials, a system that allowsformer line ministries to influence the corporate strategy of public enterprises and promotenon-commercial objectives.

Status of Transport Deregulation

1.11 Sweeping policy changes took place after 1987. (i) Deregulation has gone thefarthest for freight road transport; licensing as a way to control transport supply disappearedin 1993, and truckers enjoy full operational and pricing freedom. The only restriction is onimport of second-hand vehicles more than 8-years old. (ii) For passengers, regulationsremain in place. Private operations must be authorized and adhere to prescribed services.Fares are fixed by the Government, or enacted by the Wali after approval by the localdepartments of MICLERA and the Ministry of Commerce depending on where services areprovided. (iii) Rail transport is a de-facto monopoly of SNTF, a parastatal with limitedmanagerial autonomy and no pricing freedom. (iv) Shipping, dominated by CNAN and theother specialized public shipping lines that it spun off, remains a Government monopoly.The shipping lines operate mainly within bilateral governmental agreements. Algeria ratifiedthe multilateral Code of Conduct of Maritime Conferences, but its application remainslimited to date. (v) Air transport is tightly regulated. Bermuda-type agreements have beensigned to share traffic rights on bilateral foreign routes. A parastatal, Air Algerie,monopolizes these rights as well as domestic air transport with tariffs agreed by the State.

Transport Investments Strategy In Recent Years

1.12 Transport investments financed by the Government over 1990-1994 are estimated atDA 79.6 billion, including development of the municipal road network under the "PlansCommunaux de Developpement" (PCDs). They represented about 20 percent of allGovernment investments over the period, a relatively high percentage which reflects the factthat the central budget bears the brunt of transport investments which cash-strapped transportparastatals have difficulties financing. The National Transport Study had estimated the shareof Government financing to 70 percent of "planned investments"over 1980-89. Assuming nosignificant change, that would bring transport investments by Government and parastatals toabout AD 113 billion over 1990-94, or only 8-9 percent of all public investments, compared

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with 13 percent or more in Tunisia and Morocco. The country should increase the amountand efficiency of spending for transport, as evidenced by the generally aging infrastructureand poor service delivery. The urban transport crisis in Algiers showcases for foreignvisitors the nature of transport issues and their negative impact on travel times, operatingcosts, and the environrment. Transport could be a bottleneck to economic recovery if it is notmodernized and expanded promptly.

1.13 The distribution of Government transport investments among modes is practicallyunchanged from what it was during the eighties. Roads get 49 percent of investments, whichmay be not enough given their share of total traffic. Construction of the Algiers-Blidamotorway was the major project implemented during the period. The proportion ofinvestments going to railways, namely 32 percent, is relatively high. Costly projects wereexecuted without economic justifications, like the Jijel-Ramdane Djamel railroad, and thefirst sections of the "rocade des hauts-plateaux". This area of Government investmnent policycalls for in-depth revision. Port investments absorbed slightly less than 10 percent of total,consisting of rehabilitation of breakwaters and quays in major ports, development of roll on-roll off termninals in some, and construction of a new deep sea port at Djendjen. Details onthe investment breakdown are shown in Table 1.

Table 1: Transport investment expenditures over 1990-1994 (in current DA million)

Sub-sector 1990 1991 1992 1993 1994 1990-94(actual) (actual) (actual) (actual) (budget) (actual) in %

-roads 4250 4950 8000 9800 12000 39000 49.0(PCD)* (1500) (1850) (2400) (2800) (3000) 11300)

-ports 1020 1930 1900 2100 1650 8600 10.8-airports 341 610 1350 2000 2200 6501 8.2-railways 3412 4970 5200 5800 6100 25482 32.0

total: 9023 12460 16450 19700 21950 79583 100.0

Source: CNP, except for road investments under PCDs which have been tentatively estimated

as 20 percent of total PCDs.

1.14 The investment strategy recommended for transport infrastructure other than roads(discussed in chapter 2) is designed to increase productivity, and rehabilitate and maintain thecapital stock, with a higher priority than development of new infrastructure.

(a) In railways, elimination of the track maintenance backlog is the highest priority.Other investments should focus on increasing railway competitiveness for services to realizepotential comparative advantages over road transport. Freight transport is where thebrightest prospects exist. Expansion of suburban services to relieve traffic congestion inmain towns is badly needed. Improving reliability of basic services and enhancingoperational safety should be pursued by upgrading the telecommunications and traffic controlsystems. Track doubling and new line construction projects should be put on hold until aftercompletion of ongoing works.

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(b) In ports, the ongoing construction of container facilities in Algiers and Oran underthe Bank Third Port Project, when completed, will allow accommodation of traffic until year2000, and expansion of these terminals outside the present limits may have to be initiated in1997-98. Rehabilitation of breakwaters, and provision of modern grain terminals constituteother high priorities. Newly built away from urban centers, the port of Djendjen could bedeveloped as a center port for grain import and redistribution by coastal ships and rail. Largebulk carriers can be received in Djendjen, which will reduce the Algerian maritime bill.

(c) In airports, the 1993-1997 program covers construction of the new terminalbuilding in Algiers, strengthening and lengthening of runways, various investments by theairport agencies (EGSAs) mainly to expand and equip southern airports, and investments formodernization of guidance systems and other air control equipment. The updating of thenational scheme for airport development has been finalized. A study on economic andregulatory environment has been launched to adapt it to ongoing changes.

E. Transport Sector Issues

1.15 Deficient transport investment planning is one of the most serious, long-standingissues. Investment rationalization is much needed, requiring greater attention to soundeconomic criteria and better institutional coordination. The effects of weak planning arequite apparent. The transport sector has remained too conventional, and containerization andintermodalism have made few inroads in Algeria to date. Insufficient maintenance hashastened deterioration of roads and port infrastructure. The Government is aware of planningissues, and remedial action to address them is being taken, such as commissioning by MIRPof a road master plan study and of economic and financial studies on motorway development.

1.16 Transport remains dominated by public enterprises which, in "strategic" areas, arede facto monopolies. Their privileges go from easier access to credit and budget support forfinancial restructuring, to a tradition of doing business with major local suppliers andcustomers also publicly owned. Freight forwarders and intermediaries, so essential to theefficient functioning of the transport market, are still absent from the scene. Protectionagainst foreign competition is an underlying concern in decisions made by the Government.Creating a level playing field for public and private transport operators in order to elicit astrong supply response and cost effectiveness of transport services, constitutes the thrust ofactions needed to improve transport performance.

1.17 Inadequate cost recovery left many of the transport parastatals financially impaired.There were few incentives for commercial dynamism, technical innovation, and costcontainment in an operating environment dominated by captive markets, and Governmentinterferences on matters of tariffs and employment protection did not help to solve thesituation of the sector. Large resources have been spent by the Government in recent yearsto try to salvage EPEs. The railway company, SNTF, shows how a company's future can be

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undermined by insufficient management autonomy, limited pricing freedom, lack ofperformance, cost-accounting, and continuing investments with low immediate return.Restructured in 1988, SNTF was again faced with severe liquidity problems in 1993. Urbantransport, especially in Algiers, is another case where cost recovery objectives have beensuperseded with adverse financial consequences by social objectives. The trucking and bustransport parastatals are unable to renew their aging fleets because they do not generateenough cash. Cross-subsidization is another pervasive issue; denying economic distancesdistorts the spatial distribution of production, as well as technological choices.

1.18 Infrastructure cost recovery is inadequate as well. Construction and maintenancecosts of port and railway infrastructure are not recovered. Some of the airport infrastructurecosts are recouped by the managing entities, but major investments and maintenance worksare on the Government budget and transferred to these entities free of charge. Of all modes,road infrastructure is the one where cost recovery is the most satisfactory. The recentevolution of road user charges, however, suggests that they may be set below the long-runmarginal cost (this is discussed in Annex 14). Differences in the cost recovery achieved byeach mode also indicate possible distortions in traffic allocation, especially between road andrail.

F. Previous Bank Involvement and Strategy in Transport

1.19 The transport sector in Algeria has received ten loans from the Bank. These loans,totalling US$ 814 million, financed five highway projects, three port projects, and tworailway projects. Generic project implementation problems have been experienced in relationto cumbersome administrative procedures for procurement and disbursement. Projects weregenerally completed behind schedule, a characteristic common to most projects in the Bank'sinvestment project portfolio for Algeria. Contract execution involving foreign suppliersoccasionally ran into difficulties related to slow payment and settlement of claims. Theassociation of local and foreign consultants to execute Bank-financed contracts has not alwaysled to best results with implementation delays. Going to loan negotiations before completionof bidding documents proved to be a frequent cause of poor project performance.

1.20 Capacity building in road administration made significant progress under the ongoingFifth Highway Project. The Highway Network Directorate was reorganized in 1990, theformer maintenance sub-directorate being upgraded to a directorate status (the "Direction del'Exploitation et de l'Entretien Routiers", or DEER). This development enhanced themaintenance function and fostered growth of current budget allocations to road maintenancefrom AD 525 million in 1990 to about AD 1.6 billion in 1994. The Government awarenessof road maintenance problems has grown much sharper. DEER's internal organization iswell structured and good monitoring systems have been developed. Many interestinginitiatives were taken in the last two years by the two road directorates to improve cohesionin the decentralized road administration and stricter adherence to national standards. Normson processing time of procurement and disbursement matters are being imposed on regionaldirectors of public works. There is a genuine desire to modernize the road administration

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and to bring practical solutions to issues. The notion that substantial benefits can be derivedfrom competitive award of road maintenance contracts has been internalized by the publicworks administration, and local competitive bidding has become standard practice forperiodic maintenance contracts, as it already was for heavier type of maintenance activities.Annex 17 provides additional insights on previous Bank lending experience.

1.21 Bank lending strategy for transport in general and highways in particular is designedto eliminate the maintenance backlog and modernize infrastructure. Institution building is aparamount objective. Improving public sector management and investment rationalization areat the core of this strategy which draws on main findings presented in the WorldDevelopment Report (1994 WDR), of which those relating to better responsiveness by theGovernment to effective demand for infrastructure, development of competition and ofpublic-private partnerships in financing appear to fit the specific needs of Algeria well. The1994 WDR pointed out that high levels of public spending for new infrastructure in manydeveloping countries failed to produce the expected development benefits, and that wastefulinvestments and inefficient service delivery had yet to be tackled. It established a linkbetween infrastructure provision failures, poor public management, and lack of accountabilityto users. Hence its recommendations to operate transport infrastructure on businessprinciples and to encourage private sector involvement in the sector.

1.22 The proposed project will seek adjustment in public spending for roads by increasingthe priority in favor of maintenance, and seeking greater selectivity in the road investmentpolicy especially for large projects. "Guidelines on economic evaluation and choices of roadinvestments" will be developed under the Project. The project follows on therecommendation made in the June 1994 Country Brief that a sustainable response tostructural adjustment requires improvement of transport infrastructure. Better prioritizationof public spending for roads appears all the more needed as the Government budget will betightly constrained under the Stabilization Program approved in May 1994 by the IMF Board.By supporting privatization of the public works industry, 90 percent of which is currentlycontrolled by parastatals, the proposed project also falls in the mainstream of reformspursued under the Economic Rehabilitation Loan (ERL).

1.23 The whole set of measures designed to straighten out the incentive framework in theroad maintenance industry, which ranges from streamlined bidding documents and improvedcontract management by the road administration, to elimination of technical and institutionalbottlenecks for supply of bitumen and granular materials, will strongly contribute todeepening, in the highway sector, of reforms (namely private sector promotion, enhancedcompetition, development of small- and medium-scale enterprises, privatization, and publicenterprise restructuring) sought under the ERL scheduled for Board approval in January1995.

1.24 The privatization objective has already been approved in principle by the Governmentwhich, through the Ministry of Industrial Restructuring and Participation, is actively engagedin working out the details of its implementation. Public works enterprises have been

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included in the list of activities that could be divested by the Government in a first phase ofits privatization program. Finally, improved infrastructure cost recovery constitutes anessential objective, and increased reliance on properly designed user charges will be soughtto alleviate funding constraints and increased accountability and responsiveness to road users.The proposed Sixth Highway project fully fits the Bank strategy for transport in Algeria.

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II. THE HIGHWAY SUB-SECTOR

A. The road network

2.01 The transport infrastructure is well developed with a 95,500 km-long highwaynetwork and 2,700 bridges. With an average density of 3.3 km per 1,000 inhabitant, Algeriais ahead of Tunisia and Morocco (density of 2.3 in both cases). The classified networkcomprises three categories of roads. The paved road network is about 62,500 km long ortwo-thirds of the total which is high compared to Maghreb average. Municipal roadsrepresent nearly half of the road network. Motorways (two or three lanes each way) were thelatest addition to the network, totalling about 110 km at present along the northern east-westcorridor, plus 56 km under construction. Detailed engineering is under preparation foranother stretch of 200 km of motorways. Table 2 gives details on the composition of theAlgerian network in 1992.

Table 1. Structure of the Algerian highway network in 1992 (in km)

classification paved unpaved total

Motorways 110 0.2% 110 0.1 %National roads (RN) 22445 35.9% 3624 11.0% 26069 27.3%Wilaya roads (CW) 18846 30.2% 3286 9.9% 22132 23.2%Municipal roads (CC) 21049 33.7% 26144 79.1% 47193 49.4%

total 62450 100% 33054 100% 95504 100%

2.02 Most unpaved roads are in the municipal network; those of the national network arefound in southern regions, with average daily traffic below 50 vehicles. The average dailytraffic on paved roads ranges from close to 3,000 vehicles on RNs to about 1,200 vehicleson CWs, whereas traffic on municipal roads is estimated to be below 500 vehicles. Threeconcepts are relevant for discussion of the maintenance policy. The "reseau principal"consists of about 19,000 km of paved roads inter-connecting major towns, ports and airports,all belonging to the RN network with average daily traffic in excess of 2,000 vehicles. TheNational Transport Study delineated a larger network of 22,466 km which includes 20,472km of RNs, 1,952 km of CWs, and 42 km of CCs. Some 5,000 km of the priority networkconstitute the basic economic network which includes roads with average daily traffic above3,500 across in northern areas where two-third of economic activities are concentrated.

2.03 About half of paved roads are 7-m wide or above (against 10% in Morocco). Roadstandards as of December 31, 1991 were distributed as follows:

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(a) expressways: - 2x3 lanes (2xl0.5m) 72 km, or 0.1% of total;(with motorway - 2x2 lanes (2x7m) 466 km, or 0.5% "or semi-motorwaycharacteristics)

(b) highways: - 4 lanes (from 12 to 14m) 82 km, or 0.1% "- 3 lanes (from 9 to 10.5m) 344 km , or 0.4%- 2 lanes (from 5 to7m) 94,540 km, or 98.9%

2.04 The paved roads network expanded from 48,062 km in 1987 to 62,450 kms in 1992(+30 percent). Construction of new paved roads (RN and CW) was limited to about 1,000km over six years, less than the annual addition to the municipal network estimated between1,500 and 2,000 km. Deconcentration of road management decisions boosted demand forroad construction in a systematic effort to integrate remote communities in the nation. Dailytraffic on trunk roads have grown in excess of 10,000 vehicles in many spots (15,000 plus onthe 2 lanes RN4 road near Oued Fodda), reducing travel speed and safety.

2.05 Road condition is generally mediocre, and has deteriorated since 1987. On average,61 percent of paved roads were in good to fair condition in 1992, compared to 75 percent in1985. The low priority given to maintenance in the eighties was a factor. The CW networkfared better than the RN one due to their lighter traffic: the proportion of bad roads wasunchanged at 24 percent for the former, but rose to 32 percent between 1987 and 1992 forthe latter. The condition of municipal roads, mostly found in rural areas, is the leastsatisfactory. Unpaved roads are not managed in practice and are often in bad condition.Main characteristics on the evolution and current status of road condition are given inTable 2.

Table 2. Paved road condition. Evolution between 1987 and 1992 (in % of total)

Classification 1987 1992

good fair bad good fair bad- national (RN) 49% 27% 24% 41% 27% 32%- wilaya (CW) 49% 27% 24% 42% 34% 24%- municipal(CC) 20% 20% 60%

(sources:Etude Nationale des Transports. Volume II: Transports routiers. Table 3.3Premier Congres National de la Route. Tome II. Decembre 1992)

B. Road Administration

2.06 The road administration was deconcentrated in the mid-eighties. At the center, theDirection des Routes (DR) is in charge of new construction and major maintenance such asroad strengthening and rehabilitation. DEER handles other maintenance operations, fromresealing to routine maintenance of roads and bridges. DEER and DR exert line

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responsibilities over the director of Public Works (DTP) in each of the 48 administrativedivisions of the country. Execution of the RN budget is deconcentrated though, meaning thatthe Head of the Wilaya administration, or Wali, has delegated power from the Minister ofMIRP to commit and spend most of resources earmarked for RNs except for motorways anda few other major projects still controlled at central level. Deconcentrated road managementfully applies to CWs and CCs. The current and capital budgets, especially for CWs andCCs, are designed by DTP and voted by local governments under conditions giving DR andDEER limited opportunities to influence their choices of priorities.

2.07 The road administration in the DTPs and MIRP comprises about 500 staff atmanagement level out of about 1,300 engineers in the subdivisions, plus 7,000 laborers forexecution of works by force-account of which 3,000 are casual. The labor force is in excessof what the current scale of operations requires, but will find redeployment opportunitieswhen regular maintenance is extended to the CW and CC networks. The 48 DTPs controlsome 257 territorial subdivisions. The DTP reports to the Wali on matters related tonetworks other than the RN's. The municipal network is "owned" by the municipalitieswhich are responsible for programming, funding, and executing their maintenance. The localpublic works subdivisions provide technical assistance to the municipalities, especially for thePCD projects, services which are not clearly defined by legislation, and take too much timeto go beyond rubber-stamping technical documents. In general, the deconcentration has beenaccompanied by some dilution of responsibilities, less cohesive road policies, and weakeningof construction and maintenance standards.

2.08 The Agence Nationale des Autoroutes (ANA) was created as a semi-autonomouspublic administration in July 1992 and operates with a core staff of about 40, graduallytaking over the motorway functions formerly vested in the Highway Network Directorate. Athree-year technical assistance program is financed under the Fifth Highway Project to helpdevelop ANA. Long term advisers will train local counterparts while performing specifictasks in relation to detailed engineering of motorway infrastructure, contract management,project economic appraisal, and quality control. They will be complemented by short-termadvisers as needs may arise.

C. Planning and Programming

2.09 The pressure of major demands at both the national and local level, and of theabsence of a reference framework such as a medium- and long-term national scheme ormaster plan, have made it difficult to come up with a coordinated road plan which meetseconomic criteria. In recent years, investments were therefore concentrated on priority roadconnections belonging to the principal network. Projects are first studied at the local-government level (wilaya, municipalities) then, when the Annual Plan is prepared, aresubmitted to MIRP and the services of the Planning Delegate for joint approval. The lastfew years have seen the development of technical analysis tools (traffic levels, roadclassification, regional studies); this makes it easier to take economic criteria into accountwhen choosing investments, in addition to social criteria in cases dealing with accessibility to

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remote areas (high plateaux, South). A better balance should be sought between these twodimensions of analysis. Improvement is also required in the degree of project maturity, mostparticularly as regards the quality of studies and the lifting of project implementationconstraints. Preparation of a master plan for roads and highways was begun in 1994 with aview to expanding programs and giving greater emphasis to priority works on the roadnetwork vis-a-vis construction of motorways.

2.10 The quality of costing information in the new inflationary context has decreased, andthe traffic counting system was interrupted after 1990 for lack of appropriate equipment,depriving planning officials of key data. Furthermore, investment appraisal techniques arerudimentary. Demand forecasting is based on overly simplistic assumptions without takinginto account the structural impacts of projects, the inter-sectoral and inter-spatial linkages,and the influence of macroeconomic constraints on transport. There are too few transportplanners in the central administration, and they lack needed skills and experience. Theproposed project (see Annex 7, para. 2) will address main planning issues under themodernization and training component. In a context of funding scarcity, the Bank stronglyrecommends that road/motorway investments have an ERR of at least 12%.

2.11 Programming of road maintenance has been based on good engineering judgmentwithin tight budget constraints which, at present, only allow for taking regular care of thepriority network, or less than a fourth of Algerian roads. The strategy followed by DEER isto catch up with the road strengthening backlog for the most trafficked RNs of the basiceconomic network and carry out surface renewal as needed, namely every 10 years onaverage. Road rehabilitation applies to roads with daily traffic of 1,000-3,500 vehicles. Theextent of resealing varies from year to year between 1,000 km and 1,600 km. About 80percent of maintenance budgets including pavement strengthening and rehabilitation is spenton the basic economic network (10,000 krm). Network-based maintenance is now beingdeveloped under the ongoing Fifth Highway Project. The road data base will cover the basiceconomic network in phase 1, and 35,000 km in phase 2 to be financed under the proposedproject. A study will be financed under the proposed project to define a strategy formaintenance of Saharan roads. The maintenance policy is further discussed in Annex 14.

D. Engineering and Controls

2.12 MIRP is responsible for the design and supervision of RN works. It is assisted by(mainly local) consultants. Foreign consulting firms carried out most road studies during thefirst twenty years following independence, but they have been replaced by local consultingfirms which call upon them occasionally to bridge technical expertise gaps. The motorwayprogram paved the way to closer association of local and foreign firrns and created renewedopportunities of technological transfers under contracts jointly won. The five localengineering firms established as EPEs employ about 1,000 staff, 20 percent of which arehighway engineers. The local consulting industry has been overly protected to date, asconsultants were selected in the majority of cases on a sole-source basis by the roadadministration. That was not conducive to good performance, as evidenced by the low

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quality of detailed engineering studies of motorways carried out in the early eighties, or casesin which the detailed engineering of road strengthening works had overlooked structuraldefects, and chronically weak control of works by teams that did not always include aqualified engineer. Competitive bidding should become the rule for Bank-financed contracts.

2.13 The Organisme de Contr6le Technique des Travaux Publics (CTTP) maintainsprivileged working relations with MIRP, because of its control and supervision functions onthe whole national territory, and its experience gained during the Fifth Highway Project. Itshould also continue to develop the national technical guidelines and their disseminationduring the Sixth Highway Project. It competes with the other consulting firms for moretraditional types of works, namely geotechnical surveys and project design. CTTP wasestablished as an EPE in 1988 with design, control, and laboratory functions. It receivedextensive support under the Fifth Highway Project for the development of technical skills,lately in the form of a 1992 convention for technical assistance in effect through 1994 andhelping CTTP in carrying out a two-year training program on road maintenance (the "PlanFormation") for the 500 "subdivisionnaires" and line managers in the Public Worksadministration encompassing a wide range of basic technical and managerial skills. CTTP isalso in charge of developing HDM III in Algeria.

2.14 There are five public-works laboratories. Four are specialized by geographic area.The fifth, CTTP, maintains some of the functions formerly held by the central laboratory,LNBTP. They employ about 2,500 staff for an annual turnover slightly above US$ 1 million.The productivity per employee is low, and labor costs grow much faster than turnover,resulting in serious financial imbalances despite the high fees charged for services. Controlsperformed along the whole "quality chain", from suppliers, contractors, and laboratories, tothe client, need urgent strengthening. The laboratories do have useful in-house professionalexpertise constituting the "national technical memory", but the current status of the fourregional laboratories is serious enough to justify corrective action. Annex 4 outlines themain features of the "Laboratories" action plan annexed to the road sector policy letter.Following a Bank financed audit, a new dynamic has emerged, in particular, towards thecreation of a PW Laboratory Network.

E. Human Resources Development

2.15 An action for continuous training is being developed to address the long-standingissue of quality deficit of road engineers at entry in the profession, which has costlyconsequences. Highway engineers are trained by the Ecole Nationale des Travaux Publics(ENTP). Created in 1966 and placed in 1983 under the Ministry of Education pedagogic"tutelage", ENTP works under the supervision of DRHR (MIRP). ENTP has some growthproblems which undermine its operational efficiency. Quality of the academic training givento highway engineers is generally low in project management, procurement, economicappraisal of road investments, and new technologies. The development of post-graduatecourses with foreign technical assistance is envisaged to enhance academic skills of ENTP

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students. In addition, an engineering degree in urban techniques was introduced by MIRP in1994.

2.16 The Direction des Ressources Humaines et de la Recherche (DRHR) is committed toboth raising the skills of newly recruited engineers, and maintaining and developingprofessional skills throughout their careers. The key player in this field will be the CentreNational de Perfectionnement de I' Hydraulique (now being transformed into the "InstitutNational de Perfectionnement de l'Equipement") which, after two years in operation, will nomore be limited to host seminars conducted by others. INPE will evaluate training needs inthe PW organization on a permanent basis, and design and deliver training programs tailoredto those needs. The objective under the Sixth Highway Project is to set up an organizationcapable of assessing positions and job requirements and handling career development matters.The proposed project would train managers and trainers, finance a complement of trainingaids and technical documentation, and support implementation of a comprehensive trainingprogram for DR and DEER personnel. In the current context, quality training, locally andabroad, is an important incentive for progress.

F. Implementation Capabilities

2.17 There are 33 EPEs for execution of road works, including the former MIRP'sequipment fleet regionalized in 1984 and then transformed into autonomous publicenterprises. Competition for road contracts is not strong as these firms are all publicly-owned and assured of getting the minimum market share to stay in business from theGovernment-client concerned about social protection. The private sector is confined toperiodic and routine maintenance contracts, with one exception in 1993. LCB procedureshave yet to strike a right balance between needs to protect the administration against risks ofpoor performance by newcomers, and to create opportunities for enterprises willing to takeup more complex works. Prequalification or postqualification criteria will be adapted tomeet this requirement under the proposed project. In view of recent cases of contractexecution disrupted by cash flow problems, it is no less important that more weight be givento financial criteria to select contractors. Last, but not least, the proposed project willfinance complementary studies to the ongoing technical and financial audit of 27 largeparastatals and the road sector policy letter defined stages of the dialogue leading to an actionplan, with its progress being assessed at the project's mid-term review. The improvement ofthe payment delay situation will also be addressed and have an impact on the cash flow (seeAnnex 7, para. 6).

2.18 Force-account works more or less coincide with routine emergency maintenance, andhave been considerably downsized from the pre-1984 level when they covered most roadworks. About 60 percent of the 1994 road current budget is contracted out. There is scopefor further reduction of force-account. Development of municipal road maintenance should bedone by small contracts as far as technically possible.

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2.19 No less than 20 percent, and sometimes up to 40 percent of road work completiondelays, are linked to irregular supplies of bitumen by public quasi-monopolies. Productionof local bitumen is entrusted to Naftec, the national refiner. Import, storage, and localdistribution of bitumen is handled by Naftal. Pure bitumen (40/50 grade) widely used forroad overlays, was imported until recently. Foreign exchange scarcities led Naftec to addproduction of 40/50 bitumen in Skikda to its existing production of 80/100 bitumen in Arzewfrom imported reduced crude oil. The import substitution achieved is not yet satisfactory interms of quality, due to inadequate production processes. Naftec's storage capacity is shortof peak-demand needs. The Naftal distribution system includes port storage tanks inMostaganem, Algiers, Bejaia, and Skikda, an emulsion processing plant at Setif, mobiledepots for supplies across the country, and an important tanker-truck fleet, a large proportionof which is out of service due to lack of spare parts which forces Naftal to contract part ofits transport needs to SNTR. Low quality bitumen is one of the main causes of prematuredefects of road overlays. A task force on bitumen was formed in 1993 by the Government,and made excellent progress in looking for solutions with active support from Bank-financedtechnical assistance. The main content of an Action Plan on Bitumen Supply and Quality areoutlined in Annex 5. This Action Plan is annexed to the Policy Letter.

2.20 Close to 1,000 quarries are registered in Algeria. The Entreprise Nationale deGranulat (ENG) is the largest public firm to have specialized in quarry operations. Manypublic road contractors have developed quarrying as a branch of their activity. The privatesector operates smaller quarries with a combined production capacity of less than 20 percentof total. Quarrying is subject to authorization by local authorities, generally ill-equipped tospecify and enforce the technical clauses in concession agreements. The heavy demand forroad materials in the eighties triggered complacency in granting permits to operate quarries,to the effect that shortages of good-quality gravel and sand materials used in road works,together with loose control of specifications by laboratories, have become a recurrentproblem in recent years, causing large completion delays, cost overruns, and early defects ofnew overlays. The quarrying industry is weak and operates at less than 50 percent of itscapacity. The aging equipment used cannot be repaired easily for lack of foreign exchangeto buy spare parts. MIRP appointed a technical committee in January 1993 to review issuesand propose remedial measures; a National Conference was held in December 1993 to raiseawareness on issues, and build up a consensus on priority actions. Updating the legislation,developing relevant training, and facilitating access to foreign exchange to renew theequipment and purchase spare parts are important steps toward rehabilitation of the industry.The proposed project will focus on improving the control performance of quarries by locallaboratories, and on "filialisation" of quarries. It will finance a study of national quarryingresources and help develop better management.

G. Road Budgeting and Financing

2.21 Funding of road construction and maintenance comes under various budgets, with asystem of "Autorisations de Programmes" allowing the commitment of resources withinlimits under multi-year projects, and "Credits de Paiement", fixing annual spending limits.

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(a) The Government investment budget comprises four chapters: chapter 528 formotorways, chapter 521 for RNs, chapter 522 for CWs and 591 for CCs. A variety offunctions are covered, from rehabilitation to realignment, widening, and paving, of which thefinancial reporting system in use does not allow monitoring. Accounting should be improvedto isolate maintenance expenditures and facilitate the analysis of road investment budgets.

(b) The MIRP recurrent budget for RNs is under Chapter 35-12, which coversresealing and routine maintenance. Chapter 35-13 includes funds for protection from floodsplus minor bridge repairs. Maintenance of CWs is under chapters 904 and 951, with thelatter nornally covering major repairs but more often used for reconstruction.

(c) The current municipal budget comprises "depenses de voirie" with line itemsbroken down along a subjective classification by basic input. The capital budget includeschapters for road construction and rehabilitation. Funding of municipal road maintenance isvery insufficient. This issue is further discussed in Annex 10.

(d) Investment resources for municipal roads are available under the "PlansCommunaux de Developpement" (PCDs). The PCDs are approved by CNP after discussionat the Wilaya level where requests from municipalities are screened and credits aredistributed. The PCD funds are budgeted under chapter 591.

2.22 Table 3 gives details on road expenditures and investments between 1990 and 1993.

Table 3: Evolution of road spending in recent years (in current DA million)

type of works 1990 1991 1992 993 (budget)

Recurrent maintenance (RM)':- national roads (Chapt. 35-12) 525 583 809 1589- Wilaya roads:

Chapter 904 172 246 331 385Chapter 951 160 250 315 414sub-total 332 496 646 799

- municipal roads 462 450 (*) 500 (*) 500(*)total RM 1319 1529 1955 2888

Heavy maintenance & construction (HC):- national roads (Chapter 521) 2504 2722 4900 5688- wilaya roads (Chapter 522) 246 378 700 747- municipal roads: PCDs 1500 (*) 1850 (*) 2400 (*) 2800 (*)

total HC 4250 4950 8000 9235.

total spending 5569 (*) 6479 (*) 9955(*) 12123(*)gross national product (GDP) 536300 793100 986900 1 150000est.road spendifl in percent of GDP 1.04% 0.82% 1. 0% 1.05%

Note: amounts shown under Chapter 521 include spending for motorways; those marked with anasterisk were tentatively estimated by the appraisal mission.

/ Recurrent maintenance includes routine and light periodic maintenance.

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2.23 The above table contains approximations that had to be made to overcome the paucityof financial data provided to the Bank before and during appraisal, and gives a picture whichis deemed reasonably accurate. It shows road expenditures more than doubling in nominalterms from about DA 5.5 billion in 1990 to DA 12.1 billion between 1990 and 1993. Still,the budget allocations to roads have been hovering around 1 percent of GDP during theperiod, an indication that road budgets were following inflation without upward adjustment,and remain low by international standards which have road budgets at about 1.5 percent ofGDP. The 1994 budget is regressive, since resources allocated to DR and DEER areunchanged from previous year while inflation is running at an annual rate of 39 percent.Some budget components fared better than others in the last 5 years. Periodic and routinemaintenance under chapter 35-12 received much larger allocations which made it possible toexpand the resealing program from 700 km in 1992 to 1,700 km in 1993 (it went down to1,253 km in 1994). Allocation to bridge maintenance rose to AD 128 million in 1993, asubstantial increase over the DA 45 million budget of 1992 and a sign of increased awarenessof bridge deterioration issues across the country. Bolstered by foreign donor contributions(the Bank and the African Development Bank essentially), the "purchasing" power of the DRbudget did not change much, allowing to, respectively, strengthen and rehabilitate 500 km ofRNs and 200 km of CWs on average per year. In contrast, the means allocated to maintainroads in the Wilaya and municipal networks have been eroded by inflation, and are largelyinadequate. Payment procedures are slow, and processing of withdrawal applications at everystep of the local cycle, including the BAD, has been unduly long to date. Remedial action isbeing taken to improve the situation.

2.24 Too much emphasis is still placed on new construction in road budgets, the balance ofwhich should be tilted in favor of maintenance2. About 20 percent of the DR budget during1986-1988 went to maintenance of RNs and CWs. Reports on physical execution of projectsfrom 1988 to 1992 indicate a change of priorities and allow to estimate the share of roadmaintenance to around 40 percent of the DR budget. Actual spending of AD 5 billion in1993 was equally split between motorway construction and the DR maintenance program.Given the extent of the maintenance backlog, new construction should be slowed down andcontained to within 40 percent of the DR budget. Making road spending more cost-effectiveis another priority target. Maintenance unit costs are high and could be reduced bypromoting stiffer competition between contractors, improving contract management, ensuringtimely supplies to the work site, and facilitating access to foreign exchange to purchaseequipment and spare parts.

2.25 The municipal budget is too narrow to bear the cost of road maintenance. Pendingmunicipal finance reform in Algeria, interim solutions must be worked out to channeladditional budget support to municipal road maintenance. An agreement was reached in June1994 by representatives of the three ministries MF, MICLERA, MIRP and of CNP. DEER

2/the terminology used is a frequent source of confusion in Algeria. The english term "maintenance" not onlycovers "routine and periodic maintenance", financed under the current budget, but road rehabilitation and pavementstrengthening also, financed under the capital.

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in relation with MICLERA, MF, DTPs, local PW sub-divisions and local authorities, will beable to launch the pilot program covering road maintenance which is part of the project. Anagreement between municipalities and DTPs is an important aspect to ensure sufficientfunding of maintenance, operational efficiency at procurement and execution stages, andgood design and supervision of works.

2.26 The rationale for creating a Road Fund was discussed at appraisal. Tax earmarkingcould be a valid way to safeguard the road capital stock through implementation of high-return investments, and make it possible to target untapped road user surpluses towardexpanding the charging base while facilitating a consensus on spending more for better roads.It could be of particular relevance for the under-funded Wilaya and municipal road networks.The maintenance backlog is conspicuous, and road users would be able to monitor theimprovements against payment of higher user charges. Specializing the Road Fund on keymaintenance tasks with specific criteria for fund allocations, and having it operate understrict accounting standards, would reduce risks of macroeconomic distortions in the allocationof resources and streamline road management. The Government expressed willingness tostudy the practicality of a Road Fund solution in Algeria, and will set up an inter-ministerialcommission to that effect. Technical assistance will be financed under the proposed project.

2.27 Payments of consultants and contractors are slow and have major consequences onlocal firms' financial situation and the interest of foreign firms/consultants to bid; forexample, payments after six to twelve months in local currency, after two years in foreigncurrency have been observed during the Fifth Highway Project. A strong and dynamicaction is needed to speed up all payments, especially in the context of privatization. DPAEin MIRP is in charge of developing closer coordination between all parties concerned todecide, on the specific immediate actions to expedite payments. A specific action plan hasbeen discussed and finalized during negotiations; it is annexed to the road sector policyletter; (see annex 4). A special study is to be financed under the modernization componentto deepen the analysis and develop further actions.

M :\Ray\AWgeria\Chapter I sar

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III. THE PROJECT

A. Background and Objectives

3.1 The careful supervision of previous road projects, especially Highway V, enableddetailed identification of the key physical and institutional bottlenecks for the road sub-sector,transport sector and road- specific studies to analyze alternative priority actions, and meansto address issues, and a quality and in-depth dialogue with decision makers. In this context arelatively global modernization process is being developed and this Highway VI project is animportant step to support this effort.

3.2 Rationale For Bank Involvement. Good maintenance of road infrastructure isessential to economic development as roads carry the brunt of traffic. The currentmaintenance backlog must be reduced. Road budgets are tight and extensive externalfinancing is needed. Bank involvement is important to: (a) maintain the priority onmaintenance during the stabilization program; (b) support modernization and training effortsat MIRP, and (c) restore donor confidence. The wealth of experience acquired by the Bankin similar situations bodes well for its ability to assist in addressing organizational andfinancial issues. In many ways, the Bank can effectively help at this particular juncture oftime when Algeria moves toward liberalization of its economy, The road industry remainsdominated by the PEs. Much greater dynamism would be possible, were the private sectorgiven more opportunities to participate (see para. 1.21 on Bank Strategy).

3.3 Project Objectives. The objective of the Project is to enhance the capabilities of theBorrower to manage its road sector by (a) reducing the backlog of roads and bridges in needof rehabilitation and maintenance; (b) strengthening the Borrower's agencies responsible forthe management and maintenance of roads; (c) providing sustainable solutions to finance roadrehabilitation and maintenance works; and (d) creating an environment conducive to theefficient utilization of human and financial resources in the Borrower's road sector, inparticular through increased competition, participation of the private sector andimplementation of a quality improvement strategy.

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B. PROJECT DESCRIPTION

3.4 The project comprises three principal components:

(a) Road Rehabilitation Works (44% of project costs):(i) strengthening high-traffic basic economic network pavements;(ii) rehabilitating medium-traffic national roads with appropriate low-cost

technologies;(iii) rehabilitating priority bridges; and(iv) related design and supervision

(b) Road Maintenance (41 % of project costs):(i) periodic maintenance by contract for national roads;(ii) purchasing of equipment for current and emergency maintenance of Saharan

tracks, and for traffic counting;(iii) providing technical assistance for preparation and execution of a pilot

program for periodic maintenance of municipal roads; and(iv) related supervision, general studies and training;

(c) Training, Technical Assistance and Studies (15% of project costs):(i) auditing road enterprises;(ii) providing technical assistance to the National Agency for Motorways (ANA);

(iii) launching economic, financial, environment and engineering studies formotorways;

(iv) supporting the Ministry's modernization and continuous training of roadadministration professionals;

(v) financing road related studies and research of general interest, and an urbantransport rehabilitation study;

(vi) facilitating the access of Ministry's Directorates to foreign technicalexpertise.

The description, background, and objectives of each project component are providedbelow. Detailed cost tables are in Annex 1; all indicators are described in Annex 13;procurement aspects are described in Chapter III, Part D; implementation and procurementschedules of main components are in Annex 2. Costs given in paras. 3.6 to 3.39 bycomponent/sub-component are July 1, 1994 appraisal costs. They include physical but notprice contingencies. Costs are given in Tables 4, 5, 6 and Annexes 1 and 2 are December,1994 costs (negotiation).

(a) ROAD REHABILITATION WORKS

(a) (i) Pavement Strengthening of High-Traffic Roads

3.5 Policy. A "basic economic network" of about 5,000 km, with daily traffic rangingfrom 3,500 veh/d to 20,000 veh/d, has on average a very weak pavement structure compared

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to its traffic (see Annex 11 on Technical Background); an appropriate pavementstrengthening program has been launched under Highway V and needs to be continued underHighway VI to reduce the backlog.

3.6 Objectives. This $48.8 million work component (including physical contingencies) isthe leading road activity to support several of the key transformation/modernization actions;the main objectives are to:

(a) restore the pavement asset and maintain an appropriate level of service;(b) develop local and international competition; and(c) mobilize all actors towards quality works, and consistency between estimated

implementation time and contract.

3.7 Description. Twelve sections between 16 and 62 km each and carrying on averagebetween 2,200 and 17,000 veh/day have been identified for strengthening at an average costof US$130,000 per km. Bidding will be invited for three tranches: one just after Boardpresentation and the others at twelve-month intervals. A limited number of small roadimprovements, including for example, rectifying curves and pavement leveling in flood-proneareas, may be incorporated, subject to good economic justification within 10 percent of thesection strengthening cost; road safety audits are being launched. Funding for all roadstrengthening and rehabilitation works to be implemented under the project have already beensecured through the "inscription" at CNP.

(a) (ii) Rehabilitation of Medium-Traffic National Roads

3.8 Policy. National roads that are not in the "basic economic network" have fewer than3,000 veh/day, and represent the majority in length and replacement value. They usuallyhave high roughness indices and/or weak structures, but cannot be strengthened with thesame technologies as the basic economic network due to budgetary constraints. Therefore, itis essential to develop (a) a consistent set of appropriate technologies for rehabilitating suchroads, and (b) a program of significant size for immediate implementation (see Annex 11 onTechnical Background).

3.9 Context Synthesis. Following two years of dialogue with the Bank, and inpreparation of Highway VI, comprehensive guidelines have been prepared, at the RoadDirector's request, by the CTTP with the help of leading Algerian experts. It comprises sixdocuments: methodology, inventory of techniques, economic analysis, sample biddingdocuments, road safety, and environment. Extensive comments have been provided by theBank and foreign experts. A pilot work program has also been carried out under Highway Vto test methodologies. Studies of six long sections have been carried out by the CTTP; thefinal bidding documents have been reviewed by the Bank.

3.10 Objectives. This US$20.8 million work component (including contingencies) will(a) launch the development of priority medium-traffic route rehabilitation at a reasonablecost, (b) strengthen competition because large asphalt plants are not necessary for a majority

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of such works (which mainly use surface dressing technology over good quality granular basewithout bitumen or cement) and (c) help the modernization actions described for roadstrengthening works.

3.11 Description. Six sections totalling 256 km, each between 24 and 67 km in length,have been studied. The average cost is about $60,000 per km. Bidding will be invited forthree tranches at 12-month intervals. The track rehabilitation of 120 km of the Tamanrasset-Ain Guezzam national road and other studies are also part of this component; see para.......describing the Saharan track policy.

(a) (iii) Rehabilitation of Priority Bridges

3.12 Policy. The 2,699 bridges on National Roads (1,789) and Wilaya Roads (910)represent a total bridge deck surface of 880,000 m2 . Bridges have not been appropriatelyrepaired for a number of years; many are in bad condition, some are even dangerous forroad safety. The Road Maintenance and Operations Directorate (DEER) recently started aconsistent and comprehensive policy to progressively maintain and rehabilitate bridges. Thispolicy starts at the bridge management system level and covers detailed condition surveysand specialized construction industry skill improvements. In this very favorableenvironment, the proposed project supports the development of the whole process fromstudies to works.

3.13 Context Synthesis. At DEER's request, CTTP is developing a comprehensivehandbook for sound bridge management under Highway V, which includes:identification/glossary of bridge parts, deterioration identification manual, currentmaintenance techniques, condition surveys, and a computerized bridge management system.A national bridge rehabilitation committee has also been set up with all the main actors toselect and evaluate bridges to be rehabilitated, and to develop standard specifications andbidding documents for studies and works. Studies are now being developed to preparedetailed diagnostic reports, the rehabilitation design, and the bidding documents.

3.14 Objectives. The US$13.2 million work component, with an additional 15% forphysical contingencies, aims to (a) support the whole policy and rehabilitate first prioritybridges, (b) help in the development of a "quality chain" from the studies to works qualitycontrol, and (c) help develop local capabilities for bridge rehabilitation studies, conditionmeasurement, works and control through regular works, competition, and technicalassistance.

3.15 Description. The loan will finance:(a) 50% of bridge rehabilitation works, awarded in two tranches to facilitate the

capitalization of experience, with one first tranche (18 bridges) designed todevelop sound local competition with some foreign technical assistance where

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needed; and the second tranche designed to attract foreign contractors foradvanced-technology works;

(b) rehabilitation studies of about 40 bridges for US$1.2 million, including conditionsurveys, diagnosis, design, and preparation of bid documents; priorityrehabilitation works for these bridges will be implemented under the secondtranche of works;

(c) the continuation of general studies to implement the bridge management system;(d) the corresponding training; and(e) the control of works for US$0.7 million.

The recent development of the bridge rehabilitation policy explains the less-advanced stage ofthis component compared with the well known pavement strengthening program. Aminimum ERR of 12% will be a criterion for bridge rehabilitation works to be financedunder the project. Rehabilitation works are limited to less than one third of the replacementcost; a large majority of these bridges are on the "basic economic network" with the highesttraffic.

(a) (iv) Design and Supervision of each sub-component are also part of the project;control of works costs are 5% of work costs; special attention is devoted toquality through the audit and action plan concerning the laboratories and qualitycontrol.

(b) ROAD MAINTENANCE

(b) (i) Periodic Maintenance of National Roads

3.16 Policy. Progressive development of competition for periodic maintenance works onnational and Wilaya roads has been one of the most significant achievements of the FifthHighway Project. This still needs to be expanded in terms of geographical coverage, because20 Wilayas have had only three years of experience and in some cases, the local situationmakes true competition more difficult than elsewhere. Furthermore, four additional years ofsupport to this activity can also complete the work started on maintenance management andquality control of works. As mentioned earlier, periodic maintenance of national and Wilayaroads needs to be sustained to tackle the significant backlog of periodic maintenance, also anurgent priority. The project only finances national roads but maintenance of Wilaya roadswill be implemented in parallel by the DEER and local DTPs. The component will supportthe progressive transfer of know-how on pavement management systems from the NationalRoads to Wilaya roads.

3.17 Context Synthesis. During the implementation of the Fifth Highway Project, anational working group developed a comprehensive maintenance handbook, procedures forprioritization of maintenance sections at the local and national level, and sample biddingdocuments. Specific section identification is done in the autumn each year for the works forthe following year, with actual works starting in the spring.

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3.18 Objectives. The US$50.0 million work component aims to (a) carry out prioritymaintenance on National roads and indirectly help for the same at Wilaya road level, (b)complete the development of sound competition, (c) improve quality control, and (d) enablethe development of small/private road contractors.

3.19 Description. Works to be financed are mainly surface dressing (cheap seal) onmedium traffic RNs, and in some cases bituminous mixes on heavy traffic RNs, withcorresponding preparatory works. A total of 3,500 to 5,000 km will receive such periodicmaintenance for an average cost of US$14,000 per km, during four annual programs. All48 Wilayas will be involved. DEER will agree on a specific action plan for each Wilaya toimprove competition, quality of works, and quality control based on the lessons learned fromHighway V pertaining to each Wilaya.

(b) (ii) Rehabilitation and Maintenance of Saharan Tracks, and purchase of equipment fortraffic counting

3.20 Policy. Three main issues need to be addressed concerning Saharan unpaved nationalroads:

(a) maintenance and rehabilitation are not currently carried out appropriately, whichleads to about approximately 50 percent of roads being in bad condition and is aserious concern among the local population and decision makers;

(b) the combination of budgetary constraints and low traffic levels, from 10 to 50vehicles per day on average, and very difficult climatic conditions, raises hard-to-solve technical and economic issues; and

(c) the cost of heavy equipment for large force-account rehabilitation is prohibitiveand long- term effectiveness is unproven; at the same time, attracting goodcontractors for small annual contracts is impossible.

The main ideas of the proposed policy to address these issues are the following:

(a) track maintenance and rehabilitation have to be developed on a timely andeffective basis; otherwise, accessibility would be at stake;

(b) a global maintenance and rehabilitation policy for the 6000 km of nationalSaharan roads needs to be developed in full consistency with foreseeable budgetconstraints and reasonable ERR criteria, which implies identifying standards ofservice adequate for low traffic, and implementing an organization adapted toclimatic and distance constraints;

(c) large multi-annual contacts including both rehabilitation and subsequentmaintenance need to be developed by route or area to attract sustainablecompetition; for routine and emergency maintenance on routes or areas withoutrehabilitation and maintenance contracts, local administration maintenance unitsneed to have a consistent and reliable set of small equipment, trained personnel,financial resources and appropriate incentives to perform effectively; the tasks tobe perforned have been carefully selected in accordance with the criteria of (i)

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degree of difficulty to correctly program such tasks, and (ii) degree of difficultyto quantify and supervise.

3.21 Objectives:(a) maintain Saharan national track roads and make the best use of available scarce

budgetary resources,(b) increase the level of service of the highest-traffic 2000 km network by ensuring

current and emergency maintenance by effective intervention units, appropriatelyequipped,

(c) contract out a pilot rehabilitation-and-maintenance package for a route longenough to attract contractors and competition, and

(d) test the above mentioned strategy and propose a global maintenance strategy.

3.22 Description: The component comprises three levels of intervention and anindependent specific action:

(a) one multi-annual civil works contract of US$5.3 million to rehabilitate andmaintain the badly deteriorated 120 km of the 800-km Tamanrasset-Ain-Guezzam route (highest traffic track; 80 trucks/day; US$44,000/km). Thisrehabilitation is already included in the national road rehabilitation component;

(b) small equipment estimated at $8 million will be purchased under ICB for use byeleven southern maintenance units and five support units in routine andemergency maintenance tasks (see Annex 11 bis);

(c) a US$1.2 million study sub-component will (i) evaluate the condition of allSouthern roads, optimize level of service requirements, set priorities forrehabilitation works according to technical and economic criteria, and propose acomprehensive strategy and a multi-annual work program, (ii) develop detailedengineering plans for the Tamanrasset-Ain-Guezzam 120-km section, and (iii)make a preliminary study on three routes to optimize the date to invest inpavement. These studies are part of the rehabilitation study component;

(d) in addition, MIRP urgently needs to replace its equipment for traffic counting inthe whole territory, estimated cost - $1.3 million.

(b) (iii) & (iv) Pilot Program for Municipal Roads

3.23 Policy. The very significant issue of recurrent under-maintenance of the 47,193 kmmunicipal roads is described in Chapter 2 and Annex 10. DEER has initiated aCNP/MICLERA/Ministry of Finance coordination to set up a framework to progressivelyenable reasonable maintenance of municipal roads; the policy orientation aims at addressingfour main issues:

(a) institutional: it is necessary to define the respective roles of MIRP and localgovernments with regard to technical assistance to the municipalities;

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(b) financial: an agreement in principle was reached to finance periodicmaintenance;

(c) implementation: periodic maintenance is to be carried out by contract; and(d) quality: the local sub-divisions will be the executing agency by delegation;

special attention will be devoted to developing constructive cooperation with themunicipal level, thus avoiding demobilizing local decision-makers concerningthe management of their roads.

The main aims of the pilot program are to:

(a) test all arrangements before expanding them to all municipal roads; and(b) test key orientations to determine how municipal infrastructure can be

maintained in practice.

Closer cooperation is being developed: (i) at the central level by DEER (MIRP) with theMinistry of Finance, MICLERA and CNP to facilitate the financing of municipal roadmaintenance and set up a coordination committee in charge of monitoring the pilot programand supervising the future dissemination of lessons and their implementation; and (ii) at thelocal level, by DTP and their subdivisions with the municipalities concerned (see para. 5.02).

3.24 Objectives. The general objectives of this project component are to (a) support thedevelopment and implementation of this policy towards actual municipal road maintenance,and global and systematic policy for municipal roads "extra muros", (b) develop regulatorydocuments defining the roles of APC and DTP subdivisions, (c) validate these proposals anddetail their implementation rules through a pilot works program in several tens ofvolunteering municipalities in the territory of several volunteering "subdivisions", andcomprehensive technical assistance brought by the "subdivisions" of the DPW and the CTTP,and (d) implement an information seminar for DTP and subdivision engineers to validate anddisseminate the handbook for municipal road maintenance.

3.25 Description. A three year program will develop:(a) US$13.0 million of periodic maintenance works on municipal roads, to be

awarded by competition and to be financed under the central budget; theseworks will start in 1996 and be part of the project but will not be financed bythe loan.

(b) US$1.5 million of studies and training will include:- a general study to fully develop a global strategy for municipal roads with

CTTP and necessary technical assistance; the study covers: a comprehensiveproposal of the institutional setup, complementary proposals of financingmechanisms (for instance: periodic, current maintenance), an inventory ofmunicipal roads, a condition survey necessary to formulate a globalmaintenance policy and a three-year implementation plan;

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- preparation of a handbook and its dissemination through a seminar and theDTP "sample agreement" to provide technical assistance; and

(c) US$1.0 million for the CTTP-contracted part of the supervision and technicalassistance to the DTPs and several tens of pilot municipalities to manageintercity municipal roads;

The above-mentioned sub-components b) and c) are together in the tables under the headingb(iv) "Supervision of General Studies and Training"; they concern municipal roads.

(c) TRAINING. TECHNICAL ASSISTANCE AND STUDIES

(c) (i) Audit of Enterprises from the Public Works Sector

3.26 Policy. Comprehensive audits of road sector EPE enterprises are being developed toprepare and facilitate the necessary restructuring and privatization drive. The appraisalmission discussed the issue of privatization of road sector enterprises. Following an initiativeby the "Fonds des Participations pour la Construction" (FPC), and in line with theGovernment's policy led by the new Ministry of Industrial Restructuring and Participation,MIRP requested a special component for the audit of public works enterprises. Closecollaboration with privatization actions carried out in the framework of the EconomicRehabilitation Loan (ERL) will be maintained. The road sector policy letter describes theseaspects in more details.

3.27 Objectives:(a) define and launch necessary actions to improve the effectiveness of national

enterprises in charge of studies or works in the public works sector,(b) identify enterprises whose financial health and productivity potential would

predispose them for easy privatization,(c) take the opportunity of such audits to transfer analysis methodologies to the

enterprises themselves for future development of a corporate strategy, and(d) prepare privatization of road sector EPEs, in particular by giving a fair market

value to their assets.

3.28 Description. A series of audits has been launched and concerns (i) individualenterprises (ii) groups of enterprises, and (iii) some horizontal aspects of a whole set ofenterprises in the sub-sector. Two million dollars will finance complementary studiesfollowing up this first ongoing series of audits. FPC will be the implementing agency for thesub-component in coordination with MIRP and other actors concerned until the new law onprivatization is passed. Appropriate complementarity should be ensured betweeninternational experience, especially recent experience with Eastern Europe, and localexperience with in-depth knowledge of these local enterprises.

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(c) (ii) (iii) Technical Assistance. Training and Studies for the National Motorway Agency(ANA)

3.29 Policy. (see part II for background information). There are three main policyaspects in the motorway progressive-development context which the project will support:

(a) ANA is in charge of motorway development; the hiring of new staff to handlenew kinds of tasks requires robust technical assistance and training for aboutthree years;

(b) preliminary studies have been developed for the whole East-West motorwaycorridor and reviewed with all central and local administrations concerned; theeconomic and financial study is essential to phase and scale down the program tolevels consistent with economic priorities and affordability; detailed engineeringstudies of sound sub-projects will be developed; various alternatives formotorway concessions and financing will be studied; and

(c) MIRP will launch the environmental assessment studies, with Bank support.

3.30 Objectives. The general aim of this US$11.9 million component is to streamlineAlgeria's global approach for motorway development in this changing macroeconomicenvironment. The specific aims of this component are to:

(a) support ANA's institution building, through the three-year contract for technicalassistance and training; and

(b) develop quality studies and competitive local consultants for detailed engineeringof priority sections through sound international competition, which optimizes theuse of local expertise and appropriate study supervision by ANA.

3.31 Description.(a) the US$3.3 million component for the ANA technical assistance and training

contract started under Highway V for its first phase, and will be followed up bythe proposed project in its second and third phases;

(b) the US$8.6 million component for studies comprises: (i) the continuation of theeconomic and financial study (US$0.8 million) which is essential for all futurepolicy orientations; (ii) the completion of detailed engineering of the BouMedfaa-Khemis Miliana section (US$0.5 million), (iii) the launching of thedetailed engineering of the Hamiz-Lakdaria section, whose priority is justified byland reservation purposes, prepared under Highway V (US$1.3 million); and (iv)the procurement of further detailed engineering studies (US$6.0 million) willrequire that the sections to be studied be appropriately justified in view of theconclusions of the economic and financial study. They will be awarded afterinternational competitive bidding.

(c) (iv) Modernization and Training ActionsModernization and training are two important but different actions of MIRP, their

coordinated description illustrates their direct complementarity:

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3.32 Policy.a) Modernization The MIRP requested the Bank in June 1993 to develop ananalysis of the current effectiveness of the Ministry to design a modernization actionplan focussed on (a) operational efficiency, (b) human resources management,(c) relations within the structure of the ministry, and (d) relations with the privatesector.b) Training The Directors of Roads and Maintenance drew the lessons from theFifth Highway Project to design the priority training activities which need to beimplemented during the proposed Sixth Highway Project, in relation with DRHR. Inaddition, a training abroad of 500 managers on management is an important action ofMIRP.

3.33 Context Synthesis.a) Modernization Several Bank missions with specialized assistance have provided

assistance to MIRP and a modernization and a priority action plan are being finalized in theMinistry; Annex 7 gives a short description of this large undertaking and its conclusions;coordination has been developed in the Ministry as well as within the Bank to enablecomplementarity and compatibility between action recommendations resulting from thisanalysis and the preparation of the Sixth Highway Project. A report entitled "InstitutionalModernization in the Infrastructure Sector in Algeria" conducted by the Public SectorManagement team of the MENA Technical Department in close coordination with MIRP hasbeen finalized and was instrumental in the development of an unusual degree of ownership inthis modernization process. A detailed survey has been completed in Algeria on the fourpriority areas mentioned above.

b) Training The three Directorates concerned, Road Directorate (DR), Maintenanceand Operations Directorate (DEER), and the Research and Human Resources Directorate(DRHR) have developed detailed proposals for training engineers already working in thefield and young engineers completing their initial training. Although with significant delays,under the Fifth Highway Project, a large training component on road maintenance for morethan 400 local engineers has been successfully implemented.

3.34 Objectives. The main objectives are:(a) For the modernization sub-component, to: (i) foster improved operational

efficiency, including computerization at central and local levels, (ii) rationalizeinvestment choices, budget management and master costs and time schedule,(iii) master human resource management at central and local levels, and (iv)improve the relations between the Ministry and local governments, private andpublic enterprises, and with local agencies;

(b) And for the training sub-component, to: (i) implement the DR and DEERpriority training plan for adapting and improving the skills of engineers alreadyworking in the local DTP directorates; (ii) purchase training equipment for themain training centers; (iii) develop pedagogical engineering capabilities tocreate long-term sustainability in INPE and ENTP; and (iv) significantlychange and improve management by training 500 managers abroad.

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3.35 Description. This US$10.6 million component will have five main sub-componentsclassified below by implementation's agency:

(a) the set of modernization actions for a total amount of US$1.6 million willcontain studies carried out by foreign and local consultants; a special task forceand a "Delegate to Modernization" have been designated by the Minister tocoordinate these activities;

(b) training of DPW engineers for US$2.4 million will concern target group sizesbetween 48 and 498 on seven priority subjects: bridge management, equipmentpool management, current-maintenance techniques, public road domain rules,road strengthening, road rehabilitation, and road owner obligations;

(c) institutional development of the National Institute for Continuous Training inInfrastructure (INPE) for US$0.6 million will include technical assistance,training of trainers and managers and training equipment; the last two actionswill be combined under one TA and training contract to facilitate coordination;

(d) development of post-graduate courses for US$2.0 million, with: (i) threesessions of training for specific target groups of about 100 engineers each onthree different subjects: economics applied to public works, projectmanagement, and infrastructure owner role, (ii) related pedagogicalengineering; and (iii) related equipment needed for these sessions, technicaldocuments, and software. The contract for these post-graduate courses wouldbe procured by competition and the National University for Public Works(ENTP) would be in the short list if the action plan following the ongoingaudit is acceptable to DRHR and the Bank;

(e) the training abroad of 500 managzers for US$4.0 million.

(c) (v)/(vi) Studies of National Interest and the Ministry's Access to Foreign TechnicalExpertise

3.36 Policy. To prepare sectoral national policy, MIRP needs the results of studies to beconducted under its directives by autonomous entities under specific contracts, and with ahigh quality of institutional capitalization and technical information upstream. It also needsdirect and immediate access to foreign technical expertise, otherwise important subjectscannot be discussed on time with sufficient openness to foreign experience; when localagencies serve as intermediaries they may have a conflict of interest.

3.37 Context Synthesis. Several important national studies will be at the middle of theirimplementation by the closing date for Highway V; the audit of the laboratories identifiedseveral studies of national significance to be contracted out; recurrent circumstances duringHighway V implementation clearly showed the current difficulty for the Ministry Directoratesto obtain appropriate foreign advice on a timely basis when needed.

3.38 Objectives. The general aim of this component is to ensure that MEAT's work iseffective while limiting its staff size to a decision-making structure without large technicalteams. The main specific aims are:

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(a) for the general Studies part, to: (i) ensure appropriate capitalization ofnational experience for developing national directives and technical guidelines,(ii) ensure team work between the various technical institutions involved, and(iii) develop studies like the road data bank and assure their effective use onthe whole territory; and

(b) for the TA to the Ministry Directorates, to: (i) facilitate easy and quick accessto TA, and (ii) maintain the high quality and openness to foreign experience innational studies, key research, and policy advice.

3.39 Description. A US$5.1 million program of general studies and preparation oftechnical guidelines is described in annex 6 and a US$2 million contract will finance shortterm missions of foreign high-level advisers on specific subjects of immediate importance forDR, DEER, DPAE, DRHR, and DAG Directorates during the entire project implementationperiod, this contract could also cover short term missions of small policy teams to assessforeign experience.

(c) (iv) Cont. Urban Transport Study

3.40 Policy The urban population has developed at a fast rate over the last two decades.Current estimates put it at slightly above half of the total population in Algeria. Provision ofurban transport infrastructure and services have not kept pace with the rapidly growingdemand, and the major cities are faced with serious congestion problems. This, togetherwith the imposition by government of low bus fares, placed a heavy burden on the publicenterprises which are still the main providers of urban transport services and are not able togenerate sufficient cash to renew their fleet in a timely manner. Services are of low quality.The private sector participation appeared in 1987 and is sharply increasing in a significantlyderegulated market. The Government needs to formulate a new strategy to address currenttransport issues so critical to sustainable urban development.

3.41 Context synthesis The government sought Bank assistance in definition andimplementation of the strategy, and the Fifth Highway Project was amended in December1991 to allow for financing of a study for preparation of an urban transport enterpriseproject. Consultant selection and contract signature occurred in October 1993 butexceptional circumstances delayed study launching and the closing of the Fifth HighwayProject on December 31, 1994 requires financing which the Sixth Highway Project willsecure.

3.42 Objectives The study focusses on transport in six major cities: Algiers, Oran,Constantine, Annaba, Blida and Setif. It has two phases:

(a) the first phase will assess the demand, both satisfied and unmet, for urban busservices, the transport supply by public and private operators, and theoperational and financial performance of the former;

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(b) the second phase will project the transport demand in 1998 and 2003, and seeits implications in terms of infrastructure requirements and transport supply;actions designed to improve urban transport will be identified, and economiccalculations will be carried out to select the most effective ones.

3.43 Description US$1 million will be earmarked to finance completion of the UrbanTransport Rehabilitation and Development Study for the six above-mentioned cities. The"Direction des Transports Urbains et de la Circulation Routiere" at the Ministry of Transportwill oversee implementation of the component which is expected to end by late September1995. The amount for this study is integrated in tables under c(v).

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C. Cost and Financing

3.44 Project costs are summarized in the attached table 4:

(In AD Million) (In US5 Million)

Local Foreign Total % Foreign % Total Local Foreign Total % %

Exchange Base Foreign TotalCosts Exchange Base

l ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~CostsA. Strengthening & Rehabilitation

1. Strengthening 893.2 1,098.7 1,992.0 55 23 20.4 25.1 45.6 55 232. Road Rehabilitation 381.4 469.1 850.5 55 10 8.7 10.7 19.5 55 103. Bridge Rehabilitation 236.3 351.9 588.2 60 7 5.4 8.1 13.5 60 74. Control of Works 115.1 76.2 191.3 40 2 2.6 1.7 4.4 40 25. Technical Studies' and 37.0 69.7 106 7 65 1 0.8 1.6 2.4 65

Superilsion

Subtotal Strengthening and 1,663.0 2,065.6 3,728.7 55 43 38.1 47.3 85 3 55 43Rehb iltation

B. Road Maintenance1. Periodic Maintenance by 999,6 1,229.6 2,229.2 55 26 22.9 28.1 51.0 55 26

Contrat2. Equipment for Current 189.7 352.2 541.9 65 6 43 8.1 12.4 65 6

Maintenance and TrafficCounting

3. Municipal Road Maintenance 260.9 321.0 581.9 55 7 6.0 7.3 13.3 55 74. Supervision, General Studies 38.5 72.7 111.1 65 1 0.9 1.7 2.5 65

At Training" (Municipal

Roads)

Subtota Road Maintenance 1,488.7 1,975.4 3,464.1 57 40 34.1 45.2 79.3 57 40

C. Trainkng, TA nd StudiesI. Audit of Road Enterprines 30.8 58.1 88.9 65 1 0.7 1.3 2.0 65 12. TA to ANA & Training 50.8 95.9 146.7 65 2 1.2 2.2 3.4 65 23. Econonic, Financial, 132.5 249.9 382.4 65 4 3.0 5.7 8.8 65 4

Environm ent & Detailed

Enginecring Studies(Motorways)

4. Moderrnzation & Training 171.0 322.6 4935 65 6 3.9 7.4 11.3 65 6Actions (MIRP)

5. General Studies &Technical 95.5 180.2 275.7 65 3 2.2 4.1 6.3 65 3guidelines

6. Specific Techmcal Assistance 30.8 58.1 88.9 65 I 0.7 1.3 2.0 65for MIRP

Subtotal Training, TA & Studies 511.3 964.8 1,476.1 65 17 11.7 22.1 33.8 65 17

Totai Investnent Costs 3,663.1 5,005.9 8,668.9 58 110 83.8 114.6 198.4 58 100

TOTAL BASELINE COSTS 3,663.1 5.005.9 8.668.9 58 1(3 83.8 114.6 198.4 58 100

Physical Contingencies 323.0 405.9 728.9 56 8 74 9.3 16.7 56 8PTice Contingencies 1,772.5 2,373.4 4,145.9 57 48 6.5 8.5 15.0 56 8

TO'TAL PROJECT COSTS 5,758.6 7,785.1 13,543.8 57 156 97.7 132.3 230.0 58 116

I/ Nota Bene: The Technical Assistance component categories and sub-categories in this Table are presented according to the MIRPDirectorates who will be responsible for their implementation. It is useful to note that all these components have a strong ownershipby the borrower. Another interesting split is presented below with total US$ amounts (costs at appraisal):(i) Policy Support: US$10.0 million(ii) Institutional Development and Capacity Building: US$16.6 million, of which US$9.6 million in training; and(iii) Project Preparation and Implementation: US$16.7 million, of which US$4.6 million in control of works, US$8.1 in detailed

engineering studies and US$4.0 in applied research linked to project implementation.

-36-3.45 Financing will be:

(i) $130.0 million: IBRD loan(ii) $100.0 million: Algerian government

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D. Procurement

3.46 All contracts financed by the Bank will be procured in accordance with BankGuidelines for Procurement. Contracts for road strengthening and rehabilitation works largerthan US$5.0 million equivalent, contracts for bridge rehabilitation larger than US$3.0 millionequivalent, contracts for equipment larger than US$0.35 million equivalent will be procuredthrough international competitive bidding (ICB). In addition, for the second and thirdtranches of road strengthening and rehabilitation works, appropriate packages of calls forbids launched by the various Wilayas will be coordinated in time and procured through ICBfor a minimum total amount of US$10.0 million; similarly for the bridge rehabilitation worksafter the first tranche, all calls for bids will be coordinated to form package(s) of at leastUS$5 million. For contracts for the supply of goods procured through ICB, a margin ofpreference of 15 percent or the actual customs duties, whichever is less, would be allowedfor domestic goods.

3.47 All other work contracts will be procured under local competitive bidding with theexception of contracts costing less than US$50,000 equivalent and not exceeding US$2.0million cumulative per year (US$16.0 million in total) which are allowed to be procuredunder local shopping. Developed over the last five years under the Fifth Highway Project,the procedures for these small contracts went well; a new step in the improvements andsimplification is designed in the modernization action program. All other goods contractswill be procured under international shopping, with the exception of contracts costing lessthan US$50,000 equivalent and not exceeding US$0.5 million cumulative per year which willbe procured under local shopping.

3.48 Consultant services will be procured in accordance with the Bank's Guidelines on theUse of Consultants. Some important consultant services or studies (see para. 3.31 (a) and(b) (i) to (iii))have been launched under the Fifth Highway Project following BankGuidelines, have received the Bank's no-objection and will be continued under the SixthHighway Project. The small contracts with laboratories for quality control of works willintroduce competition for the third tranche of works; an audit of these laboratories,developed by the Bank during project preparation is translated into an action plan tostrengthen global quality approach, institutional development, and training at their own cost.

3.49 The Bank's Sample bidding documents in French will be used for the procurement ofgoods and consultant services; sample bidding documents for works, agreed with the Bank,and already used under Highway V, will be used for bidding under ICB and LCBprocedures.

3.50 Prior review of contract documents will be carried out for: (a) procurement ofcontracts estimated to cost the equivalent of US$ 1.0 million or more for civil works andUS$ 300,000 or more for goods, (b) all consultant contracts for consulting firms estimated tocost over US$100,000 or for the employment of individuals estimated to cost over US$

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50,000, (c) all sole source contracts estimated to cost over US$50,000, and (d) all terms ofreference. Prior review would cover about 75 percent of the total amount of contracts.

The DTPs are responsible for carrying out the procurement for works in their Willayaterritories under the supervision of DR for road strengthening and rehabilitation and DEERfor periodic road maintenance, similar to what was done under the Fifth Highway Project.Quarterly reports and supervision missions are important to monitor progress.

Table 5: Procurement Method

PROCUREMENT METHOD

PROJECT ELEMENT TOTAL

ICB LCB OTHER N.B.F. COST

A. Road 40.5 13.5 - - 54.0Strengthening (22.3) (7.4) (29.7)

B. Road 17.3 5.8 - - 23.0Rehabilitation (9.5) (3.2) (12.7)

C. Municipal Roads a/_ 16.8"' 16.8(0)

D. Periodic ^ 60.4 - - 60.4Maintenance (33.2) (33.2)

E. Equipment 10.9 - - 2.5 13.4(7.1) (7.1)

F. Technical - - 45 5"- 45.5

Assistance & (38.0) (38.0)Studies

G. Bridge 10.1 6.7 - - 16.8Rehabilitation (5.6) (3.7) (9.3)

Total 78.8 86.4 45.5 19.3 230.0(44.4) (47.5) (38.0) (0) (130.0)

Note: Figures in parenthesis are the respective amounts financed by the Bank loan. N.B.F.: Not bankfinanced.a. Financed by the Algerian Government; procured under LCB.b. Procured in accordance with World Bank's Guidelines: Use of Consultants by World Bank Borrowers and

by the World Bank as Executing Agency, August 1981.

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E. DISBURSEMENTS

3.51 The Bank will disburse on the basis of Table 6: Allocation and Disbursement of theLoan. The loan is expected to become effective in May 1995, and to be fully disbursed bythe closing date of December 31, 2002. This is broadly in line with the historical seven-yeardisbursement profile for transportation projects in Algeria issued in August 1993. Projectinvestments are designed for full execution within five years and the two extra years given bythe country profile provide safety margin against investment slippages and disbursement lags.Large components have been designed to be ready for immediate implementation ateffectiveness: the first tranche of strengthening and rehabilitation works, the first year ofperiodic maintenance, the purchase of maintenance equipment and several studies (see Annex2.1 and time schedule charts). They have the effect of accelerating disbursement between1996 and 1998, compared to the standard profile. Without such exceptions, which are fullyjustified, the project costs and the loan would both increase by US$1 million (plus 0.4 and0.8 percent respectively). The disbursement table and corresponding graph are in Annex 2.1

3.52 Full documentation will be required for disbursements (a) for works or goodsprocured under contracts valued at more than US$ 300,000 and (b) for consultant servicesstudies and training, under contracts valued at more than $100,000 for contracts for theemployment of consulting firms and $50,000 for contracts for the employment of individualconsultants. All other disbursements will be made against Statements of Expenditures(SOEs). Supporting documents will be made available to the Bank's supervision missionsand to the auditor. These documents will be retained for two years after Bank receipt of theaudit report for the fiscal year in which the last withdrawal from the loan account was made.Streamlining payments and disbursements will be developed in phases (see para. 2.27).

Table 6: Allocation and Disbursement of the Bank Loan

Loan Amount Disbursement Percentage

US$ In % ofMillion Total

A. Civil Works 80.3 61.8 55% of tax-inclusiveexpenditures

B. Equipment & Goods 6.8 5.2 100% of foreign expendituresand 65% of local tax-inclusiveexpenditures

C. Consultant Services, 33.8 26.0 100% of expenditures net ofStudies & Training tax

Subtotal 120.9 93.0

Unallocated 9.1 7.0

Total 130.0 100.0

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3.53 To facilitate disbursements, a Special Account will be opened and maintained in USdollars and operated on terms and conditions satisfactory to the Bank. The Special Accountwill cover the Bank's share of eligible expenses in both local and foreign currencies. Theauthorized allocation will be US$7 million, i.e. the Bank's share of the estimated four-monthaverage of project expenditures. The Borrower will submit regular monthly replenishmentapplications promptly after receipt and reconciliation of monthly bank statements from thebank holding the account. During period of heavy expenditures, applications may besubmitted at intervals of less than a month.

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F. REPORTING AND AUDITING

3.54 DPAE will prepare quarterly progress reports in a format acceptable to the Bank.Each report will give project performance indicators data2 , will indicate progress made,problems encountered, remedial steps proposed, and project activities scheduled for the nextquarter. At the end, DPAE will prepare the overall implementation completion report (ICR),on the basis of input from other implementing departments and agencies, which will beissued no later than six months after the physical completion of the project works. Thisreport will include in particular, a detailed account of final project costs and disbursements,general characteristics of project execution and benefits, the degree to which projectobjectives were achieved, and an assessment of how the Government and the Bankimplemented their respective obligations.

3.55 A computerized project accounting system will be developed by DPAE to recordproject transactions from project start-up in accordance with appropriate financial andadministrative practices; expert assistance needed to that effect will be financed under theFifth Highway Project. The accounting records will identify all project transactions underthe various components and show their financing. They will made it possible to monitorcommitments and payment arrears. Control systems will be introduced for use of SOEs,which will be recorded separately. All supporting documentation will be retained for auditand review by the Bank. Quarterly accounts will be prepared in a format approved by theBank and incorporated in the quarterly progress reports. These accounts will summarizeactual versus planned expenditures both per fiscal year and cumulated to date. BAD willmaintain the general project accounts on an on-going basis and keep separate records ofproject-related payments made out of the Special Account, and against SOEs. Implementationof the computerized system to maintain project accounts at MIRP as a Condition ofEffectiveness.

3.56 The "Inspection des Finances" will audit the project accounts, including examinationand certification of SOEs and of transactions under the Special Account. The audit willemploy principles acceptable to the Bank, and will include sample verifications of accountskept by the DTPs, of the effectiveness of control procedures and adherence to Bankguidelines for disbursement and procurement. The report, in a "Long Forn," will besubmitted to the Bank not later than nine months after the end of the fiscal year.

2/ the indicators for each major component are described in Annex 13.

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G. ENVIRONMENTAL IMPACT

3.57 The main areas in which negative, as well as positive, environment impacts of theproject are possible concern the road rehabilitation works, road safety, and the detailedengineering of future motorway sections, even though no motorway works are part of theproject. Annex 15 gives a mitigation and monitoring plan. At the Bank's request during theproject preparation phase, a special environment handbook was developed on road pavementstrengthening works by the CTTP utilizing foreign bibliography and addressing the mostrecurrent issues in the Algerian context. The handbook will raise the awareness of theoperators and users, it provides:

(a) a list and summary of the Algerian environment legislation;(b) details of the most recurrent impacts of quarries (in mountains or river beds),

crushing equipment, asphalt plants, unused materials, tree cutting, and soilerosion; and

(c) a list of mitigation actions and more detailed bibliography on implementation.

3.58 Road Works. Road strengthening/rehabilitation, bridge rehabilitation, and pavementmaintenance, will involve no realignment (only very limited, small curve correction), onlynarrow widening (50 to 80 cm) on existing right of way, drainage improvement, and mainlybituminous or non treated base/surface courses. No sensitive area is concerned. Mostgranular materials are supplied from existing quarries or quarry sites.

The handbook contains numerous photos taken on past Algerian road works, whichillustrate very well what should be avoided in practice.

In the Sample Contract for Works, a new Chapter 6 has been introduced onEnvironment; its clauses cover noise, dust, replanting where necessary, waste materialdisposal and requests a restoration plan for asphalt plant area after the works are completed.

The new Algerian legislation on emission thresholds (Decret 93/165 of 10/7/93) limitsdust emission to 70 to 485 mg/mi3; it has been requested that laboratory contracts be updatedto measure dust emission around asphalt plans, especially near urban areas; measures will bedeveloped during the first work tranche, then implementation recommendations will bedeveloped for the road sector and works contracts will be amended for the followingtranches;

Similarly, a short handbook has been developed on road safety in the context of roadstrengthening and rehabilitation to improve road infrastructure safety. Road safety studiesper section or route start being developed to identify and correct blackspots. Specialguidelines are being strengthened concerning the safety of road users and workers during thejob under traffic.

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3.59 The sample bidding document for motorway feasibility and detailed engineeringstudies now incorporates the detailed terms of reference on environment assessment proposedby the Bank. In addition, DR and ANA plan to clear the backlog of environmentalassessment for motorway sections already studied, to identify additional mitigating measuresneeded. The economic and financial study on the planned motorway system will introducenecessary and specialized environmental assessment methodologies for the future; relevanttraining on "roads and environment" is also planned. A special technical assistance to ANA,financed under the project, includes environment advice services; all these studies have beenchosen by DR to implement the new Algerian regulations on Environmental ImpactAssessment in close relation with the Environment authorities.

M:\Rny\Algeria\Chapter3

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IV. ECONOMIC EVALUATION

General

4.01 The program focusses on maintenance of heavily-trafficked roads to reduce asubstantial maintenance backlog that was allowed to accumulate for years. By nature, thesub-projects generate high returns on investments. Details on the economic evaluation aregiven in Annex 8, and the main conclusions are summarized hereafter.

Project Benefits

4.02 Main benefits from road maintenance, from light surface treatment to strengthening,are associated to vehicle operating costs savings with reduced road roughness. Other benefitscome from not having to reconstruct a road when maintenance is deferred, or fromminimization of maintenance costs over time when comparing two maintenance strategies.Preliminary calculations have been made. The road strengthening program covers some 410km with traffic of 2,200 to 17,400 vehicle per day. The economic rates of return (ERRs)range from 40 to 89 percent (weighed average of 67 percent). For the road rehabilitationprogram, covering 256 km with traffic of 770 to 5,200 vehicle per day, ERRs range from 18to 65 percent (weighed average of 44.7 percent).

4.03 For bridges, the detailed engineering studies of the first phase comprised of 18bridges are in progress, and the component start-up is only due in year 2 of projectimplementation. The second phase, covering 15 bridges necessitating more complexengineering studies, is deferred to year 3. The economic analysis will be carried out aftercompletion of the detailed engineering, and programming of sub-projects will be contingentupon verification that they achieve ERRs of at least 12 percent. The methodology to be usedfor the economic evaluation was reviewed and discussed at appraisal. It consists of asoftware package developed in Hungary, based on sound analytical principles and a largedata base, which will be adapted to Algerian conditions. The model was tested on a sampleof project bridges (8) and calculated ERRs were in the 22-68 percent range. The componentis strongly justified.

4.04 Periodic maintenance of paved roads will apply to the RN network which have trafficof more than 2,000 vehicle per day and offer guarantees of high ERRs. The economicevaluation will be preliminary step to annual programming of works. Only sub-projects withERRs of 12 percent or above will be eligible to financing under the project. The HDM IIImodel is currently being developed in Algeria, and the refined calibration of main parameterswill be completed before year end. Preliminary tests were conducted on a sample of about2,000 km of roads and showed very high ERRs for periodic maintenance (well above 100percent). Although they may not be accurate, since the HDM III model is not yetoperational, these results confirm the robust economic justification of the component.

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4.05 The economic justification of the project financed equipment was assessed on thebasis of benefits likely to be derived from the pilot maintenance program for Saharan roadsto which it will be assigned. The equipment will be used to ensure minimum maintenance ofabout 4,600 km of unpaved roads in four Wilayas with average daily traffic of 29 vehicles,including 83 percent of trucks. Main tasks include spot maintenance to restore trafficconditions (after floods, sand accumulation, and rocky deposits) and, to a lesser extent,regravelling and grading. These tasks would be executed by an organization comprised of 11intervention units endowed with a standard set of light equipment and mobile homes, and 5reserve units equipped to provide support when heavier equipment is needed or to cope withpeak workload. The combined output of the pilot maintenance organization would be12,000 m3 per year for spot improvements and 11,000 km per year for grading. With 80percent of the equipment operating cost incurred in relation to spot maintenance, the modelassumes economic unit costs of US$8.3/m3 and US$33 km for the two elementary tasks,based on an average depreciation over 6.5 years. The HDMIII model has been used tocompare two strategies: (a) stretching the maintenance capacity for modulated coverage ofthe full 4,600 km network; (b) concentrating this capacity on about 1,900 km of roads withdaily traffic above 20 vehicles. Without the project, minimum routine maintenance wasassumed at a cost of US$20/km. Benefits would come from reduced roughness (from acurrent IRI index of 15), elimination of days when roads are not passable (assumed as 10 atpresent), and traffic creation growing to 30 percent of existing traffic. Strategy (a) wasfound to maximize the net present value (NPV) of the pilot program, with an ERR of around70 percent.

Non Ouantified Benefits

4.06 As intermediary goods, transport has a pervading influence on the economic system.By contributing to making roads better, and through passing on of at least a portion of directbenefits to consumers and producers, the project investment is bound to have consumptionand production effects. These secondary growth benefits may be a multiple of measuredbenefits, given the large unemployment prevalent in Algeria and the low utilization rate ofthe production capacity. The project is also to have a positive impact on road safety. Roaddeterioration creates driving hazards, put vehicles under greater strain, and increases theprobability of accidents by loss of vehicle control and mechanical failures. Normal preventivecar maintenance is nearly impossible given the shortages of equipment and spare parts,making the vehicle fleet more vulnerable to bad roads. The capacity building at MIRP andANA bears other substantial, albeit deferred, benefits which elude quantification. Roadconstruction techniques will be improved, leading to cheaper and more durable works.Project preparation and road programming skills will also be developed, resulting in costeffective uses of scarce budget resources. This is especially true for motorway development.The Bank review of preliminary engineering studies underscores a need for a more thoroughassessment of project constraints and possible alternatives toward optimization of themotorway design and minimization of its costs. The motorway construction will by far be thelargest road investment for the next 15-20 years, and the project will ensure better conditionsfor preparation and implementation.

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Sustainability

4.07 Good road management is essential to project sustainability, as is regular funding ofmaintenance. The proposed capacity building is tailored to meet the first requirement,especially through development of new curricula of advanced engineering studies to ensurehigher qualification of young recruits at entry in the profession. Generalization of thefunding mechanism tested under the pilot municipal road program, and the targetedestablishment of a Road Fund by mid-term review will strongly work toward meeting thesecond requirement. In addition, Action Plans to eliminate long-standing bottlenecks inquarry and bitumen supplies, and to improve performance of public laboratories, both part ofthe Bank up-front conditionality, are at the core of the strategy to create an enablingenvironment for the road industry. A healthier competition on quality and prices will allow tomake the most of resources allocated to road maintenance, a goal also pursued byprivatization of public works contractors.

Risks

4.08 A sensitivity analysis was carried out to ascertain the impact of adverse changes in thevalue of main parameters on calculated ERRs. It showed that the economic justification ofthe road strengthening and rehabilitation components was little affected by assumptions ontraffic growth rates, and that underestimating the investment costs and overestimating thefirst year traffic are the most critical factors. Project investments, however, are expected togenerate high ERRs because they apply to highly trafficked roads for which maintenance isgenerally overdue, and the sensitivity analysis indicated that it would take a lot largerinvestment costs, and a small fraction of assumed traffic before ERRs would fall down tolowest acceptable level of 12 percent. For the road maintenance equipment, the sensitivityanalysis measured the impact on NPV of doubling the working expenses (NPV reduced by 20percent), cutting the overall capacity by 50 percent (NPV reduced by 17 percent), assumingno induced traffic (NPV reduced by 18 percent) and no less disruptions to traffic (NPVreduced by 4 percent). These results confirm the strong economic justification of theequipment component.

M: \RayA IgerTw\Chapter4.sar

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V. AGREEMENTS AND RECOMMENDATION

5.01 Agreement was reached during negotiations on the following dates:(i) draft action plan on bridge rehabilitation available not later than June 1, 1995;

with implementation not later than December 1, 1995 (para. 3.15);(ii) economic, financial and environmental study of East-West motorway starting

not later than June 1, 1995 and results available not later than June 1, 1996;with implementation of study's recommendations not later than December 1,1996 (para. 3.31 (b));

(iii) user charges study update available not later than December 1, 1995; withimplementation not later than June 1, 1997 (paras. 1.18, 2.26 and annex 14);

(iv) progress reports on project implementation available not later than February 1,May 1, August 1 and November 1 of each year until completion of the project;and

(v) mid-term progress report available not later than June 30, 1997 and mid-termreview to be held not later than September 30, 1997.

5.02 As condition of loan effectiveness, MIRP will send to the Bank the decisions creatingthe following committees, with membership and terms of reference acceptable to the Bank:

(i) committee to study the feasibility of establishing a road fund (para.2.26); and

(ii) committee to monitor the implementation of the pilot program onmunicipal road maintenance (para. 3.23).

5.03 Agreements having been reached on the issues outlines in Chapter III and IV, andsubject to the condition of effectiveness set forth in para. 5.02, the proposed project issuitable for a Bank loan of $130 million to the Government of Algeria for a term of 17 yearsincluding 5 years of grace.

M:\Ray\A1geria\Chapter5

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Annex 1Page 1 of 1



Detailed Project Costs

(In AD Militon) (In USS Million)

Local Foreign Total % Foreign S Total LoDsCi Foreign Total %Exchane Bane Foreign Total

Costs Exchange BCoeCosts

A. Strentbening & RebabilltatiorI. Strengthening 893.2 1,098.7 1,992.0 55 23 20.4 25.1 45.6 55 232. Road Rehabilituuion 381.4 469.1 850.5 55 10 8.7 10.7 19.5 55 103. Bridge Rehabilitation 236.3 351 9 588.2 60 7 5.4 S.1 13.5 60 74. Control of Works 115.1 76.2 191.3 40 2 2.6 1.7 4.4 40 25. Technical Studies and 37.0 69.7 106.7 65 1 0.t 1.6 2.4 65

Supervision _

Subtotal Strengtbening and 1,663.0 2,065.6 3,728.7 55 43 38.1 47.3 85.3 55 43RebabilitatI.n

B. Rod Maina4nsneI. Periodic Maintenance by 999,6 1,229.6 2,229.2 55 26 22.9 28.1 51.0 55 26

Contract2. Equiprent for Current 189.7 352.2 541.9 65 6 4.3 8. l 12.4 65 6

Maintenance and TrafficCounting

3. Municipal Road Maintenance 260.9 321.0 581.9 55 7 6.0 7.3 13.3 55 74. Sngervision, General Studies 38.5 72.7 111.1 65 I 0.9 1.7 2.5 65 I

& Training (MunicipaJ

Roads)III

Subtotl Road Makitenane 1,4N8.7 1,975.4 3,464.1 57 40 34.1 45.2 79.3 57 40

C. Training, TA and StudksI. Audit of Road Enterprises 30.8 58.1 88.9 65 I 0.7 1.3 2.0 652. TA to ANA & Training 50.8 95.9 146.7 65 2 1.2 2.2 3.4 65 23. Econotnic, Financial. 132.5 249.9 382.4 65 4 3.0 5.7 8.8 65 4

Environment & DetailedEngineering Studies(Motoeways)

4. Modernization & Trining 171.0 322.6 493.5 65 6 3.9 7.4 11.3 65 6Actions (MIRP)

5. General Studies &Technical 95.5 180.2 275.7 65 3 2.2 4.1 6.3 65 3guidelines

6. Specific Techncatl Assistance 30.8 58.1 88.9 65 I 0.7 1.3 2.0 65fnr the MEAT

SubiotalTralning, TA & Studks 511.3 964.8 1,476.1 65 17 11.7 22.1 33.8 65 17

Totl Inestmenet Casts 3,663.1 5,005.9 8,68.9 Se 100 83.8 114.6 196.4 58 I10

TOTALBASELINECOSTS 3,663.1 5,005.9 8,668.9 58 100 83.8 114.6 198.4 58 t10

Physical Contirngencies 323.0 405.9 728.9 56 8 7.4 9.3 16.7 56 8Price Contingencices 1,7.5 2,373.4 4,145.9 57 48 6.5 8.5 I 150 56 8

TOTAL PROJECT COSTS 5,758.6 7,785. 1 13,543.8 57 156 97.7 132.3 230.0 58 116

M \Ray\Algreia&Anoex.l

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Annex 2-1Page 1 of 7

THE DEMOCRATIC AND POPULAR REPUBLIC AF ALGERIA


Implementation and Procurement Schedule

The tables of pages 4,5,6 and 7 describe the implementation and procurementschedules agreed on during appraisal for the main works and goods representing about 75%of total project costs. Concerning the training, TA and studies component , many TORs arefinalized allowing signature of consultant service contracts at effectiveness; theimplementation time of the subcomponents is planned to be between two and three years,depending on the specificities of the 1995-97 context, with the exception of the post-graduatedegree which will be launched after the in-depth diagnosis of the Ecole Nationale desTravaux Publics, planned by DRHR for mid 1995.

The tables of page 2 and 3 describe expenditures and disbursements estimated on thebasis of the combination of procurement scheduled and Algeria Transport disbursementprofiles.

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Expenditure Accounts by Years - Totals including Contingencies(In US$ Million)

Todals IndCuding Conlingencks

1995 1996 1997 1998 1999 2000 2001 2002 Total

A. Strengthening & RehabilitaionI Strengthening 7.6 8.8 9.0 9.3 9.5 9.8 - 54.02. Road RehabiliLation 3.2 3.8 3.9 4.0 4.1 4.2 - 23.03 Bridge Rehabilitation 1.9 4.9 4.2 28 2.1 0.9 16.84. Control of Works 0.7 0.8 0.9 0.9 0.9 0.9 - 5.25. Technical Studies & 0.5 0.9 0.6 - - - - 2.6

Supervision _ _ ___

Subtioal Strengthening nd 12.1 16.2 19.3 18.9 17.2 17.0 0.9 101.6RehbAliltxt

B. Road MalnuensnI Periodic Maintenance by 8.5 9.9 10.1 10.4 10.6 10.9 60.4

Conbtrc

2. Equipment for Current 1.3 11.4 0.7 . . - 13.4Maintenance ani TrafficCounting

3. Municipal Road Maintenance 1.7 1.6 1.6 2.8 3.2 3.0 2.9 16.84. Superision, General Studies 0 5 0.9 0.7 0.6 - - 2.7

& Training (MunicipalRoads)

Subtotal Read Maintenance 12.0 23.8 13.1 13.8 13.9 13.9 2.9 93.3

C. Training. TA and StudesI Audit of Road Enterprises 0.5 0.5 0.5 0.6 - - - 2.12. TA to ANA & Traininrg 0.8 0.9 0.9 0.9 3.53. Ecoronic, Financial, 2.7 3.6 2.8 9.0

Environment & DetailedEngineering Studies

(Motorways)

4. Modernizatin & Training 3.4 4.1 4.2 . 11.7

Actions (MIRP)

5. General Studim & Research 1.6 1.6 1.7 1.7 6.6

6. Specific Technical Assistance 0.5 0.5 0.5 0.6 2.1

for (MIRP)

Subtotal Training, TA & Studies 9.5 11.2 10.6 3.7 - 35,1

Total lnsstanent Camts 33.6 51.2 43.0 36.3 31.1 30.9 3.8 _ 230.0

TOTALPROJECT COSTS 33.6 51.2 43,0 36.3 31.1 30.9 3.8 = 230.0

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Estimated Disbursement per Bank Fiscal Yearin US $ Million

1995 1996 1997 1998 1999 2000 2001 2002

Annual:0 20.8 31.0 26.4 20.0 15.6 15.6 0.6

Cumulative:0 20.8 51.8 78.2 98.2 113.8 129.4 130.0

Profile for Al2eria:.Prof L forAle 0 23.5 33.5 49.5 70.5 101.5 127.4 130.0

Algeria Highway VI Disbursement

'400

150

E .7 la 100- E

.......

0.

1995 1 996 1997 1998 1 999 20CC 2001 2002

Years

- Plenned disbursements per Bank fiscal year (cumulative) . Profile for Algeria

I I ~ ~I I I II ;

Nota Bene: Explanations on estimated disbursement pace are given in para. 3.47 and in Annex 2.1 - page 1.

M:\XRyAgria\Anncx.2

II l.4Jl"A VI IlI"IIIWAYl IRMU LT

1995 1996 1991 1998 1999 2WJ M M J S N J M M J S N J m M J s N J m m .1 S N J M M J S N I m M J S

_________ ________________ F A J~~~~ ~~~~~ A 0 0FA J A 0 0 F A J A0 F A J A 0 [) F A J i 0

ottlA,lO.l.~tjo ~t~I 0.ol

I I,&,,t.tt., F .j,k,oti zl *0 0 AO Wdpl ~Ps I Io..

[tl.,t 1.1 1 lalt-tloY Mo*del -1rt1-" don.

U.ad I

I..tt.... lilyttlractwatuno

.,,ttrtt bylalottatot

It.'.ttt,., ltt d,,. yIb,-

W.A.t 30*[C

Us~~~~~~~~~d,,tI., -ttaread

.53- Annex 2-1

Page 5 of 7

.,z<

4 1

4! _

2_

C -~~~_

-1 '.i,.4',

.11.111Ak %I' IIIGllWAV PH4ULICT

1995 1996 1997 1996 1999 2000MM .1 S N J M M J S N .1MM. 5 N j M M S N J M M J SN .1 M M J S N

______ ______ _____ ______ _____ ______ ___ F A J A 0 0 F A J A 0 F A . A 0 D F A J1 A 0 D F A J A 0 D F A J A 0 [1

19916

All C-to...gtt

1991 .- pa.gn

AN ttojo..W

CAl I., 6ts I., RN

RN C-.-9.t.

1998 -P.pg

Cd lo ldoloV A

I baltatllt COM,ttOi

RH Ctattpa.g.Ctngta.g Repot I rnoolo-tt .Okcal-.l

1995 and 1999 campaigns are also included in the project with the same annual time schedule.

.u t.

0 1

OQ I

I F lIA VI lIiNlIIWAI I'KIkEiHT

on tn.l M-..Op.l R.*d,

1995 1996 199 7 1998 1999 2000i M M SN]J MM]i S NJ MM J S N J MM J S N] MM J SN J M M J S N

_______________________________ F A J A 0 0 F A]J A 0 O) F A]J A 0 O F A] A 0 D F A]J A 00D F A J A0 LI

1. d,go, In f,,, tl,,nle I,, 1i. srrpe-vsIOn o! lh. -u.cp.pi rads don.

ton I.,, Ia.I-o 2 .- '! 3 ,,I I?. swroy do.*

Scrvrc -rl.lot I.,0 MiNI!

In,-- 2 -nd 3 01 fh I-,,$ln

A......,.1r.. pr...I'l.l U Ualal

m rs

I-t -

*-2

-56-

Annex 2.2Page 1 of 2



Preparation of Project Implementation Volume

1. The Project Implementation Volume (PIV) is important because many actors at thelocal level will be involved and because the absence of such document has had a negativeimpact on Highway V implementation pace; the designing and writing of the Volumechapters by each responsible Directorate is a key factor for success; comprehensivehandbooks/guidelines/sample bidding documents have already been developed on roadstrengthening, rehabilitation, and maintenance.

2. Examples of similar PIV have been distributed during appraisal and annex 1, 2, and 3of its aide-memoire give the key points for all sub-components; the draft PIV is due byMarch 31, 1995 and to be distributed at the project launching workshop planned for April1995.

3. The planned table of contents is the following:

Table of ContentsProject Implementation Volume

Executive Summary1. Introduction2. General Project Scope and Objectives

2.1 General Description2.2 Summary of Project Components

3. Project Organization and Management3.1 Organization Structure3.2 Role/Objectives/Responsibilities of

- DPAE and the "Facilitator"- DR- DEER- DRHR- Fonds de Participation

3.3 Role/Objectives/Responsibilities of other Actors (CTTP, Laboratories, CNPH-INPE, etc).

4. Detailed Component Description, Implementation Schedules, Indicators. For all 14

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sub-components, the same format is being used:1. - Objectives2. - Description3. - Costs4. - Organization

4.1 Financing4.2 Implementation responsibilities4.3 Procurement

5. - Indicators and Reporting6. - Implementation and Procurement Schedule.

5. General Procurement Rules5.1 Regulations and Procedures5.2 Procurement of Works5.3 Procurement of Services5.4 Procurement of Goods

6. Accounting System and Audits6.1 Payment Procedures6.2 Disbursements6.3 Financial Statements and Reports6.4 Performance Indicators of Payment and Disbursement6.5 Audits

7. Monitoring and Reporting

Annexes- All guidelines for procurement- All TORs for studies- Detailed references to key local documents/sample bidding documents- Sample quarterly report formats

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LETTER OF ROAD SECTOR POLICY

The PresidentWorld BankWashington, D.C.

Dear Mr. President:

On the occasion of the sixth loan granted by the World Bank for highwaydevelopment in Algeria, I should like to express my appreciation of the way in which yourinstitution is continuing to support our country's highway sector. Roads are indeed the mostimportant transport mode in Algeria, accounting for over 93% of traveler-km andapproximately 85 % of ton-km.

The highway network, which includes some 95,000 km of roadway, today representsa heavy burden on the budget, owing to the fact that maintenance constraints are increasingas pavements deteriorate with age and traffic volumes increase.

It has become necessary to optimize public expenditure in order to reconcile roadnetwork development needs and preservation of the road assets. The sector therefore intendsto grant priority to preservation of the existing highway network and improvement of itsmanagement.

The safeguarding and management of the existing network, and the motorwayconstruction works in progress or awarded priority will represent the focal points of highwaysector development over the next few years.

This program will center mainly on:

(a) continuation of actions to improve road network management, operation andmaintenance;

(b) priority treatment of the high-traffic roads included in the basic economicnetwork through pavement strengthening or rehabilitation;

(c) continued implementation of road network decongestion programs, particularlyin the country's central region and around Constantine;

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(d) stimulation of the road works market.

The actions identified within this framework will essentially involve:

- installation of some 300 small emergency maintenance units [unitesd'intervention rapide - UIR] to handle small-scale emergency maintenanceneeds on national roads and wilaya roads;

- preparation and dissemination of bridge management and maintenance guides;- implementation of a pilot maintenance program for municipal roads, designed

to ensure better organization of the management of that part of the highwaynetwork;

- development of a highway network maintenance strategy designed tooptimize works programming;

- implementation of actions geared to the development of the industry producingaggregates and bitumen, and improvement of the quality of road works thanksto improved laboratory perfonnance.

The physical works comprise:

strengthening and rehabilitation of over 4,000 km of roads, including Saharantracks;

construction or rehabilitation of approximately 100 bridges;

construction of priority sections of the East-West motorway, in accordancewith the conclusions of the economic and financial study.

Road maintenance

Many efforts have been made over the past few years in the area of maintenance ofthe national roads, which alone account for over 80% of road transport volumes.

The principal pavement strengthening operations have focussed on the basic economicnetwork, which carries the major part of the country's highway traffic.

Road maintenance budgets have increased substantially over the past few years.

Maintenance budgets more than doubled between 1990 and 1993. Accounting forinflation, this represents real growth on the order of 20%.

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The 1993 highway maintenance budget totaled DA 7 billion, while the total for 1995will be DA 9 billion, or approximately two thirds of the overall highway budget.

This effort in the allocation of budgetary resources to road maintenance will becontinued throughout project execution.

Municipal roads

A study will be carried out within the framework of the Sixth Project to improve themanagement and maintenance of municipal roads. This study will define a pilot maintenanceworks program to be launched in 1996, in order to implement the institutional, financial andtechnical mechanisms necessary to guarantee regular maintenance over the long term. Thenecessary budgetary funding for this program will be mobilized.

Motorway program

While the motorway program responds to a basic aspect of the country's economicdevelopment, its implementation demands financing on a scale incompatible with thecountry's difficult economic circumstances.

The economic recovery strategy consists of allocating available resources to thoseactions that are the most likely to solve immediate problems.

The sector will pursue the motorway works in progress and give priority to workswith the highest rate of return, this being the only way to set up financial arrangements opento participation.

Stimulation of highway studies-and-works market

The highway industry market is presently dominated by enterprises in the publicsector. The objective is to reinvigorate this market through the continuation of a number ofactions, as well as the initiation of new measures, in liaison with the institutions concerned,the principal goal being to gradually expand the field of competition and thereby achievemore efficient performance. The conditions to be met for real and sustainable competitionare currently being reviewed by the Government within the framework of the draft law topromote competition. Thus, and without waiting for formalization of this new actionframework, the Ministry of Infrastructure and Regional Planning will work to achieve itsoverall objective of improved performance by:

gradually strengthening the criteria for evaluating the financial capacities ofroad works contractors submitting bids;

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pursuing its present policy of developing the use of small local contractorswhenever appropriate;

ensuring, as far as public enterprises within its sector of activity areconcerned, that the Government's policy decision is observed, namely that ithave no part in the management of public enterprises, once their liabilitieshave been definitively cleared, whenever this is justified. Within thisframework, a review of the situation of public enterprises in the highwaysector is now being carried out, chiefly for the purpose of determining whichenterprises are actively engaged in an internally generated recovery processand identifying the necessary components for their financial restructuring,based on validated recovery plans and performance contracts. Suchrestructuring is not planned for enterprises in difficulty, which do not showsigns of an internally generated recovery process and meet the criteria forliquidation.

In application of these principles, the treatment of public enterprises in difficultyshould no longer depend on government intervention but should be approached through thenew mechanisms set up, and in particular:

Articles 24 and 25 of the supplementary finance law for 1994, entitling publicenterprises to sell their assets and open up their capital to individuals or bodiescorporate under public or private law. These provisions also representsignificant means of improving the economic efficiency of viable publicenterprises;

the provisions of legislative decree 94-09 of May 26, 1994 allowingenterprises to adapt their staffing to their potential level of activity;

the amendments to the Commercial Code, sanctioning the principle ofbankruptcy and liquidation of nonviable public enterprises.

Concerning public works contractors in the public sector, and in relation to the aboveprinciples and the actions already in progress or planned for the public enterprises, theinfrastructure department has both a specific role linked to its function as owner of highwaysand a general role linked to its mission as a government agency. It should be noted in thisconnection that the Ministry of Infrastructure and Regional Planning has already informed theWorld Bank of the establishment of a unit of economists to monitor this important aspect andto enable our Ministry to gain a strategic vision of the available means of the sector. Withrespect to actions intended to improve the economic efficiency of enterprises and to expandthe field of competition, and to sectoral actions involving public works contractors, these arecarried out, in consultation with the Ministry of Industrial Restructuring and Participation andthe Ministry of Finance, essentially through the Fonds de Participation Construction. They

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are implemented in accordance with the guidelines, objectives, and timing of theGovernment's economic rehabilitation program, which is also under discussion with yourinstitution.

A first basic document entitled "Recovery of the National Economy and RestructuringPolicy" has already been prepared and adopted within this framework, and is mentioned inthe National Planning Council's letter to the Bank of November 30.

The decisions to be taken on a case by case basis, following the review of thesituation of each enterprise as mentioned above, and the changes to be made to thiscomponent within the framework of the Government's economic rehabilitation program, willbe discussed with your institution in terms of their possible impact on the Sixth HighwayProject. This discussion will take place as soon as possible, the conclusions being taken intoaccount during

preparation of the action plans for those areas, and a report will be prepared within theframework of the mid-term review of the Sixth Highway Project.

Highway development

The quality of highway management should be developed in order that the highwaybudgets be utilized more efficiently.

The actions selected within this framework relate in particular to:

the study covering measures to update the highway taxation system, carried outwithin the framework of the National Transport Study;

the creation of a road fund designed to protect the highway maintenancebudgets from unforeseen economic contingencies, make managers moreaccountable, and develop procedures better oriented to improved performance.Its income will come essentially from the proceeds of the user fees identifiedby the highway taxation study, and its expenditure will cover all of therecurrent costs of the highway networks, including strengthening andrehabilitation;

the continuation of an approach launched some two years ago, focussing inparticular on:

(i) quality of the works(ii) bitumen

(iii) aggregates

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(iv) laboratories(v) payments

This approach is part of a process whereby lessons are learned from the past, throughconsultation with all of the actors concerned, as well as from international experience in thisfield.

The corresponding action plans are attached.

Departmental modernization

The conditions for project preparation and monitoring will be improved within theframework of the component of the Sixth Highway Project covering modernization of theinfrastructure department.

Particular emphasis will be placed on strengthening of the capabilities for performingeconomic appraisals of investment projects.

Project selection criteria will be strengthened through the formulation of studyguidelines.

Plans are under way to expand the highway data bank and operation of the networkmanagement systems to the entire priority network by December 31, 1996.

Special efforts will be made to disseminate sample bidding documents and study termsof reference.

Wilaya directorate oversight mechanisms will be set up, through the development anduse of performance indicators and of rapid and reliable information systems.

Staff motivation will be achieved through better personnel management, for examplethrough implementation of an upgrading program for each staff category.

Training

In the area of training, the principal actions will involve development of the InstitutNational de Perfectionnement de 1'Equipement and of the E~cole Nationale des TravauxPublics de Kouba, through upgrading cycles designed to raise the technical level of engineersemployed by the wilaya directorates and public works subdivisions.

A program will be set up under the Sixth Highway Project to provide managementtraining abroad for 500 professionals.

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Assistance to municipalities

Very few municipalities have highway engineering divisions, most of them relying onsupport from the public works subdivisions.

This technical assistance to the municipalities will be clarified and formalized in newregulations to be enacted during 1995 by the Ministry of Infrastructure and RegionalPlanning and the Ministry of the Interior, Local Authorities, Environment, andAdministrative Reform.

Laboratories

A technical audit of the laboratories carried out in 1994 resulted in severalrecommendations designed to improve laboratory performance in the road construction area.

These recommendations related to:

- creation of a laboratory network- redefinition of key skills and functions- regularization of the financial situation and establishment of an investment and

equipment renewal plan- redefinition of relations between the infrastructure department and the

laboratories.

An action plan implementing the above recommendations, prepared by the Ministry ofInfrastructure and Regional Planning, the laboratories concerned, and the Fonds deParticipation Construction, is annexed hereto.

The foregoing represents the major thrust of the highway sector development programto be implemented by the Ministry of Infrastructure and Regional Planning over the next fewyears. We trust that this program will be executed under the best possible conditions, inclose collaboration with the World Bank.

Accept, Mr. President, the assurances of my highest consideration.

The Minister of Infrastructureand Regional Planning

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Action Plans for "Ouality". "Public Works Laboratories" and "Accelerationof Payments and Disbursements"

Ouality Chain

1. The situation of the "quality chain" and the laboratories is described in Chapters 1and 2. In the framework of the project objective to implement a quality improvementstrategy, and following a strategic audit of the four regional laboratories, an agreement wasreached during the appraisal mission on the following:

(a) the laboratories represent a significant asset for Algeria but improvements arenecessary;

(b) the audit report recommendations are endorsed and are the basis for thedetailed action plan:(i) create a network of laboratories, to better share technical information,

but maintaining financial and management autonomy of eachlaboratory;

(ii) redefine and update missions pertaining to the laboratories;(iii) rehabilitate the financial situation;(iv) redefine the relation between the Ministry and the laboratories;(v) launch a systematic quality approach;(vi) reorganize laboratories by competencies;(vii) establish a computerization plan; and(viii) establish a selective plan for equipment.

(c) the Director of Roads decided to:(i) take steps to improve the "quality chain" among local administration

engineers and in laboratory control contracts;(ii) set up specific and progressive criteria to qualify each laboratory for

each tranche of works, thus encouraging them to implement the short-and medium-term audit recommendations; and

(iii) subordinate the access of laboratories to general studies and researchfinanced under the project, to key-action implementation related to thedevelopment of an effective "network" of laboratories in the field oftraining, quality approach plan, computerization, and technicalinformation sharing.

2. Two detailed action plans (in french) are annexed to the policy letter:

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one on "Quality for Studies, Works, Contract Management, Control andCompetition", with 20 specific actions,one on "Laboratories", with 23 specific actions.

Acceleration of Payments and Disbursements

3. DPAE in MIRP, in close relation with main actors concerned, has developed a first-step action plan to address issues described in para. 2.27; this action plan with 5 key actionsincludes an analysis of issues with a sample of contracts and the preparation of a localmanual for payment and disbursement procedures. This action plan (in french) is annexed tothe policy letter.

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Action Plans for "Bitumen Supply and Ouality" and "Granular Materials"

Bitumen Supply and Quality

1. The lessons learned from Highway V project implementation concerning bitumensupply shortage and quality are described in Chapter 2. In the framework of the projectobjective to create a more enabling environment for efficient utilization of scarce resources,and following the audit reports on bitumen supply and quality, agreement was reached duringthe appraisal mission on the following:

(a) the diagnosis and recommendations described in the audit reports are endorsedand the Director of Roads will inform the other decision makers, from thebitumen supply side, Ministry of Heavy Industry, Ministry of Commerce,Sonatrach, Naftec and Naftal, requesting them to take appropriate actions;

(b) the Algerian national working group on bitumen developed the action planbased on the already detailed action plan proposal developed by the auditreports; the key points concern:Supply side:(i) the technical specifications used in future contracts to produce non-

rutting, non-cracking bitumen;(ii) the need to concentrate at least production and distribution in one hand

(for example Naftec) for the bitumen refined in Algeria, and to create acompetitor directly importing road bitumen (for example Naftal);

(iii) the importance of producing appropriate bitumen grades at least in thetwo refineries and to charge the real transport costs;

(iv) the development of a consistent quality control system by the producer;(v) the streamlining of needs assessment and the improved time scheduling

of import ordering, including foreign exchange availability for it;Demand side:(vi) the strong development of a consistent quality control plan for bitumen

binder procurement and production of bituminous mixes; and

(c) the Director of Roads decided to:- pay for the quality control tests to be done by the administration and

launch a data base on bitumen control results;- systematically demand quality conformity certificates when bitumen is

bought by contractors; and- launch a demonstration project on the use of bitumen emulsions.

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2. A detailed action plan of 55 specific actions (in french) on bitumen supply and qualityis annexed to the policy letter.

Granular Materials for Roads

3. Following a national seminar aimed at identifying key actions to improve theavailability and quality of granular materials for roads, an action plan has been developed byDEER and is incorporated in the project. Eleven key actions are described (in french) in anannex to the policy letter.

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List of Studies on Road Sector Policy and Technical Guidelines

Road Directorate (DR)

- Preparation of Guidelines and Recommendations on Highway and Motorway Studies- Preparation of Guidelines on Environment Impact Assessment of Road Projects- Preparation of Guidelines on Economic Evaluation and Selection of Road Projects

Outside Cities- Preparation of Guidelines, and Advice on Geotechnical Studies for Roads and Bridges- Study for the Implementation of a Quality Approach in the Laboratory Network.

Operations and Maintenance Directorate (DEER)

- Study on Organization and Management of Municipal Roads Outside Cities (Part of b- iv - in chapter III)

- Road Maintenance Strategy Study with the Use of HDM III Model on National andWilaya Roads (35,000 kim)

- Audit of Main Quarries; as part of the action plan on Granular Materials- Study to Develop at National level "Technical Certification" on New Technologies

Used for Roads and Bridges.

These studies and technical guidelines have been designed in consistency with projectpriorities and corresponding actions plans. The time schedule of contract launching willflexibly take into account the evolution of relative priorities together with the qualificationsteps of concerned actors. The complementarity between local and foreign expertise will besought from origin to supervision with special care.

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COORDINATED ACTION PROGRAM FOR THE MODERNIZATIONOF THE MINISTRY IN CHARGE OF INFRASTRUCTURE

1. Origin of the action program: This sub-component of US $1.6 million is the resultof an in-depth study of organization and regulations in the infrastructure sector conducted bythe Bank between June 1993 and April 1994. The study has aimed at enhancing the globalefficiency of the operations undertaken by the Ministry and its local offices; it has also bedesigned to support the smooth implementation of Bank projects in the sector. Since thisstudy' has been requested by the Minister himself, it has been conducted jointly with theAlgerian counterpart from the Ministry, based on a substantial contribution from itspersonnel arising from the process of internal examination and review. It has also used theresults of a large-scale survey2 of government officials and of about 150 public and privateenterprises and local communities conducted in 11 of the 48 Algerian administrative districts(Wilayas).

A broad agreement was reached on the identification of needed reforms and a highdegree of ownership of the action program was achieved; the 27 actions included in theaction program, based on Bank's proposal has been graded by the Algerian counterpart; therecent appointment of a senior manager as head of the modernization department has beenone of the signals showing the commitment to implementation of the action program.

2. Strengthening the design of investment programs and projects: The analysis ofexisting investment choice methods reveals serious weaknesses. The major ones relate to thenearly complete separation of preparation of the operating budget from that of the investmentbudget, the inadequacy of economic evaluation, the absence of systematic review of the costsand benefits of major projects during their implementation, and the absence of evaluationupon their completion. Four actions are planned to address this issue: The enhancement ofinvestment selection methods and the review of major investments effectiveness, the settingup of an economic appraisal unit within the DPAE and the launching of a pilot projectdesigned to ensure consistency and trade-offs between operating and investment budgets.

3. Improving the methods used for project studies: The Ministry and its deconcentratedoffices in the Wilayas (and the agencies to a lesser extent) have been analyzed as units

I "Institutional Modernization in the Infrastructure Sector of Algeria" - White Cover - July 1994, EMTPM

2 .Modernisation du Secteur de l'Equipement' - Enquete-Diagnostic realises par le CNAT. Volume I:Entretiens effectues aupres de 5 wilayat - echantillon. Volume II: Rapport d'Enquetes aupres des DTP/DHWdes Entreprises et des Services Locaux, mars 1994.

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producing a variety of complementary services throughout all stages of investment projects,from studies to supervision and maintenance. Because an institutional strengtheningcomponent was included in the World Bank water supply and sewer rehabilitation project, theemphasis of this study was placed on the roads sub-sector. An analysis of recent highway orwater infrastructure projects revealed very frequent cost and schedule overruns and a relativemediocrity in the quality of work.

The poor quality of studies is apparent from the project formulation stage. Six actionsare designed to address the needs in this area: The introduction of a quality control over theterms of reference of complex or large-scale study, the analysis of study quality impact onproject implementation, the assistance in developing partnership between national andinternational consulting/ engineering firms, the experimentation of introducing criticalreview of the quality of projects study, the development of a method to deal with relocationof utility networks, and a "handbook" on Rights-of-Way, and the implementation of a costdatabase.

4. Reform of procurement and contract award procedures: Sound project managementalso requires the prior existence of a "good contract" with the enterprise in charge ofperforming the work. Procurement procedures are widely criticized by the field surveyrespondents -- both the enterprises and the public agencies. Two large actions and a third,smaller one, have been designed to help address this issue: The first would after detailedanalysis of the contribution of standard contracts, prepare and implement up- to- datecontract documents and develop indicators for follow up on delays in preparation of contractdocuments; the second would develop "handbooks" for reviewing bids and for handling ofaward procedures for projects financed by foreign institutions; the third would specify the jobdescription and the training needs of special correspondents to international developmentinstitutions.

5. Facilitation of project execution: Following the analysis of the project preparationstage, the report scrutinizes the administrative and financial management of projects. Thisanalysis reveals excessive complexity, incomplete information on regulations and procedureswithin the public sector, and unwillingness to accept individual responsibility. This results inmisspent time and energy and disputes with contractors, which are a source of waste andfrustration. Thus, the "enabling" measures proposed in the report should make it possible toimprove administrative efficiency. Experience worldwide has shown that competition amongcontractors plays a driving role in this respect. Large competition has only recently beenallowed in Algeria, and even now there are only few deliberate actions to encourage it -- forinstance by advance publication of preliminary project timetables or identification of the mostmobile contractors so as to broaden the bidding. An action is therefore planned to developinformation of enterprises on forecasted programs and bidding;

6. Promotion of private sector participation: An analysis of the infrastructure sectormust include consideration of the problems and possibilities of the public and private

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enterprises that build or maintain the infrastructure. On the basis of the field survey of147 enterprises, a number of regulatory and material problems emerged. Relations betweenenterprises and the department are not standardized and rely much too heavily on ad hocpersonal relationships. This is inimical to accountability and, indirectly, to efficiency. Inaddition to the procedural simplifications previously mentioned, the enterprises manifest awish for standardizing relations among the various participants in the process, simplifying theprocess of procurement, improving technical staff, and institutionalizing the interface with theMinistry offices. An action is included to set up a monitoring mechanism to track privatesector participation. An opening of procurement and contract-award regulations hascontributed to reducing some of the formal discrimination against the private sector, but itsparticipation is still minuscule. Yet, while weak, the private sector has some basicadvantages in terms of flexible management. It is therefore recommended to exploit thecomplementarity between public and private enterprises which was underlined by a numberof respondents and an action has been designed to deal with this topic. Delays in payment arerightly criticized by all types of enterprises, national public, local public and private,responding to the survey. Payment delays embarrass and weaken contract managers. Thesituation is even worse when foreign currency payments are late -- 12 months are routinelycited -- because this results in early disputes . An action is planned on handling delays inforeign currency payments.

7. Modernization of budget procedures and management tools: The analysis of theapplicable budget procedures within the Ministry and the agencies revealed that substantialprogress has already been made by discontinuing the use of the single Wilaya budget, andthat the rules and procedures have been thoroughly assimilated. However, a great dealremains to be done in order to provide the managers with the indispensable tools they need tosupport the exercise of managerial initiative. Two actions have been planned to developinformation on costs and return on services, and to enrich the content and methodology ofthe budget preparation phase.

Moreover, managers are not actively encouraged to assume responsibility, and arecorseted by a plethora of controls, ex ante and ex post. Without questioning the basic intentof the structure of controls (i.e., preventing waste, fraud and misallocations), it is possibleand essential to strike a new, much simpler balance. This simplification should go hand inhand with the gradual introduction of management by objectives, of use of all informationneeded for comparison among offices or individuals, and of explicit recognition of individualand group achievements. An action has been designed to prepare senior managementtraining.

To increase operational efficiency, a plan of action for gradually extending computeruse has been included in this sub-component, starting with the simplest and cheapestapplications, and promoting their use by stepping up the pace at which computers are madeavailable to the offices or individuals who are the most responsive in using them well.

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8. Strengthening and developing human resource management: The following keyproblems in human resource management were pinpointed: responsibility for humanresources widely dispersed through the central administration; substandard initial training,both in termns of curricular content and in terms of quality of teaching; lack of basic data onpersonnel and of expeditious ways to exchange and summarize data which exist; failure toapply merit-based performance evaluation rules, especially for the purpose of allocatingbonuses and allowances; poor mobility among higher-level staff. Three far-reaching actionshave been planned to introduce a full-fledged human resources policy, through institutionalreorganization, methodological assistance in surveying and managing staff and posts,assistance in setting up the system of adjusted bonuses to individual performances anddevelopment of institutional communication.

9. Amplify the support to the Wilayas and clarify the role of local offices for assistanceto the municipalities: Because of the vast scope and delicate implications of the subject, thereport provides a limited synthesis of the main results of the deconcentration anddecentralization policy conducted in this sector. It is based on data from the field survey ofenterprises and public officials. As for the first part, deconcentration, it was found that thetechnical offices did gain the needed autonomy and national policies were more closelyimplemented after the system of exclusive reliance on the Wali (prefect) was abandoned. Abetter balance between the technical and the political has been achieved. However, there isstill much to be done to assist, support, and guide the technical personnel within eachWilaya. An action has been designed to consider regional arrangements in order to supportthe Wilayas. On the other hand, the technical directors, and especially their subdivisionofficers, provide technical assistance to the municipalities, which appreciate this service. Butthere is no consistent framework for this service. This issue is the starting point for anaction included in the program. It will assess, among other questions, if standard contract oragreement should be drawn up for each category of services provided by the technicaloffices. Technical assistance should also regularly include a component for on-the-jobtraining of municipal personnel. Where agencies play a predominant role in projects designand execution, the policy of delegation should be pursued; an action has been designed inthis respect to establish formalized contractual relations.

10. Support to the process of change: The process of change involved in the institutionalmodernization recommended in this study has already been launched as the report was beingwritten, and has seen its first concrete applications by the higher level staff at theMinistry.This is in keeping with the original vision of the study, i.e., to make sure thatinstitutional modernization in all its aspects is embraced by the top management and future"conductors" of the modernization process. It would then become possible to move to thesubsequent stages: the initial results should be highlighted in a widely circulatedcommunication; the different staff levels and provincial offices should be brought into themodernization activities; an action aiming at the general support to the modernization taskforce has been included in the program.

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11. List of Titles of Specific Actions

On the basis of the list of 27 actions to strengthen institutional capacity, the4 following packages of terms of reference grouping related subjects have been prepared byMIRP, to call for tender:

(i) financial and budgetary procedures,(ii) operational capacity,(iii) external communication and partnership,(iv) human resource development and analysis of cost and return on services.

1. The first package contains the following:

* Action Al: Consistency between investment and operating budgets.

* Action B20: Remedies to payment delays, both in foreign and domesticcurrencies.

* Action Bi1: Appointment and training of special counterparts to internationalfinancing institutions.

* Action B2: Strengthening of budgetary preparation.

2. The second package contains the following:

* Actions A2/A4: Enhancing investment selection methods and reviewing theeffectiveness of major investments.

* Action A3: Supporting the setting up of an economic appraisal unit within theDPAE.

* Actions B1/B2: Quality control action on specifications (and terms ofreference) for large-scale studies. Analysis of effect of studies on projectimplementation.

* Action B5: Experimentation on "cross-comparison with the study"(contradiction a l'etude).

* Action 136: Study of conditions for the implementation of cost indexes.

* Action 138: Assumption of responsibility for problems arising from rights-of-way and from utility relocations.

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* Action B9: Enhancing the quality of procurement and contract documents, andmonitoring preparation times.

* Action B1O: Strengthening the quality of bid evaluation.

3. The third package will include the following:

* Action B3: Partnership between national and international consulting firms.

* Action C3: Development of institutional communication.

* Action El: Development of a partnership between enterprises with a differentstatus.

* Action E2: Development of enterprise sector information on prospect andplanning of infrastructure operations.

* Action D4: Establishing formal contractual relations between the ministry andthe agencies.

4. The fourth package will include the following:

* Action C2: Adjustment of bonuses to individual performance.

* Actions C4/C5: Human resource management, organization and operatingmethods.

* Action B23: Analysis of cost and return on services.

N.B. Numbers refer to the Modernization Study numbering.

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ECONOMIC EVALUATION

A. Road Strengthening and Rehabilitation Component

Methodology used

1.01 Adaptation of the HDM III model to Algerian conditions is still in progress,preventing its use in the economic evaluation of the component which, therefore, was doneby CTTP on the basis of the locally-developed EVEC (for EValuation EConomique) model.EVEC is a computer model designed to perform a basic economic evaluation of periodicmaintenance. Its review by the Bank showed it had the right structure to handle this kind ofanalysis. The methodology, similar to the one used in HDM III, compares estimates of theroad agency costs and of vehicle operating costs between two scenarios: without and with theproject. These costs are defined as a function of road characteristics and conditions. Costsand benefits to society are apprehended by discounting them at 10 percent per year, andeliminating taxes from the calculation. The analysis assumes free-flow conditions.

1.02 The condition of the road is assumed to deteriorate as a function of time and traffic.Once the two key parameters are entered (namely, roughness and deflection indexes forhomogeneous sections of a particular road, measured in the course of preparation of detailedengineering studies), the model computes the roughness progression without the project,based on deterioration laws defined by the HDM III model. Depending on the surfacetreatment selected under the project, a value is given to road roughness and deflectionindexes at the conclusion of works, and entered in the model for prediction of roaddeterioration with the project. The EVEC model does present some drawbacks, the main onefrom limitation of the analysis period to 10 years: it does not allow to compare maintenancestrategies, and integrate impacts deferred to after year 10. The model further lacksflexibility in the definition of the best maintenance strategy without the project, testing theamount of pothole patching is a preferable approach that HDM III makes possible, because ithas important bearings on the calculation of rates of return. Nevertheless, the EVEC modelprovides a good approximation of the economic value of road strengthening and rehabilitationworks.

Vehicle operating costs

1.03 Thorough studies have been carried out under the National Transport Study fordeternination of main features of the Algerian vehicle fleet, its composition, age, and

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utilization factors. Both the analysis and results are contained in a Special Report' dated inSeptember 1992. These results have been updated by CTTP on the basis of mid-1994 prices.The methods and mechanistic relationships used for prediction of vehicle operating costs aredirectly derived from Bank research on the subject. The type of surface, and the horizontaland vertical geometry of roads under study have been parameterized for 3 main categories ofthe environment: (i) Ti is for low-gradient and low-curvature roads; (ii) T2 is for low-to-average-gradient, and average-curvature roads; (iii) T3 is for average-to-high-gradient, andhigh-curvature roads.

1.03 Six categories of vehicles are representative of the Algerian fleet:

- P1 is for the light vehicle, a composite of the Renault 19 (< 1,800 c.c.). Itrepresents around 40 percent of the vehicle fleet and travels an annual distance of 21,500 kmon average.

-P2 is for the pick-up truck, featured as the Peugeot 504 of such type,carrying a 1-ton payload, and running an average 24,000 km annually.

- P3 is for the average bus: the locally assembled SNVI 49V8 with 50 seatsand travelling 64,000 km per year.

- P4 is for the light truck, the K66 SNVI, with a gross vehicle weight (GVW)of slightly less than 6-ton, and annual travel distances of 64,000 km.

- P5 is for the heavy truck, a SNVI c 250, or equivalent, with a 16-ton GVW,and annual travel distances of 74,000 km.

- P6 is for the tractor/semi-trailor is the SNVI TB 3051, with a 25-ton GVW,and annual travel distances of 74,000 km.

1.04 The average speed is assumed to range from 60 km/h for heavy vehicles to 70 km/hfor light ones. The average useful life is between 12.5 and 15 years. The economic fuelcosts were based on ex-factory prices quoted by Naftal, which were found to be close toborder prices. The maintenance costs reflect average market conditions.

i/see: Bedat & Dar Al-Handasah: "Etude Speciale: Couts de Transport. Volume 11: Couits d'Exploitation desVehicles" September 1992

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1.05 The results of VOCs' calculations are given in table 1.

Table I Evaluation of Vehicle Overatinz Cost (in Algerian Dinar per Veh/km)

costitems Pi P2 P3 P4 P5 P6

Fuel 0.283 0.494 1.089 0.814 1.380 2.132

Tires 0.048 0.110 1.132 0.326 1.529 2.095

Lubricants 0.043 0.041 0.065 0.072 0.065 0.108

Maintenarce 1.327 1.544 9.492 3.615 10.833 21.420

Capital Cost 2.619 2.364 8.123 2.165 5.471 8.235

Crew 0.000 0.000 1.873 1.745 2.262 2.132

Overhead 0.009 0.010 0.000 0.305 0.000 0.000

Total 4.329 4.563 21.774 9.042 21.540 36.122

ource: CTTP."Schtma lDirecteur Routier National. Actualisation des coufts d'exploitation des vehicule's" Otober1994.(VOCs are computed at roughness 2.0 IRI on slightly curved roads in relatively flat terrain - Ti environment)

Investment costs

1.06 They are estimated in June 1994 prices based on the detailed engineering studiescarried out by CTTP for each road, which detail the bill of quantities per cost item'.Average tax inclusive costs per kilometer amount to AD 5.6 million and AD 3.2 million forstrengthening and rehabilitation works respectively. Implicit and explicit taxes have beenexcluded for the economic analysis; they include the value added tax which, on average,represent 13 percent of tax-free estimates for works carried out by local contractors, and anestimated average of 7 percent corresponding to taxes and customs duties paid on materialsand equipment purchased by contractors. Several technical options have been considered: (i)a base-coarse gravel-asphalt layer of various thickness depending on the extent of structuraldefects, to obtain a roughness index of 2,000 mm/km; (ii) a base-coarse gravel layer, toobtain a roughness index of 2,500 mm/km; (iii) surface renewal only, with has no effect onroughness. Physical contingencies represent 10 percent of base costs. The works areassumed to last 18 months on average from start to finish.

Maintenance costs

1.07 Without the project, the strategy is to provide for a minimum standard of servicethrough regular maintenance and spot repairs. The average maintenance costs per km andper year are estimated around AD 200,000 in year 1, to AD 800,000 in year 10 (plus or

2/CTTP:"Preparation du Vleme Projet Routier.Estimation des Projets de Renforcement et RWhabilitation" October1994.

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minus 20 percent, depending on traffic intensity and the initial condition of the road). Withthe project, road maintenance costs are considered negligible during the first three yearsfollowing completion of works, and rise thereafter from about AD 20,000 in year 4, to AD40,000 in year 10.

Traffic levels

1.08 They were estimated per homogeneous section of each road on the basis of trafficcounts dating back to 1990-1991and updated to 1994, assuming regular traffic growth at 5percent per year. It certainly gives uncertain estimates. On the other hand, the trafficcounts that could have been made in late 1993-early 1994 would have been much affected bythe deep economic crisis that Algeria is through, and which is expected to be over by end ofthe stabilization period. On balance, relying on estimates reflecting average conditions thatexisted before the crisis may give a more reliable picture of the long term trend, and a betterestimate of the economic value of road projects which carry their effects over a long period.The uncertainty inherent to the choice made can be mitigated by checking the impact oflower first-year traffic on the economic rates of return in the sensitivity analysis.

Results of the economic calculation

1.09 As one normally expects for investments of that nature, the road strengthening andrehabilitation program is highly justified, with rates of return ranging from 40 to 89 percent,for strengthening (weighed average of 67 percent), and from 18 to 65 percent, for roadrehabilitation (weighed average of 44.7 percent). Table 2.1 and 2.2 summarize the results.

Table 2.1 Road Strengthening Component

PROJECT LENGTH INVESTMENT AVERAGE 1994 RATE OF(AD MILLIONI INVESTMENT DAILY TRAFFIC RETURN

PER KMITTCI MAXIMUM MINIMUM

(AD MILLION) TRAFFIC TRAFFIC

RN 06 MASCARA 27 190.1 7.3 7577 6049 72.2

N 08 BOUIRA 20 84.5 4.3 5585 4189 64.8

RN 23 16 96.9 5.4 9302 7505 83.3MOSTAGANEM

RN 21 GUELMA 23 107.4 4.4 6400 6400 44.4

RN 05 BOUIRA 49 217.9 4.5 15990 9762 76.3

RN 05 MILA 37 216.8 6.0 10830 7651 56.3

RN 26 BEJAIA 62 377.2 6.4 14965 7238 60.9

RN 0S MEDEA 15 101.6 6.5 3937 3655 43.9

RN 12 BOUMERDES 46 257.6 5.6 8917 8917 79.2

RN 28 M'SILA 28 154.5 5.0 3609 3160 64.6

RN 46 BISKRA 54 320.8 5.9 4465 2204 39.5

RN OS SETIF 33 211.4 6.1 17380 13698 88.6

ToTAL GENERAL 410 2336.7 5.7 l

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Table 2.2. Road Rehabilitation Component

PROJECT LENGTH INVESTMENT AVERAGE 1994 RATE OF(AD MILLION) INVESTMENT DAILY TRAFFIC RETURN

PER KM(TTCI MAXIMUM MINIMUM

lAD MILLION) TRAFFIC TRAFFIC

RN 06 EL-BAYADN 24 56.9 2.4 2069 2069 49.3LOT I

RN 06 EL-BAYADH 24 56.8 2.4 2069 1336 42.8LOT 2

RN 06 ADRAR 60 106.7 1.8 770 770 17.6

RN 06 SAIDA 32 105.9 3.3 3300 3300 34.0

RN 30 TIZI-OUZOU 49 157.5 3.2 5200 2500 64.5

RN 18 MEDEA 67 195.2 2.9 2961 2718 48.4

TOTAL GNEML 256 679.0 2.65

1.10 The sensitivity analysis was carried out to ascertain which parameters would becritical to achieving a satisfactory return on the investment. Three factors were tested:

- investment cost estimates;- the assumptions on daily traffic;- the traffic growth rate;

A sample covering all rehabilitation sub-projects, except the RN6 Saida, and thestrengthening sub-projects in relation to RN6 Mascara, RN23 Mostaganem, and RN26 Bejaiabrought strong evidence that the assumptions on traffic growth rates have very little impacton the ERRs. Should actual traffic be stagnant from year 1 onward, the ERRs would only bereduced by 7 to 15 percent, depending on project roads. As the traffic is quite high in mostcases and maintenance is generally overdue, it comes to no surprise that main risks areassociated with errors in the investment cost estimates and the daily traffic counts. Table 2.3shows that a quite substantial margin of error could be tolerated without impairing theproject's economic justification.

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Table 2.3. Road Rehabilitation Component: sensitivity analysis

Road sub-projects time investment cost should share of base case daily trafficincrease to bring NPV to 0 which brings NPV to 0

1. Strengthening:RN6 Mascara 7.1 6%RN8 Bouira 6.9 9%RN23 Mostaganem 9.0 7%RN21 Guelma 4.4 15%RN5 Bouira 13.5 3%RN5 Mila 7.7 7%RN26 Bejaia 7.4 9%RN8 Medea 3.5 17%RN12 Boumerd6s 115 5%RN28 M'sila 6.5 8%RN46 Biskra 3.3 19%RN5 Setif 13.0 4%

2. RehabilitationRN6 El Bayadh. LI 3.7 5%RN6 El Bayadh. L2 3.1 17%RN6 Adrar 1.4 68%RN6 Saida 2.7 25%RN30 Tizi Ouzou 6.4 12%RN18 Medea 4.3 14%

B. Rehabilitation of bridges

1.11 No detailed economic analysis is available at this stage for the bridge rehabilitationcomponent. The program, estimated at a total cost of some US$ 13.2 million, provides forexecution of works in two tranches. The first tranche comprises 19 bridges on heavilytrafficked roads (average daily traffic in a 3,400-25,000 vehicle-range) and presentingrelatively simple technical problems. The second tranche comprises 14 bridges requiringcomplex studies and works. The detailed engineering studies for the second tranche will befinanced under the project. Ongoing studies for the first tranche are financed by theGovernment, and related works are not likely to start before year 2 of project execution. Theeconomic evaluation will therefore be carried out on the basis of a methodology approved bythe Bank. This methodology was tested on a sample of 8 bridges, giving a broad indicationon the likely economic rate of return of investments under the component. It is understoodthat no sub-project would be financed by the Bank unless it satisfies the condition of aminimum 12 percent rate of return.

1.12 A computer model has been developed in Hungary to guide choices by the Ministry ofTransport on rehabilitation and reconstruction of bridges. It was updated several time, andthe latest version was issued in March 1994. The intrinsic quality of the model and thecomplete lack of expertise on the subject in Algeria led the Bank to recommend its adaptation

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to local conditions. A copy of the model was given to an Algerian delegation which visitedHungary shortly before Bank appraisal. They had brought technical data on 8 bridges of thefirst tranche which were used by the Hungarian specialist to run the model for demonstrationand training purposes. Main findings are summarized hereafter.

1.13 Methodology The computer model compares the flows of costs and benefits over 30years with, and without bridge repairs.

(a) On the infrastructure side, the model includes deterioration functions calibratedon the basis of data on bridges that never underwent major repairs. The data base spansseveral decades. The investment strategy comprises 7 standard options: (i) raising the loadcapacity; (ii) widening the bridge; (iii) a combination of the two previous options; (iv)periodic maintenance; (v) complete reconstruction; (vi) closing the bridge, and substituting itwith a pontoon or a ferry boat; (vii) reconstructing the bridge and road connections. Anoption (viii) allows to consider any other possible solutions. The characteristics of theexisting bridge that are processed relate to its geometry, the type of construction, the surfaceroughness along the deck, the utilization constraints to traffic in terms of speed and loadfactors. The characteristics of access roads are also taken into consideration: gradient,curvature, width, and surface cover.

(b) On the traffic side, vehicle operating costs are measured in accordance with thethe traffic composition which includes 5 categories (light vehicles, light trucks, heavy trucks,semi-trailers, and buses). The model also allows for computation of travel time costs.

(c) The benefits come from improved traffic conditions. Without repair, the bridgewill reduce the average speed of vehicles, especially if one of the lane has to be closed, andforce diversion of an increasing share of the heavier traffic component to other itineraries,thereby increasing operating costs and travel times. Savings on vehicle operating costs arealso computed if the bridge is resurfaced. Traffic was assumed to grow at an annual rate of 5percent.

1.14 Notional results Eight bridges were summarily analyzed and economic rates ofreturn were found ranging from 22 to 68 percent, with a weighed average of 46.8 percent.The main characteristics of the calculation are shown in table 3.

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Table 3 Sample analysis of the economic dustification of the bridge component

location capital cost length 1994 traffic percentage of N.P.V. IRR(in AD million) (in m) (average/day) light vehicles (AD million)

Oued Ghroura(RN8 Pk 30.5) 7.9 15 5390 81.5 % 3.6 23 %

Oued Hamidou(RN8 Pk 39,1) 3.1 12 5390 81.5 % 1.0 38 %

Oued Barek(RN29 Pk 46) 12.1 43 8613 74.8 % 3.3 31 %

Oued Ghraba(RN24 PkIlO) 1.5 14 1535 50.6 % 0.3 22 %

Oued Kniss(RN113 PkO.2) 45.1 109.5 4500 88.9 % 11.2 68 %

Boufarik ramp(RN4 PkO.6) 8.5 40 18140 69.5 % 2.1 33 %

Oued Harrach(RN61 Pkl3) 9.7 40 9780 67.8 % 5.5 57 %

Oued Chiffa(RN4 Pk17.5) 35.0 49 8228 61.7 % 11.0 33 %

M :\RAY\annex8.sar

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MAINTENANCE STRATEGY AND DEVELOPMENT OF NETWORK-BASEDMAINTENANCE

1.01 Tight budget constraints have long been a major determinant of the road maintenancestrategy in Algeria, and will so remain in the medium term as the Government has committedto reducing the public deficit and reallocating resources to the productive sector under theStabilization Program approved by the IMF in 1994. The national road network is the onlynetwork which receives regular maintenance within an explicit strategy. For roads of theWilaya and the municipal networks, technical priorities are assessed by the decentralizedpublic works administration, but the decision on its road budget is made by the Wilayaassembly alone, and budget implementation remains vulnerable to severe budget scarcity; theannual Wilaya road recurrent budget, for instance, averaged about AD 650 million during1990-93, but actual spending was less than two-thirds of budgeted amounts partly due to latebudget opening for CW. Funding shortages are even more severe for municipal roads outsidethe perimeter of cities; only 20 percent of the some 1,450 municipalities have resourcesavailable for road maintenance; the remaining 80 percent follow the implicit and costlystrategy to use investment subsidies from the state investment budget for reconstruction of theroad when it finally collapses after years of maintenance neglect. As far as national roads areconcerned, the large disproportion between available resources and the extent of maintenanceneeds somewhat facilitated decision on how to allocate funds since critical priorities wereeasy to figure out based on good engineering judgment. More analytical network-basedmethods will be needed, though, when the ongoing effort to catch up with the roadstrengthening backlog comes to an end. They are being developed under the Fifth HighwayProject.

A. Main thrust of the current strategy for national roads

1.02 MIRP has direct responsibility to maintain some 26,000 km of national roads, orabout 27 percent of total. The budget restrictions are such that the basic economic roadnetwork (about 10,000 km) takes a majority of resources allocated to roads. Issuance, in thelast two years of guidelines for strengthening, rehabilitation and maintenance works was animportant step toward greater cohesion in the maintenance policy followed nationwide anddefinition of technical standards that had previously been weakened by the excess of roadmanagement deconcentration. These guidelines are being disseminated through seminarsorganized by CTTP.

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1.03 The main unpaved national roads totalling 3,600 km are found in the South; theyhave not been maintained for more than 15 years, and the low standard of service offered tousers, predominantly trucks, is gaining more visibility. This, together with such equityconsiderations that most Algerian natural resources originate in the South led the Governmentto promote road improvement there, starting with the definition of a maintenance strategythrough a pilot program to be implemented under Highway VI.

1.04 To date, the strategy for paved roads maintenance provides for systematicstrengthening of the "basic economic network" that includes some 5,200 km of roads withdaily traffic above 3,500 vehicles and combining around 60 percent of the Algerian roadtraffic. Road strengthening in Algeria is an elaborate and costly treatment designed to adjustthe pavement bearing capacity and level of service to larger and heavier traffic, and to extendthe economic life of a road for a very long period, provided periodic maintenance is donethereafter when needed, which represents an average at regular intervals of about 12 years.The treatment includes a 15-20 cm-thick layer of base course gravel asphalt mix ("gravebitume") covered with a 5 cm-thick asphalt concrete overlay. Results are generallysatisfactory, but there are some cases where structural defects were not properly detectedleading to fast deterioration of the road soon after completion of strengthening works.Overlay ("rechargement") is a cheaper alternative to road strengthening for roads of lessertraffic, consisting of a 5 to 8 cm asphalt concrete overlay alone. Following bad experiencesand for high traffic roads with very weak pavement structures, it is seldom used, as thepavement strengthening option is always selected when it achieves a minimum rate of returnof about 25% on the investment, even though higher rates would be obtained under theoverlay option. The portion of the basic economic network yet to be strengthened includesabout 3,000 km, and the objective is to complete the program within 10 years. At currentAD 4.5 million per kilometer, the annual budget for national road strengthening is estimatedat close to AD 1.4 billion.

1.05 Road rehabilitation in Algeria applies to roads in fair-to-poor condition with dailytraffic at intermediary level (between 1000 and 3,500 vehicles). It consists of a 15-20 cm-thick layer of base coarse gravel ("graves concasses non traitees") covered with an asphaltconcrete overlay or, alternatively, a double or triple layer of surface dressing with stoneaggregates of a diameter of 3-8 mm at the top and 15-25 mm at the bottom. The works aredesigned for a 10-year life expectancy and constitute an interim treatment pending executionof more expensive strengthening works when traffic growth makes it economically justified.The cost per km is around AD2.3 million at present. Whereas rehabilitation used to becarried out selectively on the most damaged sections of a road, the policy is now to do it onits full length but adapting the base course presence or thickness to the structural and levelingneeds; this approach enables a "route approach" more adapted to user needs and safety. Thenetwork that would normally fall under this maintenance policy includes 4,000 km ofnational roads, giving annual work programs of 400 km on average at an estimated cost ofAD 1.2 billion. The budget constraints only allowed for implementation of 50 percent of thedesirable rehabilitation program in recent years.

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1.06 Periodic maintenance should normally be carried out when needed, i.e. on average,at 10-year intervals with the hypothesis that surface dressing quality/lifetime increases,implying annual treatment of 2,200 km of national roads at an estimated cost of AD 2.5billion. The actual length maintained decreased from 1,253 km in 1985 to 700 km in 1992.A much larger budget in 1993 allowed to carry out periodic maintenance over 1,568 km ofnational paved roads. The 1994 budget is unchanged from previous year in nominal terms,but has been eroded by inflation and will only allow for periodic maintenance of 1,253 km asin 1985, representing a 57 percent coverage of normal requirements. Periodic maintenanceconsists in a "monocouche" or a "bicouche" surface dressing. Current techniques makesextensive use of cut-back bitumen which is both expensive and irregularly supplied.Development of cheaper alternatives, like emulsions, will be actively pursued under theproposed project. A 5 cm asphalt concrete layer is the usual treatment for high traffic roadsof the basic economic network.

1.07 Routine maintenance is mostly executed by force account across the national roadnetwork. More than 7,000 workers are employed; half of them are journeymen. The extentof surface dressing vary between 1,500 and 2,000 km annually while patching works varyfrom 1.7 to 3 million square meters per year. Other tasks, like clearing of ditches andculverts, are performed in adequation to needs. Overall, routine maintenance is budgeted foraround AD 650 million which is satisfactory. The funding gap is essentially in relation toperiodic maintenance for which an additional AD 750 million would be required, raising thetotal allocation under chapter 35-12 of the current road budget from AD 1.6 billion to AD2.4 billion in 1994 prices.

1.08 A maintenance strategy has yet to be defined for bridges. The national roadnetwork comprises a total of 1,789 bridges, or two-third of all bridges in Algeria. Recentsurveys showed that as much as 271 bridges were in need of extensive repairs, calling forsubstantial increases in budgetary allocations of AD 126 million in 1993, cut to AD 94million in 1994. A pilot program will be launched under the proposed project coveringneeds of 40 bridges located on roads of the basic economic network. The objective is toproceed fast with local capacity building in the area of technical studies and preparation ofdetailed engineering documents, and encourage development of specialized units in existingenterprises for bridge repairs by increasing the scale of bridges-related public worksprograms.

B. Development of network-based maintenance: local application of the HDM III model

1.09 Development of a road inventory data base ("Banque de Donnees Routieres, orBDR) covering 5,069 km of main paved roads has been contracted out by DEER to CTTPwith financing provided under the Fifth Highway Project. Implementation has been delayedby insecurity and slow data transmission by field units. About 60 percent of data collectionhad been completed by mid-1994 (none about deflection though), and the contract is likely toextend through 1995, well past the initial completion date of December 1993. The BDR

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builds on a traffic survey system established by LNTP during 1985, and relies on annualcollection and update of visual data by the regional public works department, supplementedby roughness and deflection measurements conducted by centrally-based teams. Systematicborings are conducted alternatively on both sides of each lane every 4 km to carry out testsof structural soundness of the roads. The main equipment used consists of 1 bump integratorand 1 APL 25 for determination of roughness indexes, plus 1 deflectograph. The systemrepeats measurements at 4-year intervals, and covers all the information needed forpreparation of maintenance programs, combining the road inventory and traffic data. Foreach link, it should register the following information:

(a) road surface and pavement condition (roughness, depressions, texture,potholes, rut depth, patched area, edge damage, structural condition);

(b) traffic (daily traffic by type of vehicles, loading patterns);

(c) inventory update (age of pavement, nature and date of works completed);

(d) work activities (unit costs and quantities per task); and

(e) committed programs (planned dates, technical characteristics, estimated costs).

The traffic counting system relies on a combination of fixed and mobile recorders, theformer covering about one tenth of the network. It has not been operational since 1991because transport restrictions did not allow to keep up with the required schedule of fieldsurveys, and fixed recorders were increasingly malfunctioning. Renewal of the countingequipment will be financed under the proposed project. For the time being, economic studieshave assumed constant traffic growth at an annual rate of 5 percent from the last availabletraffic counts dating back to 1991 or earlier to estimate the 1994 traffic. This assumption isvery questionable, and the inherent uncertainty it creates can only be dealt with throughadequate sensitivity analysis.

1.10 Another contract to implement HDM III model and adapt it to Algerian conditionswas awarded to CTTP in 1991 and is financed under the Fifth Highway Project. The ideawas to make a first application of HDM III limited to the 5,000 km of the basic economicnetwork for preparation of the road strengthening program under the proposed project. Bymid-1994, the study had only reached mid point. Its current status is given hereafter.

(a) The primary calibration of the road deterioration model is completed; thevehicle classes have been determined and vehicle operating costs werecomputed based on surveys executed in 1991. Values were assigned to theroughness-age deterioration factor applicable to each major climatic region,and other technical factors representative of techniques used in roadconstruction and repairs. Unit costs were initially estimated in 1991 prices and

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later updated to 1994. Changes in relative prices triggered by the devaluationof the Algerian dinar in 1994 and uncertainties in the distribution betweenlocal and foreign cost components makes it necessary to carry out new updatesof economic parameters which will be done before year end.

(b) First simulations were carried out late in 1993 over 2,548 km of roads alreadyregistered in the data base, including the roads selected for strengthening underthe proposed project. These roads were grossly divided into 130 homogeneoussections based on 5 classes of daily traffic and 4 classes of structural numbers.Four strategies were devised other than the base case providing for patching ofall potholes and other routine maintenance, namely:

overlays, either done irrespective of the actual road condition at regularintervals of 5 years, with a 2.5 cm-thick bituminous layer, and 8 yearswith a 5 cm-thick asphalt concrete overlay; or triggered whendeterioration thresholds are reached: deterioration over 20 percent ofthe pavement surface within 9 years with addition of a surface dressingwhereas roughness indexes getting above 3,000 mm/km within 10 yearswould call for implementation of the asphalt concrete option;

strengthening, with thickness of the base (coarse gravel asphalt mix)varying from 12 cm for traffic below 4,000 vehicle per day, to 20 cmfor daily traffic of 10,000 vehicle or more; this option is selected whenroad roughness reaches 4,000 mm/km within 15 years of the laststrengthening works;

periodic maintenance, then strengthening: under this option, periodicmaintenance is carried out until the above-defined conditions forstrengthening are met; the asphalt concrete option prevails for dailytraffic of 4,000 vehicle, and is substituted by a surface dressing belowthat level;

strengthening, then periodic maintenance, an option that combines inreverse order the specifications of above strategies.

1.11 Preliminary results suggest that strengthening is the most economical option for only20 percent of the roads reviewed, a conclusion that seems at odds with the "heavy"maintenance strategy favored by the road administration to date. Clearly, the study needs tobe refined before more definite conclusions can be reached; the pavement deterioration lawsof 5 cm overlay and thick strengthening over existing pavement with various structuralstrength levels need to be calibrated in Algerian climatic and material conditions.

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(c) Refined calibration of the HDM III model is essential to ensure accuracy of itsprediction, and will be carried out before December 1994 with support fromforeign consultants financed under the Fifth Highway Project. A road samplerepresentative of the local diversity will be selected to carry out comparisonsbetween the observed and the predicted deterioration rates. An ongoing studyon performance of 14 sections recently strengthened, also carried out byCTTP, will generate a wealth of relevant data.

1.12 The proposed project will finance a second stage of the study to cover a total of35,000 km of roads.

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FUNDING OF MUNICIPAL ROAD MAINTENANCE

1.01 The municipal road network includes 50 percent of all roads in Algeria and a thirdof paved roads. Municipalities are entrusted with management and development of thisnetwork under supervision by MICLERA, but they have neither the internal technicalexpertise nor the financial resources to manage their roads, except for an estimated 20percent of them (300 out of some 1,540 municipalities). Municipalities receive technicalassistance from the territorial subdivisions of DTPs. Road works used to be carried out inthe past by the "entreprises communales" that municipalities had set up to cover the wholerange of their infrastructure maintenance needs. These enterprises were poorly managed andcalled to execute all kind of works not always fully funded. Many have been liquidated.Notwithstanding a high level of employment, the Municipalities have limited force-accountcapabilities, and road works are generally contracted out.

1.02 Revenues raised by local Governments are small, and most municipalities heavilyrely on Government subsidies channelled through the Fonds Commun des CollectivitesLocales (FCCL) to balance their budget. Nearly 90 percent of budget resources are pre-emptied for coverage of personnel costs (70 percent), social programs (20 percent), and thelegally-imposed minimum participation to capital expenditures (10 percent). Of theremaining 10 percent, only half goes to road expenditures estimated around AD 500 millionat present for the entire municipal network (a paltry US$ 250 per km on average). Meagerinvestment resources under local budgets rarely find their way into road programs, given themany higher priorities that exist for primary education, health care, etc.. Road capitalexpenditures are mostly dependent on subsidies allocated by FCCL to priority projectsscreened at the Wilaya level. The difficult situation of local finance and the pressure ofsocial needs give few opportunities to MICLERA to influence the local budget structure. Asa result, municipal roads are neglected, and 60 percent of them are in bad condition. Theeconomic consequences are severe, in terms of higher vehicle operating costs and erosion ofthe road capital stock. A preliminary assessment of associated losses have them around US$100 million per year. The study on municipal roads carried out by CTTP will generate moreprecise data on economic losses from maintenance neglect.

1.03 Within the national plan, the Plan Communal de Developpement (PCD) financesprojects catering to basic socio-economic needs. Government resources are transferred toeach Wilayas for distribution among municipalities. The budget allocated to PCD in 1993amounted to AD 15 billion which is substantial. These funds, however, are scattered amongmany municipalities, barely giving each the possibility to finance 2 or 3 small projects.About a fourth of PCD is used to rebuild roads after years of maintenance neglect. This is awasteful policy in many ways: (i) regular road maintenance is a much more economical

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Annex 10Page 2 of 2

alternative; (ii) the municipal road works are too small to allow for economies of scale; (iii)technical standards followed in preparing the detailed engineering documents are low, and theexecution of works by small local firms is often mediocre, reducing the economic life ofprojects. The local representative of the public works administration is called to deliver atechnical visa before payment by Treasury, but real controls are not exerted. The Bankcontributed to raise the concerned-administration's awareness of the key importance of theseissues at stake, including of governance, which largely transcend road maintenance needs andrather call for an in-depth reform of the municipal finance.

1.04 Funding maintenance of municipal roads does not seem to have other alternative than(a) making an optimal use of scarce funds by selecting priority works with the rightpavement treatment, and supervising their execution by contract with the assistance of thePW subdivisions; (b) transferring funds from the central budget, a largely impractical optionat present; (b) restructuring the allocation of central resources to local Governments, bydeveloping a better consistency between the investment level achieved and the maintenanceeffort to launch. The Government has expressed willingness to launch a pilot programcovering a sample of municipalities, and comprised of studies for definition of a maintenancestrategy (targeted service standards, institutional framework for provision of technical supportby PWs, financing systems, etc..) and of a maintenance three-year campaign. One formulacould be that funds allocated to PCDs for road rehabilitation and investments and currentlyshown under chapter 591 be redirected to chapter 962 ("Programmes pour Comptes deTiers") managed at the Wilaya level which includes resources earmarked for smallmunicipalities. The DTPs would use the funds for maintenance of municipal roads outsidethe urban perimeter under a convention with municipalities involved. An agreement, inprinciple, has been concluded between MIRP and MICLERA to decide on a detailed planaddressing the needs of the pilot program: sufficient funding of maintenance, operationalefficiency at procurement and execution stage and good design and supervision of works.

M\RAY\ANNEXIO.SAR

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Annex 11Page 1 of 3



Technical Background on Road Strengthening and Rehabilitation

1. Strengthening and Rehabilitation

The old pavements of the main national roads with high traffic generally need a heavystrengthening because the existing structure is either weak or deeply deteriorated; typicalworks consist of:

- a widening of 50 to 80 cm to reach the standard 7,5m pavement width,- a new base course of 12 to 20cm of 4 to 5% bitumen mix, and- a 5 cm wearing course of bitumen mix.

Thinner overlays have proved to deteriorate quickly under heavy truck traffic.

For traffic levels lower than 3,000 veh/d, such design strategy would be too costlyand have a low ERR; however many national roads are often very uneven and need someways of structural strengthening; the "rehabilitation" strategy was developed to address theseissues; the typical features are:

(i) defer widening where the traffic level is insufficient,(ii) use non-treated bases to achieve low cost and enable better leveling of existing

pavement,(iii) use bituminous mix wearing course only for traffic higher than about 2000

veh/day, and surface dressing (chip seal) elsewhere to reduce cost,(iv) put a special emphasis on drainage efficiency, treat a functional road link with

appropriate variable treatments, and analyze possibilities of improving roadsafety black spots.

Such a strategy leads to ERR similar to road strengthening, and cost between 70 and50% less per km.

2. Technical Handbooks

In the last four years, and at the request of the Road Directorate, the CTTP hasdeveloped the following:

- Le guide des renforcements- Le guide de la rehabilitation

(and "le guide de l'entretien" for DEER)

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Annex 11Page 2 of 3

These national technical dossiers were among the first ones for the sector where allAlgerian technical organizations worked as a true network. The typical outline of theseguidelines/handbooks is as follows:

(i) methodology and pavement condition measurement(ii) inventory of techniques and design method(iii) economic analysis(iv) organization of controls(v) road safety analysis(vi) environment(vii) bidding documents(viii) TOR for studies.

These handbooks are being disseminated and significant training is being organizedunder the project.

3. Road Condition Measurements

Detailed measurements have been developed for all roads to be rehabilitated orstrengthened, typical synthesis tables describe for each 100m section (see attached samplesheet):

(i) the road characteristics (width, profile, fill/cut, etc.)(ii) the last works,(iii) the drainage,(iv) the results of recent boring (courses thicknesses and soil Ip, CBR, W, etc.)(v) the deflexions of both sides of pavement(vi) severity of deteriorations (cracks, rutting, material loss, etc.)(vi) the evenness(vii) the traffic.

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Annex ll(a)Page 1 of 9



MAINTENANCE AND REHABILITATION OF UNPAVED ROADS INSOUTHERN ALGERIA

PILOT OPERATION - EQUIPMENT COMPONENT

INTRODUCTION

The four wilayas of the "Grand Sud"--Adrar, Tamanrasset, Illizi and Tindouf-- are of huge size(1,450,000 km2) and relatively sparsely populated (500,000 inhabitants), but possess a considerablenetwork of paved and unpaved roads. The classified system consists of about 10,000 km, of which 6,000km is unpaved. This is not a grid system but consists rather of north-south penetration roads. The mostimportant of these are the Tamanrasset - In Guezzam, Bordj Omar Idriss - Bordj el Haoues via Amguidand Reggane - Bordj Badji Mokhtar sections. These three sections, which carry the bulk of the traffic,make up one third of the unpaved system, i.e. about 2,000 km. In the first stage, maintenance andrehabilitation actions will be focused by priority on these three sections.

The following ratios are derived from the foregoing:

* Number of km of road (paved and unpaved) per 1,000 inhabitants: 20 km/1,000 inhabitants* Number of km of paved road per 1,000 inhabitants: 8 km/1,000 inhabitants* Number of km of unpaved road per 1,000 inhabitants: 12 km/1,000 inhabitants* Network density per 1,000 km2: 7 km/1,000 km2

It should be noted that for longer than 15 years the unpaved roads in the "Grand Sud" have not receivedany maintenance. Traffic conditions are currently difficult. Although traffic is low, it consists essentiallyof trucks. The unpaved road system of the four "Grand Sud" wilayas carries heavy-vehicle traffic of10-80 trucks/day. Although low, traffic on this scale unquestionably warrants a level of maintenancedistinctly greater than is presently being provided, and even some rehabilitation work.

TASK INVENTORY

The different elementary tasks (maintenance and rehabilitation) capable of improving traffic conditions canbe classified in three main categories.

Spot maintenance'

Improvement of specific points of the road. The main tasks of this sort are listed below. Lack ofmaintenance for these points, the frequency of which cannot readily be projected, can lead to roadsbecoming impassable, the economic cost of which is far from negligible even where traffic is low:

1 Different from discontinuous tasks

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* Fesh-fesh zones* Rock outcroppings* Rehabilitation "oued" crossings* Sand clearing as and when called for* Spot grading or reshaping as needed* Other critical points

These tasks are moreover often not easily quantifiable but in any case represent a relatively small volumeof work, which makes them unattractive for contractors. As things are at present, their execution by forceaccount would appear the only option, especially in light of the scarcity of small road works contractors inthese vast regions.

High-frequency periodic tasks

These consist essentially of grading operations (scraping of corrugated surfaces), the frequency of whichdetermines the average roughness (level of service) and the useful life of a travelled overlay (which alsoand especially depends on the method and quality of grading).Although the end purpose (evenness with minimum material loss) is not readily measurable, it seemsdesirable that this work should be contracted out. The contract terms and organization will have to beadapted to make this type of work attractive to contractors.

Low-frequency periodic tasks

* Continuous overlay* Discontinuous overlay* Rehabilitation

Execution of a wearing course in suitable materials makes it possible both to improve traffic conditionsby means of a better surface and to slow the rate of deterioration of the evenness (hence reducingreshaping frequency). These tasks may be continuous or discontinuous. Rehabilitation is distinguishedfrom reshaping by the scale of the ancillary works, whether improving or not, that can be included(creation of inverts, local earthworks, etc.). These works are definitely suitable for contracting out bycalls for bids, provided the contracts are made sufficiently attractive.

ORGANIZATION OF ROLTINE MAINTENANCE

The organization envisaged for handling maintenance work that can only be done by force account isbased on two types of units.

Track Maintenance Units (TMUs)

These have to be mobile and as light as possible, but must be able to handle the essentials of pointmaintenance. They are assigned a stretch of unpaved road, initially set at about 200 km (to be adjustedduring the pilot operation).

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Annex lf(a)Page 3 of 9

Support Units (SUs)

For certain specific tasks (restoration of a "oued" crossing, etc.), it will be necessary to reinforce theTMUs with certain equipment they do not possess or to temporarily increase the numbers of certainitems available to them. It is accordingly the intention to establish one or more support units at theDTP level. The definition and dimensioning of these support units are governed by a specific context:

1. The end purpose is to assure minimal maintenance for the main unpaved roads in the south;2. while remaining consistent with a general policy designed to limit work by force account to an

indispensable strict minimum; and3. taking into account the low density of the network and the considerable distances involved,

which oblige adoption of options that limit logistic means to a strict minimum.

Consequently:

The objectives of the SUs will be limited to the following aspects:

(a) Providing the TMUs with the capacity to handle certain tasks they are not otherwise equippedfor (essentially sand and gravel production, with the emphasis on mobility rather than yield).

(b) Temporarily increasing the TMUs means with a view to increasing their production capacityand NOT their productivitv.

(c) Temporarily increasing the existing means for removing sands.

The SUs' equipment will accordingly comprise essentially:

(i) a 14-t angledozer mounted on tracks equipped with a ripper;(ii) a loader mounted on tyres;(iii) a tractor and trailer to enable the moving of equipment; and(iv) 10-t payload trucks, intended for temporary strengthening of the TMUs' haulage capacity.

PILOT OPERATION

The total needs resulting from such a policy are sizable (of the order of 79 units, see annex). It wouldappear essential to begin, in an initial phase, by setting up a pilot operation designed to validate thedifferent options from the equipment, staffing, capacities and organization standpoints. The intention isaccordingly to establish, in each of the southern wilayas, a limited number of units that will work bypriority on the most important routes, and particularly those on which rehabilitation works areenvisaged (work which will not be fully justified unless maintenance can be can be assured.)

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Annex Hl(a)Page 4 of 9

LOCATION AND NUMBER OF UNITS IN THE PILOT OPERATION

Tamanrasset Wilaya

Location Number of TMUs Priority operating area

Tamanrasset I North part of Tamanrasset-In GuezzainTamanrasset-Bordj el Haoues stretch Roadnear Tamanrasset

In Guezzam I South part of Tamanrasset - In Guezzain

Amguid 2 Amguid to RNI (Tamanrasset)Amguid-Bordj el Haoues

Total 4

These four TMUs are supported by two SUs from the Tamanrasset DTP: 4 TMUs, 2 SUs

Illizi Wilaya


Illizi I Illizi-Bordj el Haoues sectionRoad near Illizi

Bordj Omar Driss 1 Roads near Bordj Omar DrissBordj Omar Driss-Amguid

Bordj el Haoues I Bordj el Haoues-Amguid sectionBordj el Haoues-EI Achir

Total 3

These three TMUs are supported by one SU from the Djanet DTP: 3 TMUs, I SU

Adrar Wilaya


Reggane I North section of Reggane-BBM

Bidon V I Central section of Reggane-BBM

Bordj Badji Mokhtar 1 South section of Reggane-BBM(BBM)

Total 3

These three TMUs are supported by one SU from the Reggane DTP: 3 TMUs, I SU

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Tindouf Wilaya


Tindouf 0 0 1 Road near Tindouf

Total I Tindouf-Gara Djebilet

This TMU is supported by one SU from the Tindouf Wilaya

Summary: The total number of units in the pilot operation as outlined in the above tables is:11 TMUs and 4 SUs.

MAKE-UP OF UNITS AND QUANTIFICATION OF EQUIPMENT AND PERSONNEL

TMUs

Type of equipment No. per Total Personnel per TMU Total NumberTMU No.

Agricultural tractor w/trailer 2 22 1 driver 22 drivers1 assistant 11 assistants

Towed fuel tank (2 to 3 mn3 ) 1 t -_

Towed water tank (2 to 3 m3 ) 1 1

Four-wheel-drive dumptrucks (6 t 2 22 2 drivers 22 driverspayload), with inter-changeable 1 assistant 11 assistantsequipment (front blade, loadingbucket)

Single-bearing vibrating compactor 1 11 I operator 11 operatorsand trailer

Logistic equipment 11 2 assistants 22 assistants* Mobile trailer, air 4 44

conditioned and equipped* Generator set 1 11* Misc. small equipment 1 11

items

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ESTIMATE

The estimated cost of the equipment component for the 11 TMUs is

Type of equipment Quantity Unit Price Amount Amountfinanced byFifth Project

Agricultural tractor wltrailer 22 400,000 8,800,000 pro mem.

Towed fuel tank (2 to 3 m3) 11 300,000 3,300,000 pro mem.Towed water tank (2 to 3 m3) 11 80,000 880,000 pro mem.

Four-wheel-drive dumptrucks 22 6,000,000 132,000,000 132,000,000(6 t payload), with interchangeableequipment (front blade, loading bucket)

Single-bearing vibrating compactor and 11 320,000 3,520,000 pro mem.trailer

Logistic equipment* Mobile trailer, air cond. and 44 500,00 22,000,000 pro mem.

equipped* Generator set 11 200,000 2,200,000 pro mem.* Misc. small eqt. items 11 200,000 2,200,000 pro mem.

Total 174,900,000 132,000,000

Parts (15%) 26,235,000 19,800,000

Grand total 201,135,000 151,800,000

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SUs

Type of equipment No. Total Personnel per Total No.per No. SUSU

Angle dozer mounted on tracks and ripper 1 4 1 operator 4 operators

Loader mounted on wheels 1 4 1operator 4 operators

Tractor and trailer 1 4 1 driver 4 drivers1 assistant 4 assistants

10-t payload trucks 2 8 1 driver 8 drivers1 assistant 8 assistants

TanksTanktruck, 7-10 m3 (sprinkling) 1 51 1 driver 5 drivers

I assistant 5 assistantsTanktruck, 7-10 m3 (drinking water) 1 4 1 driver 4 drivers

I assistant 4 assistantsTowed fuel tank(4 m3) 1 5

Single-bearing vibrating compactors with 1 4 1 operator 4 operatorstrailers

Logistic equipment 4 2 assistants 8 assistants* Mobile trailer, air cond. and equipped 4 16* Generator set 1 4* Misc. small eqt. items 1 4

An additional truck is bound for Tindouf's SU

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Annex i 1 (a)Page 8 of 9

ESTIMATE

The estimated cost of the equipment component for the 4 SUs is

Type of equipment Quantity Unit Price Amount Amountfinanced byFifth Project

Angle dozer mounted on tracks 4 9,000,000 36,000,000 36,000,000

Loader mounted on wheels 4 4,000,000 16,000,000 pro mem.

Tractor and trailer 4 6,000,000 24,000,000 24,000,000

10-t payload trucks 8 4,000,000 32,000,000 32,000,000

TanksTanktruck, 7-10 m3 (sprinkling) 5 4,000,000 20,000,000 pro mem.Tanktruck, 7-10 m3 (drinking water) 4 4,000,000 16,000,000 pro mem.Towed water tank (2 to 3 m3) 4 80,000 320,000 pro mem.Towed fuel tank (2 to 3 m3) 4 300,000 1,200,000 pro mem.

Single-bearing vibrating compactors with 4 320,000 1,280,000 pro mem.trailers

Logistic equipment* Mobile trailer, air cond. and

equipped 16 500,000 8,000,000 pro mem.* Generator set 4 200,000 800,000 pro mem.* Misc. small eqt. items 4 200,000 800,000 pro mem.

Total 156,400,000 92,000,000

Parts (15%) 23,460,000 13,800,000

Grand Total 179,860,000 105,800,000

Recapitulation of component costs

No. Cost Amount to be Amount to befinanced financed by loan

(65%)

TMUs I1 201,135,000 151,800,000 106,260,000

SUs 4 179,860,000 105,800,000 74,060,000

Contingencies 11,429,850 7,728,000 5,409,600

Total in DA 392,424,850 268,328,000 185,729,600

Total in US$ 10,900,690 7,370,222 5,159,155

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Infrastructure:The infrastructure facilities (workshops, offices, etc.) existing in each of the wilayas.

Operating cost:The operating costs of a TMU and a SU are estimated at DA 3 million/year/unit.The operating budget to be allocated to the four wilayas (16 units) is DA 48 million per year.

M:\Ray\Algcria\Annexl L.a

ALGERIA

Highway VI ProjectMinistry of Infrastructure and Regional Planning - Organization Chart

M inister

|Hodernizationneleetlog aabietn

Directorates Planning and Human Resources General Services Roads Road Maintenance Large

Economic Affairs and Research Administration (DR) and Operations Hydraulic

(DPAE) (DRHR) (DAG) (DEER) Infrastructures

Sub-Directorates -General Studies - Initial - Regulations Motorvays -Operations IrrigationTraining & Bridges,l

-Planning -Maintenancei- Continuous - Budget and Road Water Regulation

-Economic Studie3 Training Accounting Progranis _ and Protectionand Financing Equipment

- Research & - Administration

-Information Cooperation and Personnel Ports and

AirportsInformation General Logistics

-Technology

Public Administrative National Motorway Agency

Organizations (EPA) National Center for National (ANA)Continuous Training Public Worksin Infrastructure Univrersity(CNPH-INPE) (ENTP)

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Detailed Organization of Road Directorates

At National Level:

Direction des Routes:1. Sous-direction des autoroutes et des ouvrages:

a) bureau des 6tudes autoroutieresb) bureau des programmes autoroutiersc) bureau des ouvragesd) bureau de la reglementation des autoroutes et ouvrages

2. Sous-direction des programmes routiersa) bureau des renforcementsb) bureau des infrastructures nouvellesc) bureau des programmes du sudd) bureau de la reglementation techniques routiere

Direction de l'Exploitation et de I'Entretien Routier1. Sous-direction de l'exploitation de la route

a) bureau de la securite et de la signalisation routiereb) bureau des donnees routieresC) bureau de la reglementation et de la gestion du domaine public routier

2. Sous-direction de l'entretien routiera) bureau de la reglementationb) bureau de la programmation des travaux d'entretien

3. Sous-direction des parcs A materiela) bureau de la maintenanceb) bureau de 1'exploitationc) bureau des investissements

At Wilava level

Direction de Wilaya des Travaux Publics1. Service de l'exploitation et de l'entretien des infrastructures de base:

a) bureau de 1'exploitation routiereb) bureau de 1'entretien des infrastructures de basec) bureau des parcs A materiel des infrastructures de base

2. Service du d6veloppement des infrastructures de basea) bureau de developpement des infrastructures de baseb) bureau des ouvrages d'artc) bureau des etudes

3. Service de I'administration et des moyensa) bureau de la gestion des personnelsb) bureau du budget et de la comptabilite et des moyens generauxc) bureau du contentieux

Subdivision Territoriale1. Section de 1'exploitation et de la maintenance des infrastructures routiares2. Section du parc A materiel3. Section du developpement des infrastructures de base

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Annex 13Page 1 of 2



Key Performance Indicators

1. The lessons learned from the Fifth Highway Project helped identify the performanceindicators especially designed to monitor specific priority objectives per component, resultingfrom past recurrent weaknesses.

2. To the extent possible, indicators monitor physical progress, effectiveness, anddevelopment impact. They have also been designed to enable monitoring at the job site leveland to aggregate the local results both at the Wilaya level and at the national level; ratioshave been chosen to facilitate immediate understanding by all actors and comparison to thetarget.

3. Quality indicators are chosen to monitor specific key works qualities directly linked toshort and long-term performances and enable their aggregation at site, local, and nationallevel;

4. More detailed performance indicator description is being developed in the projectimplementation volume. Evaluation of institutional performances of contractor, laboratoryand local administration for each large contract has been developed under Highway V andwill continue to be used.

5. Special performance indicators are also being developed for the streamlining ofpayment and disbursement procedures.

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Annex 13Page 2 of 2

KEY PERFORMANCE INDICATORS

Component Performance Indicator Target atpbtio____ ____ ____ ___ ____ ____ ___ _ __ ____ ___ Com pletion

Road competition: average number of responsive bids per call 4 5Strengthening / for bidsRehabilitation

progress: amount of works actually paid / amount of 80% 95%works planned to be paid at that time

final delays: actual completion time/initial contractual 1,20 1,05time

quality: percentage of tests outside the contractual 15% 5%specifications for compaction density ofbases and wearing courses

&lobal ex-post ERR with actual evenness, traffic 90% 95%effectiveness: and costs, compared with before-works

ERR

Bridge progress: amount of works actually paid/amount of 50% 75%Rehabilitation works planned to be paid at that time

design: Final Contract Cost/Initial Contract Cost (in 1,5 1,4constant AD)

Periodic competition: average number of responsive bids per call 4 5Maintenance for bids

ouality: percentage of tests outside the contractual 20% 10%specifictions ofor granular materialcleanliness for surface dressing

final delays: actual completion time/contractual time 1,20 1,10

progress: surface of "surface dressing" 80% 90%completed/surface contractually planned

Maintenance progress: actual delay compared to initial planning of 1,1 n/aEquipment procurement

repair percentage of time trucks are under repair n/a 15%effectiveness:

Each Study progress: depay in month between actual and planned 2 months I month(Modernization) step for that time

implementation time between agreement on study and first 4 months 3 monthsof formal action of conclusions implementationrecommendations

Training quantity: number of trainees traininged/plans (both in 80% 90%man x month)

Ouality: percentage of success (to end-of-training 60% 70%tests)

M\Ray\A1gerna\Annc. 13

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Annex 14Page 1 of 6



STATUS OF ROAD USER CHARGES

1.01 The Government has yet to develop an explicit road user taxation policy. Transportactivities are heavily taxed as is usually the case in other lower-middle income countries, butmainly as a way to finance general Government spending. Road user charges are seldomseen in Algeria as a pricing mechanism to capture economic benefits from better roads andlink the payment made by any user to the cost of services rendered with a view to optimizeroad utilization. In truth, the practical importance of efficiency pricing for roads could wellbe overlooked in a centrally planned economy where the assessment of needs was supplydriven, and pervasive regulations or the domination of public transport monopoliesconstituted the strongest of incentives. Conditions changed though, as Algeria moves on thepath of structural reforms to help transition to a market economy. A stabilization program isunderway, calling for fiscal restraint to restore domestic financial balance and reallocateresources from the Government to the productive sector. Price distortions will be correctedto promote a more efficient allocation of resources. As general budget cuts are impending ata time when much more should be done to maintain the deteriorating road network, increasedreliance on user charges to finance road expenditures could be one of few ways to guaranteethat enough resources will be forthcoming, especially through earmarking which makesadditional charges more politically acceptable as road users will be able to monitorbetterment of traffic conditions. The grossly underfunded Wilaya and municipal roadnetworks could benefit the most from development of road user taxation. On the other hand,overcharging road users should be avoided because it reduces the mobility of goods andpeople essential to market integration and growth. Hence a need for a comprehensiveassessment. This was done under the National Transport Study financed under the FifthHighway Project. Since most data analyzed relate to 1986-89, the study needs updatingbeyond the summary interim assessment presented hereafter.

A. Main findings of the National Transport Study'

1.02 The study made an inventory of taxes raised in 1985-86 on road transport ownershipand operations and estimated their proceeds to a total of AD 17.7 billion, or about a third ofall Government tax revenue at the time. They were broken down by nature between generaltaxation and user charges, with the latter accounting for AD 7.4 billion. Besides taxesdirectly identifiable as user charges, the general principle applied was to credit the usercharge component with any tax and custom duty collected over and above the average tax

1/see Bedat/Dar Al Handasah: "Etude Nationale des Transports - Etude Sp6ciale: Charges aux Usagers de la Route"

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Annex 14Page 2 of 6

paid by industrial products, namely 10 percent2. Fuel charges calculated as the differencebetween pump and border prices constituted the main element of road user taxation (about 77percent of total). Import duties ranked second in importance (about 15 percent). A specialand discriminatory tax raised on private vehicles imported and financed outside the officialchannels ranked third (about 6 percent). Other sources, mostly taxes raised by the Ministryof Transport upon issuance of driver licenses and other official transport documents made forthe rather insignificant balance of 2 percent. A comparison of taxes paid by variouscategories of vehicles showed private sector operators bearing much heavier taxes than thosein the public sector.

1.03 Several cost recovery objectives were discussed and assessed over 1986-88.

(a) Charging for the short-run marginal cost with a view to maximize netbenefits for society would recover the variable portion of recurrent maintenance only, roadadministration expenses, plus congestion costs. Routine maintenance costs were notconsidered as the wear and tear at stake was (improperly) assumed to be entirely time andweather related. The cost coverage ratio was respectively calculated as 2.1 and 1.8 on thebasis of actual and desirable spending levels. Projected user charges and road costs over1990-94 gave a ratio of 2.

(b) Charging for the long-run average cost, or the entire cost of operating andmaintaining the road network, implied addition of fixed periodic maintenance costs, routinemaintenance costs, and construction costs to those already computed. The cost coverageratio was estimated around 1 under both existing and projected conditions.

(c) Charging for the long-run marginal cost would eliminate the fixedcomponent of maintenance and construction costs from the calculation; the cost coverageratio was calculated as 1.7 which is quite satisfactory.

1.04 The report recommended adoption of strategy (b) together elimination of the "taxespeciale" compensated by fuel price increase in order to reduce distortions, maintain thesector's contribution to Government revenue, and allow for intensification of periodicmaintenance.

1.05 One of the main finding was that congestion costs were the dominant component ofroad use costs. They were estimated in terms of travel delays (a value was assigned to timefor various categories of users) and of additional fuel consumption under condition of snarledtraffic. The share of congestion costs ranged from 91.5 percent of short-run marginal costs,to 43 percent of long-run average costs. About two-third of vehicle-kilometers were found torelate to intercity traffic which, therefore, would generate a similar proportion of total user

2 /a simplified calculation like this one is likely to overestimate the "real" user charges

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Annex 14Page 3 of 6

charges raised nationwide. Since congestion is essentially incurred on urban road networks,it follows that cost coverage ratios achieved on the intercity network are much higher thanthe average ones given above. For instance, the cost coverage ratio under policy (b) is 1.3in this case, instead of 1 on average.

B. Summary interim assessment

1.06 Many of the critical assumptions used in the study need updating. Since 1986-88,prices of fuel and vehicles were greatly affected by the devaluation of the Algerian dinar andfast running local inflation. The ongoing structural adjustment in itself brings changes inrelative prices most relevant to the analysis. The tax reforms that took place point in thesame direction. Last but not least, the utilization rate of the national vehicle fleet must havebeen lowered by deepening of the economic crisis. These changes are too many, and toolarge for any firm conclusion to be drawn on their global impact on road cost recovery. Anupdate study will therefore be carried out before year end on the basis of terms of referencecleared by the Bank, and it will be financed under the Fifth Highway Project. Its scope isnarrowed to intercity road and traffic. In the meantime, some provisional conclusions can bedrawn from the likely impact of recent changes in key parameters. This interim assessmentis presented hereafter.

(a) fuel based user charges lost real value: as road cost recovery ispredominantly based on fuel, the evolution of fuel taxation has a large impact on revenuesfrom user charges. A major producer, Algeria enjoys cheap supplies of crude oil and theGovernment used to pass on part of the advantage to local producers and consumers.Sonatrach sold its products to distributors at prices well below world market price, andGovernment taxation was moderate. In March 1990, the border price of gasoline was set attwo-third of world prices. Since 1990, tighter fiscal and monetary policies have beenfollowed, including progressive elimination of implicit and explicit subsidies. Local fuelprices rose swiftly: the pump price per liter of gasoline and diesel oil rose respectively fromabout DA 3.5 and 0.9 in March 1990 to about DA 8 and 6. Converting these prices indollar at respective exchange rates of AD 7.98 and 38 to US$ 1 shows that diesel oilconsumption is no more subsidized and generate positive albeit modest user charges. On theother hand, gasoline-based user charges have lost 70 percent of their 1990 value. Table 1summarizes the evolution.

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Annex 14Page 4 of 6

Table I: Comparison of Algerian and world fuel prices in March 1990 and July 1994 (US cents per liter)

Gasoline premium gasoline regular diesel oil

1. Pump prices:- 1990 45.7 37.6 11.3- 1994 22.3 20.5 15.7

2.World prices:- 1990 15.8 14.3 12.9- 1994 14.5 13.2 12.7

Difference (1-2)- 1990 29.9 23.3 - 1.6- 1994 7.8 7.3 3.0

Source: 'Etude Nationale de Transport. Etude Speciale: charges aux usagers de la route" (page 5-18)for 1990 estimates. The 1994 estimates were obtained from "Petroleum Intelligence Weekly" for worldprices; the 1994 pump prices were communicated at appraisal

1.07 The net impact of reduced tax returns on gasoline and added returns on diesel oilcan only be approximated. It is reasonable to assume a 1994 total and structure ofvehicle/kilometer roughly identical to the one assessed in the National Transport Study, sincetraffic gains of the late eighties-early nineties were likely erased in late years. User chargesraised on diesel oil consumption are therefore estimated around US$ 50 million3 which,together with those raised on gasoline consumption, bring fuel-based user charges to a totalof US$ 195 million, a fraction of the US$ 711 million estimated in 1989 (minus 72.5percent). The changing dinar value of world prices must be reflected in pump prices: this iskey to avoiding further erosion of implicit fuel taxation.

(b) A shortfall of tax revenues may have developed in late years: thenational intercity road network alone would require spending some US$ 70 million annuallyfor strengthening and rehabilitation, plus US$ 65 million for resealing and routinemaintenance. Normal maintenance of the Wilaya network, which carries much less traffic onabout the same total road length, warrants spending no less than a third of the national roadbudget, or US$ 45 million per year. The normal maintenance budget for the municipalnetwork, which comprises a comparable length of paved roads but nearly ten time as muchunpaved roads as the other two networks, should be around US$ 30 million. Fully fundedroad maintenance would then imply spending some US$ 210 million annually. Extension andmodernization of the network must also be pursued, at a reasonable pace though which, infirst approximation, would contain related expenditures within 30 percent of the total roadbudget, or US$ 100 million. Recoverable long-run marginal costs are tentatively estimatedaround US$ 150 million distributed as follows:

3/it assumes 30 percent of vehicle/kilometers relate by diesel-powered vehicles (trucks and buses mostly) which, as agroup, consumes 2.5 liter of fuel for any liter consumed by the group of gasoline-powered vehicles. Based ongasoline consumption in 1989, diesel oil consumption is estimated at 1.7 billion liter; related user charges should bearound US$ 50 million.

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resealing costs of US$ 90 million, reduced by 35 % for time related wear andtear, to an estimated US$ 58.5 million;20% of routine maintenance costs, or US$ 5 million;65 % of road strengthening and rehabilitation, or US$ 60 million;20% of construction costs of US$ 20 million;the administration cost, roughly updated at US$ 7 million.

1.08 Further assuming fuel-based user charges collected for use of intercity roads torepresent about 60 percent of total, or US$ 117 million, and taking into account eliminationof the "taxe speciale" and of reduction of the "taxe compensatoire" from 30 to 10 percent ofthe c. i.f. value which has the effect, other things being equal, to raise the share of fuel-baseduser charges to some 85 percent of total user charge revenue, lead to conclude that the long-run marginal cost may be marginally in excess of road user charges (namely,US$ 150 million against US$ 137 million).

(c) Heavy vehicles may still be under-charged: despite the recent removalof implicit subsidies on diesel oil, light vehicles using gasoline are still making the largestcontribution to road cost recovery. Trucks were contributing so little, according to theNational Transport Study, that recent fuel price increases seem far short of what is needed tocorrect imbalances, knowing that a semi-trailer can cause as much damage to roads as 30,000private cars4 or more. Diesel oil charges may have to be brought in line with those raised ongasoline. The economic rationale behind the lower taxation of diesel oil appears weak,especially when external costs from diesel oil being a much more polluting fuel are dulyacknowledged. An axle-load tax, best related to pavement damage, would be a goodcomplement to raising taxes on diesel oil for achieving normal cost recovery.

(d) Current user charges discriminate against private transporters: theNational Transport Study showed trucks bearing taxes equivalent to 107 percent of the c.i.f.compared to 59 percent for semitrailers. The gap has been narrowed as combined taxationof trucks represent 82 percent of the c.i.f. value, but is still sizeable, and, since privatetruckers have limited access to official credit and mostly operate small to medium trucks,they end up being taxed more heavily. Foreign exchange accessibility was another source ofindirect discrimination. Whereas parastatals received foreign exchange allocations topurchase trucks belonging to planned imports, the private sector could only import to theextent that financing is secured on the parallel market at much higher exchange rates, whichconstitute an implicit taxation of private transporters and a hidden form of discrimination infavor of parastatals. The 1994 measures toward free convertibility of the Algerian dinar donot seem to fully remedy the situation.

4/pavement damage is proportional to the number of equivalent standard axles per vehicle, defined as the ratio of theload on each axle to a standard 8.2-ton axle, raised to the fourth power.

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(e) Raising road user fees should go with reducing general taxation: thetransport sector is heavily taxed, and additional road user charges5 might trigger tax evasionand/or worsen recession in the transport industry. Full streamlining of road taxation,therefore, may call for a comprehensive reform of general taxation whereby Governmentwould find alternative sources of tax revenue to make up for decreased general taxes ontransport which, as evidenced in the National Transport Study, are much higher than those inthe nature of road user charges (40 percent higher at the time).

(f) a road fund could help increase road budgets: tax earmarking wouldboth facilitate a consensus on spending more for better roads, and allow to target untappedroad user surpluses toward expanding the charging bases, with special relevance to theWilaya and municipal road networks. The Government expressed willingness to study anddiscuss conditions under which a road fund could be established in Algeria.

5 /taxes supported by private cars range between 150 and 425% of ex-factory (or imported) costs. The tax paid uponpurchasing an imported truck is about 70% of the c.i.f.value.

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Environment Mitigation and Monitoring Plan

Issues Mitigating Actions Organization Responsible for Dateactions/monitoring

Quarries - actions to avoid dust and noise where quarry or contractor owning the Before worksappropriate quarry (under local authority start

supervision)

Drainage/Erosion State of the art actions like: Contractor under Engineer During- concreted ditches according to plans Supervision contract- planting

Widening (50 to - appropriate signals for road user safety Contractor under Engineer During80cm) on existing - limited length under construction (1 km) Supervis contractright of way - appropriate waste disposal

Asphalt plants - measurement of dust emission Laboratories First Tranche- development of implementation

recommendations and incorporation in DR/CTTP Followingcontract clauses (dust filters where Tranchesnecessary) Before works

- restoration plan of asphalt plan area Proposed by contractor and areapproved by engineer completed

Effect of works on Special recommendations following DR Before worksroad user safety previous - project experience start

Effect of traffic Blackspot analysis incorporated in study Consultant under supervision by During studyspeed after road Engineerrehabilitation

Development of - TA to ANA ANA/DR continuousEIA quality - sample TOR of EIA for motorway studies ANA for 2 yrs.

agreed with the Bank done

Development of - Utilization of recently developed ANA/DR Duringspecific environmental handbook for roads to projectenvironment develop a national handbook implement-guidelines for - regular assessment of environmental CTTP/DR ationroads contract clause implementation and After each

improvements introduced in the road tranche isrehabilitation handbook completed

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Supervision Plan

1. The Borrower's supervision activities will be coordinated/carried out by MIRP. Hissupervisory functions will involve the following:

(a) initial review, recording and forwarding ofall procurement orders- all disbursement requests and liaison with special account

expenditures/disbursements by Banque Algerienne de Developpement(b) review of bidding documents prepared by local DTP(c) preparation of quarterly reports per subcomponent(d) liaison with General Finance Inspection for annual audits.

2. The Bank Supervision team would comprise:- a highway engineer- a transport economist- a financial analyst (especially for the audits of enterprises)- a public sector managemeit specialist (especially for the modernization actions)- specialized technical experts where and when needed.

The specific characteristics of the project and the context necessitates 30 SW for thefirst year after board presentation, 25 SW the following year and 20 SW each followingyear. Two supervision missions per year of at least two weeks each are necessary.Including local individual consultant in the Bank supervision team has proved to be veryeffective. Technical meetings outside the country have proved to be useful. The normalfeasibility of works and the possibility to effectively supervise them is a key factor for theircost-effectiveness, and quality; deviations from this normal situation should only be acceptedafter careful analysis of (i) the region where it takes place, (ii) the specific componentconcerned, (iii) the institutional strength of the DTP in charge, (iv) the possibility of effectivecentral supervision, and (v) the importance of the necessary TA for this task and the methodto mobilize it.

3. The mid-term review should be developed sufficiently before the call for bids for thesecond or third tranche is launched.

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Annex 17Page 1 of 3



PREVIOUS BANK INVOLVEMENT IN TRANSPORT

1.01 The transport sector in Algeria has received ten loans from the Bank. These loans,totalling US$ 814 million, financed five highway projects, three port projects, and tworailway projects.

A. Highway Projects

1.02 The highway projects were all characterized by delays due in large part to (i) lengthycivil works contracting and approval procedures, and (ii) late start-up of studies andconsequent completion delays.

1.03 The First. Second. and Third Highway Projects (Loans 912-AL, 1407-AL, and1683-AL in respective amounts of US$18.5 million, 41.5 million, and 126 million) focusedon reforms of the road maintenance organization including development of force accountcapabilities to accompany decentralization, built up local expertise in InternationalCompetitive Bidding procedures and contract supervision and management of major roadprojects, in addition to financing priority road rehabilitation and strengthening and two largeroad investments focussed on eliminating two severe bottlenecks: East-West linkBoudounaou-Lakhdaria and North-South link Chiffa-Berrouaghia. The project completionreports (and the Project Performance Audit Reports No. 2552, on Loan 912-AL) allconcluded that project objectives in each case had been met, although project components hadto be revised several times to keep pace with administrative and organizational changestaking place in Algeria. The regional equipment pools finally became autonomous publicenterprises.

1.04 The Fourth Highway Project (Loan 1892-AL, US$ 110 million) was approved inAugust 1980 and closed in December 1988. It was a follow-up of the Third HighwayProject and comprised a second tranche of periodic maintenance and of a pavementstrengthening program, continuation of a program for training maintenance personnel,assistance to improve the efficiency of public construction enterprises plus reconstruction of acritical section of a major north-south road, including construction of three tunnels and aviaduct through the Kherrata Gorges, and technical assistance to improve road management.Main project objectives have been met, but implementation difficulties taught several lessons:(a) construction of costly tunnels should not be undertaken prior to conclusion of thoroughgeological explorations; (b) potential procurement issues should be brought to the Borrower'sattention before appraisal; (c) whenever safety equipment is needed to operate new civilworks, early tendering is required to ensure that it be in place on commissioning the worksto traffic; (d) the Borrower's commitment to carry out the entire project should be secured,particularly as regards technical assistance and training which are not used as effectively asneeded; at the same time, the institution building objectives should be carefully assessed toensure that they are both relevant and realistic.

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1.05 The Fifth Highway Project (Loan 2808-AL, US$ 120 million) was approved in May1987 and became effective in January 1988. It has been implemented during a period ofstrong devaluation of Algeria Dinar. It was designed to reduce the backlog of roadmaintenance (strengthening of primary roads and periodic maintenance by contract), toimprove road maintenance planning and programming and contract management, tostreamline transport sector policy formulation, and enhance skills of personnel employed bythe Ministry of Public Works, the Ministry of Transport and transport public enterprises. Theoriginal loan closing date was postponed by three years to December 31, 1994. The projecthas reached its physical objectives, in spite recurrent shortages of bitumen and of aggregates;repeated instances of sub-standard quality works were observed due to poor incentives and aweak chain of controls, from contractors and laboratories to the client itself. Local roadmanagement expertise did improve, particularly through services rendered by the TechnicalQuality Control Organization (CTTP) which dynamic local management and project financedtechnical assistance help grow into a fairly effective consulting firm, able to capitalize onlessons learnt through maintenance and rehabilitation projects in Algeria. ContractorCompetition for periodic maintenance was also developed. Project components based at theMinistry of Transport largely failed for lack of commitment to objectives and inefficientmonitoring of the national transport study which, by completion time two years behindschedule, was already outdated. Lengthy contract award procedures and lack of efficiency forhandling of disbursement by the Algerian Development Bank slowed implementation.

B. Port Projects

1.06 During the mid-seventies, the Bank participated in financing port facilities for exportof liquefied natural gas under the Bethiouia Port Project (Loan 995-AL, US$ 143 million).From a technical standpoint, the project was a success despite late completion of works andtense relations between the Borrower and the contractor linked to payment delays andinadequate contract management. The project's relative failure with regards to technicalassistance stemmed from poor coordination between the respective Government agencies andthe state-owned enterprises. The PCR did not assess the economic viability of the project forlack of relevant data. Still, it pointed out that rescinding of LNG contracts to supply the USmarket prior to completion of works left the new port largely underutilized.

1.07 The implementation of the Port of Jijel Project (Loan 1427-AL) appraised in 1976did not materialize because of the construction of the steel complex was indefinitelypostponed. The loan was cancelled in 1980. An attempt to revive the project under a reviseddesign led the Bank to appraise it in 1984 but procurement issues could not be resolved,preventing further processing of the renamed Djen Djen Project.

1.08 The Third Port Project (Loan 3105-AL. US$ 63 million) is the second Bank lendingoperation in the sub-sector. Approved by the Board in June 1989, the project becameeffective in June 1991 after late signing in September 1990 related to procurement delays andthree postponement of the effectiveness deadline due to late submission of reimbursementagreements between the Government and the beneficiary port enterprises. The loan finances:(i) development of specialized container-handling facilities in the three major ports ofAlgiers, Oran, and Annaba through remodelling of existing berths and provision of container-

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handling equipment; (ii) provision of a bulk grain handling facility in the port of Annaba;(iii) assistance for studies on cost accounting, assets valuation, and on next phases of portmodernization; and (iv) provision of training to support the introduction of container-handlingtechnology, including trade facilitation, operating methods, and maintenance. Moderateproblems are experienced. Compliance with audit covenants has not been satisfactory todate. Civil works in Algiers are running behind schedule due in part to relocation, out ofenvironmental concerns, of the dumping site for dredged materials. Berth strengthening inOran was expected to start in November 1993, nearly two years after the no-objection by theBank to the proposal for contract award. Progress in Annaba is satisfactory except for siloconstruction, still at pre-design stage. Botched procurement, slow decision making, technicaland financial management weaknesses are the main obstacles and project completion isexpected to slip by no less than two years.

C. Railway Projects

1.09 The First Railway Project (Loan 996. US$ 49 million) was designed to support therailway's modernization program within the 1974-77 Development Plan, and consistedmainly of renewal of motive power, rolling stock, rehabilitation of tracks, and technicalassistance. This project dragged on for 7.5 years and one-fourth of the loan was unutilizedand cancelled. Limited implementation capabilities and disagreement between the Bank andthe Borrower on the economic justification of a track doubling project contributed toproject's failure. Little institutional improvement took place as consultants were lackingsuitable counterparts. The project was closed on December 31, 1982.

1.10 The Second Railway Project (Loan 2976-AL. US$ 143 million) was approved by theBoard in June 1988, but cross-conditions with the Japanese EXIM Bank (cofinancing loan ofUS$ 47 million) delayed effectiveness until March 1990. The project had six components ofwhich track rehabilitation and renewal, modernization of signalling and telecommunications,equipment for track maintenance and unloading of rock phosphate, technical assistance todevelopment of modern management systems including cost accounting, and training supportto the Railway Training Institute. A deadlock on procurement issues led to minorachievements in the area of track maintenance. Disbursement by closing date of February28, 1993 were barely above US$ 23 million, most of which relating to rolling stock. Noprogress materialized on institutional aspects. Key studies were not commissioned, and theBorrower defaulted on nearly all financial covenants. Frequent changes of general manager,lack of management leadership, biased procurement practices, violations of the 1988Convention fixing the financial obligations of Government to the railways, contributed to theproject's failure.

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Selected Documents and Data Available in Project Files

- Planning and Programming Road Maintenance on the Main Network (5000 km). Use ofHDM and Results - November 1993 - done by CTTP for DEER. MI. Analysis ofAlternative Strategies.

- Modernization of Infrastructure Ministry; Proposals Report by the Committee - 5/16/94.sent by Mr. Saadali, Directeur de Cabinet.

- Modernization of Infrastructure Sector in Algeria. Joint Study by M.I. and WB. May1994 with Annex 1 to 5. Main Results of CNAT Survey.

- Paper on National Road Policy. December 1992 by Mr. Brahim Benchouk, Director ofRoads

Evolution Objectives to be brought by Highway VI Project Component on RoadRehabilitation 1/04/94. Note from Road Director.

Road Maintenance Policy and Highway VI Project - 1994. Note from Director of RoadMaintenance and Operations.

-Financing Dossier on Detailed Engineering Studies for 3 Motorway Sections 1/23/94 -Direction de Cabinet.

- Dossier on Bridge Rehabilitation - Bridge Survey; Rehabilitation Prioritization; SpecificBridge Condition Analysis with Photos; Update on Bridge Management Study; Minutes ofNational Bridge Rehabilitation Committee Meetings.

- 6/30/90 Decree Creating CNPH (National Center for Training in Hydraulics) and DraftDecree Transforming CNPH into INPE (National Institute for Continuous Training inInfrastructure).

- Dossier on Quarries; Letter from the Minister of Infrastructure to the Walis; Note onAction Proposals to Improve Quarry Production; National Symposium on GranularMaterials - 126-7/93.

- Sample Bidding Documents for Pavement Strengthening and Rehabilitation. Example forRN6. - 1993 - prepared by CTTP for DR.

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Annex 18Page 2 of 2

- Audit Report on Algerian Public Works Laboratories - May 1994. Draft version writtenby Bernard Heritier, Patrick Morissey, Charles Parey for the World Bank at the Requestof the Ministry of Infrastructure.

- Audit Reports on Bitumen Supply and Quality. June 1994 - written by Philippe Fevre andJean-Luc Delorme for the World Bank and the Algerian Working Group on Bitumen.

- Guide for Road Strengthening - Dec 1992 Road Directorate.

- Guide for Road Rehabilitation - 1994 Road Directorate.

- Guide for Road Maintenance 1994 - Road Operations and Maintenance Directorate.

- Maintenance and Rehabilitation of Saharan Tracks - Analysis of Tasks to be Done byContracts or by Force-Account. Analysis of Minimum Equipment Required - 1994.

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