t gt < <, ,J / L 6i7Z Document of The World Bank FOR OFFICIAL USE ONLY Report No. 12579-UG STAFF APPRAISAL REPORT REPUBLIC OF UGANDA TRANSPORT REHABILITATION PROJECT VOLUnE I MARCH 8, 1994 MICROGRAPHICS Report No: 12579 UG Type: SAR Energy & Infrastructure Operations Division Eastern Africa Department This document has a resited dkstributko and may be ased by redpients only In the petonnance of their offical duies Its contents may not otewise be dbcosed withot World BDn authorzatIon. CURRENCY EQUIVALENTS Currency Unit Ugandan Shilling (U Sh) US$1.00 = UShsl 174 (October 29, 1993, official rate) UShs 1.00 US$0.0008517 SDR1.00 = USSI.3934 (October31, 1993) US$1.00 SDR 0.7177 FISCAL YEAR Government = July 1 to June 30 URC Jan. 1 to Dec. 31 Local Authoriti Oct. 1 to Sep. 30 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AGO Automotive Gas Oil AIDS Acquired Immuno-Deficiency Syndrome CAA Civil Aviation Authority DA District Administration DE District Engineer DES District Executive Secretary DFCU Development Finance Company of Uganda EC European Communities ERR Economic Rate of Retun ESAMI Eastern and Southern Africa Management Institute FY Fiscal Year GDP = Gross Domestic Product GNP Gross National Product (JIM =Gesellschaft fuer technische Zusammenarbeit HQ Headquarters ICB International Competitive Bidding IDA International Development Association IFC International Finance Corporation ILO International Labor Organization lun kilometer KR Kenya Railways LA Local Authority LB/LES Labor-Based, Light Equipment Supported LCB Local Competitive Bidding MFEP Ministry of Fnance and Economic Planning MOLG Ministry of Local Government MOLG/ED = Ministry of Local Government, Engineering Department MOLG/PD = Ministry of Local Government, Planning Division MOWrC Ministry of Works, Transport and Communications MOWTCIED = Ministry of Works, Transport and Communications, Engmeering Directorate MRMP Main Roads Maintenance Program MT Metric Ton NDF Nordic Development Fund FOR OMCIAL USE ONLY ABBREVIATIONS AND ACRONYMS (contd..) NPRM = National Prioritized Ma'i Roads Maintenance Program NRDP or RDP = National Recovery and Development Plan NRM = National Resistance Movement p.a. per annum PMS = Premium Motor Spirit PPF = Project Preparation Facility PWTC Public Works Training Center RMI = Road Maintenance Initiative SAC = Structural Adjustment Credit SDR = Special Drawing Rights SP = Strategy Paper for Rural Feeder Roads Rehabilitation and Maintenance SSATP = Sub-Saharan Africa Transport Program TRC = Tanzania Railways Corporation TSIREP = Transport Sector Investment & Recurrent Expenditures Plan TSM = Transport Sector Memnorandum UAC = Uganda Airlines Corporation ULC Uganda Leasing Company UNCTAD = United Nations Council for Trade and Development URA = Uganda Revenue Authority USh = Uganda Shilling URC = Uganda Railways Corporation ThJs report is based on hefindings of a Bank appraisal mission consisting of Ms. Haytey Goris (Task Manager), Messrs. Sujeer Nayak (Railway Engineer), John Rwerson (Roads Engineer), Satdev Kadunria (Highway Engineer) and Mesdames Maria K1wanuka (FnanciautAnalyst) and Margaret Heraty (ransport Econom). Lead reviewers were Ian Heggie and Melody Mason, Peer reviewers were Thampil Pankaj and Louis Thompson. Aviraj Chakranarayan was responsiblefor the processing of this report. Mr Stephen Weisman and Mr. Francis Cola*o are the Managing Divwion Chief and Department Director, respectively, for the operation. This document has a restricted distribution and may be used by recipients only in the performance of their ofcial duties. Its contents may not otherwise be disclosed without World Bank authorization. REPUBLIC OF UGANDA TRANSPORT REHABILITATION PROJECT TABLE OF CONTENTS Credit and Project Summary L Country Background A. Geography, Climate, Population Resources 1 B. Economic Performance 1 I The Transport Sector A. Transport Infrastructure and Flows 4 * Uganda's Transport Infrastucture 4 * Overall Transport Flows 4 * Freight Demand Projections 5 * Road Infrastructure 6 * Road Traffic Flows 6 * Main Roads Network 7 * Rural Feeder Roads 7 * Railways and Wagon Ferries 9 * Air Transport 9 * Fuel 9 B. Government Strategy for the Transport Sector 10 * Transport Sector and Sub Sector Strategies 10 * Current Transport Policies and Practices 11 C. Transport Sector Organization 13 Mlnistry of Works, Transport and Communications 13 . Ministry of Local Government 14 . Uganda Railways Corporation 15 D. Planning and Financing of Public Expenditures in the Transoort Sector 16 * Central Government Responsibilities 16 * Transport Investments in the Recovery and Development Plan (RDP) 17 * Maintenance of Road uifrastructure: Cost Recovety 19 * Priorifized National Main Roads Maintenance Program 21 * District Administrion Finances 23 * Parastatal Financing 23 * URC Finances 24 E. Lessons from Previous IDA Involvement 26 F. Rationale for IDA Involvement 28 m The Project A. Project Origin 29 B. Project Objecdves 29 * Relationships with other IDA-supported projects 29 C. Project Description 30 * Four year Main Roads Maintenance Program (FY95-98) 30 * Strengthening and improvement of the Kampala-Entebbe Road 31 * Upgrading, Revravelling/Rehab. of Selected Roads 31 * Constuction Supervision 32 Institutional Strengthening of MOWTC 32 - Technical and Training 32 * Rehabilitation of Feeder Roads 33 * Four Year Feeder Roads Maintenance Progratn 34 * Establishment of District Feeder Roads Maintenance and 35 Rehabilitation Capacity * Stregthening of MOLGtED and Distncts Works Deparinents 35 - Training and Technical Assistance 35 * Institutional Strengthening of URC 37 Training of URC Marine Services Personnel 38 *Procurement of Fery Maintenance Spares 38 Oil Spill Contai Equipment 38 * Technical Assistance for Transport Planning and National 38 Transport Data Base * Dry Port/Container Terminal Study 39 D. Project Cost 39 E. Project Financing Plan 41 IV lProject Implementation A. The Borrower and On-lending Arrangements 43 B. Institutional Arrangements for Implementation 43 C. Procurement 45 D. Disbursement 48 E. Implementation Schedule 49 F. Project Monitoring, Supervision, Accounting & Auditing 49 V Project Justification A. General Project Inpact Sl B. Economic and Other Benefits 52 C. Impact on women 54 D. Environtmental Impact 54 E. Project Risks 56 paeg VI Agreements Reached and Recommendations A. Agreements Reached 57 * General 57 *SMain Roads 57 * Rural Feeder Roads 58 * Railways 59 B. Conditions of Effectiveness 59 C. Conditions of Disbursement 59 * Main Roads 59 * Feeder Roads 60 * Railways 60 D. Recommendations 60 Annex 1 Letter of Transport Sector Policy Tables in Text 2.1 Uganda Freight Flows: 1991 2.2 Potential Future Freight Traffic Demand 1995 - 2000 2.3 Uganda Road Network: 1990 2.4 Uganda Private Vehicle Fleet 2.5 Main Roads Network 2.6 Recovery and Development Plan 2.7 Summary of Gross and Net Revenue raised from Road user Charges in FY90/91 2.8 Budget Estimates and Releases for Main Roads Maintenance 2.9 URC Operational and Financial Highlights 3.1 Project Cost Summary 3.2 Estimated Costs and Financing Plan 4.1 Procurement Methods MAPS: IBRD No. 25487, 25486, 25485, 25484, 25483 -j- REPUBLC OF UGANDA TR4NSPORT REHABIITATIONPROJECT CREDITAND PROJECTSUMMARY Bm~aa: Republic of Uganda Inupleanmlfng JMnistry of Worb, Transport and Communications (MOWTC); Agency and Ministry ofLocal Government (MOLG); and Uganda Railways Benejidaav: Corporatfon (URC) for a portion of the credNt CtedkA,nwah SDR 54.5 million (USS75.0 million equivalent) Tes. Standard IDA Terms with a maturity of 40 years Rdendig Tam Out ofa total passed on to URC of approximately US$3.1 million. 68 percent or approximately USS21 million would be passed on to URC as grant, and 32 percent or approxmately US$1.0 million would be relent at the rate 7percentper annum, repayable over 15 years Includtng 5years of grace. Theforeign exchange riskwould be borne by URC. Pk4at Ob*al andDeapr The project objecties are to assist the Government in providing basic road and rail nrfirastructure to the economy, and ensuring that dhis infrastnwuture will be well maintained and effidenty managed on a sustainable levet, with private sector Invvolvement wherever practicable. The project would help (a) protect the capital investment in, and increase the seruice life of selected rehabilitated main roads; (b) Improve maintenance planning and operation of the main road network; (c) improve MOWTC's capability for project Implementation; (d) introduce labor-based methods of road maintenance and feeder roads rehabilitation wherever most cost- effective; (e) improve MOLG's and the Local Authorities (Districts) capacity to pln manage and monitor fetder roads rehabilitation and maintenance; 6) improve feeder road network accessibility In four districts; '@) train. advise and employ domestic small and medium size contractors for feeder roads works, and (h) reorient URC's management towards commercdal operation and promote Its financial autonomy. lan~kw~ The project will support Uganda's economic recovery through a reduction in transport costs and improved accessibility to the productive agricultral areas. A major benefit of the project will be the establishment and continued execution of a sustainable main -U - roads maintenance program. The project wouldfurther contribute to the strengthening of capacity and capability of the responsible Mfnistries and Local Authorities in road construction and maintenance, which would result in efficiency gains in maintenance management, and resource allocation in the transport sector The project would help an increasing number of Ugandan contractors to operate efficiently through training, better access to equipment and more regularflow ofpayments for work An economic analysis was carried on the various components and the aggregated economic rate of return is estimated at 17.8 percent Alsks. There is a risk that the increase in the presently very low ratio of revenues to GDP would not be sufficient to alleviate the severe budgetary constraints, thus resulting in cutbacks on core road maintenance expenditures. As the Government is getling an increasingly firm grfp on budget expenditures and has agreed to establish a Special Road Maintenance Account, to help ensure the timely availability of resources for maintenance, this risk is diminished. Moreover, annual discussions with the Government to agree on a sustainable level of road mintenance and core road rehabilitation have been included in the project to help mitigate this risk Government and IDA macroeconomic policy discussions, includfng a continuation of annual Public Expenditure Reviews will also strengthen the Government's commitment to road maintenance A sector-wide risk Is that the Government will not substantially improve its management of public investments, and thus allow deterioration of the country's infrastructure by inappropriate prioritizatfon of and inefficient execution of investment projects. The Project, as well as our macro-economic dialogue, would address this risk through the rate of return requirements for new projects and through an ongoing review of the transport investment program There is a risk that URC would make Insufficent progress in transforming ftsel into a commercial enterprise, which would result in further loss of its market share and weakening of its financial positon. The project would provide technical assistance to URC's reorentation process as well as the areas offinance and marketing to assist URC in this crucial transformation period. Kenya Raflways(KR) and Tanzania Railways Corporation (TRC) must also improve their performances, or URC will be unable to provide efficient services to the seaports. IDA is simultaneously providing assistance to KR and TRC, which, ff continue4 could help alleviate this risk H ii Estimated Project Costs: Local Forel Total (In U$S ndlon equivaent) Main Roads 15.2 46.0 61.2 Rural Feeder Roads 4.4 8.8 13.2 URC 0.1 25 2.6 Transport Planning 0.1 0.7 0.8 Total Ease Cost 19.8 58.0 77.8 Physical Contingencies 2.0 5.8 7.8 Price Contingencies 3.1 8.9 12.0 PPF 0 1.5 1.5 TOTAL COST 24.8 74.2 99.0 Financing Plan: Local Forrda Total Nordic Development Fund 0.8 3.8 4.6 IDA 12.8 62.2 75.0 Government 10.7 81 18.8 URC - 0.1 0.1 Local Authorities (Districts) 0.5 0 0.5 TOTAL FINANCING 24.8 74.2 99.0 EconomicRate of Return: The project's weighted average economic rate of reum is 7.8percent Estmated IDA Disbursements: Fscal Year Ending June 30 Year 1995 1996 1997 1998 1999 2000 Annual 14.0 15.3 18.4 15.0 10.4 1.9 Cumulative 14.0 29.3 47.7 62 7 73.1 75.0 Poverty Category: Program of Targeted Interventions -1- I. COUN'TRY BACKGRW77ND A. GEOGRAPHY, CLIMATE, POPULATION, RESOURCES 1.01 Uganda is a landlocked country sibtated on the Equator in Attica, bordered by Sudan to the north, Kenya to the east, Tajzaia and Rwanda to the south and Zaire to the west. The county has a total area of 236,000 km , about one seventh being swanp or lake. Lake Victoria is shared with Kenya and Tarzana and provides a key link in Uganda's extenal transport system. The county lies mainly at or above 1,200 meters and its topogaphy, except for mounuins in the rme east and west, does not pose special problems for inrascture construction. A&xjuate rainfalU averaging 1,270 nmn annua}ly, allows the cental and eastem parts of the country to produce several crops per yea. The rain is distriouted firly evenly over the year, with oae or two ramy seasons. However, accessibility for low lying road sections requires special antion in rainy seasons. Total food production is sufficient but there are some deficit areas and major nutritional probleas can occur when food movmets are interrupted. The population, esmated at 17 million, lives primarily in the rural areas. The population density of individual disticts varies frm a low of 10 persons per sq. In in Morototo a high of 283 in Mbale, one of the project districts for the Feeder Roads Conmonent (see Apperdix 2.1). The per cap. GDP is estimated at US$170 per annum. Uganda's mai natural resource is its lare potential for hydropower production; it has minerals and petroleum but at this time there is no large scale exploitaion. B. ECONOMIC PERFORMANCE 1.02 General: Uganda is emerging from a period of severe economic decline and instability. Since 1987 the NRM Government has been pursuing a wide nging package of financial stabilization and restructuring policies designed to bring inflation down and improve the balance of payments situation as preconditions for recovery and economuc growth. 'Me policies have included devaluation, the libealization of tade, enouragment of nontraditional exorts and the eliination of most price controls. The Government has made impressive progress, and the initial supply response has been stxng with a growth rate of nearly 6 percent p.a. for several years. Ihe economy remains vulnerable to extenal factors such as changes in the price of coffee and oil and growth has been about 5 percent recently. At about 7 percent of GDP, Governmenat revenue is very low, even by SSA standards, and dqedence on foreign financing remains very laWe, not ony for public mvestmts, but for part of recurent expenditure as well. 1.03 The Government is determined to continue its macro economic policy refonn programs. The reforms in the incentives and regulatory framework have to be deepened, the trade regime needs to be rationalized in conjunction with the Govemmenes establishment of a unified foreign exchange market in October 1993, incentives for traditional export crops must be improved, the industrial climate needs faurer improvement to attract pnvate investment, and the financial sector needs comprehensive reform to improve the mobilization of savings and its allocation to productive activities. These economic reforms have to be supported by significant improvements in Uganda's economic infastructure and services, including transport, power and agricultural research and extension. 1.04 Public Expenditure Reform: In addition, public expendiu policy has to be geared to meeting the most pressing impeives of this reform agenda. Overall public expenditure is constaed by extremely low revenue collection. While the share of deense has been reduced by .2 - an impressive demobilization program started in 1992, the renting resources are dispersed over a large mmber of ministries/self accouiting agencies as well as an overstaffed, poorly paid and ill- equipped civil service. Government is trying to do too much with too little: it should do less, better. Present realities necessitate an explicit recognition of financial and institutional constraints that limit the scope and pace of rehabilitation, and make it unfeasible or undesirable to replicate the network of infiastructure and services of the past. Major refomis arc necessay, erefoe, in public exeditur policy if Government is to fulfill successfully its role in stimulating growth and developmet: - planning and budgeting must be reoriented to ensure that activities critical for the refonn agenda receive greater prority in funding and institutional strengthening; - concerted attempts must be made to raise the revenue effort; - the planned reducdon in the defense force from 80,000 to 30,000 over three years must be implemented vigorously; - expenditure allocations will need to be increased for cntical activities and wages and salaries raised to improve incentives; - simultaneously, the financing of unproductive facilities, activities and personnel within and across sectors must be phased out; and - donor financing must be coordinued effectively to execute prioritized national plans and progms. 1.05 Prioritizing Recurrent Expenditure: In FY91 the Goverment began a process of expenditur priorzation. The main items that have first call on resources are wages, interest, amortzation, dotestic arrears, statutory expenditure, funding for the Ugandan Revenue Authoty (URA) and countrpart fiuds for the core development budget. Beyond that, the Goverment ientified in the recurrent expenditure budget primary education, prnmary health care, water supply, agrculural research and extenson, and road maitnance and feeder roads as high priorqty programs. ITe selected progamms were to receive substantial real increases in allocations in sucessive budgets. The allocations in tum were to be protected from expenditur cuts when rven colction f:ll short of the approved estimate. The high priority progras were to benefit from automatic releases of funds by the Treasury during the fiscal year. The above approach to exeture priorizaion has had a measure of success. The designated programs lave benefited from ineased budget allocations and, except for difficulties experienced in the final quarter of FY9Z allocations have been protected from cuts. 1.06 With effect from FY94 the Govemment expanded the list of high priority recurrent expnitu programs to include the Police Service, Justice and the Judiciary, the Office of the Auditor General and Office of the Inspector General of Govemment The Govemenufes policy is to contiue to chamel more resoures into the high priority programs, particularly those which provide basic socia services. As a result, the total budgetary allocation for the high priority recunt progms will rise from Ush56.4 billion in FY93 to Ush67.0 billion in FY94. As a condition of second tranche release of the Second Structural Adjustment Credit (SAC II) the Govennt will release all the agreed re- rrent budget allocations for the high priority programs in FY94 and for FY95 agree with IDA on the level and composition of nonwage recurrnt expediture. -3- 1.07 Rationalizing the Development Budget: Tle shortage of counterpart funds to support donor projects and the slow implementation of projets strongly suggest that the development budget has grown too big. The development budget is also too large in relation to the recurrent budget; in fact, the practice has been to add proJects to the development budget without sufficient consideration of the future recurrent costs of the projects when completed. Moreover, many projects do not fit into the Governmends highest expenditure prorties namely, provision of essential infiutructure and more rapid development of human resources. Accordingly, the Gove .ient has decided that, in a time of extreme scarcity of resources, it should concentate on its cotw functions of: * proiding basic social services (basic education, basic health, water supply with broad impact); * providing basic economic infiastructure (roads, with emphasis on fWeder roads, agricultral research, extension and disease control); * protecting the environment; and * mnaintaining law and order. 1.08 In line with the above criria, the development budget was divided into core and noncom projects in FY94. The core projects, numbering 160, will receive fuUl counterpart funding. Te total FY94 allocation for govemment counterpart funds is Ush42.7 billion, of which Ush33.2 billion will be for the support of core projects. The halance of Ush9.5 billion will support a large number of noncore projects, many of which will receive only minimal releases of counterpart funds or none at all, and will therefore proceed at a slow pace or even come to a standstill. For this reason, it is necessary that, with effect from FY95, the Government work closely with the donors to start the process of tenninating projects which no longer fit into its development prorities. As a condition of second tranche release under SAC 11 the Govemment will release in full the FY94 counterpart allocations for the core projects and for FY95 will agree with IDA on the level and composition of the development budget. 1.09 Instituonal Strengthening: Civil service refonn, which is going on simultaneously with public expenditure reform will ultimately help to reach a smaller size and scope of Goverment which will be better equipped and motivated to cany out its essential functions. Very consideable instutional srecngthing will be necessary if the reform agenda is to be successfully implemented. Since Goverment has iated i on towards local authorities in FY94, Govemment capacity at both the national and local level must be increased and this will require substantial change, Govnment wil streamline and rationalize the civil service to make it smaller, better paid, motivated and more effective. The Government and IDA have agreed on specific steps in the context of SAC H. .4- II. THE TRANSPORT SECTOR A. TRANSPORT INFRASTRUCTURE AND FLOWS Uganda's Transport Infrastructure 2.01 Uganda's ransport systen consists of (1) an extensive road network of about 29,000 kn of main roads and rural feeder roads with interational, national, district and local significance; the main mad network provides reasonable conntons with Kenya, Southern Sudan, Eastem Zaire and Rwanda, but not with Tanzania because of the state of the roads in the Tanzaan, boder area;(2) tius road network is fiter supported by many small community roads and tracks; (3) Uganda Railways Corporation (URC) which consists of ferry services and teminals plus a modest domestic 1,232 1m railways system consisting of three lines; URC is linked to the Kenyan railways overland and by ferty, and to the Tanzanan railways by ferr; (4) three wagon femes operating on Lake Victoria and connecting the two Ugandan ferry teinals in Port Bell and Jinja via a 1,300 In rote via th Kenyan port of Kisumu with Mombasa and a 1,700 kan route via the Tanzanian port of Mwanza with Dar es Salaam; (5) one international auport located in Entebbe and about 12 local airfields and airstrips across the country. The infastructure lay-out is by and large adequate for the mo s needs in that it provides basic networks to move from urban to rural and nrur to rural destinations. 2.02 Summary assessment of the sector: Movement of goods and people has improved substanally since the mid-eighties, mainly as a result of rehabilitation of trnk roads, and expansion of the vehicle fleet; but main road mntenance needs urgent attention now to prevent loss of these valuable investments. At the same time, a large agricultural potential rmain untapped because notwithstanding donor support, most of the extensive feeder road nework remains in need of rehabilitation and maintenance. The large Government investments in the locomotive repair facility, wagon ferries and rolling stock in URC are yielding a relatively small contributiontotraffic xansion. This is due to some extent to one line being in bad condition, but especialy to URCs low operational efficiency and weak financial managm URC is not yet run oa commrcial principles, and its reorientation process has only just started; presently, it cannot even provide the services for traffic directed towards it by Govenunent URC also needs to manage the maintenance and operaton of its wagon ferries more effectively. All munistries operating in the transpor sector suffer from budget consaints and related understaffng, as well a. weak managenmet Especialy because of the budget constraints, the decion making prooess concerning transport investme needs to be rationalized without delay, so that the retums on investments for the economy can be maxmized by carefil prioritization, more efficient managemen and monitoring of projects. A more detailed description of the transport subsectors follows in para!s 2.07 to 2.13 below. Overall Transport lows 2.03 Estimates of the magunitude of the present Ugandan freight flows suggest about 3.4 million tons of domestic traffic and 0.9 million tons cf intemational traffic, with a 3.6:1 imbalance of imports to exports. In addition to being a land-locked country, Uganda also plays an important transit role for Rwanda, Eastem Zaire and Sudan, Rail ransport plays a major role in Uganda's extenal trade but it has an insignificant share in the domestic and transit markets, Table 2.1 below. Table 2.1: Uganda Freight Flows: 1991 (thousand tons) Domesnc international Total Trade Import Export Transit Total Trafflc Road 3,310 416 45 74 535 3,845 RaiUFerry 90 200 126 0 326 416 Air 0 6 2 * 8 8 Total 3,400 622 172 74 869 4,268 (*insignificant) Source: Transport Sector Memorandum (1992 update) Freight Demand Projections 2.04 Overall domestic trasport demand is expected to grow at S percent per annum during the 1990's, about the same rate as GDP. This is likely to combine a rather faster growth in freight transport, possibly 6 - 7 percent per annum, and a rather lower growth in passenger vehicle movements, with possibly a shift toward higher capacity diesel vehicles and more fuel efficient cars if Government limits the growth of gasoline imports by raising its price. Export volume is expected to grow relatively fist, thanks to the buoyancy of non-traditional exports, possibly at an annual average growth of 8 percent. The growth in import volumes is likely to be significantly lower than for exports, probably at a rate around that of GDP. Table 2.2: Potential Future Freight Traffic Demand (million tons) Domestc Impor Eport Total AM POL Other External Traffic 1989 3.00 0.25 0.50 0.25 1.00 4.00 1995 4.38 0.34 0.68 0.37 1.39 5.77 2000 6.00 0.43 0.86 0.58 1.87 7.87 Source: Transport Sector Memorandum. 2.05 Modal Transport and Direction of Flows: International Transport: The macro- economic policies of the Goverment affict international tansport in several important ways: first, the liberalization of agricultural marketing and foreign trade, together with a reduction in the role of parastatal twading agencies and a reduced level of barter trading is posing a conmetitive challenge for the railways. Untl recently, the Parastatal marketg system favored the aiways because it needed long distance transport for its relatively bulky and low value produce from central depots to seaports. Under the new policies, the private entrepreneurs are generally handing smaller consignments. Since they are much more interested in timely and reliable service than marketing parasals, they generally prefer road transport over rail transport, at least at URC's present level of efficiency and reliability. Second, the expected further expansion of exports and relatively slower growth of imports will reduce the relative directional imbalance in imports and exports (see Table 2.2), and will drive up the road rates for export traffic. Third, the intenational -6 - development in container traffic has also reached Uganda, and a major increase in containerized imports and exports is likely, especially with fiully liberalized coffee trading. The modal distribution of traffic between road and rail will depend critically on the commercial policies and operational efficiency of URC as well as its partner railways to the sea. If URC continues to operate at its present low level of efficiency, its modal share will probably continue to fall. With increased efficiency and market-based pricing, however, the railways could attact considerable taffic. 2.06 Modal Distribution: Domestic Transport: The macro-economic policies which the Govenmment has introduced in the last few years also have a direct impact on domestic transport. The railways' competitive position is coming under strong pressure for the same reasons as stated above, namely that private traders will move relatively small consignments and are time and service conscious; moreover, for the relatively short distances in domestic tmnsport the railways does not have an inherent cost advantage. Even if the domestic rail lines were to be fully rehabilitated, URC's share of the domestic tansport market would remain very small. Road Infrastructure 2.07 In 1971 Uganda's road infrastructure was adequate for the country's needs. By the mid- 1980's the lack of ahnost any maintenance accompanied, on the main corridor, by the diversion of rail freight to overloaded trucks had effectively destroyed much of the road network. The size of the network, about 29,000 kms, is broadly in line with regional norms, takdng into account both the population density of 85 persons/sq. km and GNP. The major shortcoming of the network is its vety poor condition. Government has given high priority to the rehabilitation of the main paved road network but much of the unpaved network and most of the feeder road system remains to be improved, Table 2.3. Table 2.3: Uganda Road Network: 1990 Ikms) Main Road Network Urban Roads Feeder Total Paved Gravel Total Paved Gravel Roads Network Rehabilitated 1,600 1,800 3,400 40 - 1,200 4,640 Other 500 4,100 4,600 400 260 19,200 25,460 Total 2,100 5,900 8,000 440 260 20,400 29,100 Source: MOWTC, MOLG Road Traffic Flows 2.08 Traffic flows on the main road network are relatively high (>1000 vehicles per day) in the immediate vicinities of Kampala and Jinja. Along the main Northern Corridor, connecting Uganda to Kenya and Rwanda, flows of 500 - 1000 vehicles are nonnal. Elsewhere on the main road network, flows of 100 - 300 vehicles per day are recorded. Traffic on the feeder road network is very light, reflecting their function and the operating conditions. It includes substantial bicycle but very little animal drawn traffic. The size ofthe vehicle fleet is estimated at about 38,900 vehicles: about 35,500 in the private sector, while the Government's vehicle fleet (excluding motor cycles) was about 3,400 in 1992. -7- Table 2.4: Uganda Private Vehicle Fleet Car Pick-up Mini-Bus Bus Truck MCyde Other Total 1990 12,284 7,967 2,762 524 3,649 4,620 3,686 35,492 Growh p.a 1981-90 1.6% 8.9% 16.9% -1.9% 0.1% 1.0% 6.0% 3.7% Source: MOWTC Database Main Road Network 2.09 The country's road network includes the classified road network of 7,938 kan which is naintained by MOWTC. The roads maintained by MOWTC are classified into three categories: primary, secondary and tertiary. In general, primary roads are important national and international roads which connect administrative centers with one another and with neighborng countries. Secondary roads are either inter-isct roads or roads linking the primary road network with other centers of economic activity. Tertiary roads serve local population centers and agricultural areas, and connect them wi other roads in the network. The classified road network comprises 2105 km of paved road and 5,833 km of gravel road, a breakdown of which is shown in Table 2.5. Table 2.5: Road Network PnimaryRoads SecondaryRoads TertiaryRoads AllRoads Percentage Paved 1,803 129 173 2,105 27 Gravel 2,197 2,134 1,502 5,833 73 Total 4,000 2,263 1,675 7,938 100 Source: MOWTC, September 1993 2.10 If the original road network were fully operational, it would be more than adequate for the country's needs. But due to the lack of proper maintenance during the 1970s and early 1980s, road conditions deteriorate severely. The situation became particularly critical for trunk roads serving transit traffic (to Kenya, Rwanda, Burundi, Zaire and Sudan) where high volumes and heavy loads caused structural damage and made roads difficult and dangerous for traffic. Ihe secondary roads too fell in a state of disrepair, and generally became impassable during the rainy season. Some 3,400 kan (43%) of the road network (1,600 kn paved and 1,800 kn gravel road) has since been rehabilitated/reconstructed with assistance from IDA (Third Highway and Fourth Highway Projects) and other donors, and is, at present, in good condition. 2.11 For the purpose of maintenance, MOWTC ranks the classified roads as priority 1, 2 and 3, where maintenance priority 1 roads are defined as roads rehabilitated since 1986; maintenance priority 2 roads are defined as other essential links in the network and maintenance priority 3 roads are defined as all other roads that would need rehabilitation prior to regular maintenance. Rural Feeder Roads 2.12 The rural feeder roads cover about 20,400 km, and consist mainly of un-engieered earth/gravel roads. While they are linked directly or indiredy to the main roads network, their use is more directly linked to location-specific services and users. Their maintenance is a mandatory service of the District Authorities which are at this stage assisted by the Ministry of Local -8- Government. Feeder roads are categorized in classes 1, II, IIl and IV, reflecting their relative significance. An estimated 2,750 km have been fully rehabilitated in recent years and in addition spot improvement was applied to about 2,000 km of feeder roads. Community roads and tracks are not included in the system mentioned above, but play an important role in transport to and from farms. 2.13 A campaign was launched several years ago by the President to provide all Districts with at least a minimum set of equipment as a challenge to undertake some maintenance and rehabilitation, although equipment without adequate provision of funds for operations and maintenance expenditure, and without adequate staffing of management and supervision posts in the districts and the ED is bound to be ineffective. This is likely to continue side by side with donor-supported efforts in specific districts. The consortium approach under which private consultants are brought in under contract to manage equipment and recurrent expenditure introduced in some areas is an innovative, mixed private/public sector Ugandan solution. It has produced some results but improved supervision by ED/MOLG, monitoring of costs and output and clarification of the lines of responsibility and accountability are required. 2.14 Private Sector Capacity. Ugandan consulting firms are increasingly participating in preparation and supervision of roads works, as partners in joint ventures or on their own account. The Association's experience with well supervised teams including Ugandan engineers has generally been satisfactory. Capacity building in the Ugandan road contracting industrv has so far been very modest, although there are many active small building contractors. There are some 10 medium-sized and a number of small domestic contractors who have been engaged in minor road upgrading and periodic maintenance works, but they lack proper equipment, management expertise and trained manpower to perform effectively and profitably. Nine domestic firms received classroon and on-the-job training under the pilot program for development of the local construction industry under the Third Highway Project; however, due to the lack of funds/equipment coupled with Government delay in making payments, the program achieved limited success. Contractors, who are generally grossly undercapitalized, cite absence of affordable bank financing with the present high interest rates as factors preventing them from acquiring the necessary equipment. They also cite the large size of contracts and the perceived strong competition of financially stronger foreign contractors as reasons for the slow take-off of the domestic road construction industry. Even more important may be (a) the absence of a steady stream of small and medium sized conrts from the largest potential client, the Government, and (b) late payment by Government to contractors, sometimes over one year, which has in the past driven some Ugandan contractors out of business. The situation should be improved by a clear, and reliable Government commitment and regular releases of funds for contracts. Also, the private sector should move towards leasing and renting of equipment. Four private contractors have pooled their equipment so as to make it available for hire. An IFC-supported project to introduce leasing in Uganda is under preparation. 2.15 Transport Industry: There is considerable supply of road transport in urban areas by Ugandan vehicle owners, mostly small entrepreneurs, with few large fleet owners. Import of second-hand vehicles has facilitated ownership of minivaas for passenger traffic. As rural roads will become more accessible, sturdy trucks and four wheel drive vehicles will be joined by pick-ups and saloon cars and provide a necessary boost in transport supply. Bicycles are extensively used, but other non-motorized means of transport are rare in Uganda and their promotion could help improve transport in the rural areas. .9 - Railways and Wagon Ferries 2.16 The Uganda Railways Corporation, established by a Presidential Decree in 1977 and given fonnal legal status by Statute of August 1992, provides Uganda with three of its major intemnational trunk routes: (1) a 1,300 kn overland rail link through Kenya Railways to the port of Mombasa, and (2) ferry connections through Kisumu to Mombasa (1,300 kin) as well as (3) through Mwanza to Dar Es Salaam by Tanzania Railways Corporation (1,700 kIn). The alternative routes through Kenya and Tanzania provide Uganda which is landlocked with more security of access to the Indian Ocean. The three routes carried 18, 52 and 30% respectively of international traffic in 1991. URC's main traffic is international and the domestic traffic is only a minor component. URC's network within Uganda is 1,232 km long, and consists of a 251 km central line Kampala-Malaba on the Kenyan border, with two short spurs to the Jinja and Port Bell ferry terminals and a loop line Busembatia-Mbulamuti-Jinja; a 333 km Western line from Kampala to Kasese, which is in very bad shape and experiences many derailments, and a 502 km Northem line Tororo-Pakwach which become accessible again in 1992 after the cessation of hostilities in the North. 2.17 URC's transport throughput increased from 378,000 T in 1987 to peak at 491,000 T in 1991. Since then, it has declined to 364,000 T in 1992. The impact of regional drought, which adversely affected the production levels of coffee and other agricultural products, was compounded by the absence of an effective marketing strategy for URC. URC found itself unprepared to respond to the liberalization measures under new economic policies, which brought it into a competitive situation vis-a-vis the trucking industry. Air Transport 2.18 Uganda has an intemational airport in Entebbe and 12 smaller domestic airfields and airstrips. It was established that rehabilitation of the runway, navigational aids and telecommunications systems were urgently required at Entebbe airport. Due to various reasons, Government has contracted first for the rehabilitation of the airport teminal building but is now actively mobilizing funds for the urgently required rehabilitation. Uganda currently relies almost entirely on foreign airlines for interaional air passenger and freight transport. Uganda Airlines Corporation (UAC) has a small fleet flying to Nairobi and a few other destnations. Within the region, Uganda has entered into arrangements with other East African countries for joint operations of long distance flights. A Civil Aviation Authority (CAA) has been statutorily established in January 1994 and now carres the responsibility for the aviation sector. Fuel 2.19 Fuel importation is in the hands of a small number of private companies. Until recendy, the companes have consitenty had privileged access for their fuel imports to adequate amounts of foreign exchange at the official rate. While Kampala and other major towns have generally had adequate fuel supply, the situation upcountry has been less favorable. On the relatively few occasions that the supply of fuel was interrupted in Uganda this was probably due, not to scarcity of foreign exchange, but to problems in neighboring countries. In November 1993, the foreign exchange market was liberalized, and oil companies now buy foreign exchange requirements in the free market like everybody else. Pump prices are regulated by Govenmment and uniform throughout Uganda. It is hoped that the liberalization of the foreign exchange market and the - 10- possible liberalization of the pump prices in the near future will lead to both continued reliable supply in town and more equal distribution of fuel over the country as a whole. The volume of fuel consumption first showed a conventional growth pattern, with expansion in line with economic recovery, but then declined from 1990 onwards. Diesel fuel consumption in particular has been declining at over 7 percent per year since 1990. Tighter Government budgetary control of f&el expenditures, rising price elasticity as Government first introduced and then increased taxes On fuel, plus recent resumption of smuggling from Kenya where fuel prices are low, have probably contributed to this development. Light vehicles use premium gasoline, while trucks, vessels and diesel locomotives are the main users of diesel fuel. The industial use of diesel is rather small. Government considers kerosene as a possible alternative for fuelwood and charcoal for household use, and hence has set its price lower than for the other categories. The price increases for diesel, premium gasoline and kerosene announced in the July 1993 budget brought them to USh810, 910 and 680 per liter, or US$0.76, 0.85 and 0.64, respectively. The tax aspects of fuel are discussed in pama 2.58. In comparison, Kenyan petrol prices were $0.36, 0.44 and 0.01 equivalent per liter at the time. B. GOVERNMENT STRATEGY FOR THE TRANSPORT SECTOR Transport Sector and Sub Sector Strategies 2.20 Sector Strategy: Ihe Govermnent's strategic objective is to promote cheaper, more efficient and more reliable transport services so as to facilitate the increase of agricultural and industrial producton, trade, tourism, social and adminstative services and ultimately improve the well-being of the Ugandan population. To this end, the Government has started to formulate an overall transport sector strategy, to be executed through policies, progrmns and projects aiming at (i) a technically sound, economically justfied and financially sustainable transport infrtructure supported by apprpriate rehilitation, maintenance and upgrading; (ii) a regulatory and incentives framework to actively promote pnvate sector participaton and (iii) more efficient public transport agencies considered of strategic importance to the country. As a landlocked country, Uganda is also seeking to improve regional transport coordinaton between the Easten Afican countries for econonuc security reasons. Concrete expressions of the Government's transport strategy are summried in The Way Forward II, Medium Term Sectoral Strategy of January 1992", and in the Letter of Transport Sector Policy which provides the framework for the proposed Project (see Annex 1). Building blocks for this letter are two major documents, namey the Transport Sector Memorandum and the paper on Strtegy for Rural Feeder Roads Rehabilitatuon and Maintenance. The ongoing work under the Road Maintenance Iitiative (RMI) is expected to lead to further important decisions in Government in 1993/94 on the basis of the study on a Highway Authorty/Road Fund which the Govermment has commissioned with GTZ financing. 2.21 Transport Sector Memorandum: The most comprehensive recent overview of te transport sector is contained in the Transport Sector Memorandum (TSM), prepared by World Bank staff and consultants in February 1991 and agreed upon between the Association and Government in December 1991. Summarizing its analysis and recommendations, the TSM stresses the need for. (a) balanced and sustainable roads improvement program, with better planning and programming of in roads maintenance, increased labor productivity and no -11- diversion of fiuds from inuntenan to reconstruction/rehabiliatio as well as cost- effective feeder roads rehabilitation and maintenance; (b) commercial orientation for the railways. (c) cost-effective policy for air tansport development. (d) improved international transport secuity. Government policy has evolved considerably in the direcion of TSM rcmmedations since December 1991, especially with respect to railways. The Govermet has sent a Letter of Transport Sector Policy to IDA which is agreeable to IDA. The letter covers objectives and policies for all transport subsectors and includes a policy statement with respect to a balaned approach to undertaking and financing Transport mainace and investments as will as a Transport Sector Investnt and Recurrent Expendite Plan (TSIREP) for FY95-FY97. 2.22 Feeder Roads Strategy: The Govenment issued a separate document "Strategy for Rural Feeder Roads Rehabilitation and Maintenance in November 1992, following adorsement by a National Seminar in September 1990. ITe Stratey Paper (SP) recognizes te serious costraints in both financing and management/manpower, and therefore proposes a program in stages: fbr the five years 1992-1996, about 14,800 kan out of a total of 21,200 ln of faeder roads is to be brought to a fair level of accessibility, of which 4,110 lan would be filly rehabilitated. The SP contains both a strategy and a Five Year Action Plan. It endorses in general ensthe policy of undertaing rehabilitation by force account as well as conact, with a gradualy iresing share of contractor-xcuted work. It furdter proposes to try out labor based methods or a combination of equipment and labor based nmetods in addition to equipment based work. The use of labor based techques will be gradual as it is a technique which, although proven in other countries, is new to Uganda, and involves intensive prior traini of personnel. 2.23 The proposed financing plan for feeder roads mintenace in the Action Plan is based o" burden sharing between the central Governent, local authorities and exteal agencies: at the begnning of the five year program, their respective shares would be 40, 10 and 50 perent, but by te fifth year these shares would have moved to 30, 50 and 20 percent, respectively. This scenario reflects the inability of the districts to fully finance maintenance, while at the same time establishing their ultimate responsibility for this mandatory service. Tle financing pian for all activities in feeder roads combined for the same years 1992-1996 reflects a similar cost sharing principle with te Uandan side increagly assuming more of the costs. Cunrnt Transport Policies and Practices 2.24 Regulation, Direct ltervention ad Public Sector Participation: Summary: The public sector is responsible for providing the transport infastructure for road as well as for rail and water transport, while transport services are provided by prvate enterprises plus a limited number of public enterpnses, all operate under Govenme regulation. Government and pamstatals undertae infrastructure invesmt and are expected to maintain these investments, while the private sector finances and operates vehicles and vessels with the exception of the feries. The fuel price is an important operatimg cost in the tansport sector, curently it is contolled by Govemment, but liberaliation of petrol prices is under discussion. Govemment aims in principle at promoting efficient and lower cost transport services through intermodal competition without distortions in the form of taxes or subsidies to specific transporters or users, limited access to makcts as directed taffic. Conditions for access to road transport services are not restrictive under curnet practices, - 12- with the exception of transport of coffee and petroleum products. Passenger services are not vety stictly regulated. Govenunent does not set freight rates for the trucking industry, but sets tariffs for passenger services, which are however pardy indicative, not mandatory. According to a recet study of the cost recovery on the main trunk roads, Government currently subsidizes the users of tansport services of both road and rail by charging them less than the fil investent and maintenance costs incurred as public expenditures. Government is however moving in the direction of making at least rail subsidies more transparent. Govenmment also does intervene direcdy in taffic allocation between road and rail, and route allocation between public buses, private buses and collective taxis. There is movement towards eliminating these distortions as well. A special issue in Uganda is the additional cost the Government believes the economy has to bear in order to keep several routes to the sea open at all times. A rational solution for burden sharing of this cost remains to be formulated. This is an important issue, although not the only reason for Uganda to actively pursue regional cooperation in transport. 2.25 Regulatory Policies and Practices: In freight transport pricing, Govennment approves URC freight rates ex post; these rates are in practice kept low mostly by the fully maket- determined rates of the trucking industry. In passenger traffic pricing Goverunent sets the rates for interurban bus services. The fees set for private hire vehicles (collective taxis) are indicative only. With respect to regulating access to market, the Transport Licensing Board is the ann of MOWTC responsible for issuing licenses for public and private passenger and goods vehicles in Uganda, with the aim of ensuring their road worthiness. MOWTC's Aviation Unit/CM conclude agreements with airlines concerning their use of Entebbe airport and approve air fares and levy charges for services provided on the basis of the 1991 CM Ordinance. 2.26 Direct Intervention: The Transport Licensing Board is also responsible for ensuring that the bus and taxi operating routes result in equitable dispensation of services throughout the country. If necessary, Government can direct the companies to areas where private companies do not provide services, in such cases, an extra amount is allowed in the bus tariff as compensation. The Ministries of Transport and Finance have signed a Performance Agreement in January 1994 with URC which includes tansparent compensation arangements for non remunerative rail services in future. Direct intervention in international traffic is still considerable. The most important tbeneficiary is URC which holds a de facto monopoly for transport of coffee exports, and also has been directed to transport 60 percent of oil imports. It is further expected to move 60 percent of its international traffic over the Tnznian route, but does not yet reach this level. Government has however agreed that some of its direct intervention be phased out in the near future: liberalization of coffee exports transport is expected to go hand in hand with liberalization of coffee trade. Meanwhile, URC is offering the private oil companies oil transport by block train via Tanzaia, which could be a very competitive choice, while the tariff for a new alternative, transport by train from the new oil pipeline tenninal in Eldoret, Kenya, is being negotiated. A special type of Government direct intervention is the considerable range of services, both public and private in nature, provided by the Government Vehicle Fleet. A recent study concludes that with the return to nornal private sector transport services inefficient and costly services could be eliminated and compensated for by including lower amounts for private services in civil service salaries. - 13- 2.27 Public Sector Participation: Government wants URC to remain a public enterprise in view of the strategic importance of the railways. But URC should become an economically and financially viable transport agency and an effective competitor for long haul bulk transport and container transport. The ongoing major restructuring of URC aims at these objectives. C. TRANSPORT SECTOR ORGANIZATION Ministry of Works, Transport and Communications 2.28 As a result of the merger of the Ministries of Works and Transport and Communications MOWTC has a wide range of functions. It is responsible for policy formulation and execution (or supervision of execution by others) for all transport and communications activities, with the exception of rural feeder and community roads. Its responsibility covers both infiastructure and transport services. A major part of its work concerns the planning, programming and actual execution or supervision of construction and maintenance of the classified road network (called "main roads network" in this report). MOWTC is the parent ministry to six parastatals, namely: the Civil Aviation Authority, the Uganda Posts and Telecommunications Corporation, the Uganda Transport Company, the People's Transport Company, the Uganda Railways Corporation and the Uganda Airlines Corporation. In addition, MOWTC comprises the Transport Licensing Board, and supervises the National Transport Safety Council. In a 1993 reorganization, MOWTC was divided into two directorates: Engineering, and Transport and Communications. The Engineering Directorate is responsible for road planning, design, construction and maintenance. The Road Maintenance Division in the Engineering Directorate, headed by a chief road maintenance enugneer/assistant commissioner, is responsible for the upkeep and maintenance of roads. Responsibility for road maintenance is distributed over 21 MOWTC maintenance districts. At MOWTC headquarters, the chief road maintenance engineer is assisted by six principal engineers, oe for maintenance planning, one for contracts and four for field operations (one each for the Northern, Eastern, Central and Western areas). Transport Planning is one of the functions of the Transport and Conmmunications Directorate, and is undertaken in the Planning Division which also houses the National Transport Data Base. Further details on MOWTC's organization, staffing and training, equipment, engineering and construction activities, maintenance financing, and other donor support in place or under consideration are in Appendix 5.1. The MOWTC organizational schedule is in Appendix 1.10. 2.29 The Engineering Directorate is understaffed at headquarters and in the field, at all levels including mechanics and plant operators. The vacancy rate is particularly high in road maintenance. The organizational setup for road maintenance is basically sound, but because of staff shortages, inadequate numbers of trained personnel and insufficient funding, the quality and quantity of maienance is unsatisfactory. The Government's low salaries make it very difficult to recruit and retain qualified and experienced personnel. Some incentives (staff housing, up country allowances) do attract young engineers. It is expected that the civil service reform planned for the Government as a whole will make capacity building easier in the medium term, but in order to keep core activities going, essential posts in road maintenance should be filled earlier. 2.30 The total MOWTC equipment fleet comprised 1,094 units at the end of December, 1992, including about 400 units of lightJsupport and about 600 units of heavy equipment. The age distribution was: 32 percent 5 years or older, 42 percent 4 years old, and 26 percent 3 years or less. According to MOWTC about 65 percent of the equipment is in satisfactory condition, the rest - 14 - is in poor to very poor condition. Due to insufficient local funding andlor bureaucratic delays, MOWTC is unable to procure sufficient fuel, lubricants, moving spais parts and tires for day to day running of the equipment. As a result, a large number of equipment units remain idle. The availability rate is about 45 percent. Ministry of Local Government 2.31 The division of responsibilities and authority between the Ministry of Local Governnent and the District Authorities is in a stage of transition as the Government has adopted a Deceritralization Policy in October 1992 followed by the Local Government Statute of 1993 and has started to implement it by tuming 13 pilot districts into autonomous accounting units in the FY94 budget. This makes their District Executive Officers the accounting officers for their districts under the supervision of the elected Resistance Councils on district level. All functions, except security, national planning, defense, immigration and foreign affairs, will be devolved in phases to the District Resistance Councils. MOLG and the technical ministries will issue regulations and set up an inspectorate to carry out regular inspection of services at district level and regular financial and performance audits will also become mandatory. 2.32 The development and maintenance of feeder roads are mandatory responsibilities of the District Administrations (DAs) under the District Administration Act of 1967. They should in principle finance the activities from their own revenues and central Government grants. During the 1960's and early 1970's the DA Works Departments maintenance of feeder roads was generally adequate, but very limited development took place. This systern collapsed with the rest of the economy in the late 1970's and district activities practically stopped. As a temporary measure, MOLG through the Engineering Department (MOLG/ED) established for this purpose, widened its role and took over responsibility for planning and implementation of rehabilitation works, while the DAs were expected to continue to manage routine maintenance. Virtually no maintenance took place until FY92, when the Government took the initiative to revive manual routine maintenance by a 50-50 financing scheme (MOLG/DAs); this activity is gradually expanding. More details on the present operations of MOLG and selected DA's are in Appendix S. 1. 2.33 The organizational structure of the Engineering Department is shown in Appendix 2.15. As defined in the Rural Feeder Roads Strategy paper, MOLG/ED will be headed by a Chief Engineer and will consist of eight divisions: Planning, monitoring and design (PMD); rehabilitation; maintenance; taining; mechanical services, general services and Urban and Buildings. The first five concern mainly rural feeder roads, and will be managed by a District Support (Rural Roads) Engineer under the direction of the Chief Engineer. 2.34 MOLG/ED is inadequately staffed and very poorly housed. The Engineering Department appears to never have been given adequate resources to grow into an organizational setup and establish systems and procedures which would allow it to function with clear division of authority and accountability. The Acting Chief Engineer is assisted by three civil engineers and one mechanical engineer at HQ in Kampala, while nine civil engineers have been assigned to various ongoing govenmnent- and donor-funded projects in the field. Systems and procedures for inventories, effective district routine and periodc maintenance, feeder road inprovement programs at district level, training of staff and contractors and establishment of reliable infonnation systems are all needed. -15 - 2.35 The joint stock of road equipment of MOLO and LAs is assumed to still be inadequate in most of the country, although under a presidential campaign, districts have been receiving maintenance equipment under many donor-financed projects and equipment supply operations. MOLG supervision of the use and maintenance of road equipment has apparently not been very systematic. As part of its effort to establish a data base for decision making, MOLG has started to build up an inventory, and will establish the location, age and condition of these units. 2.36 The Ugandan districts generally suffer even more than the central government from budget constraints, inadequate staffing and weak management. The levels of intervention by the relatively new local Resistance Councils in day-to-day execution of tasks by local civil servants remains to be assessed. Four districts are expected to participate in the proposed Project: they fall in two different categories of autonomy: Mbale and Tororo are to manage their own budget starting in FY94 while KapchorWa and Palissa will continue to be more closely supervised by MOLO for some time to come. Details of posts and staffing in the Public Works Departments of the fouxr districts are in Appendix 2.7, of equipment and tools in Appendix 5. 1. Uganda Railways Corporation 2.37 The autonomy of URC, created initially by Presidential Decree of 1977, has been formalized in the Uganda Railways Corporation Statute, effective since November 1992. Ihis law gives URC the rights and obligations to function on commercial principles and move towards financial independence and viability. URC's budget still needs to be approved by the Minister. URC bas embarked on a vital restructuring exercise to transform it from a conventional parastal organization needing financial support into a commercially oriented transport enterprise, competing in an increasingly liberalized transport market. To achieve this transformation, URC has prepared a Core Corporate Plan and a Financial Restructuring Plan and has signed a Performance Agreement with Govenmient agreeable to IDA which vill be put into effect on July 1, 1994. The Performance Agreement covers inter alia URC's capital structure, financial strategy including tariffs, debt collection, and marketing strategy, as well as Government payments for non- remunerative services. 2.38 By law, the Minister of Transport appoints a nine member Board of Directors from among persons with knowledge and experience in commerce, transport, finance, industry, administration or engineering. The Board includes a Chairman and the Managing Director, who is a full time manager. The law defines in broad terms relative roles of the Minister, the Board of the Directors and the Managing Directors. It is expected that the Performance Agreement will allow smooth operations with respect to these levels of authority. Within the URC structure, there is considerable centralization of authority at the Managing Directors level and absence of appropriate delegation of powers with matching accountability. Seven major departnent chiefs, and four heads of smaller units (including internal audit) all report direcdy to the Managing Director (see organization chart included in Appendix 3.6). Among the seven departments, the new commercial department and the financial department are particularly weak. A commercially oriented agency would require a much less centralized structure, with much more delegation of authority combined with accountability, as well as a less department- and moro corporation-oriented culture. Management of change in URC will require expert assistance for the Managing Director, the Board as well as the parent ministry, MOWTC. Moreover, the weak commercial and financial departments need strengthening and better inter-departmental interactions. Decentralization of authority and organization restructuring have been commenced, and the proposed project provides for additional expertise and organizational support. - 16- 2.39 URC has succeeded by its own efforts to bring about a large reduction in its workforce from 7,280 in 1987 to about 4,200 currently. In consultation with the Trade Union, retrencbment has been effected by selective redundancies and payment of compensation. The present target included in the Core Corporate Plan moves from 4,200 to 2,600 by 1996. The size of persomel would be one of the performance targets to be monitored as part of the annual implementation reviews. 2.40 Even though the three URC wagon ferries are the most important means of tranWort in URC's operations, they are not properly maintained, their safety arramngeents need more attention, especially when fuel transport becomes a regular part of URC's ferry opera+.ons, and more crews need to be recruited and trained to operate the ferries more effectively. URC's rolling stock is generally adequate for the projected ransport demand; in fact, the corporation has been leasing out substantial numbers of locomotives to Kenya Railways (KR). URC's permanent way on the central route Kampala-Malaba connecting to KR which is essential to URC's new role is in reasonable shape, but the track on the western line Kampala-Kasese would require possibly prohibitively expensive rehabilitation. 2.41 URC's marine vessels operating on Lake Victoria carry substantial amounts of petroleum products. These vessels need to be provided with adequate fire-fighting equipment and to be certified by Lloyds. Staff on the vessels have also (i) to be trined in the use of the equipment provided, and (ii) to be restrained from smoking on vessels carrying petroleum products. URC is taking action on these matters. 2.42 Currently there is no contingency plan to deal with possible oil spills from the vessels in service on the Lake. The plan for major spill containment will have to be prepared jointly by the three riverain countries, Kenya, Uganda and Tanzania. It is expected that a tripartite committee being formed after the 1993 sunmmit meeting of the heads of state wil be addressing this issue, with possible financing from the Global Environment Fund (GEF). Meanwhile, the proposed project provides finanwing for the basic equipment needed to contain minor spils in and around Port Bell. Another major environmental problem is that of the rapid growth and spread of the water hyacinth in Lake Victoria. Apart from biological effects, there is the threat that port entrnnces will get blocked. URC is approaching bilateral donors to seek assistance in organizing water hyacinth learing operations. D. PLANNING AND FINANCING OF PUBLIC EXPENDITURES IN THE TRANSPORT SECTOR Central Governuient Responsibilities 2.43 Total Transport Requirements and Capacity Constraints: The Central Govemment carries the overall responsibility for defining and monitoring the size and composition of the requirements in transport sector investments and maintenance, while the responsibility for the financing is in principle distributed over the central Government, local authorities and transport parastals. Currently, the central Govenmment remains at least co-responsible for some expenditures in the railways and aviation subsectors (see para 2.60 below), while carrying full responsibility for roads, and most of the responsibility for feeder roads (see para 2.58). Estimated total public financing requirements for the transport sector exceed US$150 million per annum, the - 17- amount which covers capital expenditure projected in the RDP (see paras 2.62 and 2.64) plus roads recurrent expenditures derived from the Main Roads Maintenance Program (see paras 2.54 and 2.56) and Feeder Roads Action Program, but which excludes the railways and aviation operating costs. Requirements which are in principle defined in accordance with technical standards, however, exceed realistic programs at this stage. This is because MOWTC, MOLG and the rural and urban districts are all experiencing capacity constraints; underlving faetors include understaffing and inadequate training. To build up capacity in terms of staff numbers and training will take time, and meanwhile the size of the programs that can realistically be implemented has to be limited and then gradually expanded. 2.44 Central Budget Financing: Development and Recurrent Expenditures, Role of Donors. The central Government budget covers transport sector expenditures for only a sma}l portion out of its own resources (in the form of counterpart funds for investments and recurent expenditure for maintenance) while it has to mobilize a sizeable amount of donor financing (grants or loans) mostly for investments, and in recent years mainly for road rehabilitation. In 1992, MOWTC informed donors that it would need substantial donor support for mnam roads maintenance expenditures as well because the requirements were exceeding the domestic resources. Government and donors agreed that it is ultimately the Government responsibility to mainin the capital assets incorporated in the roads, but that donors could in principle temporarily help by sharin the financing burden. Donors indicated they would want the Govemment to make finn conmitments and start assuming responsibility for definite shares of finacing which would increase over time, while the donor share would be diminishing accordingly. For feeder roads, where most of the network needs to be rehabilitated first before it makes sense to undertake maintenance, considerable support has been provided by donors both for foreign and local costs of feeder roads activities, mostly rehabilitation, but increasingly also ntance, and these resources have been managed by MOLG. Transport Investments in the Recovery and Development Plan (RDP) 2.43 RDP as investment management tool: Government is managing selection of public investments with increasing effectiveness through the Recovery and Development Plan (RDP), a roiling plan covering tiree years. While the coverage of the many proposed and onguing projects in the RDP has greatly improved, prioritization of projects is not yet applied in a rigorous manner, and moitoring of project implementation is rather inadequate. The results are: donor- rather than govenment-diven investments, inefficiency and waste of resources, heavy overcmmitment of counterpart funds due to lack of information, and very slow implementation. The 1992 merger of planning and financing functions into one Ministry of Finance and Economic Planning favors ongoing Govenment efforts to turn the RDP into a more effective management tool for public investment decisions. Projects can still be initiated by technical ministries, parastatals and donors, but the Development Committee of MOFEP screens the proposals prior to inclusion in dte RDP. If the Govennent would want to move effectively in this direction, procedures and criteria need to be fine-tuned, accepted within Government and applied in a consistent and efficient manner by a well staffed unit in MOFEP. The program goals would be: rational additions of projects to RDP, direct links between RDP projects and annual development budgets classification as core- or non-core projects, and better management information through sustained monitoring of physical as well as financial project implementation. The economy would benefit because public investments would produce urgently needed higher contributions to economic growth, and local and foreign resources would no longer be used inefficiently or wasted, thanks to more transparency. - 18- 2.46 Transport Share in RDP: Notwithsding its need for fiuther inprovements, RDP bas guided the share of transport invesmuent in total public investments in a satisfactoiy manmer. Transpott occupied an important place in the RDP in the late 1980's and early 1990's. ibs was mainy because buly road rehabiitation was a high pnrioty in e economy at that time. Te transport s' e declined gradually. In 1990/91-1993/94 the transport share, including parastals, was down to 18 percent; in 1991/92-199415 it became 15 percent. The development of the intasectoral compositon has also shown a ratonal pattem. Main roads investnents wvent from almost 99 percet of transport investment in 1987/88 and 1988/89 and 80 percet in 1989/90 to ony 33 percent in 1991/92-1994/95 (see Table 2.6). Table 2.6: Recovery and Development Plan (RDP) Planned Transport Development Expenditure (USS million) FY91-94 FY92-95 Amount % Amount X Roads Main Highways 172.7 10 99.4 5 Feeder Roads 66.4 4 47.0 3 UrbanRoads 18.5 1 48.1 3 Studies 4.8 0 5.8 0 Sub total 262A IS 200.3 11 Railways 46.1 2.5 28.5 2 Aviation 10.4 0.5 40.3 2 Inland Water Transport Study 0.6 0 0.5 0 Total Transport 319.5 18.0 269.6 1S Total RDP 1752.2 100 1858.0 100 Source: FY9I-94 and FY92-95 Recovery and Development Plans 2.47 Transport Sector Investlmnt and Recurrent Expenditure Plan (TSIREP): Goverment annal budge size and composidon of development and recuffent expenditures in the tasport sector are still determined separately. The development budget covers in principle rebabilitation and new ivestmnts only, there are a few exceptions as studies for fuure investmts and selected donor-supported road mteance are included as well. As the Goverment is rationalizng its annual budgets and expanding the tme horizon to thre-year penods, it is movg moe towards establishimg and executing a comprehensive program in the transport sector in which an appropriate balance is struck between maitemnce and rebabilitation eqpditure. One of the reasons why this is especially appropriate for the transport sector is the large amount of requirements for main roads maintenance. Te Letter of Transport Sector Policy (see annex 1) not only states the principle of balanced rehabilitation and maintce in main roads, but also that main roads maitenance wil take precedence over inveslments. To define priorities withi road muatenance, the Goverment has adopted a National Prioritized Main Roads Maintenace, Program (NPRM) which is described in paras 2.54 to 2.56. The RDP tranwsport section and fte NPRM are being put together to constitute th Transport Sector Investment and Recurnt Expendiue Plan (TSIREP) which covers high priority tUansport devlopment as weU as rerent expendi for the thlee years FY95-FY97. Indicative figures -19- for FY95 of the TSIREP are included in the Letter of Transport Sector Policy as a concrete expression of the balanced approach; the Govermnent and IDA wivl agree before credit effectiveness on TSIREP's composition for FY95-FY97. Not later than January 31 of each year of project implementation, with effect from January 31, 1995, the Government will review with IDA the size and composition of TSIREP. The Govenmment will not undertake, nor allow other public sector entities to undertake, investments which were not included in the TSIREP which exceed the equivalent of US$5.0 million in any one year without prior consultation with IDA and IDA consent; IDA consent shall not be unreasonably withheld. The Govenunent will further ensure that any investment outside TSIREP which exceeds the equivalent of USl.O million shall only be carried out if its economic rate of return is not less than twelve percent. Maintenance of Road Infrastructure: Cost Recovery 2.48 A major issue in road mainteance is sustainability. Irrespective of the sharing of the financi burden on which the Government would agree with the donors, an expenditure progran has to be sustainable in econonic terms. This implies that its costs have to be recovered in some form from the users and/or general tax-payers. Govenment could consider part of the benefits of trasport infrastructure as a common good, the costs of which have to be bome by the economy as a whole, and hence seek to cover these costs out of general revenue; other benefits (often defined as the short run marginal costs) could be considered as a marketable good which is being consumed by identifiable users, and hence their costs would be subject to targeted taxes on these users. This requirs that taxes are so designed that they match the vanous types of wear and tear caused by these users to the infrastructure as closely as possible. Currely, Uganda's general revenue base is vety narrow, with a limited number of major taxes, many of which are levied on the transport sector. This transport-based revenue is so essental for the budget that most of it is presently spent outside the transport sector even though these taxes are logical choices for cost recovery in the transport sector. Details on the taxes are in paras 2.49 and 2.50 and estimates of cost recovery data are in para 2.51. 2.49 Ciassification of Road User Charges: Revenue from road user charges in Uganda is generated from three primary sources: i) taxes on vehicle ownership which include taxes on vehicle importation, lcense fees and misceLlaneous charges and fees; ii) txes on vehicle use which include road tolls, taxes on fuel and oil, spares and tires; and iii) taxes on foreign vehicles which comprise the transit goods license and temporary enty license. -20- Table 2.7: Summary of Gross and Net Revenue raised from Road User Charges in FY90191 (USH Million) Tax Gross Net RevenueRaised Revenue Raised Custom Dutes - Vehicles 18522 7404 Customs Duties - Spare Parts 2191 876 Customs Duties - Tires 2404 962 Duties - Lubricants 1146 458 Vehicle registration Fees 2633 2633 Drivers License Fees 313 313 Sub-total Ownership Related Charges 27209 12647 Accident Reports 45 45 Road Toil 567 567 Transit Revenues 403 403 Foreign Revenues 986 986 Fuel Duty - PMS 23240 14409 Fuel Duty - AGO 15899 7314 Sub-total Utilization related Charges 41140 23724 Total 68350 36371 Source: MOWIrC/PD In 1990/91 35 percent of net revenues raised from the imposition of road user charges are accounted for by ownership-related charges, while taxes on fuel account for 60 percent. In 1991/92, it would appear that gross revenues raised from the imposition of taxes on the road subsector accounted for 37.5 percent of aU recurrent revenue raised by the Govemment of Uganda, and net revenues to 20 percent (The net revenue figure is derived from the gross figure by deducting 34 percent from the import duties on transport inputs. The figure of 34 is the average inport tax rate for aU imports in 1991/92, and is used in this context to represent the general fiscal element which should not be considered part of genuine road use charges). 2.50 Fuel taxation: Fuel is the dominant revenue base in the transport sector. In April 1992, 49, 35 and 33 percent, respectively, of the retail prices of gasoline, diesel fuel and kerosene consisted of taxes in several forms. As Government is now realizing that in the very liberalized economic environment which is emerging in Uganda continued control of petrol prices can no longer be justified, it is moving towards elimination of its control of the pump prices. This liberalization should not reduce tax revenue from fuel. Recent analysis suggests that owners of lighter vehicles with petrol engines are generally contributing relatively more, and those with heavily loaded diesel engines probably less, than their share of the costs of road maintenance. This derives from the fact that a major cost component, damage to roads related to users' vehicles, is exponentially affected by weight per axle. The FY94 budget proposal to increase taxation on diesel fuel while keeping that on petrol unchanged moves their relative taxation levels in the right direction. Fuel taxation as a revenue source in Uganda probably has limits. Much higher petrol and diesel prices in Uganda than in Kenya (see para 2.19) are cunrently leading to some smuggling and loss of revenue because of the de &cto open borders. 2.51 Cost Recovery: If the net revenue of UShs36.4 billion shown in Table 2.7 is compared with historical economic long run average costs of roads amounting to Ushs40.9 billion (according to a rcent study in MOWTC), it would appear that as much as 89 percent of all costs was -21 - covered. Maintenance was however very inadequate in those years, and a cotnparison with a more appropriate level of economic costs (UShs65.8 instead of UShs4O.9 billion) brings down the recovery factor to only 55 percent. If figures for short term cost were available (including cost of maintenance related to traffic plus expansion of the network as a consequence of traffic growth) full recovery would probably be shown. 2.52 Financial Constraints to Main Roads Maintenance Activities: A tentative estimate of aggrgated financial requirements for all road-related activities was given as US$1 10 million (see para 2.43). After allowing for capacity constraints, an amount of about US$60 million could be used as a order of magnitude. This would possibly include up to US$35 million for main roads maintenance. As stated above, main roads maintenance has been recognized as the highest priority in the roads sector at this point in time. But in recent years main roads maintenance has received very inadequate financing. Notwithstanding the fact that annual net revenue of US$48 million in road user charges (see Table 2.7) was coMlected, Goverunent allocated only US$4.0 million to main roads maintenance in that same year. Not only were the funds allocated for road maitenance far below requirements, the acual releases were below budget allocations. Fina}ly, implementing agencies tended to prefer applying the little funds they received towards rehabilitation rather than maintenance. 2.53 The level of releases for road maintenance has improved somewhat from FY91 onwards when the critical nature of road maintenance started to be recognized (see Table 2.8), but is still well below requirenments. Governent has repeatedly confirmed its comnmitnent to road maintenance and has included it since FY91 in the core recurrent expenditures programs in the context of the Public Expenditure Review. It has pledged to allocate more budgetary resources to road maintenance as the overall resource mobilization improves, and to safeguard it from cutbacks in case of revenue shortfalls. Table 2.8: Budget Estimates and Releases for Main Roads Maintenance Year Amount Budgeted Amount actually released (In US$ million) FY88 6.67 1.80 FY89 4.95 2.20 FY90 2.76 2.27 FY91 3.84 3.79 FY92 5.35 3.76 FY93 5.79 4.72 FY94 8.00 N.A. Source: MOWTC Prioritized National Main Roads Maintenance Program 2.54 MOWTC, with the help of consultants financed under the IDA PPF for the proposed project, produced a FY95-FY98 National Four Year Prioritized Main Roads Maintenance Program in July 1993. The total costs of the Program were estimated at about US$135.0 million, or about US$34.0 million per annum. The Program was drawn up on the basis of uniform unit costs nationwide for routine and perodic matenance and their sub-components. To arive at these costs, the Government's consultants liaised with other consultants supervising and preparing varous donor supported activites. This approach aims at bringing all donor contibutions in line -22- wih MOWTC's maintenance policy objectives, standard methods of work and management systems. The Program was based on MOWTC's prioritization of main roads as follows: Priority 1: major trunk roads rehabilitated since around 1986 Priority 2: other key links of the classified road network Priority 3: all other classified roads 2.55 The maintenance program would cover virtually all routine and periodic maintenance of recently rehabilitated roads (priority 1), while the coverage of priority 2 and 3 roads would be more limited. Thus, the Program is constrained to some extent because of existing financial and implementation capacity limitations. A donors meeting held in February 1994 agreed on a Maintenance Program of US$142.1 million equivalent, which is composed of the aggregated contributions of participating donors, plus Govemment-financed activities such as spot improvements. In this coordination meeting, Government pledged a contribution of US$74.5 million over the four year period. While the donors indicated a contribution of US$67.6 million. The size and composition of the FY95-FY98 National Prioritized Main Roads Program (NPRM) are satisfactory to IDA. The Letter of Transport Sector Policy (Annex 1) contains the total NPRM costs and the financial contribution to which the Govermnent has committed itself for FY95-FY98. 2.56 The Government has indicated that it will explore the establshment of a Special Road Maintenance Account, commencing July 1, 1994 through which the main roads maintenance operations would be financed: the annually budgeted main roads maintenance funds would be paid directly by the Uganda Revenue Authority to the Road Maintenance Special Account on a monthly basis. Releases will be recorded on a monthly basis and reported to IDA on a quarterly basis. MOWTC will also report to IDA quarterly on the status of actual maintenance. 2.57 In the framework of the Road Maintenance Initiative and the Sub-Saharan Africa Transport Program (SSATP) consultants financed by the Gesellschaft fuer technische Zusammenarbeit (GTZ) had prepared recommendations to Government as to whether the establishment of a Road Fund, in which a "road tariff ' would be levied on road users would be the preferred method of mobilizing resources and channelling them to the executing agencies. The study will also address the question whether MOWTC should retain its mandate for road maintenance or an autonomous road agency should be established for increased efficiency and accountability. During appraisal, the Government representatives stressed that effective control of the budget, which had been regained only recently, is essential for keeping inflation under control. The full flexibility in using its budgetary resources which MOFEP needs does not allow the introduction of a separate Road Fund at this point in time for macro-economic reasons. First remedial action in the form of increasing revenue from other sectors would have to be taken. Not later than March 31, 1996, Govemment will evaluate (i) the perfonrance of the financing mechanism described in pam 2.56 above, to determine the adequacy of local counterpart funding including timely, reliable and transparent allocation and releases, with a view to introducing an effective financing mechanism satisfactry to IDA with effect from FY97, and (ii) the performance of MOWTC in executing its mandate with respect to road maintenance and introduce changes in the Ministry's mandate as appropriate. -23 - District Administration Finances 2.58 District Administrations depend in principle on (a) revenues generated within the district, and (b) allocations from the central budget. The local tax base under (a) has been eroded by transfer in the last decade of a number of taxes to the central budget, and now consists mainly of the graduated tax (which accounts for 65-80 percent of revenue), market dues and various fees and levies. The DAs are not allowed to levy road tolls, but they levy market fees on the roads to markets. Allocations from the central budget include block grants traditionally aimed at social sector expenditures and allocations to match locally financed mnanual feeder roads maintenance. Block grants have been vety small and have often not materialized at all. DAs' collection efficiency is very low, and without access to banks or the original Local Authorities Loan Fund, which stopped operating, DAs have to tailor their expenditures to their cash receipts. The allocation process is not very transparent. The present DA revenue base is very inadequate for the many tasks they theoretically have to undertake, but their inplementation capacity is very low due to absence of personnel and facilities. More details on distict financing are in Appendix 5.2. 2.59 The implementation of the Govermnent's decentralization policy which started in FY94 saw a transfer of more responsibilities to pilot districts without the necessary posting and trining of key personnel and the allocation of adequate extra resources from the central budget and( or the authority to levy other taxes at the local level. Thus, feeder roads expenditures have to compete witth many other essential services at the local level. Moreover, the administrative and political institutions for decision making on the basis of rational priorities are only at the begnning of their development. The Association received indications from the four participating districts, that they would contribute 50 percent of the local cost of routine maintenance expenditures out of their own resources during FY95-FY98, but a formal commitment requires adoption of a resolution in each of the participating districts. This financial contribution would be confirmed in the annual working meetings at the beginning of each fiscal year. The Govemment will ensure that the four participating districts will establish and execute revenue collection enhancement programs by July 1, 1994 and that they establish local currency accounts for the purposes of this project. Parastatal Financing 2.60 Govenmment has directed the parastatals to generate sufficient revenue to cover their own costs. This is a rather heavy task at this stage; in many countries, parastals are expected to set their tariffs in such a way that they cover operating costs plus at least part of their capital costs. Since there is competition in transport, parastatals are not free to set their tariffs as they wish - the market dictates ceilings. Only after they have become truly competitive, can they expect to find users willing to pay the cost of their services including relevant capital costs. In addition, they would probably have only limited access to loans from commercial banks and foreign donors. URC, even after the ongoing restructuring, will not unmediately be able to cover operating costs plus investments. At present, URC still depends on some foreign support for locomotive maintenance costs, and Uganda Airlines used to receive Treasury support to cover most of its payroll and other operating expenses, but has recently covered its own operating costs of its much reduced services. It could not afford to buy airplanes out of its own resources. The Civil Aviation Authority is collecting sufficient revenue to cover its present operating costs, but whether it cold carry the major expenditures on runway repair, safety features and terminal building rehabilitation is yet to be conclusively determined. The situation in the two bus companies is mixed. The Ugandan practice in the recent past has been for parastatals to tailor their recurrent expenditures to -24 - their available cash budgets, which has resulted in major backlogs in maintenance in railways and aviation, and to turn to the Government for investment financing. URC Finances 2.61 URC - Financial Performance: As far as financial performance and cost recovery are concerned, URC is heavily dependent on international import/export freight, especially coffee exports. URC has operated at a loss during recent years. A primary contributing factor is that, although URC's revenues have increased over the period (an average of about 45 percent p.a.) mostly through periodic tariff revisions, working expenditures have shown a greater total growth (about 55 percent p.a.) as have operating expenditures (65 percent p.a.). This has been due to: (i) inflation pressures on local costs, (ii) currency devaluation effects on imported inputs and (iii) re- valuation of assets, leading to a (ustified) steep increase in the depreciation provision. Tariff- setting strategy is constrained by rates and service convenience offeted by competitive modes especially roads. (This is an incentive for URC to contain costs and improve efficiency and quality of service.) URC's working ratio deteriorated from 70 percent in 1989 to about 80 percent in 1992 (excluding recurrent budget support from external aid agencies). The Operating Ratio went up from 71 percent to 124 percent in the same period. Table 2.9: URC Operational and Financial Highlights (USh billion) 1989 1990 1991 1992 Freight Traffic (000 tonnes) 415 491 415 363 Operating Revenues 4.88 7.39 10.51 14.22 Donor Support (DS) 2.62 0.97 1.13 Working Expenses 3.44 7.54 8.86 11.37 Depreciation 0.03 0.03a 5.40 6.20 Op. Surplus/(Deficit) 1.36 (0.41) (4.21) (4.27) Working Ratio 70% 102% 84% 80% Operating Ratio 71% 102% 136% 124% a/ Excludes depreciation surplus of Ush5.1 billion arising from re-valuation exercise. 2.62 URCs financial crisis is continuing, with the 1993 Budget projecting a operating deficit of over Ush7.3 billion, notwithstanding an expected increase in traffic volume. Cash constraints have forced management emphasis on day-to-day operations, leaving little time for strategic planning. Donor support for routine operations (spares etc.) continues to be crucial to maintenance of locomotives and other equipment and has ranged between Ushl.0-2.6 billion per annum. URC has, at timcs, expenenced difficulties in purchasing fuel and spares and providing productivity -25 - payments to eligible staff, owing to a high level of accounts receivable lead;ig to a cash flow crunch. 2.63 Financial Restructuring: The URC Statute, which became effective in November 1992, states that URC is to be nun along commercial principles and should ensure that revenues cover all operational costs including interest and depreciation. For non-remunerative servces which URC has to perform under Government directives Govemnment is obliged by law to pay URC for losses incurred on those services. However, the statute is not specific in respect of limitations in the level of debt financing, or the burden thereof. An analysis of URC's current financial position was carried out to assess corporate ability to cover all its various cost levels in the medium-tenm. These costs included operating and maintenance costs, depreciation, debt service and contribution to fire capital investments. The analysis made it clear that a major financial restructuring exercise was unavoidable for URC to become viable. 2.64 Fimancial Strategy and Projections: Restructning alone will not solve all of URC's financial difficulties. Supporting actions to be taken include: (i) determining an appropriate minimal investment program; (ii) improving debt collection strategy; (iii) submitting timely and well-documented claims to Government for losses on directed, non-remunerative services; (iv) cost control improvements e.g. continued streamliing of workforce, reduction of the depreciable asset base, contracting out of some services, and (v) strengthening staff skills in accounting, budgeting and financial management. Development and implementation of these measures wil be a key task for the technical assistance component in the proposed project. URC moved a volume of nearly 500,000 MT in 1990, and probably in 1993 as well. With greatly improved commercial and financial .nanagement under the project, it should be an attainable taret for URC to (i) increase its traffic volume by 10 percent per annum to 746,000 MT in 1999, (ii) contain total cost increases over this period to an average of seven percent per annum, and (iii) realize an average increase in revenue of II percent per annum. In view of this scenario, URC and IDA agreed during negotiations that for each of the financial years after December 31, 1995, URC shall maintain an operating ratio not higher than 110 percent in 1996, 103 percent in 1997, 102 percent in 1998 and 94 percent in 1999. These figures exclude possible Government compensation for Government- directed, non-remunerative services. Before October 31 of each year, URC shall review whether it would meet the requirements in the current and the following year, provide the results of the review to IDA, and take all necessary measures to meet the requirements. URC and IDA further agreed that URC shall promptly submit claims for compensation to be paid by the Govenmment related to Govemment-directed, non-remunerative services, and the Govemment and IDA agreed that the Government shall start compensation payments at the latest by July 1, 1995. 2.65 Capital Structure: URC and Govemment should agree on the terms and conditions under which assets procured by the Government and handed over to URC are to be incorporated in URC's capital structure. This would determine any repayment obligations from URC to Govenmment as well as the basis for future cost calculations. The Perfomance Agremen between URC and Government, which would cover these issues, will become effective on July 1, 1994 (see pam 2.37). 2.66 Debt Collection: While annual operational revenues increased from FY89 to FY92, net accounts receivable consistently averaged over 40 percent of revenues. Thus the benefits of the increased tumover did not materialize in a better cashflow. As a result, URC had to cut back its planned maintenance and rehabilitation activities, defer expansion of its staff incentive schemes and occasionally even cut its routine expenses such as fuel. URC has started remedial action, but -26 - furtier improvements in personnel and monitoring methods would be implemented, with the help of proposed technical advice in financial mnangement. It was agreed during negotiations that by July 1 of each year, with effect fiom July 1, 1995 URC would ensure that the amount of bills overdue by more than hee months does not exceed 25 percent of total bills issued during the 12 preceding months. E. LESSONS FROM PREVIOUS IDA INVOLVEMENT 2.67 IDA has provided five Credits to the Govermnent in the transport sector, namely the First Iighway Project (Cr. 108-UG) in 1967, the Second Highway Project (Cr. 1640-UG) in 1969, the Third Highway Project (Cr. 1445-UG) in 1984, the Fourth Highway Project (Cr. 1803-UG) in 1987 and the Railways Project (Cr. 1986-UG) in 1989. Moreover, the South West Agricultural Rehabilitation Project (Cr. 1869-UG started in 1988 and the Northern Uganda Reconstruction Project (Cr. 2362-UG) started in 1992, also contain feeder road components and main roads components, respectively. The first three road projects were completed on time and without cost ovenrun, and the fourth road project is approaching completion. The railways project has been closed on Dec. 7, 1993, it has helped URC obtain its own statute in 1992 and develop a Core Corporate Plan and Performance Contract with the Govenmment as a basis for a major reorientation towards commercial operations and improved financial management. 2.68 The most important lesson derived from IDAs experience with support to main roads acuvities in Uganda is that Government comminment to provide adequate and reliable local financmg for a clearly defined main roads maitenance program is an absolutely indispensable fitor for susainable road maintenance, with improved management as a very important supporting factor. Hence, IDA's support to a National Prioritized Main Roads Maintenance Program and IDA's insistence on prior agreement with Government on scope and composition, financing scenario and mechanisms for release of funds. 2.69 The Association has helped finance four highway projects in Uganda. The First Highway Project (Credit 108-UG, US$5.0 million, 1967) provided for construction to paved standard of the Mbarara - Ishaka - Kaunr Road (122 Ian), construction of several smaU agricultural and feeder roads, and detailed engineering of 740 Ian of main and feeder roads. According to a Bank audit on this project (No. 1623 dated June 19, 1977) the main road construction was of a poor quality as a result of contractor's inefficient organization and workmanship and the actual rate of return on this investment was estimated at 8 percent to 11 percent. 2.70 The Second Highway Project (Credit 1640-UG, US$11.6 million, 1969), helped finance: (a) construction/reconstruction of 665 kn of primary, secondary and feeder roads; (b) a highway investment, maintenance and organization study; (c) feasibility studies and detailed engineenng of about 400 kn of road, and (d) technical assistance to MOW, now MOWTC. The project was completed in 1980. An audit has not been carried out due to the limited data available; a limited completion note was prepared (June 14, 1984). 2.71 The Third Highway Project (Credit 1445-UG, US$S58.0 million, 1984) comprised: (a) 4- year (1984-87) road maintenance program to help improve routine maintenance of the country's classified road network and periodic maintenance (road rescaling/regraveiling) of about 600 Ikm of paved road and about 1,000 kn of gravel road, (b) a pilot program for the development of the local constuction industry; (c) technical assistance to the MOW and MOT, now MOWTC; and (d) -27- preparation of a future road maintenance program. The project was completed in Januaiy 1992 and was partially successful in meeting its targeted routine maintenance objectives for the rapidly deteriorating road network, but did not succeed in establishing a sustainable road maintenance orgaunzation. Insufficient local funding for road maintenance and diversion of projcct equipment to road rehabilitation/reconstruction complicated project work; the technical assistance did not prove to be fully effective. It did help in starting important maintenance nmnagemt component including the National Transport Data Base. The pilot program for development of the local construction industry was completed with some success. The recalculated ERR for road rsealing and road regravelling was estimated at 54% and 270, compared to appraisal esmates of 59% and 45% respectively. Probably the most important lesson is that adequate and timely funding will be an indispensable condition for successful project execution and sustainable maintenance, both in case of execution by force account and by private contors. 2.72 The ongoing Fourth Highway Project (Credit 1803-UG, US$18.0 million, 1987) supports: (a) rehabilitation/strengthening of the Kampala - Jinja Road (mn 0 - 24) and Mbarara - Ishaka Road (60 Ian); (b) a pilot rural road maintenance program; (c) feasibility study and detailed engineering of the Soroti - Lira Road; and (d) technical assistance to the MOW (now MOWTC) and MOLG. The road rehabilitation/strengtiening is completed. Some 190 Ian of rural road, compared to the 108 kan targeted, has been rehabilitated under the pilot rural road maintenance program. The project is nearing completion. Experience with respect to the feeder road maintenance pdilot component has reconfirmed the tendency to stress rehabilitation over maintenance, as well as organizational and financial weaknesses of MOLG and Local Authorities with respect to feeder road maintenance. 2.73 The ongoing Northern Reconstruction Project (Credit 2362-UG, US$71.2 million, 1992) provides assistance for reconstruction of the northern region of Uganda, and includes, inter alia, rehabilitationlregravelling of some 364 kn of gravel road, and rehabilitation/resealing of 93 kn of paved road. Bids for the road works have been received and are being evaluated by Government. 2.74 On feeder roads, MOLG managed only to obtain US$5.0 million out of the Credit component of about US$10 million which GOU earmarked for feder road rehabilitation equipment under IDA's Second Economic Reconstruction Credit. Initially, there were problems in m tlhis equipment, but they were overcome. The lack of counterpart funding for the feeder roads rehabilitation component of the ongoing South-West Uganda Agricultural Rehabilitation Project (Credit 2362-UG, 1988) caused delays in project implementation. In summary, the multiple cases of less than satisfctory performance are among the reasons for the Association's involvement in MOLG's formulation of the Rural Feeder Roads Strategy Paper preceding the proposed project. 2.75 The US$7.0 million Railway Project which closed on June 30, 1993 was primarily an institution building project with a small rehabilitation component. It helped URC to obtain its own statute in 1992, and develop a Core Corporate Plan and Perfornance Contract with the Government. Continued support wilU be necessary beyond mid-1993 to help URC move towards commercial management and strengthening of financing and marketg in particular. Major investments would not be justified until management changes have been introduced. URC audit reporting and procurement have caused problems which suggested the need for additonal technical assistance in financial managmet. -28- F. RATIONALE FOR IDA INVOLVEMENT 2.76 The Banl's country assistance strategy for Uganda aims to restore productive capacity while steering the economy towards sustainable long-term growth. To this end, the Bank would assist the Government to: (i) maintain macroeconomic stability through an irnproved domestic revenue effort, better public expenditure management, monetary restraint and a fully liberalized exchange and trade system; (ii) improve the climate for private investment and production through deregulation, privatization of state enterprises, rehabilitation of economic and social infrastructure and strengthening the role of financial intermediaries; (iii) strengthen the human resource base by improving the quality of, and expanding access to, education and health care; (iv) stem the degradation of the environment; and (v) improve the management of external aid. 2.77 IDA is well positioned to advise the Government on Uganda's transport sector policies and investments, because of our continuous macro-economic dialogue including public investments and recurrent expenditure, our effective guidance on investment policy and attention to capacity building and efficient management. The conceptual framework for our policy advice, as well as outlines for medium and long term investments, is now in place in two documents: the World Bank Transport Sector Memorandum (TSM), agreement on which was a precondition for the processing of the proposed project, and the Rural Feeder Roads Rehabilitation and Maintenance Strategy Paper endorsed in a National Seminar in September 1990, and finalized by MOLG in November 1992, with extensive assistance from GTZ, ILO and World Bank staff. IDA is particularly well placed to promote the establishment of a sustainable national main roads maintenance progran by building on the groundwork done under the Road Maintenance Initiative (RMI). Although IDA tansport project involvement has so far been mainly on a national basis, our involvement with highways and railways in Tanzania and Kenya also puts IDA in a good position to promote increased sub-regional transport efficiency through f.e. support for transit trade facilitation and pooling of railway rolling stock. Earlier analysis of transport issues on a regional scale is being updated and will further strengthen IDA's knowledge. The Project will offer good opportunities for IDA to give continued assistance to the Ministries concemed in donor coordination. IDA can further contribute a very important technological emphasis to the labor based/light equipment supported approach for feeder roads rehabilitation. This has already proved its usefulness in Kenya and other African countnes and IDA would promote capacity building as the project would train private contractor as well as district and ministry personnel in labor based techniques and their organization requirements. -29- III. THE PROJECT A. PROJECT ORIGIN 3.01 The Project would provide support to high priority activities in highways, feeder roads, railways and transport planning. The Project composition was determined in the framework of the agreed sector strategy reflected in the Letter of Transport Sector Strategy. The Project thus is a continuation of earlier collaboration between the Govemnment and the Association, but with activities in several subsectors now prioritized in a sector perspective. The following Government initiatives tniggered the Association's appraisal of the project: the then Ministry of Works submitted a highways project proposal with a request for IDA finacing in March 1991; the Ministuy of Local Govenmuent invited IDA assistance in the preparation of its Rural Feeder Roads Strategy Paper from June 1989 onwards, and in the process requested a follow-up to the IMA- supported feeder roads pilot project in Eastern Uganda. At URC's request, the Association provided support from November 1989-June 1993 under the Railway Project, which inter alia helped URC in obtaining its own legal statute, as well as a Core Corporate Plan and a Performance Agreement with Govemment; this cooperation is now to continue through further technical support The MOWTC's Planning Division looked for modest follow-up and monitoring of recently trained local capacity after the closing of the UNDP-financed, World Bank executed Transport Policy and Planning project in January 1994. B. PROJECT OBJECTIVES 3.02 The Project's overall objectives are to assist the Government in providing the basic road infrastructure to the economy, and ensuring that this and the rail/ferry infrastructure will be well miaintaed and efficiently managed, with private sector involvement wherever practicable. More specifically, the project would assist the Government (and URC in the case of (h)) in their activities to: (a) protect the capital investment in, and increase the service life of, selected rehabilitated roads, (b) inprove maintenance planning and operations of the main road network; (c) improve MOWTC's capability for project implementation; (d) introduce labor-based methods of road maintenance and feeder roads rehabilitation whenever most cost-effective; (e) improve MOLWs and District Authorities' capacity to plan, manage and monitor feeder roads rehabilitation and maintenance; (f) improve feeder roads accessibility; (g) train, advise and employ domestic small and medium contractors for roads works; (h) reorient URCs management towards commercial operation and promote its financial autonomy. Relationships with other IDA-supported projects 3.03 IDA was one of the sponsors of the successful Kenya Rural Access Roads Project in the 1970's, which introduced labor based rural roads construction and maintenance in Kenya. The program was continued in the Kenya Minor Roads Program. Training for labor-based, light equipment supported (LB/LES) techniques is carried out in the Kisii Training Institute which is -30 - currently sponsored by Switzerland. Uganda wants to introduce these techniques and Ugandan engineers/rainers have already participated in courses at Kisii in preparation for this project. 3.04 Rural Transport Project: In parallel, a project proposal for donor financing to improve rural transport has been prepared. This would promote bicycles for travel and transport in rural areas, and provide assistance to private bicycle workshops. The project preparation report has been circulated to interested donors for consideration. The parent nunistries for this project would be the Ministries of Commerce, Industry and Cooperatives (MOCIC), and of Works, Transport and Communications (MOWTC). C. PROJECT DESCRIPTION 3.05 The project would comprise: main roads: - four-year FY95-FY98 road maintenance program: maintenance of selected main roads, including routine maintenance of 1,746 kn and periodic maintenance of 720 streingtening and improvement of 32 km of the Kampala-Entebbe road upgadig, regravelhngtrehabihtation of about 162 km of gravel roads institutional strenhenming of MOWTC feeder roads: rehabilitation of 680 km of feeder roads in four Eastern districts, Mbale, Kapchorwa, Tororo and Palissa - four year FY95-FY98 feeder road maintenance program with coverage increasing to 880 km per annum for the four districts - establishment of feeder roads rehabilitation and maindtce capacity using labor- based contractor executed works in the four districts - xstengthening MOLG/ED's planning and monitonng capacity. railways: - URC's institutional and organizational strengthening - training of URC marine services personnel - procurement of URC ferry maintenance spares - procurement of oil spill containment equipment transport sector planning: - technical assistance for National Trnsport Data Base - Container Tenninal Study Four Year Main Roads Maintenance Program (FY95-98) 3.06 The project includes a 17 percent portion (in constant prices) of the national 4-year road mantenance program (FY95-98) (see pam 2.55) prepared by consultants and covers 1,746 kn of primary road network, comprising 646 km of paved road and 1,100 kan of gravel road. It includes periodic maintenance (resealing/ regravelling) of 720 kn of priority 1 paved/gravel road (55 kan -31 - paved; 665 km gravel) and routine maintenance of 1,604 km of priority 1 pavedtgravel road (504 km paved; 1,100 mn gravel) and 142 kn of priority 2 gravel road. 3 07 Manual routine road maintenance will be carried out using the contract lenghian systm, t ile mechanized routine maintenance and periodic nmintenmce will be carried out by conuct. Manual routine maintenance envisages pothole patching of paved road, shoulder repar, clearing of roadside ditches & culverts, while mechanized routine matenance would generally involve light, medium or heavy grading (depeding on the type of road and traffic volume). Paved road periodic maitenance envisages road resealing with associated shoulder rehbilitation and ditch reinstatemet, together with minor pavement repair pror to resealing. Road regravelling envsges 150 nun thick gravel reulenishment associated with spot repairs and occasional culvert repair. Ihe roads included in the program are listed in Appendix 1.3. Strengthening and Improvement of the Kampala-Entebbe Road 3.08 The Kampala-Entebbe Road is the primaiy road conneting Entebbe with Kampala, the capital of Uganda. Ihe road also provides access to the Entebbe Airpor the only inenational airport in the country. Ihe road was constructed in the late 1950Ws. Apart from some rehabilitationtresealing work done in 1989 with IDA financing, no pavement strengdheig has been done since its construction. The road pavement is showmg signs of distess and needs swengthening in certain sections. Also, the geometry of the road needs improvements. Mixed use (vehicles, bicycles and pedestrians) is contribufing to frequent accidents, with the highest recorded mortality and damage rates in the country. 3.09 Detailed engineering and economic evaluation for the proposed strengtening and miprovement works has been carried out by consultants. The proposed works would consist of widening of the first 3.2 km of the road (from Kampala) to four-lane dual cariagewy, strengthening of the exisfing two-lane road over 6 kn, and repair/resealing of the road over the rening length and widenig/reconstruction of shoulders, besides improvenenttrepair to culverts and roadside drains and improvement to intersections. Pavement strengthening and improvement measures are designed for a service life of 10 years. Upgrading, RegravellinglRehabllitation of Selected Roads 3.10 The proposed road upgrading, regravdlling/rehabilitation component of the project covers the followmg gravel roads: Upgrading to Paved Standards: (i) Mbarara - Ibanda (66.5 km); amd (ii) Gayaza - Bugema - Zirobwe (30.9 kIn) Regravelling/Rehabilitation: (iii) Villa Maria - Senbabule (40 kIn); and (iv) Zirobwe - Wobulenzi (25 kin). -32 - The Mbarara-lbanda road lies in Mbarara district, in south-westem Uganda, and is an interdistrict road connecting Mbarara to Fort Portal, in Kabarole district. The road traverses lowland swamp to rolling/mountainous terrain and serves rich agricultural areas. The Villa Maria - Sembabule road forms part of the interdistrict road connecting Villa Maria, in Masaka district, to Mubende which is a district headquarters. The road traverses lowland swamps to rolling terramin, and serves densely populated and rich agricultural areas. The Gayaza - Bugema - Zirobwe - Wobulenzi road lies in the districts of Mpigi and Luwero, to the north of Kampala. The road traverses flat to rolling/hilly terrain, and connects Gayaza township to Wobulenzi, on the Kampala-Gulu Road, passing through Namulonge, Kiwenda, Bugema and Zirobwe. 3.11 Due to the prolonged lack of maintenance, these roads have deteriorated to the extent that they have completely lost their gravel and have reverted to earth road status; the road shoulders are badly eroded and road drainage is practically non-existent. Furthermore, most of the roads run at or below the natural ground level and have poor geometrics. Detailed engineering and economic evaluation for road upgrading, regravelling/ rehabilitation has been carried out by consultants. The design standards for these roads are based on the general standards adopted by the MOWTC, and are shown in Appendix 1.2. Construction Supervision 3.12 Consultants will be engaged to assist Government in construction supervision of strengthening and improvement of the Kampala-Entebbe Road and upgrading, regravelling/rehabilitation of selected roads. With regard to main roads maintenance, MOWTC with the assistance of TA personnel (para 3.13) will supervise the operation. Institutional Strengthening of MOWTC Technical Assistance and Training 3.13 To help alleviate staffing shortage and to assist MOWTC with road maintenance planning, organization and operations the project provides for 144 manmonths of technical assistance through a twinning arrangement, comprising: Position Manmonths Road Maintenance Management Engineer (Team Leader) 42 Road Maintenance Planning Engineer 36 Contract Management Advisor 36 Training Advisor/Instructor 30 Total 144 The road maintenance management engineer (team leader) will assist and advise the Chief Road Maintenance Engineer/Principal Engineer (Planning) on all aspects of highway maint:mance planning, organization and operations, and will oversee and coordinate the activities of the TA staff; the road maintenance engineer will assist and advise the Principal Engineer (Operations) in road maintenance operations and on-the-job training of staff; the contract management advisor will assist and advise the Senior Principal Engineer (Contracts) in administering contract operations and conducting formal training of MOWTC staff. The training advisor/instructor wil] assist and -33 - advise the Chief Training Engineer in the organization of training programs for both the MOWTC and contractor personnel, identification of training needs, reviewing available training courses both in-house and by outside institutions, drawing up of appropriate training courses and annual training programs, and providing class room and on-the-job training. Outline terms of reference of the technical staff are shown in Appendix 1.4. They include requirements for organizing and executing on the job training for capacity building in MOWTC. IDA and jovernment agreed during negotiations on the outline Terms of Reference. 3.14 The technical assistance staff will be provided on an internittent basis through a twinning arrangement with a similar but more mature organization. Agreement was reached during negotiations that Government shall, as a condition of effectiveness, fill the three vacant positions of principal executive engineer in the road maintenance section with staff whose experience and qualifications are satisfactory to IDA. 3.15 The project also provides for training of higher level staff (at international seminars/workshops) in highway plaming and administration, and of middle and junior level staff (at ESAMI or other similar institutions) in road maintenance planning and operations. Classroom and on-the-job training of road overseers, foremen, plant operators, mechanics, etc. will be undertaken with the help of TA included in the project. Agreement was reached during negotiations that Government will not later than November 30, 1994 prepare and submit to the Association for its review and approval a suitable training program for MOWTC staff and thereafter, implement the program taking due account IDAs views and comments. 3.16 The Public Works Training Center (PWTC) lacks training equipment/audio-visual aids for staff. The project wiU assist in providing supplementary items to upgrade such facilities. Itemized lists of equipment/training aids are shown in Volume II, Appendix 1.5. The project will also provide inspection vehicles (pickups and motorcycles) to assist MOWTC in supervision of works. Rehabilitation of Feeder Roads 3.17 The proposed feeder road rehabilitation and spot improvements activities will cover about 680 km of selected feeder roads, including (i) full rehabilitation (360 Iam); (ii) spot improvements of surface and drainage as required (170 kan); and (iii) improvement by culvert and general drainage construction and improvement (150 kIn). The list of feeder roads selected for the first and second year programs in each district are shown in Appendix 2.4 and in Maps 2-5. The list of all feeder roads identified in each district and list of priority feeder roads are also presented in Appendices 2.2 and 2.3, respectively. The proposed works will be carried out in accordance with agreed geometric and pavement design standards. The rehabilitation works will be done on existing alignments except for local widening and other improvements to meet suggested cross- sections and design standards on a flexible basis with regard to the width of the road and thickness of gravel. The size and composition of the rehabilitation program was agreed with IDA during negotiations, including detailed programs for the first two years. Not later than four months before the beginning of each fiscal year, each participating district and MOLG shall review with IDA the size and composition of its feeder roads rehabilitation program for the ensuing fiscal year. as well as physical, financial and staff inputs and work outputs in the preceding fiscal year. 3.18 The works will be executed by small and medium sized contractors using LB/LES methods starting during and continuing after the proposed training on how to carry out rehabilitation contracts. The trainees will receive two weeks' introductory training on a demonstration site, -34 - followed by four months' in-depth training on selected test sites. Contractor shortlisting will be based on their performance during training after which they will be given contracts on full rehabilitation, spot improvements or drage works (culverting). MOLG and DA staff trained will be equipped for increased supervision of contract works. In accordance with its strategy, Govenumt will let an increasing share of feeder roads works be carried out by domestic contractors, reducing the share carried out on force account. By not later than March 31, 1996, the Government will revise its Strategy Paper and Action Plan, and adopt financing methods and techniques for labor-based or equipment-based execution which have proven to be the most effective in light of experience during project implementation. 3.19 Arangement are being finalized for the provision of suitable light equipment, vehicles, hand tools, survey equipment and implements for the domestic contractors to carry out the rehabilitation works, and with some DA inputs, also carry out the maintenance works. The equipment and tools procured under the project will be rented or leased out to contractors. A Uganda Leasing Company (ULC) proposed to be formed under the Development Finance Company of Uganda with IFC support is expected to be operational by the fall of 1994. Government has agreed that leasing of equipment to small private contractors could be effected through the ULC. In addition, financial management support to the selected contractors will be arranged through an associated local bank on the basis of agreement between the MOLG/ED and the ULC and the local bank. The proposed arrangements for the equipment management, leasing, as weil as financial management and cost recovery from contractors are described in the Annex to Appendix 2.5. It was agreed during negotiations that not later than July 1, 1995 MOLG shall adopt a scheme, satisfiactory to IDA, under which MOLG owned equipment procured under the project and under the Fourth Highway Credit will be leased to contractors under the supervision of consultants. It was further agreed that the arrangements for equipment leasing/rental and equipment management as well as cost recovery from contractors would be worked out in the conext of the Implementation Manual (refer to pan 4.19). Relevant findings of the Plant Hire Pool Study which MOWTC is undertaking in FY94 with PPF financing, to explore the most suitable ways to promote contractor access to equipment under Ugandan circumstances, will be taken into account when they become available. Four-Year Feeder Roads Maintenance Program 3.20 A four-year routine feeder roads maintenance program would be executed in the four disticts to maintain feeder roads already rehabilitated and to be rehabilitated under the Project. Activities would begin in the first year with 260 km, increase as more roads are being rehabilitated, (see Appendix 2.4) and attain some 880 km in the fourth year. The share of force account to conta maintence is projected to decrease from 85 percent in the first year to some 10 percent in FY98. This inplies retrenchment of district group employees (porters), a process which is already ongoing under the general civil service reform. However, employment in the districts concerned is expected, if anything, to increase in view of the contractor-executed labor based operations and the commitment to maintenance in the country. The Government and IDA agreed durng negotiations on the size and composition of the four year maintenance program! which embodied active promotion of contractor-executed maintenance through training. The detailed maintenance program for FY95 was also agreed on. Not later than four months before the begining of each fiscal year, each district and MOLG shall review with IDA the size and composition of its feeder roads maintenance program for the ensuing fiscal year, as well as physical, financial and staff inputs and work outputs in the preceding fiscal year. -35 . Establishment of District Feeder Roads Maintenance and Rehabilitation Capacity 3.21 The Works Departments of the four participating Districts face a rather large challenge to achieve the level of technical and supervisory capacity required for supervising the works contacts and managing the increased maintenance activities during project execution. They will need to be strengthened by filling their vacant positions with regular staff to the maximum extent possible, and by other supplementary means such as local consultants. They will also need to mobilize sustained financial resources as well as obtain basic physical inputs. The project proposals and the related requirements were reviewed with District Officials and Resistance Committee members of participating Districts. Each District agreed to make the necessary preparations. This will include recruitment of technical staff, inter alia by arranging, with the help of the Chief Engineer, MOLG, for secondment of two District Engineers (DEs), one to be in charge of works in Mbale and Kapchorwa, and the other in charge of Tororo and Palissa. The DE's will be trained and supported, as required, by the Technical Assistance personnel including local consultants to be stationed in the project area (see para 3.22 to 3.27). The proposed Project would contribute modest support for essential building repairs, office equipment, soil testing equipment, additional simple road equipment and vehicles. The Government and IDA agreed during negotiations that the Government shall take all necessary measures to ensure that (a) the local costs of the agreed routine maintenance program for feeder roads in the participating districts shall be shared equally by the central Governnent and each district, and (b) the Government shall bear at least five percent of all periodic maintenance costs. Strengthening of MOLGAED and Districts Works Departments Training and TechnicalAssistance 3.22 The proposed feeder roads program would provide technical assistance for: (a) strengthening of MOLG in planning and monitoring of feeder roads projects; (b) training of Government staff and conators in the use of LB/LES methods; and (c) district level capacity building for supervision and implementation of feeder road rehabilitation and maintmance in the four project districts. The proposed training program in (b) and the required TA for (a), (b) and (c) are described below. 3.23 Training: A four-year program has been prepared to provide training to selected MOLG and DA staff and to domestic contractors. The training would concentrate on skills development required for the plannig, execution and control of works carried out by labor-based/light equipment-supported (LBILES) method using domestic contractors for both rehabilitation and maintenance works (both routine and periodic). Initially, training will concentrate on building up Government and private sector capacity in the project districts through staff training and curriculum development in the areas of planning and execution, but this training could be extended to Govemment and private sector staff from other districts, with the eventual establishment of a national capacity for a nationwide use of cost-effective, LB/LES feeder roads construction and maintenance methods. At a later stage, the methods introduced under this project may prove appropriate for higher classes of gravel/laterite roads. 3.24 Training in labor-based road works would cover: (a) feeder road construction and rehabilitation; (b) feeder road drainage works and spot improvements more generally, and (c) -36 - feeder road routine maintenance. In alL it is envisaged to train about 330 persons some of whom will in turn supervise and instruct a substantial number of road maintenance lengthmen and group conctors. The training programs will be coordinated with sinilar programs in and out of the country by the Engineering Department of MOLG. In addition, close collaboration will be kept with the Kisii Training School in Kenya near the Uganda border, which provides training to district engineers, mechanics, accountants, light equipment operators and drivers. So far, five DA Works Supervisors and two MOLG engineers have received training at Kisii in advance of the establishment of Uganda-based training. 3.25 Technical Assistance in MOLG/ED for Feeder Roads Planning and Monitoring: During project preparation, an urgent need was identified to strengthen MOLG's feeder roads planning, monitoring and design capacity. The PPF therefore provides for up to 14 man-months of input of a Transport Planner who is in post. But it is foreseen that a total of 32 mannmonths is required, and during negotiations, the Government and IDA agreed that MOLG shall continue to employ a transport planner to train MOLG staff in transport planning and management and to implement a feeder roads planning and monitoring system. A provision for 18 man-months is included in the project. The tasks are detailed in para 4.20 with their respective deadlines. MOLG has made available counterpart staff to the Transport Planner, which consists of a Senior Executive Engineer, an economist and a D)ata Analyst. It was agreed during negotiations that the assignment of adequate staff including an economist and a planner to the Engineering Department would be a condition of effectiveness. In the context of the Mid Term Review, by not later than March 31, 1996, the Government will evaluate the competence of the local counterpart staff. Position Manmonths Transport Planner 32 3.26 Technical Assistance (Field Support, Contractor Capacty BuUding and Training): Technical assistance will be provided by a team consisting of three expatriate technical experts for 88 man-months and three local technical experts for 144 man-months as follows: Position Manmonths Expatriate Experts:I' Project Coordinator 40 Construction/Maintance Engineer 24 Senior Training Specialist 24 Sub-total 88 Local Experts: Civil Engineer/Training 48 Civil Engineer/Construction 48 Mechanical/Logistic Engineer 48 Sub-Total 144 Total 232 1/ By Mid Term Review of the Project, the Government and DA staff should become responsible for program implementation with the expatriate specialists in an advisory position. 3.27 The technical personnel will be assisted by a local Accountant to be hired for 48 man- months over fC project implementation period. The Project Coordinator will be fully engaged in - 37 - the project for 36 months followed by two to four monitoring missions (four months altogether) during the last project implementation year. The three local private consulting engineers will be hired for the entire project period (4 years) to ensure gradual and effective transfer of know-how and responsibility by building local private sector capacity for labor-based/light equipment supported road works. MOLG will second to the project districts three goverment counterparts: a Project Manager and two District Engineers who will work closely with the team. The Ugandan Project Manager and the Project Coordinator (consultant) stationed in Mbale will initially carry the responsibility for the execution of the project jointly. They would report to the Chief Engineer, MOLG/ED and te participating districts. The Project Coordinator will train the Ugandan Project Manager on the job. In principle, after June 30, 1996, the Project Coordinator's presence in Uganda as a mentor will be intermittent only. The terms of reference with individual job descriptions of the key TA and Government personnel are in Appendix 2.5 and were reconfinned during negotiations. The detailed TA and Training Costs for which the Nordic Development Fund has been requested to provide 95 percent co-financing are in Appendix 2.6. To ensure adequate staffing agreement was reached during negotiations that MOLG will also assign, as a condition of effectiveness, adequate staff including a project manager to be stationed in Mbale, and two district engineers to be stationed in Tororo and Mbale, respectively. Institutional Strengthening of URC 3.28 Support to URC would be limited mainly to institutional strengthening, as IDA would not be in a position to finance any significant investment until URC had made substantial progress toward becoming a commercial enterprise. The project provides for up to 69 man-months of technical assistance to assist URC in consolidating the commercialization process started under the previous railway project, composed as shown below: Position Manmonths Transition Management Adviser 12 continuously plus 2x3months intermittently Financial Management Specialist 12 continuously plus 3x3 intermittently Marketing and Rail Traffic Operations Specialist 18 continuously or 12-6 intermittently Short Term Specialists 12 Total 69 3.29 The Transition Management Adviser will report to the Managing Director and will also participate in discussions in Board of Directors' Standing Committees. He will help URC management to change URC into a commercially oriented parastatal, in terms of operations, organizational culture and outlook. He will advise the top management of URC on establishing and monitoring URC's Business Plan and a set of supporting action plans, delegation of authority, interdepartnental coordination and accountability. He will liaise with the other external cperts appointed by URC and ensure the coordination of their functions. The Financial Management Specialist will be responsible for the organization and streamlining of the finance department and transfer of expertise by on-the-job training to enable the Ugandan staff to run the department effctively and efficiently after his departure. The Marketing and Rail Traffic Operations Specialist will be responsible for the establishment of an efficient and effective marketing departnent and -38 . improving the efficiency of the rail traffic operations, as well as transfer of expertise by on-the-job training to the Ugandan counterparts in the interacting departments. Furthermore, information systems in the participating departments would be strengthened and moderniized. In addition, a modest provision is made for recruitment of short term advisers when the need for highly specialized inputs arises. Terns of Reference for the specialist advisers to URC are in Appendix 3.5, and have been agreed upon. Training of URC Marine Services Personnel 3.30 The wagon ferry services are URC's main revenue eamer and critical for Uganda's external trade, but they are currently not fully staffed. To further strengthen URCs capacity to run the ferres efficiently, URC will continue the training scheme for deck officers and engineers, add training for artisans, and recruit and train additional personnel until the required staff complement is reached. Submission of a satisfactory three year training program will precede training of individuals. URC will establish a code of conduct for ferry personnel for avoidance of pollution of Lake Victoria. Procurement of Ferry Maintenance Spares 3.31 The first full major overhaul cycle for the three URC wagon ferries is scheduled to be completed in 1993. The project would provide for the next cycle of major overhaul of the three ferries in the form of procurement of spares and supervision of the work. URC will finance running spares and minor maintenance from its own resources, and prepare for subsequent full maintenance financing. To this end, a reliable supplies management system was prepared and is about to be introduced. The installation of firefighting equipment on board the URC ferries which carry fuel is one of the conditions of disbursement for the railway component. Oil Spill Containment Equipment 3.32 The Project would provide for the minimum "first aid" oil containment equipment to be stationed in Port Bell to deal with accidental minor oil spills in and around the port. This will include floating booms, skimming and pumping equipment and small motor boats to carry the equipment. Technical Assistance for Transport Planning and National Transport Data Base 3.33 To maintain and update the planning capacity and the National Transport Data Base information which was built up in MOWTC/PD under the UNDP-financed, World Bank executed Transport Policy and Planning project, the proposed project would provide transport planning technical assistance and on-the-job training in an internittent fashion. The outline terms of reference are in Appendix 4.2 and were agreed upon during negotiations. In addition. some resources will be provided for short term consultancies in specialized inputs which are not yet available in MOWTC/PD. -39. Position Manmontks Transport Policy Adviser/Trainer 12 months internittently Transport Data Base Adviser/Trainer 24 months intermittently Short Term Specialist Consultants 6 months Total 42 Dry Port/Container Terminal Study 3.34 The project will make available up to six manmonfts of specialized consultant mputs to undertake a thorough feasibility study of a dry port/container terminal. This study would be an in- depth and wider, intemdal, follow-up to an earlier pre-feasibility study. D. PROJECT COST 3.35 The Project Cost Summary (see Table 3.1) shows a total estimated cost of US$99.0 million, and a breakdown by transport subsector components and proposed activities in each of them. The overall foreign cost component is 75 percent and the local cost component 25 percent. In accordance with Bank rules, the cost estimate includes a 10 pecent physical and 14 percent price contingency. Taxes and duties are excluded. The Main Roads component represents 78 percent of he total project costs, including 31 percent for the critical road maintenance activities, 43 percent for other physical road works (including supervision) and four percent for institutional swengthening. The Rural Feeder Roads component represents 17 perccilt of the total project cost, with rehabilitation at nine percent, maintenance at two percent and car tcity building at six percent of total project costs. The small railways component represents thre percent of total project costs and is predominantly capacity building. The Transport Plamiing component represents one percent and is nearly completely capacity building. The Project Preparation Facility Advance represents 1.5 percent of total project cost. More detailed tables on each of the components are in Volume IL, appendices 1.8 for main roads, 2.13 for rual feeder roads, 3.1 for railways and 4.1 for transport policy. -40 - Table 3.1 : Project Cost Sunmnary (In US$ million) Agency Component Local Foreign Total % Foreign (1) Main Roads Maintenance 6.08 18.69 24.77 MOWTC/75 (2) Main Roads Upgrading 5.84 14.90 20.74 72 (3) Main Roads RegravellinglRehabilitation 1.46 3.75 5.21 72 (4) Main Roads Strengthening/lmproventent 0.89 4.65 5.54 84 Kampala-Entebbe Road (5) Construction Supervision 0.41 1.65 2.06 80 (6) Insitutional Strengthening 0.48 2.40 2.88 83 (7) Contingencies 3.85 11.69 15.54 Subtotal Main Roads Component 19.01 57.73 76.74 75 (8) Rural Feeder Roads Rehabilitation 2.53 4.66 7.19 MOLGILA16S (9) Rural Feeder Roads Maintenance 0.82 0.69 1.51 46 (10) Strengthening Eng. Dept MOLG 0.15 0.45 0.60 75 (11) Training, TA, office equipmewt and studies 0.89 2.99 3.88 79 (12) Contingencies 1.12 2.23 3.35 - Subtotal Rurl Feeder Roads Component 5.51 11.02 16.53 67 (13) Support to Ferries 0 0.65 0.65 URC/100 (14) Strengthening URC management 0.13 1.44 1.57 94 (15) Training Marine staff 0 0.23 0.23 100 (16) Oil Spill Containment Equipment 0 0.13 0.13 (17) Contingencies 0.03 0.59 0.63 Subtotal Railways Component 0.16 3.04 3.21 95 (18) Support to Transport Policy/Data Base 0.06 0.57 0.63 MOWTCIPD/90 (19) Container Study 0.02 0.15 0.17 MOWTCJPD/88 (20) Contingencies 0.02 0.18 0.20 Subtotal Transport Policy Support 0.10 0.90 1.00 (21) Project Prepaation Facility Advance 0 1.50 1.50 MOWTC/MOLG URC/100 TOTAL PROJECT COST 24.78 74.19 98.98 75 ESTIMATE: -41- E. PROJECT FINANCING PLAN 3.36 The sumnary financing plan is iu Table 3.2. Table 3.2: Estimated Costs and Financing Plan (in US$ million) Estimated Costs Local Foreign Total Main Roads 19.0 57.8 76.8 (of which maintteance) (7.6) (23.5) (31.1) (other) (11.4) (34.3) (45.7) Feeder Roads 5.5 11.0 16.5 (of which maintenance) (1.0) (0.9) (1.9) (other) (4.5) (10.1) (14.6) URC 0.2 3.0 3.2 Transport Policy 0.1 0.9 1.0 PPF 0 1.5 1.5 Total 24.8 74.2 99.0 FrinancingPlan Local Foreign Total Nordic Development Fund 0.8 3.8 4.6 Association of which 12.8 62.2 75.0 nain roads mainteance (0.9) (15.2) (16.1) other project components (1 1.9) (47.0) (58.9) Government of Uganda of which 10.7 8.1 18.8 main roads maintenance (6.9) (8.1) (15.0) other project components (3.8) (0) (3.8) URC - 0.1 0.1 District Authorities 0.5 - 0.5 Total 24.8 74.2 99.0 3.37 Financing by te Nordic Development Fund (NDF) and the Association would cover 80 percent, and amount to US$79.6 million, of which NDF would contribute US$4.6 million and the Association US$75.0 nmllion. The Ugandan participants would contribute 20 percent or US$19.2 million together. The NDF supported activities would be in capacity building through nru feeder roads training and technical assistance; while NDF would agree to finance 95 percent of the US$4.9 million, GovernmentlDAs would contribute 5 percent or US$0.3 million towards the counterpart staff costs, operatng costs and sponsorship of selected Government staff under the NDF supported project component (see Vol. II, Appendix 2.6). Under the IDA-supported activities, taking into account a US$0.1 million contribution of URC and US$0.5 million from the participating district authorities, Goverunent would have to finance an additional US$18.3 million. -42- Most project components would follow standard Association procedures and receive the same percentage support throughout project implementation. 3.38 The main roads maintenance component would fol!ow a different financing pattern, with a declinig IDA share and an increasing Ugandan share over the couirse of the four years. The size of the four year road maintenance pro&ram component to be supported by the Association was agreed during negotiations in the framework of the National Four-Year Main Roads Maintenance Program FY95-FY98 (see para 2.55). The IDA-supported activities for FY95 were agreed in detail during negotiations. The specific financing program for the Association-supported maintenance activiies was also agreed during negotiations. Te foreign cost of the main roads maintenance program is estimated at 75 percent. The scenario agreed for the four years is a declining IDA-financing with shares of 60, 60, 40, and 40 percent, and an increasing Government financing with sbares of 40, 40, 60 and 60 percent over the four years. This would imply a 52 percent IDA-financing share over the four year period, and a 48 percent counterpart requirement for Govemment. The Government and IDA agreed on the following: (i) not later than four months before the start of FY95 and each subsequent fiscal year, the Govermnent wil} review with IDA the proposed annual NPRM and MRMP, thei budget rqiments and their allocations. 3.39 As stated in para 3.21, the costs of the rural feeder roads maintenance components would be shared by three parties: the participating District Administrations, the Ugandan Governent and the Association. The Govenment would remai responsible for the Ugandan contibution to feeder roads maintenance, in case of a shortfall in contributions from the districts. The four districts have indicated that they are wiling to contribute 50 percent of local routine mainteance costs. This contribution would be out of their own resources and would imply a steadily increasing contribution in current terns. The Government shall take all measures necessary to ensure that the local costs of the agreed routine feeder roads mantenance program shall be shared equally by the Government and each participating District. IDA would finance foreign costs. Periodic maintenance of feeder roads in the four districts is scheduled to start in the third year of the program; IDA and the Govenunent would finance 95 and 5 percent of these costs, respectively, during FY97 and FY98. 3.40 The Nordic Development Fund has indicated an interest in providing about US$4.6 million of parallel financing on terms essentially identical to IDA terms, that is, 40 years maturity, 10 years grace and zero interest. This would help finance capacity building in feeder roads activities. Procurement of the required manpower with specialized knowledge would be in accordance with NDF guidelines, tied to Nordic consulting firms but including consultant engineers from Uganda. The fulfilment of conditions of effectiveness of the NDF credit is a condition of disbursement for the feeder roads component of the IDA supported project. .43 - IV. PROJECT IMPLEMENTATION A. THE BORROWER AND ONLENDING ARRANGEMENTS 4.01 The IDA Credit of SDRS4.S milion (US$75.0 million) would be made available to the Govemment of Uganda at standard IDA terms with a matunty of 40 yeas including ten years of grace. The bulk of the proceeds of the IDA Credit would be managed by MOWTC, MOLG and the two autonomous participating districts, while MOLO would contiue to budget for and act as a conduit for such fiuids to be tumitted to the two non-autonomous districts. With respect to the US$3.1 million IDA support to railways, IDA and Govemment agreed at negotiations that two components amounting to US$2.1 million would be passed on from the Government to URC as a gran, because they aim at reonteg URC toward a commi enterprise in the interests of the economy as a whole, while US$1.0 million would be onlent by Govemment to URC under a subsidiary loan agreemet at the rate of seven percent p.a., repayable over 15 years including 5 years grace and wih URC bearng the foreign exchange risk. Sigmng of the subsidiary loan agreement would be a condition of disbursements for the railway component. B. INSTITUTIONAL ARRANGEMENTS FOR IMLEMENTATION 4.02 The implementation of the project will be the responsibility of the following executing agencies: Poroje ct ompneR Agency support Measure (i) main roads MOWTC - consultants for construction supervsion (except road mantence activities) - technical assistance through twinning for capacity buiding - contactors for worss execution - manual routine maintenance by lengten contacts (ii) rural feeder roads MOLO/ED - adviserstrainers in field offices and at HQ with Districts - private contractors for works execution (iii) railways URC - advisers and trng of feiy pasonnel (iv) transport policy/database MOWTC/PD - mangement advisers/trainers and consultants container study MOWTC/PD - consultants Under the present division of labor between various Government ministies and agencies, separate entities are responsible for each of the project components. Each of fte agencies shown above would handle programming, procurement, management of staff (including consultants), monitoring of physical and financial inputs and outputs, progress reporting and problem solving for its own activities. In the few cases where coordination betwee agencies is needed, such as the container study and the equipment hire pool, it would be sufficient to establish study steering committees with specific terms of refrence and a tmebound agenda. Two Special Accounts wi1l be set up by the two major participating agencies. They will separately submit the relevant accounting and audit -44 - reports covering project expenditures (IDA resources and counterpart funds, including expenditures through Special Accounts), agency annual financial statements and Statements of Expenditure for agreed spending categories. 4.03 Main Roads: Project implementation will be the responsibility of MOWTC. Consultants will be engaged for construction supervision of road strengthening and improvement and road upgrading, regravelling/rehabilitation. Technical assistance will be recruited through twining arrangements with a suitable organization satisfactory to the Association. Contractors will execute the physical works, including mechanized routine and periodic maintenance financed by the Association. The works are scheduled to begin in mid-1994 and be completed by the end of 1998. An implementation schedule is shown in Appendix 1.12. 4.04 Rural Feeder Roads: Districts, with support front MOLO, are responsible for feeder roads maintenance and rehabilitation. In the four participating districts, strengthening of the District Works Departments will be achieved through staffing by direct recruitment by distncts and secondment of engineers by the MOLG/ED. The NDF-financed project assistance provides the basis for the districts to resume these responsibilities themselves (see paras 3.26 and 3.27). MOLG will continue to carry the responsibility for overall planning, guidance for preparation of budgets and accounts, and monitoring (see para 4.20). 4.05 Railways: Execution of the technical assistance component will be the responsibility of the Managin Director of URC. It was agreed during appraisal that the commercial and financial managment experts would serve in line positions during the first phase of their assignmei, and act as mentors in their follow-up intermittent visits (see para 3.28, 3.29). The expert on management of change would serve in an advisory position to the Managng Director and, for broad policy issues, to the Board of Directors. The training component for marine personnel would be prepared by the Manager, Marine Services under instructions from the Maraging Director. Procurement of ferry spares would be prepared by the Supplies Department of URC and approved by the Managing Director; it would be in accordance with the Association's Guidelines for procurement. 4.06 Transport PolicylData Base: The Planning Division in the Transport and Communications Departnent of MOWTC (MOWTCfPD) will be responsible for managing the training and technical assistance and short term consultant inputs for further strengthening of the transport policy and national transport data base capacity. 4.07 Container TerninallDry Port Study: MOWTC/PD will prepare terns of reference for the study for the Association's agreement by July 1, 1995. Execution of the study will managed by MOWTC/PD under the supervision of a proposed Steering Conmiuttee including representatives of MFEP, Uganda Revenue Authority and URC. -45 . C. PROCUREMENT 4.08 Procurement arrangements are summarized in Table 4.1 below: Table 4.1: Procurement Methods (Figures in parentheses are the respective amounts financed by IDA) (US$ million) Project Element ICB LCB Other Total Cost Main Roads Component: (i) Road Strengthening and Road 39.5 39.5 Upgrading, Regravelling/Rehabilitation (37.5) - - (37.5) (ii) Construction Supervision - - 2.61/ 2.6 (2.5) (2.5) (iii) Manual Routine Road Maintenance - - 1.g3/ 1.8 (0.9) (0.9) (iv) Mechanized Routine Maintenamce - 12.1 - 12.1 (5.6) (5.6) (v) Periodic Road Maintenance 14.2 3.0 - 17.2 (8.0) (1.7) (9.7) (vi) Technical Assistance - - 2.61/ 2.6 (2.1) (2.1) (vii) Training Equipment - - 0.22/ 0.2 (0.2) (0.2) (viii) Inspection Vehicles 0.2 - - 0.2 (0.2) - ' (0.2) (ix) Study Tours/Fellowships 0.4 0.4 - - (0.4) (0.4) Sub-total 53.9 15.1 7.8 76.7 (45.7) (7.3) (6.1) (59.2) Feeder Roads Component: (i) Strengtfiening MOLG/ED Technical Assistance - 0.41/ 0.4 (0.4) (0.4) Studies - 0.21/ 0.2 (0.1) (0.1) Equipment and Vehicles 0.1 0.1 (0.1) (0.1) (ii) Feeder Roads Rehabilitation Contractor Equipment 2.6 - - 2.6 (2.6) - (2.6) Handtools 0.22/ 0.2 (0.2) (0.2) -46- Pro3ect Element ICB LCB Other Total Cost Road Rehabilitation Works - 6.2 - 6.2 (5.9) - (5.9) (iii) District Road Maintenance Routine Maintenance - - 0.73/ 0.7 (0.1) (0.1) Periodic Road Maintenance - 0.4 - 0.4 (0.4) (0.4) Incremental operating costs - - 0.4 0.4 (0.2) (0.2) Equipment and Vehicles 0.3 - - 0.3 (0.3) - - (0.3) Building construction/repairs 0.1 0.1 (0.0) (0-0) (iv) Training and Technical Assistance - - 4.94/ 4.9 Sub-total 3.0 6.6 6.9 16.5 (3.0) (6.3) (1.0) (10.3) Railways Component: (i) Institutional and Org. Stregth. 2.01/2/ 2.0 (1.9) (1.9) (ii) Support to Ferries 1.05/2 1.0 (1.0) (1.0) (iii) Training Marine Staff 0.3 0.3 (0.3) (0.3) Sub-total 3.3 3.3 (3.1) (3.1) Transport Planning/Data Base: 0.81/ 0.8 (0.8) (0.8) Container Study: 0.21/ 0.2 (0.2) (0.2) Sub-total 1.0 1.0 (1.0) 1.0 ICB LCB Other Total Total 56.9 21.7 20.3 98.9 (incduding PPF) (48.7) (13.6) (12.7) (75.0) 1/ Bank Guidelines for the Use of Consultants 2/ International Shopping 3/ Contract lengthman system 4/ Nordic Development Fund S/ Proprietaxy spares from Orginal Equipment Manufcr (OEM) and the rest by international shopping. -47- 4.09 Highways: The road strengtmening and improvement, and road upgrading, regrvelling/rehabilitation works estimated to cost US$39.5 million, including contingencies, will be procured under unit price contracts through interational competitive bidding in accord"nce with the Bank Guidelines for procurement. Contator will be prequalified for the works. The roads will be divided into four contracts: (i) sgthening and improvement of Kampala-Entebbe Road; (ii) upgrading of Mbarara-Ibanda Road; (iii) regraveUling/rehabilitation of Villa Maria- Sembabule Road; (iv) upgrading, regravelingrehabilitation of Gayaza-Bugema-Zirobwe- Wobulenzi Road. Manual routine road maintenance estimated to cost US$1.8 million, including contingencies, wffl be carried out through the contact lengthman system. Mechanized routine road maintenance, estimated to cost US$12.1 million, including contingencies, would involve a large number of small contracts at scatered locations costing less than US$250,000, and are not likely to atrct ICB. These will be procured on the basis of local competitive bidding satisfactory to the Association. Periodic road maintenance estimated to cost USS17.2 million, including contingencies, will be procured under unit price contracts through international competitive bidding except for contacts esfimated to cost the equivalent of US$400,000 or less per contract, up to an aggregate amount of US$3.0 million, which may be procured on the basis of local competitive bidding satisfactory to IDA. Inspection vehicles will be procured on the basis of intemational competitive bidding, while trauiing equipment will be procured on the basis of international shopping by calling quotations from at least three suppliers from two countries. All contracts except those for rouine road maintenance and training equipment would be submitted for prior review by the Association; this will cover over 80 percent of the main roads component costs. The consultants for construction supervision and technical assistance will be employed in accordance with Bank Guidelines for the Use of Consultants. 4.10 Feeder Roads: The proposed road rehabilitation, spot improvement, drainage works (culverfing) estimated to cost US$6.2 million, including contingecies as well as the routine and periodic maintenance estimated at US$1.11 million, including contingencies, will be undertaken through small contracts scattered over several party remote locations. It is not expected that intemational contactors would be intrested in these works. Ihe works will be procured by the four Works Departments of the participating Local Authorities on the basis of Local Competitive Bidding acceptable to IDA. Only contractors who have successfully completed the LB/LES trainig with trial contracts under the project will be allowed to compete. A simplified standard contract suitable for labor based/light equipment methods has been prepared by the ILO preparation mission based on the suggested IDA simplified standard contract for works. The Govemment agreed at negotiations to use this standard contract for the above works. All routine maintenance of feeder roads by the Distict Authorities will be contracted out to individuals (single-man contractor or lengthman) or sma1l entrepreneurs (group conuctors) on the basis of contracts, based on unit prices as updated from time to time by MOLO, and approved by the Central Tender Board. The contract format was found to be acceptable to IDA. Procurement of suitable light road equipment, vehicles, hand tools, survey equipment and implements for the domestic contractors and the District Administrations will be the responsibility of MOLO. International competitive bidding in accordance with the Bank Guidelines for Procurement would be applied, except for hand tools which will be procured by Intemational shopping acceptable to IDA. All contracts, except those covenng the routine manual maintenance, wil be submitted for pror review by IDA; in this way, pnor review will cover 85 percent of the total feeder roads component costs excluding the training and TA. The consultants and technical assistance will be employed in accordance with Bank Guidelines for the use of Consultants. - 48. 4.11 Railways: Procurement of technical assistance by URC wiUl be in accordance with IDA's Guidelines for the Use of Consultants. Related procurement of office equipment will be by international shopping. The training program for the marine services personnel will select traiing institutes and courses the cost and curriculum contents of which are agreeable to IDA. Procurement of spares for ferry maintenance will be by direct order from the original supplier in view of the proprietary nature of the required goods. Procurement of the oil spill containmet equipment will be by international shopping. All contracts except those covering the ferry spare parts, short term consultancies and office equipment will be submitted to IDA for prior approval. 4.12 Transport Policy/Data Base and Container Study: Procurement of consultant services to provide technical assistance for Transport Policy and the National Transport Data Base and to undertake the Container Study will be in accordance with IDA's Guidelines for the Use of Consultants. D. DISBURSEMhENT 4.13 The proceeds of the IDA credit would be disbursed as follows: (i) 95 percent of total expenditure for civil works (ii) 100 percent of foreign expenditure for vehicles, equipment, tools, office machines and training aids (iii) 95 percent of total expenditure for consultant services, technical assistance and training outside the executing agencies (iv) 60 percent of expenditure for main roads maintenance in Year 1, 60 percent in Year 2, 40 percent in Year 3 and 40 percent in Year 4' (v) 10 percent of expenditure for feeder roads mainenance in Year 1, 10 percent in Year 2, 45 percent in Year 3 and 45 percent in Year 4 (vi) 60 percent of incremental operating costs. 4.14 During negotiations, the Governnent and IDA agreed on the following conditions of effectiveness: (i) MOWTC shall keep the three positions of principal engineer in the road maitenance section, which have been filled in the recent past, filled with staff whose qualifications are satisfactory to IDA (refer to para 3.14); and (ii) MOLG shall assign adequate staff including a project manager to be stationed in Mbale, two district engineers to be stationed in Mbale and Tororo, respectively, and an economist and a planner in its Engineering Department (refer to paras 3.25 and 3.27). The Government and IDA further agreed on the following conditions of disbursement: (a) disbursements under the main roads component will be contingent on the Government allocating not less than US$13.5 million equivalent for main roads maintenance related expenditure m its FY95 budget; and (b) disbursements under the feeder roads component will be contingent on (i) MOLG employment of a team of consultants which will assist MOLG and the participating DAs in project implementation; and (ii) fulfillment of the conditions of effectiveness of the NDF Credit (refer to para 3.40); and (c) disbursements under the railways component will be contingent on (i) the signing of a Subsidiary Loan Agreement between the Government and URC (refer to para 4.01); (ii) appointment by URC of the three management 'he projecte IDA contribution would be: US$5.7 million in FY95; US$5.7 million in FY96; US$2.4 million in FY97; and US$2A million in FY98, totalling US$16.2 million. -49 - experts; and (iii) establishment of URC's capital structure by the Government and URC in the context of the Performance Agreement (refer to para 2.37). 4.15 Reimbursement of expenditures for main and feeder roads manual routine maintenance, and project-related operating expenses of the participating Districts, as well as contracts for goods valued at less than US$50,000 would be made on the basis of statements of expenditure (SOEs). In such cases, procurement and other supporting documentation would be retained in a central location at the implementing agency. Procurement and other documentation relating to SOE disbursement would be the subject of selective satnple post review of awarded contracts below fte threshold levels and would be carried out on 1 out of 10 works contracts and 1 out of 5 goods contracts. 4.16 To facilitate and expedite disbursements, it was agreed during negotiations that MOWTC and MOLG would each establish a foreign exchange denominated Special Account in a local commercial bank with initial deposits of US$1,000,000 and US$250,000, respectively. 4.17 The schedule of estimated IDA disbursements is in Vol. Il, Appendix 1.1. Disbursements are projected to run over a period of six years, and expected to be completed by June 30. 2000. The disbursements are based on the Inplemnentation Schedule described in para 4.19. The project duration is mainly determined by the main roads works components, which account for about 79 percent of total IDA disbursements. Both the main roads maintenance program and the rural feder roads maintenance program are defined as four year time slices of continuous maintenance programs. E. IMPLEMENTATION SCHEDULE 4.18 Vol. IL Appendices 1.12, 2.18, 3.7 and 4.3 show the implementation schedule for each of the project components. The main roads upgrading, rehabilitation/regravelling and strengffiening works would be executed from FY95 onwards with large expenditures in FY96 and FY97. IDA financing of maintenance of main roads would start up in FY95, maintain a fairly even level in FY96, then drop to a lower level in FY97 and FY98. IDA financing of maintenance of feeder roads would start at a modest level as staff and contractors are being trained, and then gradually expand during project execution. The major steps for project implementation with their target dates were agreed with Goverunent during negotiations and incorporated in the Development Credit Agreement. In order to assist the executing agencies in preparing and managing project implementation effectively, the implementing agencies would submit a draft Implementation Manual by May 15, 1994, and an agreed Implementation Manual by effectiveness. F. PROJECT ACCOUNTING AND AUDITING, MONITORING AND SUPERVISION, 4.19 Project accounts will be maintained by MOWTC, MOLO, the participating DA's, and URC and will be available for inspection by IDA supervision missions. All accounts will be audited by auditors acceptable to the Association. Where applicable, the auditores opinion will be required to contain a special reference to SOEs confinning that the claimed expenditures were used for the purpose for which they were intended and will also be required to cover Special Accounts. Government and IDA agreed during negotiations that the participating Govenmment Ministies, so - District Authorities and URC will submit certified copies of such accounts and annual audit reports to the Association not later thian nine months after the end of each fiscal year. 4.20 In order to allow MOLG to (i) evaluate progress in project execution, (ii) assess the general effects of the feeder roads program on the impact areas, as well as a more detailed impact study of a sample of roads and (iii) consider the comparative advantages of labor-based and equipment-based methods of feeder roads rehabilitation and maintenance throughout Uganda, the Govemment and Il)A agreed to a number of activities to be undertaken prior to and during the project. MOLO agreed to: a not later than November 30, 1994 complete a baseline study in the four disticts to be started under PPF fiancing; this would provide the necessary basis for a continuous monitoring of a sample of feeder roads and their impact areas, in particular with regard to agricultural production, increased crop value and traffic flows; b. by July 1, 1995 ensure that the road inventoty data base in the four participating districts is completed; it would be very usefil to expand this inventoly to all other districts; and c. by July 1, 1995 establish and implement a monitoring system covering Uganda's feeder roads activities and the impact of fte feeder roads program on the rural economy. 4.21 Each implementing agency will prepare quarterly reports in a format acceptable to the Association and including the infomation agreed on, including specifically the Performance indicator targets and realizations (Appendices 1.6, 2.14 and 3.4). IDA will undertake implementation missions at regular intervals according to the Supervision Plan included in Appendix 5.3. This includes one supervision mission each year before the beginning of the govenmens fiscal year to discuss and agree with MOWTC and MOLG on the workplan and the financmg plan for the activities in the commg year. It was agreed during negotiations that the first supervision mission (tentatively scheduled for July 1994) would hold in-depth discussions on the Implementation Manual with executing agencies so as to familiarize all personnel with the implementation details. For the second and subsequent years the Government will, starting no later than four months before the beginnig of the fiscal year, review with the Association performance during the previous year, targets for the next year, the anual road maitenance programs, the budgetary requirements and the proposed budgetary allocations. It was fiurher agreed that a Mid- Temn Review would be held not late than March 31, 1996, and that the Goverment shall submit a reasonably detailed report to IDA evaluating progress in project implemenation 90 days before Mid Term Review. It was also agreed that the Govemnumt would cany out the Mid Term Review reommendations promptly after the Review. 4.22 It was agreed at negotiations that the Goverment would prepare its contribution to the Project Completion Report in a form acceptable to the Association and submit it to IDA not later than six months after the closing date of the Credit. -51- V. PROJECT JUSTIFICATION A. GENERAL PROJECT EMACT 5.01 The project aims at supporting Uganda's tranwsport infrr e by taeting high priorit activities within the sector and financing physical inmt and maintenance activities in roads and railway ferries as well as capacity building activities in the form of training, technical assistance and studies. The human resources improvemets will be pursued in the public and the private sector. The overall project benefits will be the provision of an improved and better maintaed basic transport infastructure as the underpinning for expanded, cheaper and more reliable fight and passenger ansport services. A posiive response fiom pnvate tansports and URC in the form of improved transport services would in tum facilitate increased availability of goods and services, and in particular an mcreased supply of agriculural products for consumption, processing and export. The bottom line is that the quality of life and the cost of living for Ugandans in rural and urban areas will be improved as a result of the tged transport activities. 5.02 lTe capacity building acivites included in the project will help MOWTC, MOLG and the participating districts build strong mannance managmet units. Future devlomnt following the ongoing Highway Authority/Road Fund Study might change the place of these unitS in a revised orgational setup of the transport sector, but the project is essentially promoting management changes which remain relevant under any organizational setup, namely changes towards more rational, prioritized and effective mainance planning, progrmming, supervision and monitoring. In addition, the private sector role in the execution of road maintenance works will be strongly promoted by this project, while the traditional force account exwcution of works will diminish over time, in pursuit of implementation medlods with high levels of efficiency and transparency. In effct, Govenmment has already decided to replace force account execution by execution through contrcts with individuals or small groups. An increasing portion of the main roads network is already maintained in this manner and in feeder roads the system has also started up; fill coverage is scheduled in the near future. Te contract approach establishes a direct connection between output and pay. The project seeks to expand the move towards contacting out works to feeder roads mechanical maintance, and feeder roads rehabilitation, as well as routine mechanical maintenance of the main roads in step with the build-up of local contactor capacity. The emergence of more local small and medium sized contators capable of undertaking these roads activities thanks to counseling, tranng and supervsion will be an important output of the project. 5.03 The t_nng of local contators and supervising govement staff will actively promote labor-based, light-equipment supported feeder roads rehabilitation. It is expected that Uganda will find this alternative technology, as Kenya and Ghana are already doing, to its advantage, as a more cost-effctive technique of underaking especially but not necessarily only feeder road activities than the traditional equipment-intensive approach. Not only can it make use of relatively inexpensive domestic resources, especially labor, and is it less dependent on imported inputs, it also creates employment and incomes on the ground. The two approaches to contract out works and to emphasize labor-based techniques enhance Uganda's chances of running tnrly sustainable road maintence progmns. 52 - 5.04 The project will also contribute to strengthening local authorities' management capacity as far as feeder roads activities are concerned, in line with the decentralization policy. In the four participating districts, the project will help revitalize the District Works Departments by providing financing and training as well as technical assistance for an initial period, so that they can resume their role as providers, first, of maintenance and later also of rehabilitation of feeder roads. For this purpose, most of the technical assistance under the project will be placed in the participating districts. Specific measures for improvement of district finances, namely raising revenue collection efficiency and commitment to feeder road maintenance in concrete amounts are also included in the project. 5.05 For URC, the project's relatively modest technical assistance inputs can make the difece between coniuing as a financially ailing, Goverment-aided, conventional railways corporation and becoming a modern, commercially oriented, competitive transport agency through a thorough process of change in corporate objectives and culture. For Uganda as a landlocked county, the project helps securing the continued access to the ocean via an alternative route which utilizes the lake ferries and Tanzania Railways Corporation. 5.06 Tbroughout the project, care has been taken that works were designed according to least cost alternatives which yield the highest rate of return on investments as well as on maintenance expenditures. Application of this principle on feeder roads has resulted in rehabilitation activities which emphasize improved accessibility rather than a high degree of surface smoothness. Rehabilitation would therefore consist of spot improvements or culvering in sections where full rhabilitation would be unnecessarily costly to achieve accessibility. B. ECONOMIC AND OTHER BENEFTIS 5.07 By selecting high priority activities, the project combines a number of high impact components which all have a positive contibution to make to Uganda's infrastructure. Not all of them lend hmselves to quantification of benefits, though. Those components which aim at capacity building through traiing and technical assistance have distinct costs but no distinct benefits. They are a necessary factor but the ensuing improved performance cannot be exclusively attributed to this input; instead, it is the product of a combination of inputs. A similar attribution problem affects studies. Hence, the corresponding components are not analyzed in detail below. The folowmg paragraphs also omit the expendiures for feffy maitenance as well as the road _mtenance expenditures which can be safely assumed to have very high rates of return. In the case of all other physical inputs under the project consultants quantified costs and benefits and calculated an Economic Rate of Retum (ERR) for each component. The weighted average for these is a 17.8 percent ERR. For the project as a whole, this is an underestimation of the real net benefits for the reasons given above. Details on the components' net benefits follow below. 5.08 Strengthening and Improvement of Entebbe-Kampala Road: Ihe analysis of this component covers both economic and safety aspects. Analysis of the proposed resealing/sbtengthning of 32.5 km of the Kanpala-Entebbe road showed an ERR of over 12.65 percent and would, assuming a 12 percent opportunity cost of capital in Uganda, be viable. This figure is based on a conservative assumption of a 3 percent per annum traffic growth and mcorporates vehicle operating costs savings and road maintenance savings only on the benefits side. There are small additional economic benefits in tetms of time savings from reducing congestion near Kampala and from higher speeds possible with the overall road improvements, -53 - which should justifiably raise the ERR. The viability of the proposed project would become much more pronounced if traffic would grow faster than GDP; this would depend on government policy on vehicle imports and use, and on fuel pricing. On safety, consultants estimated that the proposed road improvements would lead to considerably less road accidents on this road. The reduction of the frequent and serious road accidents was an explicit and distinct reason for improving this road, over and above the economic reasons; it led to a design which is particularly intent at keeping road surface edges in good repair and includes the improvement of some geometrically inferior sections to increase vehicle movement safety; moreover, it includes sealing the shoulders of the road so as to give pedestrians and bicyclists an altemative to moving on the road surface itself, thus hopefully reducing the accidents between cars and pedestrians or bicyclists. 5.09 Upgrading, RegraveDingtRehabilitation of Selected Main Roads: Consultants calculated costs and benefits for each of the four sections (refer to para 3.10). After due consideration of the Annual Average Daily Traffic (AADT) as well as the Economic Rate of Retumn (ERR) figures, MOWTC and IDA agreed that upgrading to paved standards was prerable to regravel}ing for two out of four sections, while the two other sections will be rehabilitated by regavelling. The AADrs and ERR's for the two sections to be upgraded are shown below: Length AADT 1992 ERR (in kn) *i) Mbarara-Ibanda 66.5 354 18.2% (ii) 1. Gayaza-Bugema 14.9 376 18.2% 2. Bugema-Zirobwe 16.0 317 20.4% The ERR!s for the two sections to be regravelled are estimated at 15 percent, and the average ERR for the four sections jointly is estimated at 18 percent. 5.10 Rehabilitation of Feeder Roads: During project preparation, information on average agricultural characteristics desegregated to district level as well as on traffic composition and traffic flows was collected, in order to allow consultants to undertake a feasibility study of a typical road. Utilizing the combined consumer surplus/producer surplus methodology, a return of 21 percent was found. The sensitivity analysis indicated a high sensitivity to the initial level of road access and the level of agricultural income. The major producer surplus benefits are seen as a combination of three agricultural factors: (i) a reduction in transport costs between smallholder farm and nearest market, resulting in increased prices for smallholders; (ii) reduction in loss of perishable products due to road impassability, leading to an increase in marketable volume, and (iii) improved reliability of marketing and access to inputs and extension services, leading to a gradual increase in quantity and variety of crops produced and marketed. For the purpose of calculating a weighted average for the project as a whole, a conservative figure of 21 percent was utilized. A base line data and monitoring system is being established to improve the collection of relevant agricultural and traffic data; this will be in the form of specific information by zone of influence for a sample of representative roads proposed for rehabilitation (refer to pam 4.20). This will allow MOLG to monitor the actual feasibility of specific roads and apply feedback to the program starting after about five years. -54 - 5.11 For the purpose of establishing the composition of the Rehabilitation Program, selection of individual roads was undertaken with the help of a simplified and transparent systn which ranks roads by agroeconomic impact, using (a) investment costs for rehabilitation net of savings in fiture maintenace costs, (b) number of fanning households in the zone of influence, (c) improvement in accessibility of the road, and (d) potential increase in net agricultural income per household in the selected zone as compared to other agroeconomic zones, as its variables. This approach was discussed with District representatives and they found the rank order resulting from the approach generally acceptable. 5.12 Other Socio-Econonic Aspects: The rehabilitation of the feeder roads will be undertaken with labor-based, light equipment supported technology. The esfimated labor input needed for rehabilitation is estimated at 2,000 workdays per kilometer. Contractors would be expected to employ up to 200 people for 60 working days each over a six kilometer section which would take them about 4 months to complete. For the 680 km of rehabilitation an aggregate of 22,600 persons would work for similar periods on the selected feeder roads during the four-year project period. The local population living within reach of the road would constitute most of the workforce, and they would work together with a limited complement of skilled supervisors, foremen and plant operators coming from outside their areas. The temporary increase in cash income would therefore be an added benefit for the households in the roads' sphere of influence. More permanent work would be created by the revival of the feeder roads maintenance programs on the district level. It is expected that with an improved flow of maintenance financing the aggrega number of road naintenance workers, either in public service or working for contractors, would show a considerable increase over the actual number of government lengthmen still on tlhe districts' payroll. C. IMPACT ON WOMEN 5.13 Improvement of transport infrastructure would benefit women in the areas where the selected road sections have an impact by facilitating and naking goods transport less expensive. This would include agricultural produce for human consumption, which affects women either as producers or consumers. Access to social centers would become easier. The feeder roads components would be expected to have several noticeable effects on rural women living in the roads' zones of influence: they may find some their tasks including headloading produce to market made lighter, while at the same time putting in more work in the field to produce a lager output. The incomes of households as units are expected to increase permanently as a result of the agroeconomic factors mentioned above. Moreover, employment on feeder road rehabilitation will be offered to both men and women. D. ENVIRONMENTAL IMPACT 5.14 Ihe project is a category B project and was analyzed during project appraisal by an environmental specialist and a Ugandan physician specialized in AIDS problems. The possible positive project effects, described elsewhere in this chapter, are considerable and far outweigh the project related risks of environmental degradation or spread of AIDS. Environmental risks in the mam and feeder roads components were found to be small, because the roads activities will practically all be undertaken within existing rights-of-way, without intruding :nto any consecrated areas of national interest or causing illegal incursions on protected higher mountain forest areas of Mount Elgon. An AIDS awareness action program will be undertaken in Districts participating in the rural feeder roads program, an existing N-" (Non Government Orgapiation) will be - 55 - subcontracted for this action. URC's ongoing ferry operations, are carrying fire hazard and water pollution risks which need to be remedied urgently, and the project would include actions agreed between the Government and IDA to prevent or mitigate these negative effects. The Project would provide financing where needed for mitigation actions, both in AIDS awareness and in fuel spill containment. The specific actions are included in the relevant chapters, but a summary follows below. 5.15 For main roads, (i) the detailed designs for strengthening, upgrading and rehabilitation/regravelling have already been prepared. They cover provisions to prevent soil erosion and execute drainage works in such a way that adjacent farms are not flooded and malaria risk, which derives from stagnant water, is reduced; also, contractors are not to leave behind unprotected gravel pits. All this is in accordance with good professional standards. MOWTC agreed that they would further incorporate the necessary provisions in the supervising engineers' and contractors' contracts to ensure that execution of works would be undertaken accordingly; (ii) the detailed design on the Kampala-Entebbe road makes specific provision for increased safety of pedestrians and bicyclists, and MOWTC would arrange for strict supervision of this aspect among others during construction. For feeder roads, (i) local authorities together with the Ugandan project manager, and with advice of the project coordinator and staff of the ongoing Mount Elgon Conservation and Development Project would pursue a sensitization program of the population for effective control of incursions, which could include guarded barriers at the end of the motorable sections of roads leading toward the higher slopes, and set up monitoring systems on illegal logging and charcoal production; (ii) the Ugandan project manager, with advice from the project coordinator would engage the services of non-governmental agencies already active in the districts of Mbale and Tororo with community involvement to expand their awareness campaigns among the local population in the project impact areas before the arrival of the workforce from outside the districts. Draft contracts for these services would be submitted to IDA November 1, 1994 of the project, and trining would start at the time of the workshop. The Ugandan project manager would also ensure that first aid kits and briefed personnel would be available in the feeder road training program. W'ithin the railway component, URC would deal with industrial hazards and waste disposal, by establishing a satisfactory code of personnel conduct together with a training program of staff and a continuous monit-ring program. Financir3 for fuel spill containment equipment to fight mninor spills is being prov under the project and equipment would be installed by July 1, 1995. 5.16 Indirect effects of the project or effects of ongoing activities which interact with project activities would require additional action outside the scope of this project by the responsible Ugandan authorities. They include the National Environmental Action Program Secretariat for a biochemical campaign to contain the water hyacinth on Lake Victoria and in the ferry terminal at Port Bell; the Ministry of Agriculture, Animal Industry and Forestry for the promotion of livestock in Western Ugandan areas as an alternative to unwarranted cultivation of marginal lands and essential swamp areas; and the local authorities along international trucking routes to issue no licenses for truck stops close to or in population centers to reduce the spread of AIDS. URC is also advised to restrict the use of bromicil on weeds on the railway track to areas where the herbicide will not get into streams or swamps and hence into drinking water. Major oil spills on Lake Victoria concern all riverain countries. The appropriate inter governmental committee for Kenya, Uganda and Tanzania would prepare a contaimnent plan for ferry oil and fuel spills, mobilize financing for the required equipment and establish an enforcement mechanism. The Project would provide for equipmcnt to contain minor spills in and around Port Bell. IDA would receive regular -56 - progress reports from the respective executing agencies on the environmental actions included in paa's 5.15 and 5.16, and include the actions for review in the Mid Term Review. E. PROJECT RISKS 5.17 A macro-economic risk which would affect most project components would be the chance that the Government would not achieve a significantly higher Revenue/GDP ratio, would therefore continue to suffer severe budgetary constraints, and would end up cutting back even core road maintenance recurrent expenditure. As the Government is getting an increasingly finn grip on budget expenditures, revenue is edging up and a Special Road Maintenance Account has been agreed on, this risk is diminishing. Moreover, annual work program discussions about a sustainable level of road maintenance -and core road rehabilitation were included in the project design in order to mitigate this risk. Governnent-IDA macro-economic policy discussions, including a series of Public Expenditure Reviews, would seek to strengthen the Govermnent's commitment to road maintenance. A sector-wide risk is that the Government would not substantially improve its management of public investments, and would allow deterioration of the country's infiaswtructure base by insufficient prioritization, lack of transparency and inefficient execution of investnent projects. The agreement reached on a Letter of Transport Sector Policy was intended to mitigate this risk. There is also a risk that Uganda Railways Corporation would move too slowly in its restructuring process, and would as a result see its market share diminishing and its financial position deteriorating. By providing specialist advice to the transformation process itself as well as in the crucial areas of finance and commerce, this project tries to keep URC's restructuring moving forward rapidly. Moreover, if Kenya Railways and Tanzania Railways Corporation do not improve their performance, URC will not be able to provide efficient services to the seaports. IDA is simultaneously providing assistance to KR and TRC, which, if contnued, would help alleviate this risk. -57 - VI. AGREEMENTS REACHED AND RECOMMENDATION A. AGREEMENTS REACHED Agreements were reached during negotiations on the following: General: 6.01 (a)(i) by not later than January 31 of each year, Govenunent and IDA shall review the size and composition of the Transport Sector Investment and Recurrent Expenditure Plan (TSIREP) (refer to para 2.47); (ii) the Govenmuent shall not make, or cause any investments to be made in the transport sector which were not included in the TSIREP and wlich exceed the equivalent of US$5.0 million in any one year without prior consultation with, and the consent of the Association. The Association's consent shall not be unreasonably withheld (refer to para 2.47); (iii) the Govenmnent shall fiurther ensure that any investment outside TSIREP which exceeds the equivalent of US$1.0 million shall only be carried out if its economic rate of return is not less than twelve percent (refer to pam 2.47). (b)(i) by not later than March 31, 1996 the Govermment shall conduct a Mid Tern Review jointly with IDA. The Review will cover, inter alia, the implementaton and management aspects of the project, the implementation procedures, progress made by the project, perfornance and use of technical assistance personnel including the transfer of responsibilities to local staff, the role of national counterpart staff, status and results of training, review of the Strategy Paper on Rural Feeder Roads Rehabilitaton and Maintenance, evaluation of the financing mechanism for main roads maintenance, evaluation of MOWTC performance with respect to its road maintenance niandate, environmental measures taken, reporting, accounting and auditing perfornmnce, disbursement procedures and sustainability of the project; (ii) by not later than ninety days before the Review, the Government shall submit to IDA for its comments a report including an evaluation of the progress achieved in implementing the project; and (iii) the Government shall cany out the recommendations ensuing from the Review promptly after the Review (refer to para 4.21). (c) the participating government ministries, District administrations and URC will submit certified copies of their accounts and annual audit reports to IDA not later than nine months after the end of each fiscal year (refer to pam 4.19). Main Roads: 6.02 (a)(i) the Government has adopted the FY95-FY98 National Prioritized Main Roads Maintenance Program (NPRM) including the IDA-supported Main Roads Maintenance Program (MRMP), the size and composition of which are satisfactory to IDA, and shall implement NPRM and MRMP in a manner satisfictory to IDA, during FY95 through FY98 (refer to para 2.55); (ii) the Government has committed itself to allocate an amount of US$13.5 million equivalent in FY95 and satisfactory amounts for local counterpart funding of NPRM in its annual budgets for FY96 through FY98 (refer to para 2.55); this will include an increasing share of Government financing for MRMP (refer to para 3.38). -S8 - (b) not later than four months before the start of FY95 and each subsequent FY, the Government will review vrith IDA the proposed annual NPRM and MRMP programs, their budget requirements and allocations (refer to para 3.38). (c) by not later than November 30, 1994, the Government will prepare and submit to IDA for its review a training program for MOWTC staff, and thereafter implement the program taking due account of IDA's views and comments (refer to para 3.15). (d) by not later than March 31, 1996, the Government will evaluate: (i) the performance of its financing mechanism for road maintenance (refer to para 2.56) to determine the adequacy of local counterpart funding including timely, reliable and transparent allocations and releases, with a view to introducing an effective financing mechanism, satisfactory to IDA, with effect from FY97; (ii) the performance of MOWTC in executing its mandate with respect to road maintenance and introduce changes in the Ministry's mandate as appropriate (refer to para 2.57). Rural Feeder Roads: 6.03 (a)(i) MOLG shall adopt, and the participating districts, with the assistance of MOLG and a team of consultants, shall execute four year rehabilitation and maintenance programs (FY95- FY98); the size and composition of the first two years of the rehabilitation program and the first year of the maintenance program have been agreed upon in detail with IDA (refer to paras 3.17 and 3.20). (b) the Govermnent shall, with respect to feeder roads maintenance in the participating districts, take all measures necessary to ensure (a) that the local costs of the agreed routine maintenance programs for feeder roads shall be shared equally by the Government and each participating district, and (b) that the Government will bear at least five percent of their periodic maintenance costs (refer to para 3.21). (c) not later than four months before the beginning of each FY, each district and MOLG shall review with IDA the size and composition of its feeder roads rehabilitation and maienance *program for the ensuing FY, as well as physical, financial and staff inputs and work outputs in the preceding FY (refer to paras 3.17 and 3.20). (d) by not later than July 1, 1995, MOLG shall adopt a scheme, satisfactory to IDA, under which MOLG-owned equipment procured under the project and under the Fourth Highway Credit will be leased to contractors under the supervision of consultants (refer to pam 3.19). (e) MOLG shall continue to employ a transport planner to implement a feeder roads planning and monitoring system, and to train MOLG staff in transport planning and management (refer to para 3.25). (f) by not later than November 30, 1994, MOLG shall complete a baseline study in the participating districts covering the status of the feeder roads and the impact areas, in particular of agricultural production, crop value and traffic flows (refer to para 4.20). (g) by not later than June 30, 1995, MOLG shall (i) establish and subsequently implement a mnitoring system covenng feeder roads activities and the impact of the feeder roads program on -59 the rural economy, and (ii) complete a road inventory data base covering the participating districts (refer to para 4.20). (h) by not later than March 31, 1996 MOLG shall revise its strategy paper and action plan on feeder roads rehabilitation and maintenance and adopt financing methods and techniques which have proven to be most effective in light of experience during project implementation (refer to pam 3.18). Railways 6.04 (a) for each of the FY after December 31, 1995, URC shall maintain an operating ratio not higher than 110% in 1996, 103% in 1997, 102% in 1998 and 94% in 1999. Before October 31 of each year, URC shall review whether it would meet the requirements in the current and the following year, provide the results of the review to IDA, and take all necessary measures to meet the requirements (refer to para 2.64). (b) by July 1 of each year, with effect from July 1, 1995, URC will ensure that the amount of bills overdue by more dtan three months does not exceed 25 percent of total bills issued during the 12 preceding months (refer to para 2.66). (c) URC shall promptly submit claims for compensation to be paid by the Government related to Government-directed, non-remunerative services, and the Govenunent shall start comnpensation payments at the latest by July 1, 1995 (refer to para 2.64). B. CONDITIONS OF EFFECTIVENESS 6.05 (a) The Borrower shall finnish to the Association: (i) a satisfactory Transport Sector Investment and Recurrent Expenditures Plan for FY95 through FY97; and (ii) a satisfactory Inplementation Manual (refer to para 4.18). (b) In view of the need to ensure adequate staffing for project implementation, (i) MOWTC shall keep the three positions of principal engineer in the road maintenance section, which have been filled in the recent past, filled with staff whose qualifications are satisfactory to IDA (refer to para 3.14); and (ii) MOLG shall assign adequate staff including a project manager to be stationed in Mbale, two district engineers to be stationed in Mbale and Tororo, respectively, and an economist and a planner in its Engineering Departnent (refer to paras 3.25 and 3.27). C. CONDMONS OF DISBURSEMENT Main Roads: 6.06 (a) Disbursements under the main roads component will be contingent on the Government allocating not less tian US$13.5 million equivalent for main roads maintenance related expenditure in its FY95 budget (refer to para 4.14). -60 - Feeder Roads: 6.07 (a) Disbursements under the feeder roads component will be contingent on (i) MOLG employment of a teamn of consultants which wili assist MOLG and the participating DAs in project implementation (refer to pam 4.14); and (ii) fulfillment of the conditions of effectiveness of the NDF Credit (refer to para 3.40). Railways: 6.08 (a) Disbursements under the railways component will be contingent on (i) the signing of a Subsidiary Loan Agreernent between the Government and URC (refer to para 4.01); (ii) appointmeUn by URC of the three management experts (refer to para 4.14); and (iii) establishment of URC's capital structure by the Government and URC in the context of the Performance Agreement (refer to para 2.37). D. RECOMMENDATION 6.09 On the basis of the above agreements, the project is suitable for an IDA Credit of SDR 54.5 nillion (US$75.0 Million equivalent) on standard IDA terms. Annex 1 Page 1 of 7 Telephnes: M,. . Ministry af Finance and Ka"ZP8IU 2O5~ & Z32S70 Eonomic Planning. jeix. 400 -t Lines) P.O. goX 8147. .'xdnw cFtr.~- LKapala,. *fi|WatwycxtespondAnSn -J IgandJa. March 3rd 1994 To Ztr. Edward V..K. 3aycox Vice President, Africa pgegion World Bamk Washing-ton D._C. . .~~c Dear Mr. 7Taycox, 'e: UGaJD& WiPoNSPORT SECTOR. PLI:rc 1. The following describes the Government of Uganda's Strategy for the Transport Sector and is to serve as the agreed framework -within which tle Government and the Association intend to -implement the proposed Transport Rehabilitation Project- 2. General P=rinoIplq: An etficient transport sector is essential for the development of a8L integrated, self -sustaining economy. Considerable progress has been =ade in recent years in rehabilitating trans;port iastructure, particularly in the road nd rail sub-sectors, and Government continues to girve high priority to the transport sector. However, as work on the most obv-ous priorities for rehabilitation (e.g. the Northern Corridor route) is almost completed, txe next phase will require much more careful planning and diffricult choices for public expenditure not only bet:ween investment projects, but also between maintenance and invest=ent. GovernMent Pol cy in the next phase will be focussed on improved transport and communications services for accelerated development and for consolidation of National Unity. To this end, the Gov'ernmenat will rehabilitate, construct, own and ensure proper mai"ntenance of all transport infrastructure in general, towards ecornomic integration of the country as a- whole. The Government will not, as a rule, d-irectly participate irn the prov-ision of transport services, except in thLe case of strategic activities. Its zrole with respect to the supply 'of transport services is to clearly define by law, and efficiently exercise it:s regulatory powers vis-a-vis public and private operators. In this cfontext, tbh GovcatmennL will continue the.policy of de facto free access to thLe transport sexvices market and of letting the mnarket forces determine the tarifrs for the trucking industry and the railways. The Government will also implement Axle Load control and coordinate this with neighboring countries, as well as safety measures for road'users to reduce road accidents. Annex 1 Page 2 of 7 Issues and Actions 3. Transport Planning; The Governent will select and prioritize transport sector Investaments and recurrent expenditures in a rational. manner. This is particularly necessary at this stage, when many ongoing and new projects are co=peting for very limited resources. The Government will utilize its three year rolling Rehabilitation and Development Plan to derine its priority investment requirements. Additions to this plan will be made only after thorough analysis of alternative ways of executing the project, the preferred solution's economic costs and benefits, riss and remedial action, with due consideration given to optimum use of domestic resources and labor-based techniques, safety precautions and a.environmental protection. With respect to mairn roads Maintenance, the Four Year National Prioritized Main Roads Maintenance Program for FY95-Y98 will take precedence. A five year High-way Plan (PY95-FY99) covering both: main roads InaintOfnance and Ynvestnent Plan has been drawn up and will be reconciled with the RDP annually for the purpose of additions to RDP. For maintenance of feeder roads, the principles of the Strategy Paper for Rural Feeder Roads Rehabilitation and Maintenance will continue to provide the guiding principles. 4. Balanced rehabilitation-maintezance in maim roads; In order to reaffirm its decision to implement a balanced program of =aintenance and rehabilitation, the Government intends to implement a Three Year Transport sector Xnvestment and Recurrent Expenditure Plan (TSIREP) for PY94-FY97 of which the indicative figures for PY 94/95 are attached, and will roll this- over annually. 5. Road MainZteinauceprogram: With respect to the main roads, the Government recognizes that maintenance of recently rehabilitated roads has to be put on a sustainable basis and given priority over further rehabilitation arid construction so that the valuable assets embodied in the rehabilitated roads do not deteriorate. within maintenaLnce, priority will be given to routine over periodic maintienance if scarce resources make it necessaary to prioritize. To this and, the Government has adopted the Four Year National Prioritized Main Roads : Maintenance Program, the annual totals of which are shown below and which will constitute the program for maintenance operations in the country. The Government recognizes that financing the maintenance of main roads is basically the Government's responsibility, and has therefore agreed to; (i) provide the following armual Government cointributions during the progra:m and; (ii) increase its contribution by similar amounts in the period beyond rY98, until Government financing reaches 100 perdent. Annex I Page 3 of 7 E'r95 FX96 Fy97 FY98 TotaL1 YeiO. YeacS (Ua ML1Uion EgWiv1ae?t) Total Cost 24-9 33.4 .41.8 42.0 142.1 GoVernme~ Share 13.S 17qQ 20.0 24.0 74.S Government has obtained indications ot donor support to finance the remainder of the costs during FY95-FY98. In order to achieve the ultimate target of 1_00* Government financing or road maintenance, the rate of enlargement of the road network for which MoWTC is responsible will be controlled. Further donor support is being sought by Government to f inance -the capacity building component of a comprehensive road maintenance programme. S. 6 eeoder Roads Rehabilitation: With respect to the rehabilitation of feeder roads countrywide, the Government is pairsuing in the first instance an improvement to all weather accessibility of the rural areas rather than provision of feeder roads surface with a high degree of smoothness. Priority will be given to those roads which could first unlock areas with potentially high agricultural surplus. Social considerations such as improved access to schools and health centers would be supplementary considerations. The responsibility for rebabilitation of feeder roads would be gradually transferred from the Iimistry of 1ocal Governaent to the districts as their -capacity to manage this task improves. This transfer will be accelerated as much as possible in light of the feacentralization Policy introduced in 1992. In contrast, the responsibility for maintaining feeder roads is already vested in the respective districts, but the Government will match the District contributions for local costs of routine manual maintenance. 7. Interim. amd Final Financing Mechanisms for all Road xaintenance: The Government will continue for time being to release budgeted maln roads maintenance funds through normal budget procedure while exploring the possibility of the URA paying budgeted amounts direct to a Road Preservation Account in the )MOWTC without passing through the Consolidated Fund. Should such arrangements fail to solve the problem of erratic releases of budgeted funds by the end of l995/96, the Government of Uganda will take steps to establish a Road Fund. The Government w-ill continue to apply the present funding procedures for the rural feeder roads and urban roads for the next four years- 8. Institutional Arrangements; The Government will -. in the framework of the ongoing civil service reform - make provisions for adequate staffing, training, remuneration and supervision of staff responsible for road maintenance activities throughout Government. It will introduce changes, if found necessary, in MOWTC's mandate for main roads maintenance on the basis of the forthcoming recommendations of the Highway Fund/Highway Authority Study by Kid Term Review. It will also actively pursue ways of 3 Annex 1 Page 4 of 7 involving all major stakeholders in roads, including the private sect-or, in decisions concerning the introduction and supervision of new financial and institutional arrnents. 9. ILocal Construction InduStry: Government recognises the shortage of technical and %management skills in the local construction industry both in the public and private sectors. A tailor-made four-year road industry training programme has been developed to address the training needs of the sector. The Government will actively promote the deovelopment: of a viable local contracting industry, in particular through training end employment of contractors for feeder roads rehabilitation and maintenance work, employment of contractors for routine mechanical maintenance of main roads and introduction of equipment leasing or rental arra.ngements. Targets for the share of contractor executed works, as contrasted to force account works, are: FY96 50% of annual maintenance budget. --Y97 65% .. a FY98 75% n n Labor based, light equipmnent supported techniques will be used wherever they prove to be more cost effective.. 10. ConmerQial Orientation and improved rinancial &utonomy for *U3C: Considerable progress has bqpn made in recent years in rehabilitating Uganda Railways Corporation's system. However, recent developments in other areas of Government policy will. constrain the future size and pat:tern. of URC operations . Eirstly, the e4ctensive rehabilitation of .the trunk road network has significantly reduced road transport costs. Secondly, Government-'s policy of liberalizing tiLe marketing and etxport of agricultural commodities is likely to lead to a reduction in the role of large parastatals and to smaller consigjments- It will become increasingly important, therefore, for URC to effectively compete with other transport modes if it is to be a viable commercial organization. Particularly with the introduction of the Port Bell terminal, one can clearly distinguish between tRC's operations of profitable external ferry services on liake Victoria and its loss-making domestic rail services. As mairine traffic increases URC must improve the utilization of its. tbree wagon ferries before investing in additional capacity. The Government considers URC a strategic transport agency which should remain in tihe public sector but operate as a commercially oriented. increasingly Einancially autonomous enttity. The Government has recently signed a Performance Agreement with tJRC,. which will become effective on 1 July 1994. It covers ORC's tapital structure, equal tax treatment with competing transport modes, tariff setting, debt collection, mnarketing strategy, and the. Government's obligation to compensate tJRC for non-remunerative services that it requires URC to provide. 4 Annex I Page 5 of 7 11. Aix Mra=sportatiou: Tte rehabilitation of Uganda Airlines Corporation is under way, beginning with the restructuring of top management. It is imperative that henceforth tJAC be run on a profitable basis without recourse to Government subsidies. One of the new management's first tasks will be to assess thoroughly the airline's route structure and fleet composition ad to examinae all options for ensuring profitable operations. Partial privatization of the airline should also be considered. 12. It has already been noted that since the airline suspended international services in 199o, international services can be provided to Uganda with or without UAC. Additional airlines are. empected to fly here once air safety and other facilities at Entebbe Airport have been brought up to international standards. UAC will require a massive investment in new aircraft if it is to resume long haul international operations. Pooling arrangements, such as those recently signed by Uganda, Tazazia and Zambia for an "African Joint Air Services", will help to promote regional integration and will offer better prospects of :profitable operations- i3. Govrernment's medium ter priority in air transport should be the rehabilitation of facilities at Entebbe Airport so as to encourage airlines, whether foreign or domestic, to operate into Uganda, as well as the rehabilitation of other airports and aerodromes thxroughout the country. The Govaernment's Transport s.ector Policy will adjust continuously to changing circumstances in the country and in Eaastern Africa. Sincerel(yo1rsr {~~~ J. & Xayanj MrXST Or YnDANCE MM ECONXC PXAM=G Annex 1 Page 6 of 7 TRANSORT SE3CT3OR 3nDWCAT:VE 21994195 3RDP EWf)ZTURM. EXEDITURES -PPJECr SJBSECOR USh. BLN TR03 (B) NALUKOLOGO WORKSHOP 1,9 TR06 (A) TELECOX SYSTDl 0.1 TRO9 (A) REHAB .- ROI7NG STOCK 0.8 TR35 (C) P - RAILWAYS 0.6 RES RADAR FOR Fr3RRIES 0.1 RES ACIS PHSE 0-4 SUBTOTAL RAILWAYS 39 AV-IAomt TR17 (A) REHAB OF ENTEBSE AIRPORT - RNWAY/NAVAIDS 17 . 5 SOBTOTAL AVIATION 17.5 ROAD INFASTRUCTURB Feeder Roads TR26(A) REi. a X4INT. FEEDER ROADS--. GTZ 0.4 TRIG (D) REAB. 3FEEDER ROADS - IFJAD 0.8 TR16 (E) REEMB . FEEDER ROADS - BADEA 3.4 TR16 (F) CAMNT_ FEEDER ROADS - ADB 7.3. -TR16(G) REHAB_ FEEDER ROADS - JICA 0.9 TRI 6 (H) REHAB- FZEEDER ROADS - ERC II 0.7 TR35(3) TRPREH. & XAIN!. FEEDER ROADS 3.1 Subtotal Feeder Roads 16.6 Main & Urban Roads TRII (A) ROAD MAINT. EAST UGA - -w 6.3 TR19 (A) ITYANA-FORT PORTAL ROAD 2.0 TR20(A) IGANGA-TIRnfYI-MBALZ ROAD 7.4 TR20(B) CAYAZA-KALAGX ROAD 3-0 TR23 (A) REHA. MAJOR BRIDGES - XFW 7.0 TR24 (A) PER. OF XzA/OTHR URBAN RDS - JICA II 0.7 TR24(B) REHAB. OF KLA CITY ROADS - EEC 14.9 TR35(A) TRP IN ROADS MAINT. 9.5 TR35(A) TRP REHAB. MAIN RDS- & TA 8.2 TR36(A) SOUTH WEST ROAD MAINT. .351 TR41 (A) ROAD RESEALIfNG UNIT O.S TR4Z (A) MASIDI-APAC-LIRA-KITTGUM 6.9 MSO1(A) NURP - ROADS 9.0 Subtotal Maixx & Urban Roads i8.5 SUBTOTAL ROAD 322FRASTRUCTURE 95 .2 Aumex 1 Page 7 of 7 9%?UDZE MM4 CA) PTAL OWADS 0.5 TR2BSA) C SS:E:F ROAP ZZTWOpK STUD) 3.7 TR33t A) IIROv Vm OF rRY SEvICES 0.3 *W3sOT1L mwDIS 4-5 . 9h wo ANSPORd S33OR S21.0 Ri3s PROPOSE PRoJzECTS STLL :N RESERVE LIST UGANDA t b TRANSPORT REHABIUTATION PROJECT S U D?A N TRANSPORT NErWORK sUDAN / F*jd DRoolss (9 jn ; \/j/#" Roods \A c pjXi Pd.imy bi.tl - I, __PnmagcwG v-vl *.boo_o !bSE 5- 9- d rg o _ i , ',' _ -- K E N Y A S600doy bit f 5 1 ' '' - Oth. teods ( SK R i &w - l' R_ ...sda c l Al '_ . ,E N Y A -O* tood 'Ipi / '7 JINJAS ODiid c5.tfl§ b.rid I. L UU I\- \ 1X ~~~- RoiI~~~~~~~~~~~~oo4. I NUB ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ooT' KOOEP0 0 200 0 6 0 -IES 0 0 0 6 Z A IRE AMI Od2IND NW ' ' ' ' ' °°* OSAA / M 7~ ~ -. 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