Document of O

.N - The World Bank~~~~~~~~~~( N

' OR OFFICiAL USE ONLY

I > .i \ ~ - Repwt No. 7135-MAG

STAFF APPRAISAL REPORT

I - DEMOQRATI0. REPUBLIC OF MDAGA SCAR

SEVENTH-HIGHWY PROJECT

April 18, 1988

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Infrastructure Operations DivisionSouth-Central and Indian Ocean DepartmentAfrica Region N

This document has a retricted distrbution and may be used by redipients only in the performance of

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CurreacX Eauivalent

Currency Unit * Malagasy Franc (FMG)USS FMG 1,200 (as of December 1987)

WeiJhts and Measures

1 meter (m) . 3.28 feet1 kilometer - 0.62 mile1 square kilometer (km2) X 0.386 sq. mile1 square meter (m2) . 10.76 square feet

AcronVms and Abbreviations

AfDB African Development BankAfDF African Development FundBADEA Arab Bank for Economic Development in AfricaCATP MTP Training School (Centre d'Application des Travaux

Publics)CCCE Caisse Centrale de Cooperation Economique (France)CMN Shipping line (Compagnie Malgache de Navigation)DGE Directorate of Works (Direction Generale de l'Equipement)DGP Directorate General of Planning (Direction Generale du Plan)DMAT Equipment Division (Direction du Ma,teriel)DR Division of Roads (Direction des Routes)EDF European Development Fund (EEC)EESP National Technical College (l'Etablissement d'Enseignement

Superieur Polytechnique)FAC Fonds d'Aide et de Cooperation (France)KfW Kreditanstalt fuer Wiederaufbau (FRG)LNTPB National Soils Laboratory (Laboratoire des Travaux Publics

et du Batlment)MC Ministry of Commerce (Ministere de l'Industrie

et du Commerce)MOD Ministry of DefenseMPARA Ministry of Agricultural Production and Agrarian Reform

(Ministare de la Production Agricole et de laReforme Agraire)

MTP Ministry of Public Works (Ministare des Travaux Publics)MTMT Ministry of Transport, Meteorology and Tourism (Ministare

des Transports, de la Meteorologie et du Tourisme)ODR Office of Rice Development (Office du Development Rizicole)PSAC Public Sector Adjustment CreditRN National Road (Route Nationale)RNCFM Reseau National,des Chemins de Fer Malagasy.SDC Swiss Development CooperationSG Permanent Secretary (Secretaire General)SMTM Shipping Line (Societe Malgache des Transports Maritimes)

Fiscal YearJanuary 1 - December 31

FOR OFFICIAL USE ONLY

DEMOCRATIC REPUBLIC OF MADAGASCAR

SEVENTH HfLTfAY PROJECT

STAFF APPRAISAL REPORT

TABLE OF CONTiSiTS

Parte No.I. THE TRANSPORT SECTOR .................... .......... 1-

A. Geographic and Economic Setting .................B. Transport Sector . .. ............................ . 2C. The Transport Network ....... . ......... ....... . 4 -

Mi) Road Transport ...... ........................... 4(ii) Rail Transport . ................................. 5-(iii) Air Transport .. ..................... . ......... . 5(iv) Ports and Coaital Shipping ...................... 6

D. Road Administration ....................... ............ 7(i) Organization ....................... .......... 7

(ii) staffing and Training .................... 2'iii) Maintenance .... ................................ 0...... 9(iv) Financing ......................... .............. 10

(v) Engineering and Construction ........... ...... 11(vi) Traffic Regulation and Safety .......... 12

E. Bank Group Role in Transport .......... ............. ... 12F. Rationale for Bank Involvement ........................... 13

_:. THE PROGRAM AND THE PROJECT ........ ...... .............. .... 13

A. Objectives .................. . ......... 13B. Program Description .................................. 14

Mi) Rehabilitation and Resurfacing of Paved Roads 15(ii) Rehabilitation and Regravelling of Engineered

Earth Roads ........................... 15.......... 15(iii) Rehabilitation of Feeder Roads ............. .... 15(iv) Routine Maintenance .................. .... 16(v) Development of Domestic Contractors ... 16(vi) Training and Maipower Development ............. 17(vii) Consulting Services ...... . ... 18(viii) Traffic Regulation and Safety ....... .. 18

This report is based on the findings of an appraisal mission which visitedMadagascar in-November/December 1987; members of the mission were P. Sooh(Sr. Engineer), B. Bostrom (Sr. Economist), J.M. Lantran (Sr. Engineer),and A. Benouahi (Financial Analyst). Secretarial assistance for thisreport was provided by Ms. Mary Y. Jackson.

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

(ii)

Page No.C. Program Cost and Financing ......................... 19D. Project Cost and Financing . .......................... . 21E. Implementation and Procurement . ...... 24F. Disbursement ........... .. . .4 ... 4 ................. .. 25G. Accounting, Auditing and Reporting Requirements ...... 27H. Environmental Aspects .. ................. 28I. Poverty Alleviation Aspects . .................. 28

III. ECONOMIC EVALUATION .................. ................. 29

A. General ................ .. ....... 29B. Benefits and Beneficiaires ..........** .............. 29C. Economic Analysis .................... ................. 30D. Overall Evaluation and Sensitivity Test .. ' ........... . 32E. Risks ..... ... ....... 32

IV. AGREEMENTS TO BE REACHED AND RECOMMENDATION ................. 32

Annexes:

1. Transport Sector PIP (1986-1990)2. Vehicle Fleet3. Petroleum Product consumption (1J3-1986)4. Road Design Standards5. Bank Group Projects in Transport6. Road Program and Economic Tables7. Equipment, Materials and Supplies in Road Maintenance and

Traffic Regulation8. Outline Terms of Reference for Technical Assistance in Road

Maintenance, Training and Transport Planning9. Project Financing Plan10. Accounting, Auditing and Reporting Requirements11. Related Documents and Data Available in Project File

Charts:

1. Organization of MTP2. Project Implementation Schedule

Dap

IBPJD 20566R

(iii)

MADAGASCAR

SIEENT HIGHWAY PROJECT

Credit and Prolect Summary

Borrowers Democratic Republic of Madagascar

Beneficiairess Ministry of Public Works (MTP) and Ministry ofTransport, Meteorology and Tourism (MTMT)

Amounts SDR 28.9 million (US$40.0 million)

Termes Standard IDA, terms.

Projects

Obiectives:

The project aims ats (i) strengthening MTP's capacity, especiallyir. policy formulation, planning, budgeting, and supervision;(ii) facilitating agricultural development, thus promoting food securityand exports of agricultural products; (iii) gradually shifting mostmaintenance operations from force account to private contractors who arealready active in the sector; (iv) developing local human'resources and thedomestic construction industry; (v) improving public expenditure practicesin the road sub-sector through a three-year rolling Public ExpenditureProgram (PEP) prepared yearly and based on a current updated NationalTransport Plan; (vi) improving road safety and enforcing trafficregulations; and (vii) ensuring optimal use of donors' assistance throughfinancing of high priority works.

Description:

At appraisal a four-year program (1988-1991) for roadrehabilitation and maintenance, and institution building was designed tomeet the high priority transport needs of the country. The cost of theprogram was estimated at US$197.0 million equivalent 11. With pledges madeby donors during a meeting held in the Bank offices in Paris on January 27,1988, a project consisting of critical elements of the program has beendesigned; it is estimated to cost US$144.1 million. The project presentedin para. 2.21 is self-contained; it is designed so that as additionalfinancing becomes available, the elements can be easily expanded.

1/ Costs are net of taxes which are estimated at US$29.5 million andUS$21.6 million equivalent respectively for the program and theproject.

(iv)

The proposed Seventh Highway Project is within the scope ofGovernment's National Transport Plan and conforms to Government'smacro-economic development strategy. The proiect's objectives will beoptimally achieved bys (i) rehabilitating and maintaining during afour-year period (1988-1991) the main roads and priority feeder roads;(ii) restructuring and strengthening the role of MTP by (a) entrusting itwith planning, coordination and monitoring of works including those carriedout by other entities; (b) decentralizing MTP's functions by shifting themanagement of road operations to MTP's regional heads; (c) graduallycontracting out most maintenance works by LCB to local (antractors;(d) developing the domestic construction industry by upgrading contractors'skills through training at MTP's Centre d'Applications des Travaux Publics(CATP) and providing timely payments through contractual arrangements; (e)strengthening the professional caliber of civil works personnel byupgrading CATP to the rank of institut so that its diplomas andcertificates are valid for promotion of its graduates in the public andprivate sectors; (iii) providing the Ministry of Defense (MOD), chargedwith enforcing traffic regulations and road safety requirements to minimizeroad deterioration and accident fatalities, with the legal instruments todo so; and (iv) providing consultants' services to assist in programimplementation.

Benefits:

The project would support the country's policy reform aimed ateconomic development by rehabilitating and maintaining an economic roadnetwork which carries about 90 percent of the traffic, traverses the mostpopulous regions of the country and links all the major centers of economicactivity, and by rehabilitating the vital feeder road network, which wouldfacilitate and increase exports of agricultural products and promote foodsecurity thus alleviating poverty in the rural areas. The promotion ofsmall- and medium-scale domestic contractors who will carry out laborintensive road maintenance operations will provide employment to the ruralpoor.

Risks:

The main risks associated with the project arise from thepossible shortage of local counterpart funds for the maintenance componentand from MTP's capability to manage and and execute force account works.These risks should be mitigated by the use of the Road Fund which ensuresadequate, timely and easily accessible funds for road maintenance, by usingcontractors to carry out most of the civil works and through the technicalassistance provided.

Project Cost:

The total cost of the project is estimated at US$144.1 millionequivalent, with foreign cost of about US$105.6 million and local costs ofUS$38.5 million. The detailed costs and financing plan are in thefollowing table.

(v)

Seventh Iioh'Fo I (1963-1991)PrOl et CoGt ERtI' tes Mnd Flnncl, F Pl,n

(m5l MII son)

Foreign asLoal Forelon Total X of Total

I) ProWect Cost Estiteson

(1) Reh16blltation/Resurt.ecna of PLved Road. (1.472 km) 16.6 30.2 46.2 76

(Ii) Robabilitotlon/R.gravelllna of Enoineered Earth Road. (519 ki) 6.6 1.6 2.1 76

(iii) Rehabilltation of Feeder Roads (1.790 ki) 3.5 26J 28.9 70

(iv) Routine mlnt n ol(1' aOperating ond-Cntracting Cost

( a Paved Roads 2.3 5.2 8.0 6eEngineered Earth Roads 1.6 2.4 4.0 66

(c) Feder Roads 1.0 2.4 4.0 66(2) Equipml t, Materials and Supplies 0.4 4.6 4.4 90(8) Infrastructur 0.1 0.6 6.7 of

Sub-Total 1i i4T 21-I3 69

(v) TruinII Inftrestructure/Equipent 0.1 0.6 6.7 962) Fellowships 0.4 0.6 1.6 Ob

Sub-Total EK ri !T 71

(vi) Road Satf*C1) Fqui p nt/Infrestructure 6.1 6.9 1.6 90

(vii) Conrulting Services(1 Supervision 1.4 8.6 7.0 as(2) TA Malntenance 0.4 1.8 2.2 80(a) TA Transport 6.1 0.8 0.4 B6e4) TA Training 6.4 1.6 2.2 80

Sub-Total i 4 11.8 8I sTotal Base Cost 28.6 76.2 186.8 78

Continencies-hysITS4r 2.9 7?8 10.7 73

Prico 7.0 19.6 a 78Sub-Total 11 U7i 87; 74

Grand Total 38.6 195.6 144.1 78

I1) Financing Plan US million Foreign As

Local For*lsn Total S of TotalIDA EFr 1I0U 406.6 1F2AfOB 4.6 20.6 2.60 17

,EDF 8.7 28.9 82.6 22SDC 0.6 15.6 15.6 11 V/NORAD 0.8 1.9 2.7 2Covernment

Road Fund (Recurrent) 7.2 12.6 20 6 14FNDE (Development Budget) 6.2 60.0 62 / 6

Total I lO ifli 144 t

Estimated Disbursemnt

IDA Credit (US1 *13illon) FY89 FY FY91 FY92 FY98Annual 2.I 9-I 8 19 -- 6Cumulative 2.3 1241 28.7 88.6 40.0

Economic Rate of Return: 34X over 651 of total project cost

Staff Appraisal Report: Madagascar Seventh Highway ProjectReport No. 73S-MAG

Map- IBRD 265666

V/ Coats are net of taxes which are estimated at US821.6 million equivalent.

V Equivalent to SOC grant of SFR. 156 0 illion ce'lnancing with IDA and aboutSF. 10.0 mIIIIon bilateral 1fnancing.

Of which US6.5 IIlion could be covered by Swiss Government counterpartfunds of Its balance of payments oupport.

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MADAGASCAR

SEVENTH HIGHWAY PROJECT

I. ;HE TRANSPORT SECTOR

A. Geographic and Economic Setting

1.01 Madagascar is a large and diverse island with a good naturalbase for agriculture. Ecological zones are varied and the agriculturalsector is equally diverse. Rice and cassava are the main food crops,while cattle raising is common in most areas. Agricultural products,primarily coffee, cloves and vanilla, comprise the bulk of exports;however, some minerals, mainly graphite, chromite and mica, are alsoexported. The country's mineral resources are limited, but recentexploration indicates good possibilities that petroleum may be found ineconomically exploitable quantities. Manufacturing consists almostentirely of consumer goods industries catering to local demand andagro-industries.

1.02 The fourth largest island in the world, Madagascar covers anarea of about 590,000 sq. km. Its topography is generally rugged and acentral mountain range traverses the country from north to south. Theclimate is marine tropical with cyclones and heavy rainfall particularlyfrequent on the east coast. The country is sparsely populated (about17 inhabitants per sq. km.) and its population is unevenly distributed,with about one half of all inhabitants occupying the central one quarterof the island. The total population is estimated at about ten millionand growing at about 3.0Z p.a. Ninety percent of the population worksin the agricultural sector; its output accounts for 40X of the GrossDomestic Product (GDP). Industry accounts for 14? of GDP and annual percapita income was about US$230 in 1986. Madagascar is thus at an earlystage of development.

1.03 Prompted by economic stagnation and a resultant 122 decline inper capita income in the late 1960s and early 1970s, significantinvestments were made in all sectors of the economy in the late 1970s.Financed largely by foreign borrowing, the spending boom left thecountry with a debt servicing burden that is straining its economy.Economic development over recent years reflects the need to correctserious imbalances in external accounts and in the government budget.','With generally declining exports, the imbalance in external accounts hadto be corrected by cutting back imports. Imports declined steadily from1981 through 1984; the volume of imports in 1984 was approximately 23?lower than in 1979. Imports of raw materials and spare parts have beenparticularly affected causing disruptions in production. GDP declinedby about 9? in 1981 and 2? in 1982. Estimates for 1983-1987 suggest agrowth of about 1.5? per year. Industrial output has also declined andshortages of new equipment and spare parts have affected the transportsystem and diminished its capacity.

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1.04 The stabilization measures which began in 1981, with IMFassistance, had led to a significant improvement of fiscal balance by1984. These measures were followed by two IDA sector adjustment creditsin 1985 and 1986, and a broader-based Industry and Trade PolicyAdjustment Credit in 1987. The proposed Public Sector Adjustment Credit(PSAC) would complete the process of external trade liberalization, andreform measures in the parastal and financial sectors, and would extendthe reforms to the public expenditure and social areas. In thetransport sector development programs focusing on rehabilitation andpolicy reforms have considerably improved overall infrastructure andrestored financial viability to the railways, the port of Toamasina andthe national air carrier. Road freight transport has been liberalized.Institution building and policy formulation have also been strengthenedthrough new institutions such as tne new Planning Directorate in theMinistry of Transport, Meteorology and Tourism (Ministare desTransports, de la Meteorologie et du Tourisme, MTMT)

B. The Transport Sector

1.05 Development of the tt: .tsport sector has been influenced by:(i) rugged topography and a tropical climate with heavy rains andfrequent cyclones; (ii) an unevenly distributed population concentratedin a few isolated regional centers; and (iii) the lack of suitableconstruction materials in some parts of the island. As a result, roadconstruction and maintenance are costly and less populated regionsremain relatively isolated. Transport needs are relatively well servedon the central plateau where half of the population is concentrated.Nevertheless, the transportation infrastructure fails to provide accessto all productive areas of the country.

1.06 Government policy towards transport development is to:(i) connect regional capitals by all-weather roads; (ii) improvecommunications between the centrally located capital and the mainseaports (Antananarivo, Moramanga, and Toamasina); (iii) improve roadmaintenance; and (iv) improve transport organizations and theirservices. An overriding objective is to satisfy the country'squantitative and qualitative transport requirements at reasonable cost.IDA is in general agreement with these objectives. An action program tobetter coordinate measures relating to infrastructure and means oftransport has been agreed. It seeks to: (i) coordinate and plantransport with regard to services, complementarity, infrastructure, andpricing; (ii) improve the quality of services by introducing competitionbetween the different types of transport and, where possible, betweendifferent operators of a given mode; (iii) reorganize training ofinfrastructure specialists and transport company personnel; and (iv)rehabilitate transport companies by importing sufficient quantities ofspares and tires to ensure regular maintenance of the equipment. Otherobjectives relate to the general development of Madagascar's economy.The overall policy goals aim at providing transport at lower cost,reducing regional isolation through rehabilitation of the secondary roadnetwork, and promoting food security and increasing exports ofagricultural products.

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Sector Management

1.07 Several ministries and government organizations sharereoponsibilities for the transport sectors MTMT and the Ministry ofPublic Works (Minist8re des Travaux Publics, MTP) play the mostimportant role. MTMT has overall responsibilities for road, rail, airand water transport and oversees several autonomous government agencies,including the Madagascar Railvay, Air Madagascar, the Port of Toamasina,and the shipping companies. MTP is responsible for planning, buildingand maintaining roads, and other civil works.

1.08 Other government agencies whose responsibilities affecttransport policy icludes the Ministry of Commerce (Ministere duCommerce, MC), the Ministry of Agriculture (Minist6re de la ProductionAgricole et de la Reforme Agraire, MPARA), the Directorate General ofPlanning (Direction Gdndrale du Plan, DGP), and regional administra-tions. MC's responsibility to collect atad market crops significantlyaffects road transport capacity, and its price control of basiccommodities influences transport tariffs. The supply of transportservices is also affected by MC's role in setting policies on theimportation and assembly of motor vehi-Aes, as well as in determining,together with the Central Bank, foreign exchange allocations forimports.

1.09 Although there are several state-owned road transportenterprises, the majority of transport services are provided bycooperatives and private operators. Also, each regional administrationowns a small trucking company and has recently begun limited pass?rngerservices. Passenger transpert is regulated by MTMT and provincialauthorities. Freight tariffs are determined by the operators, with someguidance provided by indicative costs published regularly by MTMl. Asone of the conditions under the Sixth Highway Project, the liberaliza-tion of freight transport was largely undertaken during 1986. As partof the proposed Credit, MTMT will be required to review legislation andregulations of passenger transport and further liberalize the system ifnecessary. This was discussed and agreed during negotiations and ispart of the covenants of the Credit Agreement. The Government will alsobe undertaking a rationalization of public enterprises, including thosein the transport sector, in the context of the proposed PSAC.

1.10 As of early 1984, MTRT's Directorate-of Planning has beencharged with transport sector planning. The Directorate's main task isto coordinate transport investment plans with other agencies, and alsoprepare investment programs of the sector. Pending the completion of aNational Transport Plan (NTP), (now virtually finalized), DGP hasprepared a Public Investment Program (PIP) for 1986-1990 (see Annex 1)with assistance primarily from MTMT and MTP for the transport sector.IDA and other bilateral and multilateral aid agencies have helpedimprove sector planning, but more assistance is still needed. Under theSixth Highway Project, planning improved through the establishment ofthe planning department in the MTMT with rechnical assistance financedby French aid and IDA. Given the importance of planning in resourcemanagement, MTMT will update the NTP for IDA review by 1990 and 1993.

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MTP and MTMT will be requested to prepare yearly, for IDA approval, athree-year rolling Public Expenditure Program (PEP) for the sectorbeginning with tvo years in 1989 and three years in 1q90. This wasdiscussed and agreed upon during negotiations, and is part of thecovenants of the Credit Agreement.

C. The TransDort Network

1.11 Madagascar, as an island, is dependent upon mainline shippingfor its transport links with the outside world. There are four mainports, 18 lighterage ports and a navigable canal along the east coast.The country's internal transportation infrastructure includes anextensive road network, two rail sections of considerable length and awell-developed air network. Nevertheless Madagascar's transportationinfrastructure is inadequate in that it fails to provide access to allproductive areas of the, country. The country's lifeline, between theport of Toamasina and the central plateau area where most of thepopulation lives, consists of a railway line and of a paved road.Madagascar has also developed an extensive system of ports and coastalshipping as well as an air transport network denser than in mostcomparable countries.

Mi) Road Transport

1.12 The road network comprises about 50,000 km of roads, of whichabout 5,200 km are paved, 5,300 km are engineered earth and gravel and39,500 km are feeder roads and tracks. The paved road network, the mostimportant element of the surface transport system, consists of a mainnorth-south artery (1,700 km) -- RN4 and RN7 -- stretzhing from theregional center of Mahajanga in the north to Antananarivo in the centerand continuing to Fianarantsoa in the souwb-central region and Toliarain the southwest (Map IBRD 20566R). Other paved roads branch off fromthis central axis or are found around the major coastal towns. Thepaved and engineered earth road network is adequate in length and meetsthe country's objective of connecting all regional capitals byall-weather roads, a goal essentially achieved under the Fifth and SixthHighway Projects with the construction of bridges and improvement toengineered earth standards of the Antsohihy-Ambanja road. However, someproductive and potentially productive areas on the east and west coastsare still not connected to the rest of the country by all-weather roads.Road links to the southern region are mainly earth roeds or tracks, mostof which are in poor condition although, with the drg climateprevailing, they are passable year round. Following rehabilitation andmai-ttenance works under the Fifth and Sixth Highway Projects, thecon. ition of most of the paved and engineered earth roads ranges fromgood to fair, while the condition of rural and feeder roads isdeteriorating. In view of limited resources (organization, manpower andfinances), the Government has selected, with IDA assistance, a limitedeconomic network on which the proposed rehabilitation and maintenanceprogram will concentrate exclusively. This network (Map IBRD 20566R)consists of 14,700 km of roads including 5,000 km of paved roads, 3,700km of engineered earth roads, and 6,000 km of feeder and rural roads.This network includes the most trafficked roads in the country, carries

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902 of the traffic, covers all major administrative centers and allmajor agricultural and industrial zones. It aims at pronoting foodsecurity and increasing exports of agricultural products.

1.13 Total vehicle fleet in 1984 and 1985 numbered about46,700 vehicles of which 42,000 were in working order. They include17,200 commercial vehicles of which 12,000 are pickup trucks forpassengers and freight, and 5,200 trucks and semitrailers (Annex 2). Bycontrast, in 1976 there were 104,000 vehicles, 472 of which werecommercial. The decline in traffic is also reflected in the lowerdemand for petroleum products, particularly gasoline (see Annex 1).Since 1985, traffic has begun to increase again as a result of i;rovedroad conditions and rehabilitation of the transport fleet.

(iL) Rail Transport

1.14 The railways are operated by the Raseau National des Chemins deFer Malagasy (RNCFM), a parastatal agoncy under the authority of MTMT.The railways consist of two separate and unconnected single tracksystems. The northern system (about 700 km) connects the capital(Antananarivo) with industrial areas in the high plateau region, themain port of Toamasina and the rice and chrome producing area of-LacAlaotra. The southern system (163 km) connects the regional center ofFianarantsoa with the main coffee-producing area in the south and theport of Manakara. The Antananarivo-Toamasina line is the most importantline and the main mode of transport between the most populated anddeveloped parts of the country. Almost half of the population ofMadagascar llves in the areas directly served by the railway.

1.15 RNCFM is expected to remain the main means of transport forbulk commodities such as petroleum products, grain, chemicals andconstruction materials from Toamasina to the central highlands.Long-term projections indicate that rail traffic is unlikely to increasesignificantly even if the economy continues to grow, due to increasedroad competition for non-bulk comioditLes. Freight traffic is thusexpected to stabilize at the current level of 224 million ton-km. In theshort-to-medium term, desplte some 302 decline in passenger trafficsince 1979, the peak year, the railways will still continue to carry asubstantial number of passengers as many existing vehicles for roadtraffic need to be replaced, a process which may take some time giventhe current scarcity of foreign exchange.

(iii) Air Transport

1.16 By regional standArds, Madagascar has developed a densedomestic air transport network in response to the-distance betweenpopulation centers, the rugged terrain, costly construction andmaintenance of surface transport. There are 56 airports, of which 17are built to all-weather standards, including five suitable forinternational flights. The remainder are gravel or grass strips. Theinternational airport at Antananarivo handles 50X of all traffic; 15small airports carry 302 of the traffic; and 40 very small airports

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share the remaining 202. Service to many small airports is notfinancially profitable but ensures access to otherwise isolated areas.

1.17 Air Madagascar, of which the Government owns 80Z, Air France182, and private shareholders 2Z, provides international service toParis, Marseilles, Zurich and several countries in East Africa and alldomestic service. Its aircraft fleet includes a B-747 (combinationcargo/passengers) for European service. two B-737s for domestic andregional service, two HS-748s and four Twin Otters for domestic service.A subsidiary operates several smaller aircraft for air-taxi and charterservices. In 1984, Air Madagascar's successfully renegotiatedmaturities on its long-term debt obligations to foreign banks, and in1985 began a financial improvement program, which in 1986 resulted in aprofitable operation.

(iv) Ports and Coastal Shippinx

1.18 Although Madagascar relies on maritime shipping for the bulk ofits foreign trade, coastal shipping is important. The country also ownsa navigable canal along the east coast. Indeed, shipping by water isthe only means of transporting freight between many areas of the countrywith no access to all-weather roads. There are four main portstToamasina, the main international port serving the populated centralhighlands via the railway, handles 55Z of the total traffic; Mahajangahandles 11; Antsiranana in the north, 52; and Toliara in the south,about 4Z. The remaining 25Z of traffic is handled by 18 smaller coastalshipping ports. The port of Toamasina has adequate capacity to handlepresent traffic; its operations have improved but are still hampered bylack of spare parts. The increasing constraints on the railway'stransport capacity in the early 1980s have led to the diversion of someinternational traffic to the port of Mahajanga. Capacity there islimited however, as the port requires lightering and the subsequent longdistance surface transport to Antananarivo via RN4.

1.19 The Societe Malgache des Transports Maritimes (SMTM), thestate controlled international shipping line, operates two carge vesselsfor the country's externally traded merchandise. Coastal shipping ishandled primarily by the Compagnie Malgache de Navigation 'CMN), 922state-owned, operating nine vessels of which eight are leased from theGovernment. The government-owned oil company, SOLIHA, operates threetankers, and a number of lighters and barges. Several private operatorscontinue operating one or a few vessels each in coastal or inter-islandshipping to nearby islands in the Indian Ocean. Parts of theintracoastal waterway on the East Coast are now being rehabilitated withAfrican Development Bank (AfDB) financing but traffic is expected to belight. Government's objectives toward coastal shipping and ports are toimprove their efficiency. A survey of shipping services was performedin 1983 with French aid in order to work out a policy to rehabilitateand develop the country's ports. This and further studies ofinstitutional improvements for the sub-sector formed the basis for therecently approved IDA second port project.

D. Road Administration

(i) orsanization

1.20 In Madagascar, MTP is only one agency among other public andprivate entities, such as Faritany (provinces) and Office duD4veloppement Rizicole (ODR), entrusted with management responsibilitiesof the about 50,000 km road network. This arrangement causesinefficient operations and ambiguous accountability. In principle, MTPis responsible only for the administration of main roads (paved andengineered earth roads). In practice, however, since '-P is the onlyorganism equipped and with technical know-how, it is c led uponcontinually to intervene in the other parts of the network to perform'emergency' road repair works, interrupting its own programs, divertingits resources and overtaxing its management. To alleviate theseproblems, the Government with IDA assistance: (a) has selected a limited14,700 km of economic network (para. 1.12) on which the proposedrehabilitation and maintenance program will exclusively concentrate;(b) 1Fas decided to gradually shift to private contractors andconsultants almost all of the road works and to concentrate MTP effortsin policy formulation, planning and supervision of the implementation.MTP's new decentralized organization (para. 1.21) will allow thisinitiative and ensure that basic, simple and routine maintenanceoperations are carried out while emergencies are properly addressed; and(c) has prepared an "Agreement on Road Network Management" ('Charte deGestion du Reseau Routier") which would delineate the responsibility ofeach agency and would make MTP the executing agency for others. Workswould thus be designed and supervised under MTP, carried out bycontractors and disbursements made through the Road Fund (para. 1.26)for MTP and through other agencies with their own separate funds andaccounts. MTP would thus carry out strjctly emergency works as thoseneeded, for instance, after cyclones. Under the 'Charte', an initiationwill be made to charge local users the cost of maintaining feeder roads.The decree on the "Agreement" was discussed and agreed upon atnegotiations. The publication of the decree is a condition of IDACredit effectiveness.

1.21 The organization of MTP has also impeded road maintenance; acentralized system with headquarters in Antananarivo designing roadmaintenance operations, dispatching brigades and giving instructions tothe regions had resulted in inefficient road maintenance operations witha lack of adaptability and continuity. Improvement is being made inthis area since MTP has decided to delegate road maintenanceresponsibilities to the regions. In November 1986, a decree was issuedsetting up a new organization (Chart 1); its main features are discussedbelow:

(a) road maintenance operations are to be decentralized to the sixregions of Antananarivo, Antsiranana, Fianarantsoa, Mahajanga;Toamasina and Toliara, the special division of Toalanaro and33 subdivisions. Brigades, personnel, equipment, workshops,and financial resources will be placed directly under the

responsibility of these units to carry out routine roadmaintenance operations and emergencies, and execute, throughcontractors and consultants, regional road rehabilitation andmaintenance programs; and

(b) a central administration is to be charged with policyformulation, planning, financing and supervision of theimplementation. It will monitor regional programs through aperformance accounting system and provide prompt logisticalsupport to the reSions if needed. The central administrationwill comprise the General Secretariat (Secr6tariat General,SG) charged with administrative, planning and trainingfunctions and a General Directorate (Direction G4ndrale del'Equipement, DGE) which includes a Road Division (Directiondes Routes, DR) and an equipment division (Direction duHateriel, DMAT).

The legal instruments (Arr@tOs d'Application) implementing this decreehave been published. They satisfied one of the conditions ofnegotiations.

(ii) Staffing and Training

1.22 A shortage of qualified and experienced staff at all levels ishampering maintenance operations. For the administration of roads, MTPemploys about 50 engineers, 700 technicians and 2,000 skilled andsemi-skilled laborers. This staffing strength is numerically adequatefor MTP's current operations and will require only minor increases tocope with future workloads. However, MTP's engineers and techniciansare inadequately trained and generally inexperienced. Hadagascar'seducation system is not equipped to train civil works technicians, andinstructions given to engineering students at the Government UniversityTechnical School (Etablissement d'Enseignement Superieur Polytechnique,EESP) is too theoretical.

1.23 To provide the Public Works and private sector personnel withthe required qualifications, the proposed program aims at improving(i) training capacities and status of MTP's Centre d'Application desTravaux Publics (CATP) and (ii) conditions of employment ofprofessionals and technicians in the sector. CATP, created under theFourth Highway Project, has provided road maintenance programs with keypersonnel under the Fifth and Sixth Highway Projects. But as the onlyin-ititution filling the gap in the education system for the training oftechnicians in this sector, it must be able to cater to the needs of thewhole civil works market. Under the proposed program, CATP will beequipped to fulfill these needs. However, training at CATP is notrecognized as a qualification for the recruitment and promotion oftechnicians. To solve this problem, the Government intends to upgradeCATP's status to an Institutw specializing in vocational training. Thenew institute will award diplomas and training certificates which willbe valid for promotion in the public and private sectors. CATP willremain under the jurisdiction of MTP which will liaise with the twoMinistries of Education and with the "Institut National de Formation-

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Promotion' (INPF). The legal instruments creating the new Institutehave been prepared; they also contain a scheme by which firms sendingparticipants to courses at CATP would be required to pay fees adequateto cover at least the average cost per trainee for salaries of localteachers and consumable goods. They were discussed and agreed uponduring negotiations and specified as covenants in the Credit Agreement.The publication of these instruments is a condition of effectiveness ofthe IDA Credit.

(iii) Maintenance

1.24 During the 1970s, the Government concentrated on buildingaccess roads to regional economic centers and paid little attention tomaintenance. Consequently, inadequate road maintenance has become aserioua problem and its effects are being felt throughout the economy,especially in the agricultural sector where farmers find it increasinglydifficult to get their crops to the markets. In 1984, the mainconstraints preventing proper maintenance were: (i) inadequate financialallocations to the Road Fund, established under IDA's Sixth HighwayProject (Cr. 1391/SF4-MAG), from central government's budget and not asstipulated by fuel tax receipts through the national oil company,SOLIMA; (ii) sporadic maintenance operations directed centrally by MTPwhich lacked adequate management capacity; (iii) multiple managementresponsibilities of the road network by other public and privateagencies, such as Faritany (provinces) and ODR with resultinginefficiencies and ambiguity of accountability; (iv) delayed progress inrehabilitation works under the Sixth Highway Project caused by arrearsin payments to contractors, consultants and suppliers; (v) lack of Xenforcement of traffic regulations and safety which has resulted inaccelerated deterioration and high accident fatalities; (iii) cumbersomeadministrative and procurement procedures; (iv) shortage of qualifiedroad maintenance technicians; and (v) poor management, budgeting andimplementation of maintenance operations.

1.25 Major steps have been taken since then to remedy some of theseproblems under the ongoing Sixth Highway Project: (i) the November 1986Decree decentralizing road maintenance operations and entrusting MTPwith policy formulation and supervisory functions; (ii) funds providedthrough Caisses d'Avanceu, established under the Sixth Highway Project(para, 1.26), and the completion of the rehabilitation of workshops (inAntananarivo, Mahajanga, Toliara, Fianarantsoa, Toamasina andTaolanaro), financed under the Fifth and Sixth Highway Projects, haveaccelerated rehabilitation and maintenance of roads and equipment;(iLi) seven brigades have been organized in the regions with equipmentprocured under the Fifth and Sixth Highway Projects; (iv) MTP hasshifted the execution of about 30? to 402 of the road maintenance worksto private contractors; and (v) a permanent training center, CATP, hasbeen established and a training program for road maintenance personnelis in operation. These actions will be expanded under the proposedprogram, where further clarification of responsibilities andaccountability for road works will be settled, MTP will concentrate itsefforts on management and most of the werks will be executed by privatecontractors (para. 1.20); financing of road maintenance operations willbe secured directly from fuel taxes (para. 1.26 and 1.28); training

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activities will be expanded to iccommodate the private sector needs(para. 1.23) and a program of traffic regulation and safety will beimplemented (para. 1.31).

(iv) Financingt

1.26 Road maintenance is financed from the recurrent budget whilenew construction is financed from the investment budget which comesmainly from external sources. Thus, funds for new construction do notcompete with other sectors for scarce local fupds. In 1982 when theSixth Highway Project was being prepared, an average of FMG 4.0 billionp.a. was allocated to overall road maintenance (rehabilitation, periodicand routine maintenance). This was insufficient to adequately maintainthe economic network. Moreover, the disbursement of these funds wasalw4ys late, thereby interrupting and delaying the works. At that time,to solve the dual problem of over-investment in new construction andunder-financing of maintenance and ensure reliable, timely and adequatefunds for road maintenance operations, a covenant was introduced underthe Sixth Highway Project requiring that the Government creates a RoadFund financed by fuel taxes with simplified disbursement procedures. Asstipulated in the Credit Agreement, SOLIMA, the Government Oil Company,was to deposit FMG 5.0 billion directly into the Road Fund from theproceeds of fuel taxes. The Road Fund was legally established by decreeon December 14, 1984. It was however untimely and inadequately financedthrough the budget with cumbersome disbursement procedures. But arevolving fund, aCaisses d'Avancel, opened under the Road Fund, isproviding about FMG 600 million quarterly for routine road maintenanceoperations, or about half the basic routine maintenance needs of thenetwork. In response to IDA's request, the Government has issued adecree *n September 11, 1987 which (i) authorizes SOLIMA to supplydirectly the Road Fund, (ii) makes MTP managing entity of the Road Fund,and (iii) authorizes MTP to designate responsible individuals in theregion to manage regional accounts credited from the Road Fund, and toexpedite the execution of road maintenance operations. This decree hasbeen published thus satisfying one of the conditions of negotiations ofthe proposed IDA Credit.

1.27 As of mid-October 1987, the Government had accumulated aboutFMG 4.6 billion arrears of payments during the execution of the ongoingSixth Highway Project. This issue, as a condition of negotiations, hasbeen resolved by Government paying these arrears. If these arrears werenot paid, they would have jeopardized the execution of the proposedprogram, as contractors, consultants and suppliers would have increasedthe base costs to recover their dues.

1.28 Revenues from road user charges are estimated to have beenabout FMG 16.0 billion in 1986. This exceeds the amount spert on roadsfor both construction and maintenance and is far above what normallyshould have been allocated for road maintenance. Import duties andsales taxes from transport equipment and spare parts totalled FMG 7.2billion in 1985 and annual license fees, vehicle inspection fees, etc.,added another FMG 0.4 billion. Taxes on gasoline and diesel fuelproduced revenues of about FMG 8.5 billion in 1985, and at present level

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of fuel prices (November 1987), they are expected to yield about FMG 9.7billion per year. Thus, the general level of road user charges isadequate to cover road maintenance needs. To etnsure reliable fundingunder the program, the Government agreed to (i) allocate SDR 3.6 millionequivalent yearly to routine road maintenance operations through theRoad Fund, (ii) maintain a sub-account to the Road Fund 'Caissed'Avance replenished quarterly to the equivalent of at leastSDR 360,000, and (iii) keep the prices of fuel at competitive levels togenerate resources to cover road maintenance needs, taking intoconsideration inflation and expansion in the network. Since a timelyrevision of fuel prices is needed to sustain the tax revenue, aprovision for an annual review of the fuel tax revenue was included as acovenant in the Credit Agreement.

(v) Engineering and Construction

1.29 The DGE through its DR and regional offices is responsiblefor engineering studies and execution of construction works.Engineering and construction standards follow those developed by theFrench Ministry of Equipment but have been adapted to conditions inMadagascar (Annex 4). The DG carries out project identification andsome preliminary design. But most studies and construction supervisionare executed by foreign firms and their affiliates, the Government-ownedfirm DINIKA, and the National Soil laboratory (Laboratoire National desTravaux Publics et du Batiment, LNTPB).

1.30 Up to now almost all major road construction and maintenanceworks have been carried out by foreign contractors and their affiliatesand by force account. Domestic private construction sector has startedto play a small but increasing role. The government-owned constructionfirm, Soci6t6 d'Interet National de Travaux Publics (SINTP), hasrecently opened its equity to the China Road (China), and a domesticconstruction firm, SARA, has captured a sizeable share of the buildingconstruction market. In addition, there are about fifty small domesticcontractors which are involved mostly in building construction but haveoccasionally executed small subcontracts for road works.. A surveycarried out under the Sixth Highway Project has shown that many of theseexisting or aspiring small and medium domestic contractors have somebasic skills in civil works (as former employees of MTP, contractors orconsultants) but need managerial skills to execute substantial civilworks contracts. The role of the domestic construction industry willexpand under the proposed program as most of the maintenance works willbe executed by contractors. To assist these firms in executing thesesmall and scattered road maintenance operations for which they havecomparative advantage over foreign firms, a training/work program willbe established (para. 2.12). The applicant-firms will carry out roadmaintenance works under close supervision, and if successful, they willbe prequalified for similar operations under the program. There is nospecific financial assistance designed in the proposed program, but tosolve these contractors' liquidity problem contractual arrangements willbe made to provide quick up front payments, and ensure regular paymentsthrough the Road Fund. In addition, under the proposed Small ScaleEnterprise (SME) Project, a financial assistance to SME, including

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small- and medium-scale domestic civil works contractors will beprovided on a cross sectoral basis. More specifically, equipmentleasing and renting will be considered, which will result in addressingone of the main constraints which hamper the development of domesticconstruction industry.

(vi) Traffic Reaulations and Safety

1.31 Regulations governing truck weight and dimensions areadequate. Weight regulations allow loads up to 10 tons/axle;weighbridges were bought under the Fourth Highway Project to helpenforce these regulations but enforcement remains poor. Spot surveyshave revealed that more than 60S of trucks are overloaded and manyexceed legal dimensions. The laws governing road safety are adequatebut enforcement is lacking; and driver education, licensing and vehicleregistration are hardly more than formalities. Vehicle inspection iscarried out sporadically and superficially. Although statistics ontraffic accidents are scattered and inconclusive, the large number ofdemolished vehicles along major roads point to a high toll of accidents.Under the Sixth Highway Project, the Government has prepared enforcementmeasures which would reduce the rate of road deterioration and ensuresufficient road safety. These measures will be implemented under theproposed program (para. 2.17).

E. Bank Group Role in Transport

1.32 Bank involvement in the transport sector in Madagascar hasbeen substantial. Between 1966 and 1987 the Bank supported eleventransport projects with IDA Credits totalling over US$200 million, sixin roads, two in ports, and three in railways. The Bank has and shouldcontinue to play a critical role in improving the institutional capacityand policy framework for the sector. No other donor is prepared to, orseems capable of, playing this role. Further details on previouslyfinanced transport projects are given in Annex 5. Through its highwayprojects the Bank has assisted Madagascar in meeting its objective ofconnecting all regional capitals by all-weather roads, and improving themaintenance of the network; however, further improvement is still neededin institution building and financing (paras. 1.24 through 1.28). Themost recent (1986) railway credit (Credit 1694-MAG, US$13.0 million,1986) is financing priority items of the RNCFM's investment plan for1987-1989. This consists of the following main componentsttelecommunications and track rehabilitation, reconstruction of a bridge,provision of a road/rail link to a cement plant, provision of spareparts for locomotives and wagons, purchase of trolleys for trackmaintenance, workshop machinery, tools and other equipment, stafftraining, technical assistance and studies. Cofinancing is provided byCaisse Centrale de Cooperation Economique (CCCE) of Prance.

1.33 The most recent Ports Rehabilitation Project (Credit 1752-MAG,US$16.0 million, 1987) will provide for the rehabilitation of portsinfrastructure in all the most important ports for coastal shipping,modifications and improvements to cargo handling in those ports,strengthening navigation and other services to shipping and

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institutional development and reform, particularly for the main port ofToamasina. The project is expected to reduce the cost of shippingthrough improved cargo handling, improved ship utilization and toimprove safety of navigation. The project is supported by cofinancingfrom several donors such as CCCE and Kreditanstalt fuer Wiederaufbau(KfW).

F. Rationale for Bank Involvement

1.34 Transport is a key sector in the Bank's lending strategy inMadagascar because inadequate transport constrains economic developmentin other sectors as indicated in the 1983 Transport Sector Memorandum.The Bank's heavy investment in the sector has resulted in: (i) agradually increasing emphasis on rehabilitation versus new investments;(ii) progress towards the creation of a highway maintenance institution;and (iii) increased management and financial autonomy for the railwaysenabling them to carry out significant tariff reforms. The Bank hasbeen promoting an integrated approach to transport to help Madagascar'seconomy, to maintain an ongoing dialogue with the Government with a viewtoward furthering policy reform, and to balance the Bank's lending amongsub-sectors. This rationale has been the basis for both the most recentrailway and ports rehabilitation projects. The transport modes alsosupport each other so that both highways and railways must remainoperative to ensure an efficient flow of goods to and from the ports.

1.35 IDA's support of Government's proposed Seventh Highway Programis therefore justified on the following grounds: (i) assistance toGovernment to achieve food security through the development ,of priorityfeeder roads; (ii) consolidation and continuation of transport sectorimprovements initiated under previously financed IDA projects;Ciii) support to Government's policy reforms aimed at restoring vitalinfrastructure and mobilizing more effectively domestic and externalresources; and (iv) leadership in the coordination of support to aprogram which many donors, including AfDP, CCCE, European DevelopmentFund (EDP), Fonds d'Aide et de Cooperation (FAC), Italy, Japan, KfW,Norwegian Aid (NORAD), Swiss Cooperation and USAID, are willing tofinance.

II. THE PROGRAM AND THE PROJECT

A. Obiectives

2.01 The road network of Madagascar is adequate in size. However,a sustained effort in its maintenance is necessary to meet the country'seconomic and social development goals. The Government has prepared acomprehensive four-year (1988-1991) rehabilitation and maintenanceprogram of this national asset. This program expands efforts begununder previous projects and aims at: (i) strengthening MTP's capacity,especially in policy formulation, planning, budgeting, and supervision;(ii) promoting food security and increasing exports of agriculturalproducts; (iii) gradually shifting most maintenance operations from

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force account to private contractors who are already active in thesector; (iv) 4eveloping local human resources and the domesticconstruction industry; (v) improving public expenditure practices in theroad sub-sector through a three-year rolling PEP prepared yearly andbased on a current National Transport Plan; (vi) improving road safetyand enforcing traffic regulations; and (vii) ensuring optimal use ofdonors' assistance through financing of high priority works..

B. Proaram Description

2.02 To achieve the above objectives the four-year (1988-1991)program comprises:

(i) rehabilitation and resurfacing of 2,231 km of pavedroads;

(ii) rehabilitation and regravelling of 1,250 km of engineeredearth roads;

(iii) rehabilitation of 2,783 km of feeder roads;

(iv) routine maintenance of the total economic networkincluding about 5,000 km of paved roads, 3,700 km ofengineered earth roads, and 6,000 km of feeder roads;

(v) development of small- and medium-scale domesticcontractors;

(vi) training and development of HTP and private sectorpersonnel;

(vii) use of consulting ser"ices; and

(viii) improvement of traffic regulation and safety.

2.03 The program has been designed to meet the road.transport needsof the country. As such it is flexible and could be executedprogressively as financing is acquired, ensuring optimal use of donors'assistance through financing of high priority components. The design ofthe works in the program has been the subject of two comprehensivestudies carried out under the Sixth Highway' Project by consultants. Thefirst, carried out by Gendron Lefebvre Inz. has produced a soundrehabilitation and maintenance program for the main paved and earthroads. The second, executed by Renardet Engineering (France) and SAUTI(Italy), has identified a prioriA.y feeder road network and proposedrehabilitation and maintenance itorks to sustain agricultural andindustrial development, and to achieve the country's goal of foodsecurity in the 19909. All rehabilitation and periodic maintenanceworks and most of the routine maintenance works will be carried out byprivate domestic and foreign contractors. Bidding documents have beenprepared to award such works. As a result, MTP's role will be alteredwith most of its efforts directed to policy formulation, planning andmonitoring of the program. An annual review of this program was agreed

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upon during negotiations a-id is part of the covenants of the CreditAgreement.

(M) Rehabilitation and Resurfacing of Paved Roads

2.04 The program continues the rehabilitation of the paved roadnetwork begun under the Fifth and Sixth Highway Projects. Under theseprojects, the rehabilitation of the country's major road axisMahajanga-Antananarivo-Fianarantsoa-Toliara (1,700 km) has almost beencompleted. The proposed program completes this process; it includes2,231 km (Arnex 6.1) of paved roads. These roads were built 10 to 20years ago, they carry about 100 to 500 vpd, with trucks amounting toabout 502 of vehicles on low trafficked roads and 202 on those heavilytrafficked. During the past decade maintenance has been spotty andcarried out on an emergency basis, some pavements have deteriorated tothe extent that reconstruction is necessary while others need protectionto avoid premature breakdown. Pavement widths built within a range of6.0 m to 5.5 m have eroded to about 4 m to 3.5 m. The works consist of:(i) improving drainage systems; (ii) repairing structures;(iii) regravelling of shoulders ranging from 0.5 m to 1.0 m .n width;(iv) rebuilding of some subgrades; (iv) patching, resealing andexecution of a single surface treatment on some sections;(v) constructing new base courses of crushed rocks or treated local soilmaterials; and (vi) executing double surface treatments or asphaltconcrete wearing courses on others. The design is based on a realisticmaximum single axle load of 13 tons for an economic life of 15 years.It is expected that resurfacing will be required after 7 to 8 years.

(ii) Rehabilitation and Rearavellint of Engineered Earth Roads

2.05 The proposed rehabilitation and regravelling of engineeredearth roads includes 1,250 km (Annex 6.1) of roads, ensuring criticallinks between the main paved road network and the feeder road network.These roads, carrying about 50 vpd were built at the same geometricstandards as those of the paved roads. Some have deteriorated causingtraffic disruption and constitute serious bottlenecks in the entire roadsystem while some need regravelling to bring them up to standard. Theworks proposed are the same as those for the paved roads (para. 2.04)except that base and vearing courses will be built of gravelly soilmaterials.

(iii) Rehabilitation of Feeder Roads

2.06 The proposed program of rehabilitation of the feeder roadsincludes clusters of feeder roads totalling 2,783 km (Annex 6.1),providing access to the most agriculturally productive regions in thecountry. Some of these roads have not been maintained during the pastdecade and )thers are only tracks on which traffic is impeded during therainy season due to, inter alia, lack of adequate drainage, steep gradesand sharp curves. Works proposed includet (i) widening of widths toabout 4.5 m with shoulders of 0.5 to 1.0 m when economically feasible;(ii) improving drainage; (iii) partially realigning and improvinggrades; and (iv) selective regravelling. These works, in conjunction

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with the rehabilitation of the main road networks, would allow a year-round circulation system to sustain agricultural and industrialdevelopment in the regions.

(iv) Routine Maintenance

2.07 The proposed routine maintenance program will cover the entire14,700 km of economic road network. Since rehabilitation and periodicmaintenance works will be carried out on pars of this network at thesame time, as described above (paras 2.04 to 2.06), routine maintenanceoperations will be executed yearly on average on about 3,600 km of pavedroads, 3,000 km of engineered earth roads and 3,900 km of feeder roads.Routine maintenance operations will consist of (i) clearing ofshoulders; (ii) cleaning of ditches and culverts; (iii) minor repairs ofbridges; (iv) patching and resealing of paved roads, and (v) filling ofpotholes and regrading of engineered earth roads and feeder roads.

2.08 Patching and resealing will be carried out by force account asthey cannot be packaged and contracted out economically. Operations onfeeder roads will mostly be contracted out to 6mall- andmedium-scale contractors in the region, under supervision of MTP.Patching and resealing will be carried out by seven brigades, one ineach of the six regions and- in the special division of Toalanaro. It isestimated that each of these brigades will maintain about 400 km ofroads a year. Each region will also have an additional brigade tohandle minor urgent earth works and emergencies in the subdivisionswhere the capacity of domestic small and medium contractors is notsufficient. Force account operations consisting of cleaning ofshoulders, clearing of ditches and culverts, minor repair of bridges andfilling of potholes will be carried out by labor-intensive 'cantonnage'teams composed of about 15 *cantonniersu supervised by a headman. It isestimated that each of these teams vill maintain about 75 km of roads ayear. Most of thb equipment and tools for the brigades and teams havebeen provided under previous projects. The proposed program willprovide complementary equipment. The physical facilities and equipmentof the 33 subdivisions (para. 1.21(a)) will also be improved. The listof equipment (Annex 7) was discussed and agreed upon duringnegotiations. Equipment will be maintained in the seven workshopswhich, along with the regional headquarters, were improved and equippedunder previous projects.

(v) Development of Domestic Contractors

2.09 The shift of road maintenance operations from MTP forceaccount to private contractors entails an intense utilization of small-and medium-scale contractors. These contractors have a comparativeadvantage over major ones for the execution of small and scatteredroutine road maintenance. About 50 domestic small and medium-scale-contractors have been identified. They are qualified to varying degreesin the execution of small civil works, with the majority havingextensive eperience in building construction with the capacity todiversify. To assist in this development, (a) a comprehensive trainingwork scheme will be established under the proposed program, includingtraining courses and seminars to CATP. Field works, as part of the road

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rehabilitation and maintenance program, will be carried out in theregions with tutorial management assistance, and (b) contractualarrangements will be made to provide up-front payments to solve thecontractors' liquidity problems (para. 1.30). To help small-scaledomestic contractors develop their ability to carry out periodic androutine maintenance, training works will be organized by MTP andassisted by consultants. The training program (para. 2.12) willprogress gradually, expanding into two new regions every year until itis in place in all six regions and the special division of Toalanaro.These contractors will compete for the training works and will receivetechnical and management training. Each training-work site will consistof about 7 km of engineered earth road or feeder road to berehabilitated, or maintained, costing about US$50,000 to US$100,000.Five work sites will be selected in each region during the program.

2.10 Special care will be taken to monitor the progress made bycontractors during implementation. Once training works have beencompleted, contractors showing satisfactory performance will be approvedto compete on their own for similar works in the program.

(vi) Training and Manpower Development

2.11 The proposed training program will expand training effortsbegun under the Fifth and Sixth Highway Projects by offering trainingfor the entire civil works market. For this purpose the trainingcenter, CATP, built, equipped and operated under previous project, willbe transformed into an Institut (para. 1.23). This would fill the gapin the country's education system by providing necessary practicalskills to civil works personnel. The targeted NTP personnel includes:40 engineers, 140 road technicians, 120 equipment operators, 250mechanics and electricians, 60 accountants, and 70 store clerks. TheInstitute has the physical capacity to accommodate the training ofcontractors and could expand its teaching core according to demand. Theproposed program would provide the necessary additional equipment, toolsand supplies and the basic corps of experts to implement the trainingprogram (para. 2.15).

2.12 The program will combine classroom and field training. Thetrainees will receive on-the-job training by joining MTP's brigadesunder the Institute's supervision, while domestic contractors (majorityowned by Malagasy nationals) will gain field experience by executingtraining works (para. 2.09). The training program will include mainsubjects such as labor-based methods, quality control, contracting,administration, construction management, and equipment operation andmaintenance. Successful trainees needing additional instruction will begranted fellowships for short courses abroad or organized locally.Malagasy instructors, counterparts to the expatriate experts, willreceive on-the-job training in the Institut and additional trainingabroad on short-term scholarships. During their training in theInstitute, trainees will receive daily allowances in addition to theirsalaries as an incentive to prospective trainees and a means to attractpersonnel from outside hntananarivo. The proposed program is designedto be the most cost-effective means of providing road construction and

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maintenance skill to civil works personnel. The design and execution ofthe training program will be reviewed every year by the Government andthe Bank.

(vii) Consulting Services

2.13 As the program envisages MTP in a role of policy tormulation,planning and monitoring of the implementation, consulting services willbe needed for the execution of the operations. The needed consultingservices are as follows:

(1) Sugervision of Contracted Works

2.14 Consultante will supervise rehabilitation, resurfacing andregrav.elling works carried out by contractors.

(2) Technical Assistance to MTP and MTMT

2.15 MTP regional units will need 3 road construction andmaintenance experts, 2 mechanical experts and one administrative and afinancial expert to assist in the implementation of the force accountand tutoring of small contractors for a total of 272 man-months. MTHTwill need 2 transport experts for about 45 man-months to carry outtransport planning and coordination. The experts will assist in 1i)planning works and supervising the brigades: (ii) carrying out repairand maintenance of equipment; (iii) procuring equipment and spare parts,materials and supplies; (iv) procuring and supervising routinemaintenance works carried out by domestic contractors; tv) carrying outcost-accounting to determine equipment and brigades outpuit, unit costs,and indices for monitoring equipment utilization and progress of works;and (vi) transport planning and coordination. The outline terms ofreference of the experts and monitoring procedures (Annex 8) werediscussed and agreed upon during negotiations.

(3) Technical Assistance for Training

2.16 A core of 9 experts will be needed for a total of 400 man-months to implement the training program. Additionally, 111 man-monthsservices of various specialists will be needed to carry out shortseminars during the program. The experts will aspist in (i) developingappropriate curricula; (ii) selecting trainees and-conducting classroomand field instruction; (iii) selecting institutions and trainees forshort-term fellowships for studies locally or abroad; and (iv)monitoring the progress of trainees and helping them to be recruited inMTP, other public services, or private businesses. The outline terms ofreference of the experts (Annex 8) were discussed and agreed upon duringnegotiations.

(viii) Traffic Regulation and Safety

2.17 As required under the Sixth Highway Project (par&. 1.31), theGovernment has undertaken field experiments in order to design andimplement an appropriate program for enforcement. From these

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experiments the Government has designated the Ministry of Defense (MOD)as the sole authority to approve the technic41 aspects of importedtrucks, and operators' licenses. MOD will also carry out vehicleinspections, operate weigh-stations, and carry out road patrols fromthree centers located in Maevatanana - (RN4y'¢ Brickaville (RN2) andAmbatolampy (RN7), the major traffic corridors in the country. Theprogram will provide the infrastructure and equipment for theseoperations. Legal instruments conferriag tbloe responsibilities to MODand spelling out standards and methods of execution were discussed andagreed upon during negotiations. Their publication is one of theconditions of effectiveness of the credit.

C. Program Cost and Financina

2.18 The total cost of the program, net of taxes and duties butincluding contligencies, is estimated at US$197.0 million equivalentwith a foreign component of US$146.0 million (742), and US$51.0 millionof local costs. Taxes are estimated at US$29.5 million. Base costs areat December 1987 prices. Physical contingencies of 102 have been added,and price contingencies are based on recent estimated inflation rate asfollowss 3.0X in 1988-90, and 4.01 in 1991-1993. The detailed programcosts are shown at Table 2.1.

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Table 2.1

Madasascar

Seventh Highway Pr.gras (1 M -1991)

Cost Estimates V(USs illIton)

Foreign asLocal Foreln Total S of Total

(1) RRhabilitation/re.irfacina Daved roads (2.281 kn) 11.7 86.8 47.0 75

(il) R.habilitation/resrav.llins engineered earth roads (1.256 km) 2.7 0.8 9.0 70

(iii) RehabiIt*on der roads (2.788 k) 18.6 81.5 45.0 70

(Iv) Routine .hLt once(1) Operating and contracting cost

(a) Paved roads 2.8 7.2 9.5 75(b) Engineered earth roads 1.8 8.2 4.6 70(e) Feeder roads 1.8 8.2 4.6 70

(2) Equipment 0.2 2.i 2.5 go(8) Infrastructure 0.8 1.2 1.6 8a

Sub-Totel 5.4 17.1 22.5 75

(v) Training(1) Inf rstrueture/Equi pennt 0.1 1.4 1.5 80(2) F llowships 1.0 1.5 2.5 66

Sub-Total 1.1 2.9 4.6 78

(vi) Road Safety(1) Equipmont infrastructure 0.1 0.9 1.0 9

(vii) Consulting Services(1) Supervision of works 2.0 8.0 10.0 80(2) TA mintenance 6.6 2.0 2.5 80(3) TA Transport 0.1 6.8 0.4 86(4) TA training 6.9 8.7 4.6 80

Sub-Total 8.6 14.0 17.5 80

Total B se Cost 89.0 108.6 146.0 74

ContingencesPhysic l 8.6 10.8 14.6 74Price 9.2 27.2 86.4 76

Sub-Total 18.6 88.6 51.6 75

Grand Total 51.0 146.0 197.0Cna .5 = . _

V Costa are net of taxes which *r estilated at US 29.6 mtillion equivalent.

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2.19 The cost of works of paved roads are estimated at US$45,000/kmfor rehabilitation and US$6,000/km for resurfacing. The costs forengineered earth roads are estimated at USS12,800/km for rehabilitationand US$2,500/km for regravelling. The rehabilitation of feeder roads isestimated to cost US$16,000/km. Routine maintenance costs are estimatedyearly at US$750/km for paved roads, US$300/km for earth roads andUS$250/km for feeder roads. Supervision services are estimated at 10?of the cost of works. These unit costs are also based on those ofsimilar recent and ongoing works in the country. Cost of equipment,spate parts, materials and supplies are based on recent bid prices andoperations in Madagascar. The man-month cost of technical assistanceservices estimated at US$9,000, includes US$7,000 for salaries andoverhead (home office expenses, expatriate allowance, social cost andother expenditures) and US$2,000 for reimbursable expenses (travel,telecommunication, houses and other miscellaneous items); these costsare in line with those for similar and ongoing services in Madagascar.The costs of fellowships are estimated at US$10,000 per student peryear, including tuition and fees, housing, travel and subsistence; anaverage daily allowance of US$4.0 is foreseen for each locally trainedcandidate.

2.20 Madagascar is experiencing serious budgetary constraints andthe need for significant government participation in the financing ofthe program could impair its execution. Therefore the Bank Group andother co-lenders would finance the total foreign costs and a significantproportion of the local costs. Government's contribution would thus beconcentrated in financing the costs of routine maintenance operations.During a donors' meeting held in Paris on January 27, 1988, fiveinstitutions pledged a total of US$115.9 million equivalent of readyfinancing. They include IDA (US$40.0 million credit), AfDF (US$25.0million credit), EDF (US$32.6 million grant), Swiss DevelopmentCooperation (SDC) (US$15.6 million grant), and NORAD (US$2.7 milliongrant). The SDC US$15.6 million represent SFR 15.0 million cofinancingfor which IDA is the executing agency and SFR 10.0 million of bilateralfinancing. Other donors indicated their willingness to participate at alater date in the financing of the program; they include Italy, Japan,CCCE/France, FAC (France) and KfW (FRG). A project (para. 2.zl)consisting of priority elements of the program has been designed basedon the available financing. The remaining elements of the program willbe executed as additional financing becomes available.

D. The Proiect and its Financing

2.21 The proposed project would comprise the following elements 11(i) rehabilitation and resurfacing of (a) 1,472 km of paved roadsestimated to cost US$54.3 million; (ii) rehabilitation and gravelling of519 km of engineered earth roads - US$2.8 million; and(iii) rehabilitation of 1,790 km of feeder roads - US$39.0 million;(iv) routine maintenance on the main road networks and most of thefeeder road network for US$28.4 million; (v) training of key MTP

1/ All cost estimates include contingencies, but not taxes which areestimated at US$21.6 million for the total project.

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personnel - US$2.3 million); (vi) road safety and traffic regulation -US$1.4 million; and (vii) consultant services to assist in the projectexecution - US$15.9 million. The total cost of the project is estimatedat US$144.1 million equivalent, with foreign costs of about US$105.6million (732) and local costs of US$38.5 million. The project would befinanced by US$115.9 million equivalent pledged 'y foreign donors(para. 2.20), and by a government contribution .f US$28.2 million tocover the recurrent costs of routine maintenance. Government'sparticipation would be provided under the Road Fund - US$20.0 millionfor routine maintenance works, the Development Budget (FNDE) - US$8.2million to cover some local costs co-financed by foreign donors. AboutUS$5.5 million, under FNDE financing, could be covered by SwissGovernment counterpart funds of its balance of payments support.Detailed costs and summarized financing plan are given in Table 2.2.The detailed financing plan is shown in Annex 9.

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Seventh HI hiiw: ram n198-1991)Prolaet Cost Estimte. Al and Financina Plan

(USu MIIIion)

Foreign *aLocal Foreign Total of Total

I) Project Coat Estimate.

(1) RshabilItationlR.eurfacIne of Paved Road (1.n472 km) 10-0 8e2 4e 2 76

(I1) RehabilitatlonlResravellina of Enginreeed Earth Road. (519 kd 6.6 1.6 2.1 70

.(II) RehabilIltation of Feeder Roade (11796 km) 0.6 26.8 28.9 76

(Iv) Routine Maint c g one(1) Op r ting *n ontr cting Cofts

(a) Paved Roads 2.8 6.2 8.6 65(b) Engineered Earth Roads 1.6 2.4 4.0 6o(c) Feder Roads 1.6 2.4 4.6 6e

(2) Equlpment, Materiels and Supplies 0.4 4.0 4.4 9W(8) Infrastructure 0.1 0.6 0.7 80

Sub-Total K 1iTi 2X:T 69

(v) Trining(1) In nratructuro/Equipm_nt 0.1 0.6 0.7 s0(2) Fe lowships 0.4 0.6 1.6 66

Sub-Total EK r1 T7 71

; (vi) Ro d Saft t(1) Equl_pent/Infrastructure 6.1 6.9 1.0 90

(vI1) Consulting Serviceselr-s"wv| 3u on1.4 5.6 7.0 80(2) TA Maintenance 0.4 1.8 2.2 86(8) TA Tr nsport 0.1 0.8 0.4 86(4) TA Tra ntng 0.4 1.8 2.2 80

Sub-Total i3 71 11.8 80Total Bass Cost 28.6 78.2 16.8 78

Cntinonl s°hysienl- 2.9 7.8 10.7 78Price 7.0 19.6 26.6 73Sub-Total 27.4 I 74

Grand Total 88.5 165.6 144.1 78

XI) Financing Plan - US million -Foreign As

Local Forelon Total X of Tot IIDA 9 86.9 W4 28AfDB 4.C 20.5 25.0 17EDF 8.7 28.9 82.6 22SDC 0.6 15.6 16.6 11 VNORAD 0.8 1.9 2.7 2Government

Road Fund (Recurrent) 7.2 12.8 20.0 14FNDE (Development Budget) 8.2 8.9 8.2 6i a

Total 88.C IW. 61 i4- Di

1/ Coot. are not of taxes which are estimated at US821.6 million equivalent.

Il Equivalent to SDC grant of SFR. 15.0 million cotinancing with IDA and aboutSFR. 16.0 million bilateral financing.

VJ Of which USIS.5 m ilion could be covered by Swiss Governmnt counterpartfunds of Its balance of payment. support.

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E. luDlementation and Procurement

2.22 The project will be implemented by MTP through its DGE and byMTMT for assistance in transport planning and coordination. Theexpected implementation schedule for major activities of each projectcomponent is shown in Chart 2. This schedule will be discussed andagreed upon during negotiations. The project covers a four-year period,starting June 1988. The rehabilitation of engineered earth and pavedroads will start in December 1988 and take approximately 36 months tocomplete. Equipment for road maintenance, offices, telecommunications,workshops, and training should be delivered by June 1989, about sixmonths after notification of contracts to the suppliers. Technicalassistance for training and routine maintenance will continue for fouryears starting in December 1988. The project is expected to becompleted by June 30, 1992.

2.23 Procurement arrangements are summarized in Table 2.3:

Table 2.3

Madagascar

Seventh Highway Prolect (1988-1991)

Procurement Arrangements

Procurement Method (US$ million)

Not TotalProiect Element ICB LCB Other ApDlic. 2

Civil Works 59.0 6.4 54.4 119.8(20.8) (3.5) (24.3)

Equipment, Materials 6.5 0.5 0.1 7.1and Supplies (6.5) (0.5) (7.0)

Consultant Services 17.2 17.2and Fellowships (8.7) 3/ (8.7)

65.5 6.9 17.2 54.5 144.1(27.3) (4.0) (8.7) (40.0)

1/ Figures in parentheses are amounts financed by IDA.

2/ Contracts by Government and other donors.

3/ IDA Guidelines.

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2.24 Major civil works for the rehabilitation of engineered earthand paved roads will be carried out by contractors on the basis ofinternational competitive bidding (ICB) in accordance with the 1985 BankGroup Guidelines after suitable pre-qualification process. Qualifieddomestic civil works contractors would be allowed a preferential marginof 7.5? over the bid price of competing foreign contractors. Small andscattered construction works on roads and buildings costing less thanUS$500,000 each and aggregated to not more than US$6.4 million will becarried out by contractors on the basis of local competitive bidding(LCB) procedures, on the basis of Madagascar Decree 70-089 ofJanuary 28, 1970 provided that: (a) registration of foreign bidders inthe Registry of Commerce will not be required for the acceptance oftheir bids; (b) no procurement shall be made on the basis of selectedtendering or direct contracting except in the case of rejection of allbids: (c) bids shall be opened in public. i.e., bidders or theirrepresentatives should be allowed to be present; and (d) no specialpreference will be given to local bidders in the evaluation of bids.Works estimated to cost about US$1.8 million (out of the US$6.4 millionmentioned above) will be subdivided into small lots of about US$50,000to US$100,000, which small domestic civil works contractors will executeas part of field training; these works will be procured under LCB,limited to participants in the training program (para. 2.12).Equipment, spare parts, materials and suppliers will be groupad intosuitable lots and procured through ICB. Miscellaneous items ofequipment, spare parts, materials and suppliers in lots of less thanUS$50,000 and totalling no more than US$500,000 may be procured byinternational or local shopping on the basis of at least 3 quotations.Consultants for supervision, technical assistance and studies will be*selected following the 1981 Bank Group Guidelines; their terms ofreference and conditions of employment were discussed and agreed uponduring negotiations. Before awarding the fellowships, the Governmentwill furnish to the Association for its approval a detailed program fortraining. The program would include the qualifications of thecandidates, types and cost of training as well as the traininginstitutions and an indication of assignments to be given to thetrainees on tneir return to Madagascar. IDA's prior review ofinvitations to bid, proposed awards and final contracts will be limitedto contracts estimated to cost US$35,000 equivalent or more. Theseundertakings were also agreed upon during negotiations and are a part ofthe covenants of the credit.

F. Disbursement

2.25 The proposed IDA Credit of SDR 28.9 (US$40.0 million) would bedisbursed on the following basis:

(a) 100Z of total expenditure for civil works for therehabilitation, resurfacing and regravelling of roads,improvement of subdivisions, training center and trafficcontrol centers;

(b) 100? of foreign expenditures for civil works of routinemaintenance of roads;

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(c) 1001 of total expenditures for consultants services, technicalassistance and fellowship; and

(d) 1001 of foreign expenditures and 701 of local expenditures forequipment, spare parts, materials and supplies.

All diet ursements will be fully documented. In order to expeditepayments, a special account in foreign exchange will be opened at aninstitution acceptable to IDA. An initial deposit of US$750,001,representing about 3 months of expenditures for contractors,consultants, equipment, materials and supplies. will be paid at c.editeffectiveness.

2.26 The estimated schedule of disbursement is shown below. It isbased on the project implementation schedule and the disbursementprofile of past projects in the country. It also allows for one yeardelay from the end of the physical execution of the project and the lastpayment to allow for delays in issuing price indices governing pricevariations in contracts.

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Estimated Schedule of Disbursements(US$'000)

Bank Group Fiscal Year Cumulative Disbursementsand Quarter Ending at end of Quarter

1989

March 31, 1989 900June 30, 1989 2,300

1990

Sept. 30, 1989 4,700Dec. 31, 1989 7,200March 31, 1990 9,600June 30, 1990 12,100

1991

Sept.,30, 1990 15,000Dec. 31, 1990 17,900March 31, 1991 20,700June 30, 1991 23,700

1992

Sept. 30, 1991 26,200Dec. 31, 1991 28,600March 31, 1992' 31,100June 30, 1992 33,500

1993

Sept. 30, 1992 35,0Q0GDec. 31, 1992 36,700March 31,1993 -38,300June 30, 1993 40,000

Closing Date: December 31, 1993

G. Accounting. Auditina and Revorting Renuirements

2.27 Project accounts vill be maintained by MTP with separateaccounts for each component and will be available for inspection by theAssociation during project supervision. Project and Road Fund accountswill be audited annually by independent auditors acceptable to theAssociation. The auditor's report together with the project accountsvill be submitted to the Association not later than six months after theend of each fiscal year. The borrower will prepare a Project Completion

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Report (PCR) to be submitted to IDA not later than six (6) months afterthe closing date of the credit. The foregoing, detailed in Annex 10,were discussed and agreed upon at negotiations and are part of thecovenants in the Credit Agreement.

2.28 Every year, concurrently with the preparation of the annualbudget, MTP will prepare a detailed road maintenance work program forthe following year, taking into consideration the overall maintenancetargets set for the program period and likely budgetary allocations.This program will describe the type of activities to be carried out byeach brigade; indicate the estimated output of the brigades by majoractivity and the corresponding inputs required in terms of personnel andequipment, equipment utilization, fuel and lubricants, materials andspare parts. To establish the work program on a sound basis, MTP willintroduce an appropriate permanent road condition inventory system.Subsequent annual workprograms will be furnished to the Association andother donors for their comments by October 31 of each year and will befinalized upon determination of the final budget taking intoconsideration comments received.

2.29 Progress of implementation will be reported by MTP on thebasis of the same indicators used in the preparation of the workprogram.MTP will ensure that systems which currently exist in the Regions, i.e.,daily, weekly and monthly reports are maintained and improved in theSeventh Highway program. These reports should be the basis for costaccounting and adequate financial management. MTP will prepare aquarterly progress report showing targets and achievements by majoractivity and explaining significant discrepancies. An annualimplementation report will consolidate this information and providedetails on inputs used in the execution of the program, productivitydevelopments and units costs of the various activities. The quarterlyreport will be submitted one month after the end of the period and theannual report two months after the end of the year. MTP will beresponsible for monitoring the quantity and quality of the works carriedout by Regions and by contractors. It will outline its findings andrecommendations in a note to be issued jointly with the annualimplementation report.

H. Environmental AsDects

2.30 None of the project's components will harm the environment.Improvement and rehabilitation works will follow the existing alignmentand will have little or no effect on current land use. In fact,.improvement of drainage structures will benefit adjacent areas, and therehabilitation and maintenance operations, coupled with theimplementation of a traffic regulation program, will considerablyimprove road safety.

I. Poverty Alleviation Aspects

2.31 By improving road conditions in the rural areas, and makingmarkets for agricultural products more accessible, the project will have

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a beneficial impact on the rural poor through higher farm gate pricesand lower prices for inputs and consumer goods. Since the labor-intensive routine maintenance is undertaken over the entire roadnetwork, largely in low income rural areas, the project would contributeto poverty alleviation in these areas and foster the country's goal offood security by the l990s.

III. ECONOMIC EVALUATION

A. General

3.01 A main objective of Madagascar's Public Investment Program(PIP) concerning the transport sector and based on a recently completedNational Transport Plan, is to alleviate constraints in the movement,marketing and export of agricultural produce and to make basic servicesavailable to improve the economy, For the primary sectors of theeconomy, improvements to the transport sector are critical to bothagricultural and industrial recovery. For the transport sector the-highest priorities are rehabilitation of the railways and ports,restoration of the main trunk roads and priority rural roads,rehabilitation of road maintenance capacity and. improved institutionalcapability. Transport infrastructure rehabilitation has been thesubject of considerable bilateral aid and road maintenance is the mainfocus of the ongoing Sixth Highway project (Credit 1391-MAG/SF4-MAG).In the PIP (para. 1.10) a major remaining goal is the restoration of themain routes such as parts of RNl through RN33. The proposed programwould focus on the most critical links of the main road system. (Annex6.1' Another major part of the program is rehabilitation of rural roadsto achieve the goal of security in food production of essentialcommodities by 1990 and alleviate constraints in transport of importantexport crops such as coffee, cacao, vanilla, and cotton.

3.02 There are two new features in this project not present inprevious highway projects. One is an increased reliance on privatecontractors for highway maintenance, the other a strong emphasis onrural road rehabilitation. The economic evaluation does not considerthese aspects separately from the overall evaluation. Nevertheless theinstitutional development promoted by these features would provideadvantages well beyond what is traditionally measured by the economicevaluation (para. 3.03).

B. Area of Influence of the Proiect. Benefits and Beneficiaries

3.03 The program includes the rehabilitation of 923 km of the mostseriously deteriorated paved road sections and 561 km of_unpaved roadsections of the highest priority main roads which connect some of themore populated areas of Madagascar and 2,783 km of the most importantrural roads (Map IBRD 20566R). Such areas include the most developedhighland area of the country and some of the best agriculturaldistricts, particularly vital for export crop production. The mainbenefit of the highway rehabilitation/strengthening will be its impact

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in reducing vehicle operating costs. Improved road conditions willallow better access to productive areas, provide cheaper and morereliable transport, arrest deterioration of road conditions and improveMTP's maintenance capacity. Important benefits not quantified in theeconomic evaluation include reduced freight damage, accidents and traveltime and better access to social and medical facilities. Except for thetechnical assistance, including support to small local contractors forthe rural road program, and studies for which no separate rate of returnhave been calculated, all other pxoject components have been subjectedto economic analysis.

3.04 The major direct beneficiaries of the reduced transport costswill be the owners and operators of cars, trucks and buses. Sincefreight transport is essentially free of regulation, it is expected thattransport users and consumers alike would benefit from the resultingreduced transport costs. Avoiding rapid deterioration will prolong thelives of both the vehicles and the roads. Reduced fuel consumptionwould also result in savings, mostly in foreign exchange. TheGovernment is also a beneficiary, partly through its ownership ofvehicles. Because of the nature of the benefits, the target groups interms of income strata are very difficult to identify precisely. Lowincome groups who do not have access to their land will benefitgenerally from reduced prices of food brought in from surplus areas andparticularly from the lower cost of rice, the main staple food. Lowincome groups will also benefit from a reduction in transport cost forpublic passenger transport, enabling them to visit. their villages tosupplement wage income by home-grown produce. All income groups wouldbenefit from a reduction in cost of a wide variety of industrial goodsthrough transport cost reductions including a reduction in losses due toaccidents.

C. Economic Analysis

3.05 For the main road rehabilitation, the different road sectionsof the program have been individually analyzed. For the technicalassistance and support to domestic contractors, data at this stage doesnot permit an economic analysis. For the most important roads, severalsections were analyzed to obtain optimal design solutions, using theHighway Design Model (HDM) by consultants preparing the studies forthese roads. For the the rural road program, a system of assigningscores to different roads was used to determine priorities betweendifferent parts of the program.

3.06 The economic analysis of the main road program is based on anassessment of costs and expected benefits "with' and *without* theproposed works. The 'without" project case assumes progressivedeterioration of the road surface and a corresponding increase invehicle operating costs, estimated by using the HDM model. In the'with" project case it is assumed that the investments will protect theroad against further deterioration and reduce the Vehicle OperatingCosts (VOCs) by 21Z to 29Z depending on the type of vehicle, the stageof deterioration, condition and type of road. Only savings in vehicleoperating costs are quantified for the analysis. Benefits not

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quantified such as savings in delays of future reconstruction, timesavings and reductions in potential freight damage represent substantialbenefits which, if quantified, would enhance the rates of return. Theeconomic evaluation therefore underestimates the expected rates ofreturn.

3.07 The average daily trarfic ranges from 13 to 7,212 vpd on someof t\e main roads of the country. A summary of the development of roadtraf,ic counts is given in Annex 6.2. The proportion of commercialvehicles, including pick-up trucks, is high, or about 492 of totaltraffic, indicating the importance of commercial traffic. Trafficgrowth has been estimated at 4? p.a. for the road sections on the mainhighway system. This relatively high growth rate is primarily a resultof rapid population growth (3Z p.a.) and expected economic recovery.

3.08 Following major improvements to the main highways as a resultof earlier IDA projects and substantial external financing in recentyears, the 1988-91 program's main goal aims to improve the condition ofthe extensive but inadequately maintained rural road network. Withfinancing under the Sixth Highway project a study of this network wasundertaken to identify a program of rehabilitation and improvement. Withthe assistance of MTP, MTMT, MPARA a;.d other entities concerned such asMPAEF a priority network of these roads of about 4,500 km was studiedand 2,783 km were selected to be of highest priority for the 1988-91period. Because of the limited current traffic on these roads, thepriority was determined, after economic impact studies of 10 majorregions, by a system of ranking by economic and technical factors. Atotal of 153 road sections were ranked, and 106 sections selected. Theeconomic and social factors considered were, for instance, land undercultivatioia or prospects of cultivation, production yields, distance tomarkets, development projects under implementation, population density,present service availability, distance to nearby towns and largevillages, etc.

3.09 For this project component as a whole, the road constructioncost for the rehabilitation works, and future road maintenance cost,were compared to the value added for agricultural production for the 10principal regions indicated above. Even if one of the main criteria forselection of the roads in the priority network was an existing orproposed agricultural project in the area of influence of the roads, theroad investment is not the only factor needed for increased agriculturalproduction. The timing of increased production is also not veryprecise. Rural road improvements need other support such as extensionservices, improved fertilizer and seed supply, farm equipment, etc. forincreased production to materialize. Experience with rural developmentprojects indicates that the road investment accounts for between 1/3 and213 total initial investment required for such projects, or in otherwords that such investments other than roads will be between 50? andtwice the amount of road investment. With the share of roads varyingbetween 30? and 70? of the production benefits the ERR for the roadswill vary from 13? to 422. The best estimate of one half of thisdifference in value added was included as benefit of the overall feederroad improvement program. The best estimate ERR for this program was

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about 292 over the period 1990-2003. As an example of the physicalresults of the program, by about year 2000 a total rice productionincrease of between 160,000 tons and 208,000 tons of paddy would bepossible as result of better access, in addftion to an increase of80,000 tons of other crops, and 11,000 tons of export commodities.

D. Overall Evaluation and Sensitivity Test

3.10 The overall economic rate of return (ERR) for the main highwayprogram is 392 for all the quantitatively analyzed components,representing 952 of the program cost. For the program as a whole theERR is 34Z. A summary of the program of highway rehabilitation is givenin Annex 6.1. For rehabilitation of paved roads the ERR is 392 and forengineered earth roads, 35Z. Various sensitivity tests have beencarried out, with returns ranging from 10 to 150S. An indication oftypical vehicle operating costs is included in Annex 6.3. The streamsof costs and benefits for the best estimate are included in Annex 6.4and the results of different sensitivity tests in Annex 6.5. The bestestimated rate of returns range from 14S to 1591, with first yearreturns ranging from 202 for rural roads to 391 for paved roads and 26Zfor unpaved roads based on an opportunity cost of capital of 12X.

E. Risks

3.11 While the program is designed to reduce as much as possiblerisks associated with implementation, the possibility neverthelessexists that implementation could be delayed due to the lack ofadministrative capacity in MTP and in the local agencies. To minimizeimpact of this possible inadequacy, the rehabilitation of the main roadsincluded in the program will be carried out by contractors. Other risksinvolve the possible shortage of local resources which to the extentpossible could be prevented through use of the Road Fund.

IV. AGREEMENTS TO BE REACHED AND RECOMMENDATION

4.01 The following principal items were discussed and agreed uponby Government during negotiations and specified as covenants in theCredit Agreement:

(i) reviewing legislation and regulations of passengertraffic and implementing f_rther liberalization ifnecessary (para. 1.09);

(ii) updating the National Transport Plan and annuallypreparing, for IDA approval, a three-year rolling PEP toimprove allocations of resources and promote a rationalchoice of investments (para. 1.10);

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(iii) providing at least SDR 3.6 million for annual routinemaintenance through the Road Fund supplied by fuel taxes;and adjusting these funds annually taking into accountexpansion of the road network (para. 1.28);

(iv) maintaining a sub-account to the Road Fund 'Caissed'Avance', replenished quarterly to the equivalent of atleast SDR 360,000 (para. 1.28);

tv) keeping the prices of fuel at competitive levels togenerate resources to cover road maintenance needs andreviewing annually fuel prices to sustain tax revenues(para. 1.28);

(vi) determining accounting, auditing and reportingrequirements (para. 2.15 and 2.27 through 2.29); and

(vii) setting up procurement procedures for works, goods ar.dservices and award of fellowships financed under theproposed project (para. 2.24).

4.02 The following items were discussed and agreed upon, byGovernment during negotiations; they constitute conditions ofeffectiveness of the proposed credits publishing legal instruments: (i)coordinating all road activities and initiating charging local users thecost of maintaining feeder roads (para. 1.20); (ii) upgrading CATP tothe status of an institute, empowering it to issue valid trainingcertificates and diplomas, and charging private contractors the cost of

! training their staff at CATP (para. 1.23); and (iii) establishing! adequate standards for implementation of traffic regulations- and road

safety measures (para. 2.17).

4.03 During negotiations, agreement was also reached on the termsof reference for the experts providing technical assistance in roadmaintenance, management and training (para. 2.15 and 2.16, Annex 8).

4.04 Following agreement on the above conditions, the proposedproject qualifies for IDA lending as a credit amounting to SDR 28.9million (US$40.0 equivalent), on standard IDA terms.

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ANNEX 1

MADAGASCAR

SEVENTH HIGHWAY PROJECT

Public Investment Plan. tor tho Transort Sector(FPU bt I lon*)

1094 - 67 1106 - 1990Foreltn Loca l Total Forelcn Local Tot"l

HIghwayInfrastructure

Rehabilitation 88.14S 65.681 141.207 869.266 66.184 145.400Workshop, Equipmnt,and Studies 2.7M2 2.951 5.788 4.428 0.610 5.08S

90.928 56.012 146.948 98.6e9 56.744 160.488Rail Transport

Rehabilitation 6.076 2.562 9.628 10.957 1.15 27.082New Works - 1i. 1.0 B.800 8.800Studles & Toech. Aet. 2.502 .711 8.218

6.876 8.562 9.626 19.459 14.616 84.076

Air TransortRehabilitatton - 7.S6# 7.S6 5.607 3.684 9.141New Works - .168 .16UStudies and Tech. Ast. - o.-6 - 0.800

- 7.784 7.784 5.807 8.684 9.441Maritim Transoort

Rehabilitation 8.078 0.819 0.62 8.129 2.776 10.905W project 0.714 2.427 8.141

Studies & Tech. aset. 1.769 0.422 2.1810.767 8 248 12.088 9.88 8.19 14.0!6

River and Canal TransportRehabilItation 18.810 1.490 14.806 19.976 2.219 22.196

(Canal of Pang lanes)Studios _.755 0.160 0.916

18.810 1.490 14.68 20.781 2.879 28.110

National Transport Plan 0.782 0.40 0.622 8.66 0.657 1.878

TOTAL 119.888 72.874 191.957 1S6.880 81.180 281.618

S-!rcsIT: MT

May 1987

SEVENTH HIGHWAY PROJECT

,FAD VERICE MMff 1979, 1982 AND 1984

1AMAISDNM NM1MVNrA F1ANARWIA ANlSIRMWW& JMImANARTD TOMAL1979 1982 1984 1979 1982 1984 1979 1982 1984 1979 19821984 1979 1982 1984 1979 1982 984 1979 1982 1984

PASS&CR VE_CU

Urban hies 7 8 6 - 4 4 6 7 3 4 10 7 11 10 3 170 124 188 198 163 211Statinwagm, 9 places 45 60 42 32 30 20 18 10 10 90 48 57 176 103 9 608 195 192 969 446 420MInibus, 20-25placas 183 132 165 156 223 241 61 99 116 190 262 293 166 213 217 815 867 1335 1571 1796 2365Eus, 3D-50 pLos 5 5 - - 1 - 7 - - 3 1 - - - - 7 1 - 22 8 -

Suburbmn 1 - - 2 - 1- 2 - 1 - - - 2 - - 30 29 52 37 29 54PaEny3t/crgatrurk8 - - - - - 32 - - - - - - _ _ _ _ - 1607 - - 1639

EUlFM= VEHICLESi

Lem than 3.5 T 615 833)1349 415 -549) 879 355 493) 722 562 859)2120 410 665) 1015 2673 4033) 4119 5030 7432)10204Frm 3*5 T to 7 T 113 120) 70 81) 52 80) 151 199) 78 98) 348 481) 812 1059)

7 T ard ower 245 321 271 242 252 214 197 337 144 210 278 70 172 251 122 887 1401 1707 1953 2840 2528Tractors 67 140 35 6 11 - 12 47 7 5 12 13 23 44 12 35 53 18 148 307 85Trailers & sedl-traler 78 146 59 12 25 - 19 97 11 7 21 5 3 18 - 75 127 56 194 434 131

PRIVAIE TRNl VEHICaES

Taida 176 149 - 208 161 - 265 188 - 295 2C4 - 165 150 - 2137 3430 - 3246 59 -

Passugewr translportation 15) 14) 13) 10) 48) 135) - 235)Drivibg siool cas 5) 956 - 5) 426 - 9) 723 - 4) 739 - 10) 740 - 49)10398 - 82)13175 -

PrivaeW cars 986) 470) 686) 1449) 862) 11205) 15658) -

1UrCAL 2541 2870 - 1632 1763 - 1702 2081 - 2980 2633 - 2126 2292 - 19174 21139 - 301S5 32778 -

1/ Station-MUat, 9 placesatdr-beBus, 30-50 pdeces/Autocar

So : Centre de SeLurite Rotlere

May 1985

- 36 -

ANNEX 3

MADAGASCAR

SEVENTH HIGHWAY PROJECT

Petroleum Product Consumption (1973-1986)(Thousand m 3 )

1973 1974 1975 1976 1977 1978 1979Gasoline 115.5 113.5 111.3 110.5 109.9 116.5 113.8

Gas oil 177.1 175.5 169.7 147.2 146.6 163.3 182.0

Total motor fuel 292.6 289.0 281.0 25747 256.5 279.8 295.8

1980 1981 1982 1983 1984 1985 1986Gasoline 110.8 95.2 79.2 78.7 73.3 74.9 79.0

Gas oil 183.1 169.9 149.1 147.3 146.6 150.5 172.9

Total motor fuel 293.9 265.1 228.3 226.0 229.9 225.4 251.9

Sources SOLIMA

December 1987

- 37-ANNEX 4

MADAGSCAR

SEVENTH HIGHWAY PROJECT

Road Desisn Standards

Primary Secondary| 1. Roads Road Network Road Netowrk

Maximum design speed (km/h) 80 50

Minimum radius forhorizontal curves (m) 200 (30) 1, 70 (25)

Maximum radius forvertical curves

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

Sag (m) 1,000 (750) 500

Maximum grade Ca) 8 12 (14)

Transversal slope\Pavement (X) 3 3

Shoulders (X) 4 3

Pavement width (m) 5.5 to 7.0 4.50

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

Maximum permissible

Axle load (t) 10 10

2. BridQes

Carriageway width (m) 3.5 and 7.0 3.0

,Sidewalks (m) 2x0.75 to 1.00 2x1.0

Design load:in accordance with fascicule 61 61B

F Figures in parentheses indicate values adopted in exceptional cases\for specific short secdLons located either in very mountainous terrain

or in other particularly difficult conditions

Sourcet Ministry of Public Works, 1987.

/

/

- 38 -

ANNEX 5Page 1 of 3

MADAGASCAR

SEVENTH HIGHWAY PROJECT

Bank Group Proiects in the Transport Sector

1. The First Highway Project (Credit 90-MAG. US$10 million, 1966)provided for construction to paved standards of two sections of theAntananarivo-Hahajanga road (145 km). The Project Performance Audit Report(PPAR, No. 1409), dated January 3, 1977, found that the cost of the roadconstruction was far below original estimates and the recalculated economicrate of return (between 15Z and 202) was greater than that estimated atappraisal (11Z). Surplus funds were used to finance supplementary works andstudies, which necessitated a delay in project completion.

2. The Second Highway Project (Credit 134-MAGILoan 570-MAG, US$8million, 1968) helped to finance construction of 146 km of two major trunkroads and construction of three bridges. The project did not completelymeet its objectives, and completion was delayed by about one year due todifficulties of the contractors who carried out the project. Actual projectcost was US$15.2 million, including contingencies. This represented anoverrun of 302, of which about half was due to price increases and half toincreased quantities. The cost overrun was financed in large part by theGovernment, but savings under the First Highway Project also contributed tofinancing. PPAR No. 811, dated July 18, 1975, found that the economicjustification of one of the project roads, Ambilobe-Ambanja (91 km), wasdoubtful in view of its low rate of return -- 82 primarily eaused by higherconstruction costs than foreseen at appraisal. The ERR on the individualcomponents of the Second Highway Project ranged from 42 to 212 compared tothe 8Z to 162 estimated at appraisal.

3. The Third Highway Project (Credit 351-MAGlLoan 570-MAG, US$30million, 1973) provided for construction of 417 km of primary roads,detailed engineering of the Antsohihy-Ambanja road and a review of thetraffic c.ounting system. In 1975 the project had to be modified due tosubstantial cost increases as a result of price and quantity increases notanticipated at appraisal, as well as the devaluation of the US dollar. Asupplementary credit of US$5.6 million was therefore provided whileconstruction was reduced by 67 km. PPAR No. 2143, dated July 27, 1978,found that while the overall recalculated rate of return of 142 wasacceptable and in line with appraisal estimates (or slightly below theoriginally estimated 162), two road sections had individual rates of returnof 102 or less, since expected agricultural benefits failed to materializedue to the deteriorating political and economic situation of the country.The PPAR outlined the project's deficiencies, including insufficientprovision of funds for road maintenance and a failure to train Halagasynationals which would have contributed to institution building.

- 39 -

ANNEX :5Page 2 of 3

4. The Fourth Highway Project (Credit 641-MAG, US$22 million, 1976)helped finance construction of 370 km of secondary roads betweenTsiroanomadidy and Maintirano and the 67 km of primary roads betweenArivonimamo and Analavory deleted from the Third Highway Project. A roadmaintenance component provided for a study to evaluate maintenance needs,including equipment and technical assistance for training local staff inroad maintenance. The project's road construction component is partiallycompleted but the largest section, Tsiroanomandidy-Maintirano, encounteredmajor difficulties due to poor management and organization of works by thestate-owned construction company (SINTP). Bridges have been completed butearthworks and approaches were finished much later. The maintenance studyled to purchase of road maintenance equipment; implementation of therecommended training program has been delayed. Since training of localstaff was essential to improving maintenance operations under the FifthHighway Project, the Government agreed to take measuies to allow an earlystart of training. A PCR in 1985 gave an overall ERR of 14Z.

5. The Fifth Highway Project (Credit 938-MAG, US$24 million, 1979;plus a US$10 million EEC Special Action Credit) has helped finance urgentlyneeded resurfacing on about 200 km on RN4 between Mahajanga andMtananarivo. construction of bridges for the Antsohihy-Ambanja road,continuation of improvement of maintenance operaticns begun under the FourthHighway Project, a feasibility and detailed engineering study, and trainingof MTP staff by technical assistance. The project was about two yearsbehind schedule due to mismanagement and lengthy Government procurementprocedures. However, since early 1982 implementation greatly improved withall major components now completed, and the Credit now closed.

6. Bank Group assistance has also helped finamce construction offeeder roads under agricultural and rural development projects. The VillageLivestock and Rural Development Project (Credit 506-MAG, 1974) financed theconstruction of about 170 km of secondary roads in Mahajanga province andmaintenance of about 280 km of roads. The Mangoro Forestry Project (Credit525-MAG, 1974) provided for construction and maintenance of 56 km ofgravelled service roads, 840 km of plantation truck roads and 910 km oftracks. The Morondava Irrigation and Rural Development Project (Credit 332-MAG, 1972) included the improvement of 24 km of secondary rural roads andconstruction of about 9 km of feeder roads. Construction of farm roads wasalso included in the Lake Alaotra Irrigation Project (Credit 214-MAG, 1982)will help in the construction and maintenance of about 100 km of ruralaccess roads, continuing the work begun under the first project.

7. The latest highway project is the Sixth Highway Project (Credit1391-MAG and SF-4-MAG) which continues the earlier Bank emphasis on highwaymaintenance and rehabilitation of major roads. This project has also been aplatform for considerable cofinancing (AfDB, FAC, Swiss Cooperation). Themajor effort is to conclude the rehabilitation by contract of the vital

- 40 -

ANNEX 5Page 3 of 3

Hahajunga-Antananarivo road (RN4) and, financed by AfDB, its continuation tothe South (RN7). Initially, the project got a slow start but theimplementation is now almost complete. Included is also support forinstitution-building of both MTP and MIMT. The establishment of a newDirectorate for Transport Planning and Coordination (DEPCT) in MTMT forjoint work with MTP (and partly assisted by FAC) is one of the results sofar.

8. Bank Group assistance has included three projects to aid theReseau National des Chemins de Fer Malgache (RNCFM). The First RailwayProject (Credit 488-MAG. US$6 million, 1974) assisted RNCFM in replacingoutdated equipment to provide a modest increase. in transport capacity,improving the railway's managerial and operational capacity, and setting upa framework for transport planning. The project had to be reduced in scopedue to cost overruns and was completed with a three-year delay. Although atransport planning and coordination unit was created in the Ministry ofTransport. it did not succeed in setting up a general framework fortransport pelicies mainly because the Government failed to integrate thisteam into the decision-making process. The recalculated rate of return onthe project was less than 102. The major problems faced by the projectresulted from deteriorating economic conditions and from general politicaluncertainty regarding transport policy formulation and the overallinstitutional environment. Management of the railway was, however,considered generally efficient.

9. The Second Railway Project (Credit 903-MAG, US$13 million, 1979)continued the rehabilitation efforts undertaken in the first project andprovides for replacement of outdated equipment, track renewal, andimprovements in telecommunications and workshops. It also provides forimplementation of measures to strengthen the railway's financial management.Most of the physical elements of the project have been implementedsatisfactorily; however, in view of the deterioration in the management ofthe railway and non-compliance with a number of covenants, the credit wassuspended in June 1982. It was later reinstated (December 1982) followingimplementation by the Government of a complete and successful financialprogram for the railway.

O.t The Third Railway Project (Credit 1694-MAG. US$13 million, 1986)also became effective in 1986. After some initial delays this project is nowmaking good progress.

11. A first Port Project (Credit 200-MAG, US$ 9.6 mil_ion, 1970)zrovided for extension of Toamasina Port, creation of the -oamasina PortAuthority and technical assistance for management personne_ and training. In1973 the credit was increased by USS 1.8 million to cover a shortage offunds resulting from currency realignments. PPAR No. 2299, dated December22, 1978 concluded that (i) the physical objectives of the project weresat -sfactorily carried out; (ii) a lower, revised econcmic return of 7.0?was due to lack of traffic growth resulting from adverse local andinternational political and economic conditions that cculd not have beenforeseen at the time of appraisal, and (iii) technical assistance forinstitution building did not achieve satisfactory results.

- 41 -

ANNEX 6.1

MADAGASCAR

SEVENTH HNGIWAY PROJECT

Sumary of Highway RehabilItation (Base Coot)

RoadNo. Location: Rehabilitation PrTodic LMintenance Traffie Rate of Total

Paved Reods: Lonat hnmF Ion L nath km FMl IIIon Yoh/Dao Return X FMC tillIonI Antananarivo-Anslavory 26.WS' 4279 .9 1 10T.-0 839.82 Antananarlva-Tomaeina 9.4 487.6 129.1 *07. 262 62.0 1244.08 Antananarivo-Anjorosobe 69.4 1476.7 2.6 44.7 485 62.6 1516.4SA Vohidiala-Vohitralvo 104.$ 211.8 228 169.0 211.8so Ambariomiaubana-Andapa 06.0 179.9 118 179.94 Antananarivo-Mahajanga 119.0 6l10.0 147 23.6 6lo.66 Toamasins-Soanitrans-Ivongo 162.4 1568.1 61.6 88.2 lal 88.0 1671.3GA Sambava-Vohemar 70.0 2485.6 74.0 264.3 114 28.0 2769.96 Fort Serge-Antlranana 220.5 6971.6 119.2 476.1 I0S 18.6 7449.96 Ambondrommy-Fort Berge 106.1 6966.6 51.9 600.0 16o 14.0 7760.012 RN2S-Vangaindrano 6.8 190.8 146.6 988.4 161 27.0 1176.718 Toalagnaro-Ambovoie 74.6 1660.9 39.0 436.9 232 32.0 2119.822 RNS-Anj ahamb 65.6 290.1 41 28.0 290.181 RN6-6.alanana 89.5 56.5 66.632 RN6-Sefandrlana 9.6 841.2 67.0 906.9 25 19.0 486.184 Antairab-Ma lalmbandy 386.0 1606.6 in6 906. 1566.364 Mahajanga Airport Road 6.0 280.6 200.6SOA RN4-RN7 6.6 210.0 216.0Sea Antananarivo-PAPMAD 7.0 245.0 246.0

City Acces 1600.6 1600.6TOTAL (FMC million) 618.6 86991.6 1412.6 6677.0 37668.5

TOTAL US# million(USS1 u FUG NO6) 86.7 8.8 47.0

Earth Roads:5A Sambava-Antlaha-Maromandio #6.6 1861.1 85.3 46.6 70 17.0 1697.90 Tollary-Tanandeve 876.0 1391.2 66 44.6 1391.2i9 Tollary-Ampaniky-Ambovembe 06.2 468.1 10.6 39.8 46 40.0 497.412A Toalangnaro-Mananterln& 62.6 474.6 41.3 37.4 14 14.6 512.027 Farafangena-Ihosy 74.4 460.0 144.4 6.1 15 35.6 462.181 Ambato.i-SeB lanana 82.6 62.6 22 S8.0 62.648 AmbohTbary-SoavinandrieaFa 52.0 611.6 45.0 1.9 l1 69.60 512.944 Moramanga-Vohitravo 68.9 644.2 1lU.1 46.7 121 41.0 690.9

RN4 Mine Acc 36.0 221.0 221.6Regional Acces 962.0 952.0

TOTAL (FMU million) 4S8.5 5681.2 791.9 1669.4 7200.6

TOTAL USS million(US21 =PG 666) 7.6 2.0 9.6

Foeder Roads:Faritany Mahajanga 621.6 7441.0Faritany Toliary 497.0 4946.6Faritany Fianarantsoo 660.0 9568.6Faritany d'AntTranann 906.0 919.0Faritany d'Antanarivo 610.0 9404.0Faritany Toamasina 299.6 4062.0

TOTAL (FMU million) 2783.6 86282.0

TOTAL USS mlliIon(USSi a FUC 6) 45.4

March 1968

- 42 -

ANNEX 6.2

MADAGASCAR

Si.ENTH HIGHWAY PROJECT

Summarv of Road Traffic Counts 1980-1986(Totals for 134 Counting Stations)

Vehicle Tvne 1980 1981 1982 1983 1984 1985 1986

Private Cars 24,870 24,124 17,740 19,086 17,817 15,487 19,843

Taxis and Buses 8,334 8,351 7,066 6,953 6,747 5,791 6,995

Pickup Trucks 8,040 8,351 7,066 6,953 6,747 5,791 6,185

Trucks 7,509 6,746 6,650 5,729 5,062 4,286 5,230

Semi-Trailers 473 680 939 666 507 412 732

Other Vehicles 113 82 106 51 72 104 108

Totals 49,339 48,334 39,567 39,438 36,952 31,871 39,093

Sources MTMT

October 1987

- 43 -

ANNEX 6.3

MADAGASCAR

SEVENTH HIGHWAY PROJECT

Vehicle Overating Cost(FMG/vehicle kmn)

Paved Road Earth RoadSmall car (taxi-be) 253 322Pickup truck 211 278Bus (autocar) 382 536Semi-trailer 1,398 1,845Truck 555 734

Source: NTMT April 27, 1987

May 1987

- 44 -

ANNEX 6.4

MADAGASCAR

SmVENTH HI04AY PROJECT

Cost and Benefits(FMG MlliIlon)

Paved Road SectionsRN I RN 2 MRN 8A RN5 RN A RN O RN oYear: South Worth-929 -W7 -84 -201 -88 -284 a -4761989 0 -487 -1M09 -11 -1688 -2485 -2687 -280M1990 1691 10S 637 926 579 5oo -2586 -12351991 l1f7 1046 882 857 62 O -1647 -12641902 2045 187 s65 892 626 038 1082 11521998 2127 118B 1o 927 651 864 1126 11061994 2212 1176 986 966 677 69e 1179 12461095 2301 1228 978 1098 704 718 1217 12961996 2398 1272 1012 1048 782 747 1266 18431997 2468 1828 1058 1085 761 776 1816 14021999 2588 1876 1096 1126 792 887 1869 14681999 2691 1481 1189 1174 923 848 1424 15162000 2799 1466 1184 1220 5ss 878 1481 16772001 2911 1547 1281 1269 891 on 1S40 16402002 8026 1609 1281 1820 926 945 1602 17062008 8149 1674 1882 1878 968 982 1666 17732W94 8276 1741 1885 1428 1002 1022 1782 18442096 8408 1810 1441 1486 1042 1068 1802 1918

Paved Road SectionsRN 7 RN 12 RK 13 RN 22 RN 32 RN 84 Rural

lRoadsYea r:-1040 -778 -1689 0 o o -98871989 -2800 -77n -s4 -290 -48 -660 -90411990 460 871 774 72 76 lse -7661991 479 as8 a6 75 78 1441 85791992 498 402 687 y8 81 1499 96841998 618 418 870 81 84 1559 98671994 588 484 966 04 83 1621 929

1996 66o 452 941 88 91 les 9s981996 582 470 979 91 96 174 986521997 69 489 1016 96 99 1824 106561998 6e 608 1069 99 198 1897 1156091999 656 526 l1l 102 107 1978 124182090 6Sl 649 1146 107 1ll 2062 188712001 709 671 1191 1ll 115 2184 143882902 787 694 1289 116 120 2219 164622009 766 61s 1283 120 126 2808 166082W4 797 643 1840 125 1go 2402005 829 869 1s89 189 1886 2496

Ensineered Earth Road SectionsRN S RN 9 RN 1 RN 12A RN 27 RN 31 RN 4a RN 44

i -a-98 -1891 -497 -612 -462 -68 -518 -8911990 -780 562 181 66 148 22 88 25691991 2m0 605 188 69 152 28 849 2691992 291 629 18s 71 168 24 868 2861998 aos 656 204 74 164 25 878 2911994 a8s 6Sl 212 n 171 28 898 808199S 828 708 220 so 178 27 409 8161996 841 786 229 84 18 28 425 8281997 354 766 2a8 87 192 29 442 8411998 39 797 248 90 200 as 460 8541999 s8s 828 258 94 208 81 478 892800 899 268 98 216 as 497 8882001 414 279 102 225 84 617 3092802 481 290 106 284 85 583 4152008 448 881 l1 248 87 669 4312084 466 818 114 258 39 682 4492005 486 826 119 268 40 6e5 486

January 1998

- 45 -

ANNEX 6.5

MADAGASCAR

SEVENTB HIGHWAY PROJECT

Economic Returns and Sensitivity Tests

Best Benefits Costs Benefits -10?Road Section Estimate -20? +10? Costs +10l

RN 1 Paved 104 90 98 91 X2 62 52 57 533 52 43 48 443a 159 139 150 1405 38 31 34 315a 23 18 21 186 North 18 14 16 146 South 14 10 12 1112 27 22 25 2313 32 27 30 2822 28 22 25 2332 19 15 17 1534 96 78 88 79

RN 5a Gravel 17 13 15 139 40 33 37 3310 40 33 37 3312a 14 10 12 1127 35 28 32 2931 38 31 35 3143 69 56 64 5844 41 33 38 34

Rural Roads 29 22 26 22

Source: Mission estimates

January 1988

- 46 -

MADAGASCAR

SEVENTH HIGHWAY PROJECT

A. HiLhwav Enuipment for Road Maintenance

1. EquiDment Ouantitv Cost(USS'000)

Hand compactor 30 293

4-wheel-drive vehicles 20 340

Motor pump, 10 75

Truck 33 1,366

Water tank 7 44

Fuel tank 7 44

Service trailer 5 94

Pneumatic compactor 2 138

Road patching truck (Camion Pat) 1 106

Total 2,500

2. Snare parts, materials and suDDlies 1,900

3. ImProvement and eauioment of 15 subdivisions 700

B. TRAFFIC SAFETY AND REGULATIONCUS$'COO)

1. Infrastructure 750

2. Equipment 250

Total 1,000

ANNEX 8Paige Iof 3

MADAGASCAR

SEVENTH HIGHWAY PROJECT

Technical A,sistance for TrainintManasemont of MTP Road Operations, and Transport PlanninA

Outline Terms of Reference

Technical Assistance for Trainint and Implementation of Road ManagementSstee

1. The main objective is to establish and maintain a comprehensiveand effective road management system. The objectives of the technicalassistance ares

(a) Strengthening of the road management system developed duringthe Sixth Highway Project Including

(i) sound programming o_ivoad works;(1i) monitoring the eicution of the road workss and(iii) continuous inventory of road network including

structures;

(b) professional development of MTP and domestic contractorsstaff for Implementation of (a) above through training andseminars.

2. To achieve the above objectives, MTP and MTMT will need technicalassistance.

Oualificationa

3. Each expert should haves

(a) fluency In spoken and written French;(b) training experience in his field In order to facilitate

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

Road Maintenance and Construction Experts

4. They should be road engineers or senior road work superintendentswith at least five and ten years' experience in their respective fields.In particular they should have extensive knowledge of and experience ins(a) road maintenance and construction and maintenance of equipment; (b) useof heavy equipment; (c) various elements of road construction management,contract and specifications; and (d) soils engineering. They shouldt

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

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

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

- 48 -

ANNEX 8Page 2 of 3

Mechanical Experts

5. They should have at least eight years' professional experience inthe use of heavy equipment for public works. Their qualifications shouldbe as followss

(a) specialization In both diesel and gasoline engineers;(b) experience in operation and maintenance of equipment used in

maintenance work;(c) knowledge of vehicle electrical systems; and(d) basic knowledge of general mechanics. They should:

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

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

(iii) train spare-parts storemen; and

(iv) assist in training equipment inspectors.

Experts in Training Eauipment Operators

6. They should have at least ten years' experience in trainingequipment operators, and be familiar with the major types of heavyequipment currently used in road construction and maintenance. They will:

'i) train and give refresher courses to operators ofvarious types of road machinery; and

(ii) supervise the mechanics assigned to worksites.

Financial Advisor

7. He should have at least ten years' experience in financialmanagement. He will

(i) improve costing, accounting and reporting systems andprocedures at local, regional and national levels;

(ii) review existing cost recovery practices and chargesfrom beneficiaries in particular for feeder roads andmake recommendations for improving revenue generation;

(iii) introduce management information systems;

(iv) prepare financial statements, cost accounting, andbudget program procedures; and

(v) train personnel assigned to these tasks.

- 49 -ANNEX 8Page 3 of 3

Transport Experts

8. In order to assist MTMT expand and improve its transport planningcapability, the project will include experts to work closely with Malagasyofficials in this respect. The team of experts will includes

(a) an economic planner (mission head) to be responsible for technicalassistance for transport coordination; and

(b) an engineer-economist specialized in road transport surveys.

9. The experts shall be attached to the Transport Planning andCoordination Unit in MTMT. The consultants may also assist the DirectorateGeneral of Planning ('JGP) in the Presidency, as required by the Government,but they shall report in all cases to the MTMT Coordination Unit.

iO. The unit is responsible for establishing the proper inter-ministerial coordinating mechanisms and works closely with the DGP inestablishing transport demand models based on macroeconomic projections.

11. -In addition, the experts will:

i) determine and assist in collecting and compiling the datarequired to implement a continuous and effective transportplanning mechanism in the country, and in particularnecessary origin-destination surveys;

(ii) recommend and assist in setting up an effective system ofintersectoral development information enabling transportplanning to be made responsive to priorities developed forother sectors (inter-ministerial meetings or through theDirection Gin;rale du Plan), and improving the level andeffectiveness of intersectoral investment coordination;

(iii) train Malagasy nationals in matters related totransportation planning and coordination so that once theseservices are completed the Malagasy staff will be capableof taking over full responsibility for transport planningin Madagascar, including the preparation, evaluation andsupervision of transport projects and policy formulation;

(iv) advise and assist the Government and the MTHT on currenttransportation problems and issues, including planning,reviewing and coordinating transport studies and evaluatingmajor investments proposed for transportation projects;

(v) assist MTMT in preparing coordinated transportationinvestment programs including budgeting of investment andoperating funds for the entire transport sector; and

(v) advise and assist the Government in transport policyformulation such as pricing and regulation.

WARSEV8IrRT~pgOECT

f-ina"cln Pl4n

Totnl Cost Road Fund FNDE MDA AfDF EDF B WrTA later NORAD

6.5 1.8 4.7RN, aA 2.9 *.7 2.2at:, RN 1/ 14.4 1.4 13.0RNi , R1184 15.1 16.1RN4, Mils 18.4 15.4

tl) Eolnered Earth Roadii) 1.1 8.3 0RN48 0.9 0.1 o.0

ili) Feeder Roads 39.0 .3 0.6 8 .g 12.2 V 5.4 Y 2.7 V

IV) Routine MaintenancRocurrnt cos e 21.5 29.9 1.6Equipment, Materials and SuWpile 6.0 0.Infrestructure .9. 9.1 9.6 / 3 V

v) Tralnina 2.- 1.3 1.e

Vi) Road Safety 1.4 1.4

vii) Consltio Srvi c4Siipervision 9.4 *.6 2.2 2.3 2.9 10 e.6TA Maintenance a.o a oTA Transport e.6 0.5TA Training 8.0 3.

.~ ~ ~ ~ ~~~~~T- . W. .T. i

/ Ambodromamy-Port Bergerv Port Bergver-Ante ranano4/ 300 km of *e_ rods of which 19 km In Antananarivo region and 2J0 km In Fianar nteoa.

460 km of feeder roads In rha aJna p nd In Antananorive560 km of foeedr roads of which 860 km In MahaJanoa- 10 km In Antananarivo and 199 In Tollor .

N 3so km of feder road ot which 259 km In Lake Alaotra ar and 100 t In Antnanarivo% 130 km of feeder roads In AntananarivoImprovm,nt of 10 subdivielon.

I Improvement of 5 subdivisionsil Of which USI5.5 million could be covered by Swirs Government counterpart funds

of its balanco of payment support.l Equivalent to SDC grant of SFR. 15.0 tillIon *t US u 1.U SFR.',

31 Equivalent et SOC grant of about SFR. 1. mlillIon t USSII * 1 SFR.lncl. participation In financing of foreitn coats of maIntepance,

. .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

- 51 -

ANNEX 10Page 1 of 3

MADAGASCAR

SEVENTH HIGHWAY PROJECT

A. Progravning and Monitoring of Maintenance Program

1. The principal aim of the annual and quarterly programming andmonitoring scheme is to increase the efficiency of MTP's operations. Thepreparation of annual workprograms will be undertaken simultaneously withthe annual budget exercise. Programs will be finalized upon determinationof the final budget. Execution will be monitored on a quarterly basis.The programming and monitoring will be based, inter alia, on the followings

Permanent Road Condition Inventory

2. The permanent road condition inventory will make possible todetermine the priority works to be included in the following year'sworkprograms of each brigade and unit and to schedule the works during theyear. The inventory will also form the basis for monitoring the quality ofthe works carried out.

Activities

3. The main activities to be programned/monitored includes

- paved road maintenance (m2 )- gravelling (m3 )- spot improvements - earth works (m3

- surface grading (km)- manual maintenance (km)- manual maintenance (m3 of selective material)- culvert maintenance (units')- bridge maintenance (units)

Inputs Required

4. The inputs requirediused to achieve the activity targets bybrigade or unit include:

- personnel (by qualification)- equipment (units and utilization)- fuel (liters)- spare parts (FMG)- materials (m3 or tons)

Efficiency Indicators

5. Efficiency indicators will include availability rates (in Z) andutilization rates (in hours or km) of major equipment categories.

- 52 -

ANNEX 10Page 2 of 3

- graders- bulldozers- trucks- pick-ups\-- loaders

The combination of input and output indicators will also provide measuresof productivity and unit costs.

Workshops

6. Indicators measuring workshop activity would be:

- repairs by major type- overhauls by major type- spsre parts consumption (FMG)

Trainint

7. Main indicators of training would be:

*i) standard training sessions- number of trainees,- average length of training

(ii) special training seminars- number of trainees- average of training

SunmarY Report

8. A summary report shall accompany the above indicators andinclude, inter alia,

- 'key information which is not provided by the quantitativeindicators;

- information on unforeseen events which have a bearing on theimplementation of the program;

- explanation as to to deviations from the targets set anddescription of the corrective measures which have been takenor are being prepared;

- information on key staff changes in MTP; financialinformation on the execution of the budget or on budgetrevision.

B. Proiect Reporting Requirements

1. The Borrower will prepare Progress Reports on the elements of theProject not included in the quarterly and annual reporting on theimplementation of the maintenance program and covering:

- 53 -

ANNEX 10Page 3 of 3

- physical progress and difficulties encountered- expected deviations from implementation schedule- costs of the component- financial situation of the Credit- status of covenants

Proiect Completion Report

2. The Borrower will prepare a Project CompletIlon Report (PCR), tobe submitted to the Association not later than six (6) months after theClosing Date.

3. The primary objective of the PCR is to reinforce theself-evaluation capacity by the Borrower and the Association's operatingdepartments and to facilitate dissemination of lessons learned through theproject. The PCR will examine and assess

(a) the performance by the Borrower and the Association of theirrespective obligations under the Credit Agreement and whether theAssociation could have been more helpfull

(b) the results that can be expected from the project, as comparedwith expectations at appraisal, and whether the originalexpectations were realistics and

Cc) whether in retrospect the project was worth doing or could havebeen done better,

7. For those components of the project for which a rate of returnwas estimated during appraisal, the PCR should contain a new estimate ofthe return the project is now likely to yield and analyze the reasons forphysical or economic deviations. However, the new rate of returncalculation should be as simple as possible under the circumstances andshould absorb only a minor portion of the tim devoted to the preparationof the PCR. An annex with the relevant informtion supporting thisanalysis should be included.

- 54 -

ANNEX 11

MADAGASCAR

SEVENTH HIGHWAY PROJECT

Related Documents and Data Available in the Prolect File

1. Etudes des Routes Bitumies et des Routes en Terre (Mare 1987)

2. Etudes des Routes d'Acces des Zones Productives (Janvier 1987)

3. Plan National de Transport (1987)

4. Exploitation du Pont Bascule de Maevatanana - RN4

5. Etude Sous-Sector Transports Routiers (Novembre 1986)

6. Procas-Verbal Pr6dvaluation Septi&me Programme Routier (Aug. 1987)

7. Proces-Verbal Evaluation Septieme 1'rogramme Routier (D6cembre 1987)

8. Etude Global du Transport Aeriev Malagasy (Septembre 1986)

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CHART 2

MADAGASCAR

SEtEW HHIGWAY PROJECT

PROJECT IMPL4EMRTATION SCHEDULE 1/

* Calendar Yea-

1998 1989 1990 1991 1992Item Item Components Activity Action By _ _ -_990 199_ _ 1 9 9

. ~~~~~~~~~3 4 l1 2 31 4 1 21 _3 4 11 2 3 4 1 2

Credit Signing Government/IDAEffectiveness Government/IDA

Routine main- Equipment. Materials Preparation of Bids Supplierstenance Materials and Evaluation and Award Government/IDA

Supplies Supply Suppliers

Subdivisions Preparation of Bids ContractorsImprovement Evaluation and Award Government/IDA

Works Contractors

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

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

Rehabilitation Paved, Engineered Preparation of Bids Contractors/Resurfacing Earth and Feeder Evaluation and Award Government/IDA

Roads Works Contractors _ _ _ _ _ _ _ _ _ _ _ _

Road Safety Equipment Preparation of Bids SuppliersEvaluation and Award Government/IDASupply Suppliers

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

Services Consultants . . . . . . . .

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

Supply Suppliers

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

1/ All bidding documents and short lists of consultants will have been completed by September 1988.

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SEVENTH HIGHWAY PROJECTMain Road Network

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