DRAFT CONFIDENTIAL 14468-AFR VOL. 4 INTERNATIONAL TRANSPORT IN EAST AFRICA A Discussion Brief The Questions The Problems A Possible Action Agenda The Great Lakes Corridor Study FILE COPY! INTERNATIONAL TRANSPORT IN EAST AFRICA THE QUESTIONS ? Why is East Africa not realizing its potential to compete effectively in international markets? ? What prevents East Africa having the quality of external transport service necessary to encourage export-oriented manufacturing? ? How can East Africa best take advantage of the potential offered by modern logistics to lower import prices and raise export prices? ? What should be done to bring Government policies into line with the transport realities of the 1990s? International Transport in East Africa THE PROBLEMS ALL SECTORS: o Unless international transport is improved substantially, East Africa will be effectively prevented from competing in the world market for high value or time sensitive products o It takes 42 days for a consignment to move from Mombasa to Kampala but only 3 days from London to Rome o High quality infrastructure exists but high quality management and maintenance do not o Management systems, incentives and sanctions are absent or inadequate : centralized crisis management prevails o Conventional technical assistance has not succeeded in generating and sustaining high quality transport services CUSTOMS and TRANSIT: o Bureaucratic customs procedures are critical constraints to the foreign of all countries in East Africa o 50 percent of containers are verified in East Africa, 10 percent in Asia and 2 - 3 percent in Europe o Container clearance through an East African port takes 20 days, at least, but less than 5 days in Asia o The present complex transit procedures achieve little except generate the opportunities for illegal payments o Transit bonds and police convoys raise costs but do not prevent fraud o Customs Departments work part-time in East Africa PORTS: * The levels of service at Dar es Salaam and Mombasa are so low that the ports are major constraints to economic development : the real costs are enormous and priority action is essential * Shipping charges are high: congestion and surcharges are a persistent problem despite excess port capacity * Port productivity is often only 30 percent of international norms for the same equipment ROADS AND ROAD TRANSPORT: * Governments have invested US$ billions in the road network and then seen this investment lost through inadequate maintenance * Overloaded trucks break up the roads but no effective action is taken * Trucks provide an efficient service but their utilization is low and their costs are high RAIL: * Rail freight volumes have halved in 20 years and trucks have become the dominant freight mode * Substantial demand exists, but locomotive availability is < 50 percent, and capacity to meet demand is not available * Rail is still expected to provide the services of the 1960's, but the transport environment has totally changed International Transport in East Africa A POSSIBLE ACTION AGENDA PORTS: * Critical priority: international-standard port and container management . establish effective management control over port facilities * implement proven management system through performance- related management and training contract, or * lease facilities to private sector under landlord arrangement * Privatize or contract out non-core port activities * Rationalize staff levels and establish productivity-linked incentives for stevedoring and cargo handling or contract out * Equipment maintenance contracts with performance guarantees ROADS and ROAD TRANSPORT: * Critical priority: full routine and periodic maintenance of main road infrastructure, funded through assured and transparent mechanisms * Introduction of appropriate transit tolls, related to road damage and maintenance costs * Implementation of appropriate axle-load and vehicle weight regulations or, if this is not feasible, introduce specific vehicle-related charges * Develop appropriate institutional framework for effective road maintenance, tapping the potential of the private sector to the maximun extent International Transport in East Africa A Possible Action Agenda - 2 RAIL: o Critical priority: The locomotive availability and reliability problem must be solved. If in-house maintenance cannot deliver 75 percent availability, contract out maintenance with performance guarantee or lease motive power o Separate commercial and non-commercial activities, eliminate cross- subsidies, implement performance contracts with clear objectives, management autonomy and unambiguous management incentives and sanctions o Rationalize freight activities to provide point-to-point train load services and simplify management o Encourage private sector participation in provision of additional or specialized capacity o Strengthen regional cooperation in maintenance, marketing and pricing policies to compete more effectively with road transport CUSTOMS: o Critical priority: Procedures are unnecessarily complex and should be streamlined and computerized, major simplification of port and port- related customs procedures is crucial o Upgrade facilities and provide 24 hour customs' services at all major ports, terminals, and border crossings o Full introduction of targeted verification and risk management procedures for both home use and transit containers to reduce verification; identify and prosecute persistent offenders o Develop stringent policy for licensing and accrediting clearing and forwarding agents; withdraw licenses from agents not meeting the criteria International Transport in East Africa A Possible Action Agenda - 3 TRANSIT: * Critical priority: simplify procedures achieve and then enforced them effectively * Simplification of transit bond system and introduction of regional bond * Full compliance with the existing provisions of the NCTA and PTA agreements, especially use of the RCTA as the sole customs document for road transport * Allow rail transit on basis of commercial documentation with bonding of rail companies * Terminate the involvement of other authorities, such as police, in transit control * Regional cooperation and information exchange between customs authorities should be used to control fraud * Utilize the documentation and databases generated by the new PSI systems to help control fraud FILE COPY DRAFT CONFIDENTIAL Report No: 14468 AFR Type: SR