Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7551-MAI STAFF APPRAISAL REPORT MALAWI INFRASTRUCTURE PROJECT October 16, 1989 Infrastructure Operations Division Southern Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Currency Unit = Malawi Kwacha (MK) US$1.00 = MK 2.60 (October 1988) US$1.00 = MK 2.73 (1989) MK 1.00 = 100 Tambala SDR 1.00 = MK 3.53 Fiscal Year (FY) April 1 to March 31 Weights and Measures 1 imperial gallon (Ig) = 1.2 US gallons = 4.55 liters (1) 1 cubic meter (m3) = 220 Ig = 264.2 US gallons 1 liter per capita per day (lcd) = 0.2642 US gallons per capita per day 1 million imperial gallons per day (Igd) = 4,546 m3/day 1 meter (m) = 3.28 feet (ft) 1 millimeter (mm) = 0.039 inch (in) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km2) = 0.386 square mile (sq mi) = 247 acres (ac) Abbreviations and Acronyms ADMARC =Agricultural Development and Marketing Corporation AfDB =African Development Bank AfDF =African Development Fund DANIDA =Danish International Development Agency DOW =Department of Water DRIMP = District Roads Improvement and Maintenance Program DWSF =District Water Supply Fund EDF =European Development Fund FRG =Federal Republic of Germany GTZ =Gesellschaft fur Technische Zusammenarbeit EPDD =Economic Planning and Development Department ERR =Economic Rate of Return GDP = Gross Domestic Product GOM =Government of Malawi HDM =Highway Design and Maintenance Model ICB =International Competitive Bidding ILO =International Labour Office JICA =Japan International Cooperation Agency KfW =Kreditanstalt fur Wiederaufbau LCB =Local Competitive Bidding MLG =Ministry of Local Government MOW =Ministry of Works MTC = Ministry of Transport and Communications MWS =Ministry of Works and Supplies (until the end of March 1988, then sub- sequently renamed Ministry of Works (MOW)) ODA =Overseas Development Administration OPC = Office of the President and Cabinet PVHO = Plant and Vehicle Hire Organization SADCC = Southern African Development Coordination Conference SATCC = Southern Africa Transport and Communications Commission SIAP =System for the Inventory and Analysis of Highway Projects TPU = Transport Planning Unit UK = United Kingdom UNCDF = United Nations Capital Development Fund UNDP = United Nations Development Programme UNHCR = United Nations High Commissioner for Refugees USAID = United States Agency for International Development UT(M) = United Transport (Malawi) vpd = vehicles per day FOR OFFICIAL USE ONLY MALAWI INFRASTRUCTURE PROJECT STAFF APPRAISAL REPORT Table of Contents Page No Credit and Project Summary ...................... i-iv I. The Infrastructure Sector. 1 A. Country Background. 1 B. Institutional Framework. 3 C. Past and Planned Investments in Infrastructure. 4 D. The Highway Subsector. 6 E. The Water Supply Subsector .15 F. Public Buildings .18 G. Previous Bank Group Projects .18 H. Rationale for Bank Group Involvement .21 I. Other Donor Agencies' Past Involvement .21 II. The Project .................................................. 22 A. Objectives ............................................... 22 B. Project Scope ............................................ 22 C. Detailed Project Description ............................. 23 D. Project Costs ............................................ 30 E. Financing Plan ........................................... 32 F. Implementation and Procurement ........................... 36 G. Disbursements ............................................ 38 H. Accounting, Auditing and Reporting Requirements .......... 40 I. Environmental Impact ..................................... 40 J. Riparian Matters ......................................... 41 III. Financial Analysis of Water Supply Schemes ................... 42 A. Past Operating Results ................................... 42 B. Financial Position ....................................... 44 C. Future Performance ....................................... 46 D. Financing Plan ........................................... 47 E. Tariffs .................................................. 48 F. Financial Covenants ....................................... 49 This report is based on the findings of a Bank appraisal mission which visited Malawi in September-October 1988, comprising Messrs. Preben Jensen (Principal Highway Engineer and mission leader), Ebenezer Aikins-Afful (Senior Sanitary Engineer), Jan V.R. Segerstrom (Technical Educator), Arun Banerjee (Senior Financial Analyst), and Kenneth Clare (Senior Economist, Consultant), and Mesdames Imogene Burns (Infrastructure Economist) and Asamanetch Fantaye (Operations Assistant). Ms. Kanyhama Dixon-Fyle (ILO Project Officer) assisted the mission in appraising the Rural Transport Service Component. Mrs. Brigida Arriaza-de-Figueroa provided secretarial support in the preparation of the report. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. IV. Project Justification ........................................ 51 A. Economic Evaluation of Project Components................ 51 B. Affordability of Water Supply............................ 58 V. Agreements Reached and Recommendations .. 59 ANNEXES 1. Related Documents and Data Available in Project File ......... 62 2. Road Design Standards Adopted by MOW ......................... 66 3. Infrastructure-related Projects in Malawi .................... 67 4. Technical Assistance, Studies, and Training Requirements ..... 68 5. Candidate Paved Roads for Rehabilitation and Strengthening... 74 6. Candidate Earth and Gravel Roads for Rehabilitation .......... 75 7. Candidate Roads to be Improved to Paved Standard ............. 76 8. Candidate Paved Roads for Resealing .......................... 77 9. List of Bridges to be Reconstructed .......................... 78 10. Equipment and Plant Required by PVHO ......................... 79 11. List of Equipment and Materials for the Planning and Design Branches ............................... 80 12. Facilities for Road Maintenance Depot ........................ 81 13a. Rural Transport System ....................................... 83 13b. Rural Motorized Transport Pilot Scheme ....................... 85 13c. Pilot Integrated Rural Transport Project ..................... 88 14. Road Safety Program .......................................... 91 15. Specifications for Urban Water Supply Improvements ........... 96 16. Public Buildings to be Rehabilitated ......................... 101 17. District Water Supply Fund - Assumptions for Financial Projections ...................... 103 18. District Water Supply Fund-Income Statement .................. 105 19. District Water Supply Fund - Sources and Applications of Funds .......................... 106 20. District Water Supply Fund-Balance Sheet ..................... 107 21. Economic Vehicle Operating Costs ............................. 108 22. Economic Analysis of 1st Year Program - Road Rehabilitation and Improvement ........................ 109 23. Economic Analysis of 1st Year Program - Bridge Reconstruction ....... ..... 110 24. Economic Analysis of Urban Water Supply Systems ............. 111 25. Economic Analysis of Borehole Rehabiltitation Component ...... 112 26. Economic Analysis of 1st Year Program - Public Buildings ..... 113 27. Economic Analysis of 1st Year Program - Road Rehabilitation and Improvement in Case of Delay ....... 114 CHARTS 1. Organization of Ministry of Works ............................ 115 2. Target Implementation Schedule ............................... 116 MAP IBRD No. 21225 Infrastructure Project MALAWI INFRASTRUCTURE PROJECT CREDIT AND PROJECT SUMMARY Borrower: Malawi Beneficiaries: Ministry of Works (MOW) and the District Water Supply Fund (DWSF) for which the Department of Water (DOW) in MOW is responsible; and Ministry of Transport and Communications (MTC). Amount: SDR 22.3 million (US$28.8 million equivalent) Terms: Standard IDA terms with 40 years maturity. Project Objectives and Benefits: The main objectives of the project are to: (i) strengthen the management of MOW; (ii) restore or improve the physical condition of selected roads, thus facilitating the movement of traffic and lowering transport costs; (iii) expand the system of district roads thus providing improved access for many rural people; (iv) expand urban and rural water supplies; and (v) rehabilitate priority public buildings. Benefits expected from the project include savings in transport costs, increased supplies of potable water to many people with favorable effects on health and quality of life generally, better delivery of public services in various hospitals, schools, and other public buildings. Project Description A. MOW Management Improvement Program (i) technical assistance, training, and consulting services for studies, to improve MOW management; B. Roads (i) rehabilitation and strengthening of about 270 km of paved roads; - ii - (ii) rehabilitation of about 300 km of earth and gravel roads; (iii) improvement of about 115 km of earth and gravel roads to bitumen standard; (iv) resealing of about 200 km of paved roads; (v) extension of the District Road Improvement and Maintenance Program (DRIMP); (vi) reconstruction of 8 bridges; (vii) installation of new signs on the road network; (viii) procurement of plant, vehicles and workshop equipment for the Plant and Vehicle Hire Organization (PVHO) of. MOW; (ix) procurement of equipment and vehicles for the Road Planning and Design Departments of MOW; (x) construction and furnishing of 9 road maintenance depots and expansions to existing depots; (xi) pilot program for rural transport; (xii) road safety program; (xiii) a pavement overlay unit; (xiv) technical assistance and training for the Roads Department of MOW; C. Water Supply (i) construction of 7 urban water supply systems; (ii) rehabilitation of about 2,500 boreholes and development of a maintenance management system for boreholes; (iii) construction of 13 gravity-fed piped water schemes; (iv) technical assistance and training for DOW; - iii - D. Public Buildings (i) rehabilitation of selected public buildings, and development of a maintenance management system; (ii) expansion of Lilongwe and Zomba Training Centers; and (iii) technical assistance and training for the Buildings Department of MOW. Risks: The principal risk involved in the project is the possibility that Government's financial allocations for maintenance of infrastructure facilities may be inadequate. Government's commitment to the project, which helps to implement key development policies, should minimize this risk. For urban water supply, a possible risk is that DWSF would not generate sufficient revenues because the Government may be unable to authorize necessary tariff increases. However, Government has recently (April 1, 1989) taken steps to improve the financial standing of DWSP through its tariff increases of 20Z, an increase in line with financial targets specified in the financial plan. Summary of Project Costs: Local Foreign Total --------US$ million-------- MOW Management Improv. 1.5 5.9 7.4 Roads 23.8 54.8 78.6 Water Supply 11.1 20.4 31.5 Public Buildings 3.2 3.9 7.1 Base Costs 39.6 85.0 124.6 Contingencies (i) Physical 4.0 8.5 12.5 (ii) Price 6.6 14.0 20.6 Subtotal 10.6 22.5 33.1 Total Project Costsa/ 50.2 107.5 157.7 a/ Identifiable taxes and duties amount to US$5.9 million equivalent and total project costs, net of taxes and duties, are about US$151.8 million equivalent. - iv _ Financial Plan Local Foreign Total --------US$ million-------- IDA 9.9 18.9 28.8 AfDF 8.4 30.4 38.8 DANIDA 0.9 0.6 1.5 EDF 5.8 16.1 21.9 JICA 0.4 7.7 8.1 KfW 4.6 11.3 15.9 GTZ 0.2 2.7 2.9 ODA 4.0 11.4 15.4 UNCDF 1.8 3.2 5.0 UNDP 0.7 2.7 3.4 USAID 0.8 2.5 3.3 Government 12.7 0.0 12.7 Total 50.2 107.5 157.7 Estimated Disbursements (US$ million): FY90 FY91 FY92 FY93 FY94 FY95 Annual 3.1 5.8 7.6 6.6 4.3 1.4 Cumulative 3.1 8.9 16.5 23.1 27.4 28.8 Economic Rates of Return: z Roads 17 Bridges >50 DRIMP >12 Water Supply 6 Borehole Rehabilitation 20 Public Buildings 29 Map: IBRD No. 21225 Infrastructure Project MALAWI INFRASTRUCTURE PROJECT STAFF APPRAISAL REPORT I. THE INFRASTRUCTURE SECTOR A. Country Background 1.01 Malawi is a long, narrow, land-locked country situated in the Great African Rift Valley, with a land area of about 94,300 km2 and a lake area of 24,200 km2 (see IBRD Map No. 21225). A major escarpment runs the length of the country, separating the Lake Malawi plain from the plateau to the west; altitudes range from about 60 m above sea level in the Shire Valley in the south to over 2,500 m in the northern plateau. Rainfall averages between 750 mm and 1,600 mm, but is much heavier in the high plateau areas of Mulanje, Zomba, Viphya, and Nyika (4% of land area). 1.02 Malawi is characterized by a limited resource base, poorly developed social and physical infrastructure, and low per capita incomes. Despite these limitations, from independence in 1964 to 1978, GDP increased in real terms at the relatively rapid rate of 5.5% per annum, with much of this growth a reflection of steady agricultural expansion. However, beginning in the mid-1970s, Malawi's economic performance weakened as a result of external shocks, delayed policy responses, and intensification of structural imbalances. By the 1980s, growth of the economy had been checked by (a) a rapid rise in import prices (particularly fuel, capital goods and intermediate goods) and swings in export prices of Malawi's main export commodities (tobacco, tea and sugar), resulting in a fall in the country's terms of trade; and (b) droughts in 1980 and 1981 that caused a decline in export volume and forced the normally food-surplus country to import maize in large quantities. On the domestic front, Government resorted to deficit spending, financed largely by external borrowing on commercial terms. Inflationary pressures increased and the country's balance of payments position deteriorated. GDP did not grow at all in 1980 and declined by 5% in 1981. 1.03 In 1981, Government introduced a structural adjustment program to help restore macroeconomic stability and economic growth. This program was supported by successive arrangements from the International Monetary Fund, and three structural adjustment lending operations by the World Bank. A price liberalization program was completed, key relative prices and incentives were realigned, and measures to address structural problems were implemented, including a major restructuring of the parastatal sector. The adjustment package quickly yielded results, with real GDP growth of 4% per annum from 1982 to 1985. However, by the mid 1980s, external events again contributed to a further weakening in economic performance. These included (a) the rising external transport costs due to the closure of the rail lines between Malawi and the Mozambican ports of Beira and Nacala; and (b) the influx of a large refugee population fleeing the insurgency in Mozambique, now estimated to be about 750,000 or over 9% of the country's -2- population. From 1986 to 1987, the rate of inflation rose to 25Z and, with imports compressed well below historical levels and inventories virtually exhausted, real output fell by 0.2Z. 1.04 Despite the difficult environment, Government continued to implement structural reforms during 1987 and 1988. Smallholder agricultural marketing was substantially liberalized, agricultural producer prices continued to be adjusted, and further actions were taken to improve the performance of parastatals, in particular, the Agricultural Development and Marketing Corporation (ADMARC). The Government also initiated a program of tax reform, an important element of the structural adjustment program presently underway. In 1988 external developments took a more positive turn, as export receipts exceeded earlier projections due to an increase in tobacco prices and higher capital flows due to quick disbursement of adjustment financing. A 25Z rise in import level resulted in strong output performance, and by year-end manufacturing capacity had risen to 50-60Z from 30-40Z the previous year. This growth, combined with modest recovery in agriculture due to better weather conditions, led to growth in GDP of 3.6Z. However, inflation remained high, averaging 30Z throughout the year. 1.05 The presence of the refugees continues to represent a significant burden on Malawi's already strained resources, both in terms of budgetary outlays and increased workload for existing institutions. While relief agencies provide most of the funding for refugee programs, Malawi Government continues to support these programs through activities such as maintenance of boreholes in refugee areas, construction of access roads to the camps, and payment of salaries of Government staff involved in the supervision of relief activities. Additional costs arise from the increased maintenance and rehabilitation requirements for infrastructure that has deteriorated more quickly from intensive use, e.g., increased road maintenance due to the heavy vehicle traffic of relief activities. There is the further need to expand the infrastructure to compensate for services and facilities previously available to the Malawian population but now overburdened by the refugees. A recent Bank study of the Malawi Refugee Public Expenditure Program estimated the total cost to Government of these activities, after relief financing, to be US$14.5 million in FY 1988/89 and US$10.0 million in FY 1989/90. 1.06 With a population of about 8.0 million, growing at an average rate of 3.7Z per year and added to by Mozambican refugees, Malawi has one of the highest population densities per km2 of agricultural land in Africa. Since 90Z of the population lives in rural areas, and agriculture contributes over 90X of Malawi's exports, rural development is a primary economic and social objective. In addition to raising agricultural productivity, rural development is seen as an effective vehicle for the Government's policy of redistributing income in favor of the rural poor. Such development has involved improvement of road access to markets, public health facilities and other services for the rural population; it also has included providing more convenient and better quality water supplies in rural areas. 1/ Preliminary results from the 1987 Population and Housing Census. B. Institutional Framework 1.07 Responsibility for developing the three sectors -- roads, water supply and public buildings -- rests in the Ministry of Works (MOW). MOW, which is organized according to its three basic functions (Chart I), has offices in each of the three regions which are directly responsible for field operations for roads, water and other works. MOW also has a Plant and Vehicle Hire Organization (PVHO) with workshops in all regions and in most districts and a central workshop in Blantyre for major repairs. In total there are some 100 professional staff, 400 sub-professional and supervisory staff and 1,300 other salaried staff. MOW has in the past been administered by senior expatriate staff, financed by ODA of UK. These are gradually being replaced by Malawians. 1.08 Nationwide, about 97% of formal sector jobs have been localized. The rate of localization of positions in MOW has been somewhat slower particularly with regard to engineering positions. Of the 112 professional level posts in MOW, 53% are presently filled by Malawians and 29Z remain vacant. The accelerated localization has imposed an increasing burden on management of many of MOW's functions. The project will therefore provide support for integrated staff development, including substantial technical assistance coupled with local and overseas training. Implementation of this staff development component will also facilitate localization of MOW staff. At negotiations, the Government presented a localization plan for MOW. The plan sets targets for filling 27 positions, currently held by expatriates, with Malawian staff according to the following time schedule: 2 positions in 1989/90, 4 in 1990/91, 2 in 1991/92, 7 in 1992193, 6 in 1993/94, 2 in 1995/96, and 4 in 1996/97. The Government agreed to take all appropriate measures to implement the plan and meet these targets. 1.09 The Government has an active staff development program for selecting, educating and training nationals for professional positions. This program has not yet met the demand for qualified personnel, mainly because of a scarcity of suitable candidates. The private sector offers better salaries for experienced engineers and other technical personnel, and thus MOW has difficulty competing with private firms. Training abroad is provided with external assistance. The Polytechnic, part of the University of Malawi, is developing its capacity in the technical fields with the help of bilateral assistance. Good progress has been made in training lower echelon personnel, such as supervisors, foremen, equipment operators and mechanics in MOW's two training facilities in Zomba and Lilongwe. Development of the latter facility was financed under the Fourth Highway Project (Credit 1099-MAI, 1981, SDR 25.9 million), and Fifth Highway Project (Credit 1423-MAI, 1983, SDR 12.4 million, IDA Special Fund Credit SF-6-MAI, SDR 13.1 million, and Loan 2363-MAI, US$18.0 million). However, it requires further expansion and increased focus on technical/practical skills to accommodate the demand for training. Provision is made in the project for the expansion of both the Lilongwe and Zomba training centers. 1.10 Overall, MOW needs major strengthening to enable it to perform its wide-ranging functions effectively. As a result of management weaknesses and the underfunding of infrastructure maintenance during past years, serious deterioration of assets has occurred and much rehabilitation is now required, particularly for roads, boreholes and public buildings. In the - 4 - meantime, there is an urgent need to expand the water supply capacity in three large and four smaller urban areas. However, the principal unresolved issue relating to infrastructure development, maintenance and administration is that of improving the management capabilities of MOW. Under the proposed project, MOW will be reorganized and new management systems introduced; the basis for this planned reorganization is an IDA- funded consultants' study completed in January 1988 (para. 2.03). C. Past and Planned Investments in Infrastructure 1.11 Government's overall priorities among sectors and subsectors are reflected in the 5-year rolling public sector investment program. Investments in transport, water and public buildings infrastructure in the recent past are shown in the following table: Table 1.1 Public Investment in Transport, Water Supply, and Public Buildings 1982/83 - 1987/88 (MK million) Fiscal Years 1982/83 1983/84 1984/85 1985/86 1986/87 1987/881/ Roads 24.6 19.6 36.0 49.1 51.6 70.4 Railways and Lake 2.2 0.5 1.7 1.4 3.0 1.3 Civil Aviation 4.9 9.8 9.5 1.5 1.7 1.6 Other 1.1 0.8 1.0 0.7 1.9 4.2 Total Transport 32.8 30.7 48.2 52.7 58.2 77.5 Water Supply 8.7 6.6 8.4 5.8 5.6 15.7 Public Buildings 17.8 12.8 13.0 16.7 2.81/ 0.911 Investments in all Sectors 124.2 142.9 138.4 160.2 189.8 208.4 X of Total Investments Represented by: Transport 26 21 35 33 31 37 Water Supply 7 5 6 4 3 8 Public Buildings 14 9 9 10 1 - 1/ Estimate. Source: Public Sector Financial Statistics, 1984-85, and Malawi Government Economic Report, 1987 and 1988. Total investments in transport were relatively small in the 1982/83 and 1983/84 years, but increased steadily in all later years. Similarly, transport investments as a percentage of total investments reached a low of about 21Z in 1983/84, but continued to rise to 372 by 1987/88. Investments in water supply declined steadily throughout the same period until 1987/88 when expenditures nearly doubled over the previous high. Investments in public buildings decreased steadily in absolute and relative terms to less than 1Z of total expenditures in 1987/88. - 5 - 1.12 Planned public investments in infrastructure are shown in Table 1.2 below: Table 1.2 Planned Public Investments in Transport, Water Supply and Public Buildings 1988/89 - 1992/93 (MK million) Fiscal Years 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 Roads 41.8 52.9 82.4 72.9 88.8 76.4 Railways 21.0 34.4 28.3 23.7 19.7 14.4 Lake 10.0 7.0 6.9 6.2 2.0 0 Aviation 4.4 2.2 8.8 1.9 0.5 0 Road Haulage 3.4 3.6 0.4 0 0 0 Total Transport 80.6 100.1 126.8 104.7 111.0 90.8 Water Supply 11.7 19.2 25.9 16.7 14.2 19.7 Public Buildings 1.0 1.8 3.7 7.7 5.6 19.7 Investment in all Sectors 267.0 325.9 378.6 392.6 432.5 335.1 Z of Total Investment Represented by: Transport 30 31 33 27 26 27 Water Supply 4 6 7 4 3 9 Public Buildings - 1 1 2 1 6 Source: Approved Estimates of Expenditure on Development Account for the Financial Year 1988/89 and Public Sector Investment Program, October 1988. 1.13 Planned investments in transport are large throughout the plan period in relation to the other sub-sectors and as compared with actual transport investments in recent years. Transport investments as a percentage of total investments would remain around 31X - 33Z during 1989/90 and 1990/91, and then fall gradually to 27% by the end of the five- year period. Road investments constitute a heavy proportion of the planned transport investments, with the percentage rising through the period from 53% to 84Z. Two important factors in the large transport investments during the period are the costly multimodal Northern Transport Corridor Project (Credit 1879-MAI, 1988, SDR 11.1 million) already under construction and the road rehabilitation and improvement works included in this project. 1.14 Investments in both water supply and public buildings are expected to increase steadily over the next five years. As a percentage of total investments, water supply is shown as growing from 4% to 9% and public buildings from less than 1X to 6% over the five-year period. 1.15 Whereas planning of both water supply and public buildings is the responsibility of the respective departments within MOW, coordination of -6- transport investment plans is the responsibility of the Transport Planning Unit (TPU) of the Economic Planning and Development Department (EPDD) of the Office of the President and Cabinet (OPC). TPU reviews proposals put forth by MOW for roads and by the Ministry of Transport and Communications (MTC) for other modes. The transport planning and coordination capability in TPU has been strengthened by technical assistance financed under the Fourth and Fifth Highway Projects. The Credit agreement for the project contains a covenant requiring the Government to consult with the Association prior to undertaking any new investments in infrastructure. D. The Highway Subsector Composition of the Transport System 1.16 Malawi's transport system comprises about 12,850 km of roads, 678 km of railways, 4 lake harbors and a number of landing points served by the Lake Service, and 4 commercial airports. The principal features of the system are (i) a main road network of about 3,300 km, which is fairly well developed south of Lilongwe but somewhat less developed in the northern half of the country; (ii) the rail system, which lies entirely in the southern half of the country; (iii) lake transport, which mainly serves the north and compensates to some extent for the limited land transport links; and (iv) air transport, which handles mainly passengers for whom time savings are particularly important. The main outlets to the sea for Malawi's external traffic were, prior to 1983, two railway lines through Mozambique to the ports of Beira and Nacala on the Indian Ocean linked to the internal rail system. As a result of bandit activity along these lines in Mozambique in recent years, the traffic declined and ultimately ended with most of the traffic diverted to much longer and costlier routes through Zambia, Zimbabwe and the Republic of South Africa (RSA). A new route for external traffic is being developed via road through northern Malawi and connecting the TANZAM railway to the port of Dar es Salaam in Tanzania under the Northern Transport Corridor Project. 1.17 The system, consisting of road, railways, lake and air traffic, constitutes the top, most visible part of the total transport system. Within the rural areas of a country such as Malawi, a less visible transport system exists upon which the conventional road and motorized vehicle network is superimposed. This system has much denser coverage and extends to the doorstep of each rural household. Its capacity to meet the substantial movement needs of the rural population is limited by the infrastructure and means of transport that characterize it: footpaths and tracks, low vehicle ownership, a predominance of pedestrians and a paucity of transport services. This basic rural infrastructure, including non- motorized vehicles and transport services, has received little attention in the past, and there is a need to expand its capacity to improve the mobility of Malawi's rural population (para. 1.22). The Road Network 1.18 The network of classified roads totals about 10,050 km (Table 1.3) of which some 2,200 km (about 22Z) are paved, 1,900 km are of engineered gravel standard and the rest are earth roads. In addition, there are about 2,000 km of unclassified feeder and crop extraction roads constructed to - 7 - minimum standard under agricultural development projects and an undetermined length of unclassified earth roads and tracks, including about 800 km within forestry plantations and reserves and another 80 km within the national parks. Road density is about 141 km per 1,000 km2 or 1.9 km per 1,000 inhabitants, which is above average for southern African countries. A high proportion of the paved and otherwise improved roads is located in the southern half of the country, reflecting the general pattern of regional imbalance of development in the past. Table 1.3 Highway Network by Administrative Classification and Surface Type, 1987 (km) Main Secondary District Other All Roads Roads Roads Roads Roadsl/ Z Bitumen 1,820 284 24 80 2,208 22 Gravel 1,167 680 45 - 1,892 19 Earth 301 1,565 3,685 402 5,953 59 Total 3,288 2,529 3,754 482 10,053 100 1/ Does not include about 2000 km of currently undesignated roads (mostly in the district road category) and 800 km of township roads. Source: MOW 1.19 The coverage of the network is adequate for the country's present needs, but the road standards and maintenance conditions are not satisfactory on much of the system. Although improvements have been made on some roads, particularly upgrading them to paved standard, there still are many low standard roads, resulting in high transport costs. Most paved roads are in fair to good condition, while the majority of gravel and earth roads are in fair to poor condition (Table 1.4). Overall, 60Z of the roads are in fair condition, 25Z are in relatively poor condition, and nearly 15% are in good to excellent condition. Table 1.4 Condition of Roads by Type of Surface (Z of length by type) (Poor . . . . . . . . . . . . . . Excellent) 1 2 3 4 5 All Bitumen 0 6.4 38.0 46.6 9.0 100 Gravel 1.5 14.7 75.6 8.2 0 100 Earth 6.1 28.6 64.3 1.0 0 100 Z of Total Length 3.9 21.1 60.6 12.4 2.0 100 Source: MOW Road Inventory Data, 1987. 1.20 From 1977 to 1987, the overall length of the road network remained relatively constant. However, the length of paved roads during this period rose by 26% from 1,749 km to 2,208 km. Construction of the north-south spine road to paved standard has been a high priority for many years and nearly the entire road is now built; the last segment from Karonga to the Tanzania border will be completed under the Northern Transport Corridor Project. Another long-term development has been the construction or improvement of almost 5,400 km of district roads, of which about 2,000 km have not yet been so designated, in nearly all districts. Having constructed or substantially improved many main roads in recent years, attention is now shifting from new construction to road rehabilitation and improved maintenance of the existing network (para. 1.30). Road Use 1.21 While good standards have been achieved in the maintenance of district and even of unclassified roads, traffic volumes are low. Transport services and the ownership of vehicles among the rural population have not risen to take advantage of the opportunity offered by a network in good condition. Comprehensive data on road traffic are not available, but periodic automatic counts have been taken at a number of strategic points on the road network. The data show that over a 9-year period, 1975-1984, traffic increased 3Z in the Southern Region, 17Z in the Central Region and 21% in the Northern Region. Overall, these data indicate average growth of less than 1% per year. Traffic volumes on main roads vary considerably between the south, where traffic is mostly in the range of 200-600 vehicles per day (vpd), and the north with far lower traffic levels, mostly in the 40-100 vpd range. Traffic on secondary and district roads averages about 30 vpd. 1.22 Data on motor vehicle registrations suggest that the number of vehicles in use increased from about 38,700 vehicles in 1984 to 44,150 in 1985 but subsequently declined (Table 1.5). In 1986, the latest year for which data are available, 40,311 vehicles were in use, a decrease of 9% over the preceding year. Passenger cars apparently declined by 8X and goods vehicles by 13% in the 1985-1986 period. Most of the goods vehicles have less than 3-ton carrying capacity and a high proportion of the heavier trucks have a relatively low average capacity of 7 tons. Table 1.5 Motor Vehicle Fleet,l1 1984-1986 Z Change Z Change 1984 1985 1984-85 1986 1985-86 Passenger cars 15,584 18,075 16 16,598 - 8 Goods Vehicles 12,605 14,222 13 12,326 -13 Buses 1,115 1,330 19 1,283 - 4 Motorcycles 7,537 8,469 12 7,782 - 8 Others 1,848 2,054 11 2,322 13 Total 38,689 44,150 14 40,311 - 9 1/ Private motor vehicles only. Includes motor vehicles for which user charges were paid during the latest three year period. Source: Government of Malawi Economic Report, 1987 and Transport Performance Bulletin, 1987. - 9 - 1.23 The great majority of trucks are owned by various private firms and public agencies for transport of their goods. Among transport companies hiring out their vehicles, about 470 companies operate an aggregate fleet of some 1,400 trucks of 3-ton capacity and over. More than 60Z of these trucks are owned by small operators and 34Z by 9 large operators with over 30 vehicles each. The average size of the for-hire fleet operated by small operators is 3 vehicles with an average capacity of 7 tons, compared to vehicles of 9-ton capacity on average operated by the large companies. 1.24 Bus services are provided by the private firm United Transport (Malawi) and a few small local operators. Services are concentrated in urban areas and along the main roads, often with long distances between scheduled stops. While large buses predominate, the numbers of mini-buses for short distance scheduled and unscheduled stops are increasing. Public passenger services along secondary and district roads are virtually non- existent. A consultant study of bus transport needs in rural areas was completed in 1985. On the basis of the study recommendations, a pilot rural transport scheme is included in the project. 1.25 A significant proportion of rural transport also does not take place on roads. Studies investigating rural transport in developing countries from the demand side have shown that most rural transport takes place away from the road network on tracks and footpaths in and around villages. Ownership of wheeled vehicles is extremely limited and walking and headloading predominate as means of transport. The amount of transport that is taking place away from roads appears to be taking up so much household time and energy that productive activities are seriously constrained. A pilot project proposed by the International Labour Office (ILO) aims to make household transport more efficient (para. 2.15). This pilot project, although not included under the Infrastructure Project, was reviewed at appraisal because of its potential significance for rural transport planning investment and its complementarity to the rural transport services scheme. 1.26 Regulation of road users is of various types. Road transport licenses are awarded by the Road Traffic Commissioner's Office of MTC and are provided for specific routes. Freight rates are regulated by specifying maximum rates per ton-mile, although in practice competition among road transporters frequently leads to charges below the published rates. Vehicle dimensions and weights are also regulated, the maximum allowable axle load being nine tons, but enforcement has not been fully effective. Under the Fifth Highway Project some mobile scales were introduced and some of the existing weighing stations were upgraded. These actions have had a favorable effect on compliance with regulations. 1.27 In keeping with its policy to give priority to use of existing infrastructure and to develop competitive transport services, Government has plans to relax the regulations that restrict entry into commercial transport services. In particular, Government would lift its current ban on private carriage of fare-paying passengers to permit the development of a transport services industry in the rural areas. In an attempt to bring more vehicles within the reach of large sections of the population, Government is examining measures that would increase the availability of - 10 - non-motorized means of transport, such as bicycles, carts, etc., and lower their cost. Specific policy changes being considered include an increase in the foreign exchange allocation to non-motorized means of transport, a lowering of the import duty and surtax thereon, and a removal of the import license requirements on these items. 1.28 Road accidents have taken a heavy toll in terms of deaths, injuries and property damage. The extent of the problem is indicated in Table 1.6, which shows that 7,049 vehicles were involved in road accidents in 1987 resulting in 2,736 injuries and 558 deaths. The incidence of such accidents initially peaked in 1978-79, moderated somewhat thereafter, but then began to rise once again in 1985, exceeding all previous levels in 1987. The problem remains very serious, and the Government is determined to reduce the number and severity of the accidents. A National Road Safety Council has been functioning since 1978 but requires strengthening to increase its effectiveness. A road safety component of the project, based partly on a study financed by the Southern Africa Transport and Communications Commission (SATCC), will provide assistance in this field. Table 1.6 Road Accidents, 1973-1987 Number of Vehicles Persons Persons Years Accidents Involved Injuredl/ Killed 1973 3,634 5,118 2,191 269 1974 3,732 5,242 2,370 271 1975 3,844 5,387 2,224 278 1976 3,957 5,634 2,339 268 1977 3,991 5,702 2,342 305 1978 4,594 6,649 2,411 582 1979 4,531 6,522 2,551 649 1980 4,470 6,375 2,520 574 1981 4,211 5,925 2,164 576 1982 3,646 5,338 2,003 598 1983 3,849 5,206 1,952 556 1984 3,876 5,206 1,917 584 1985 4,604 6,190 2,435 667 1986 4,672 6,258 2,571 537 1987 4,974 7,049 2,736 558 1, Excludes slightly injured persons. Source: Government of Malawi National Statistical Office, Statistical Yearbook, 1987". Sector Finances 1.29 Road users contribute to Government revenues through taxes and duties on fuel, lubricants, vehicles and spare parts and through license and registration fees. At the time of appraisal in October 1988, the pump price of petroleum was MK 1.86 per liter (US$0.72/l equivalent) and of - 11 - diesel MK 1.61 per liter (US$0.62/l equivalent); equivalent import prices were MK 0.95 (US$0.37) and MK 0.86 (US$0.33), respectively. Petroleum product prices, including taxes, more than cover c.i.f. costs and internal distribution costs. Customs duties and other taxes (surtax and levy) on vehicles vary with the type and size of vehicle. Total revenue from road users, as shown in Table 1.7, was MK 59.0 million in 1986(1987, and represented approximately 12Z of total Government revenue (exclusive of grants, reimbursements and appropriations-in-aid). Table 1.7 Revenue from Road User Charges (MK million) 1986/1987 Duty Surtax Total Taxes and duties on fuel and lubricants 22.7 16.4 39.11/ Import duties on vehicles and spare parts 7.3 6.9 14.1 Vehicle registration fees and licensing fees - - 5.8 Total 30.0 23.3 59.0 1/ Estimate. Source: MOW and National Statistical Office. 1.30 Government maintenance and administrative expenditures on highways are financed under the recurrent budget; new construction is financed under the development budget, which is largely funded by grants and credits from bilateral and multilateral aid programs. Expenditures on construction rose sharply in FY 1984/85 and especially in FY 1985/86, then fell to MK 32 million in FY 1986/87, and then rose again to MK 43 million in 1987/88 (Table 1.8). With road maintenance receiving increased attention in the 1980s, maintenance expenditures rose to MK 13 million from less than a fourth of that level in the late 1970s. In 1986/87, capital, administrative and maintenance expenditures on the road network, including the cost of the Road Traffic Commissioner's Office, amounted to MK 41.7 million. Thus, road user revenues more than covered maintenance expenditures and the capital costs of the network in that year. - 12 - Table 1.8 Annual Expenditures on Highways, FY 1976/77-1987/88 (MK million) Fiscal Year Construction Maintenance Administration Total 1976/77 12.3 2.3 .5 15.1 1977/78 14.9 2.0 .5 17.4 1978/79 21.1 2.7 .6 24.4 1979/80 17.4 3.5 .6 21.5 1980/81 21.9 3.1 .6 25.6 1981/82 27.1 4.0 .6 31.7 1982/83 27.3 6.2 .6 34.1 1983/84 19.6 7.9 .71/ 28.2 1984/85 36.0 8.6 .71/ 45.3 1985/86 49.5 9.9 .71/ 60.1 1986/87 32.0 9.0 .7T/ 41.7 1987/88 42.8 12.9 .81/ 56.5 1/ Estimated on basis of trend. Source: Economic Planning Division Economic Report, 1987 and Government Accounts. Administration and Training 1.31 The Road Department of MOW is responsible for all classified roads except that the district councils are responsible for the district roads. From time to time, some unclassified roads administered by other agencies are designated as classified roads and brought under MOW or district council administration. Planning and overall supervision activities for roads are handled by the headquarters staff at Lilongwe. 1.32 The Roads Department has 34 posts for professionals, 29 of which have been localized. With respect to the regional organization, each of the 24 district councils has a road foreman on its staff and most councils have a core of road maintenance employees. The earlier phases of the District Roads Improvement and Maintenance Program (DRIMP), financed under previous highway projects, have done much to develop an organizational framework, provide training of key staff and furnish equipment and depot facilities. The project will include further assistance of this type to the three districts not yet covered by DRIMP. Recurrent and maintenance expenditures have risen substantially in districts that have had their road networks improved under DRIMP. Since the district councils' revenues are very limited, the Government has supplemented the maintenance budgets. Both the Fourth and Fifth Highway Projects have assisted the Government by providing financing on a declining basis for the incremental portion of the recurrent maintenance expenditures during the project period. This assistance would continue under the project. - 13 - Planning 1.33 Although MOW is responsible for road planning, its capacity for doing this work has been limited and, therefore, international consultants have been used extensively to assist MOW. In recent years, the emphasis in road planning activities has shifted from new road works to rehabilitation and maintenance of roads. Nevertheless, planning of road improvements on main and secondary roads remains an important function of MOW. Under the Fifth Highway Project, on-the-job training of planning has been carried out, thus strengthening the capabilities of the local staff. Further efforts in this field are required and such assistance is included in the project. Engineering and Construction 1.34 The Design Branch within the Roads Department of MOW is staffed by 12 civil engineers and 25 technicians and surveyors. The Branch, which has a laboratory for materials and soils testing, is primarily engaged in design of structures; it also carries out preliminary investigations of roads and some design of roads and bridges, but detailed engineering for major road projects is done by consultants. The design standards adopted by MOW (Annex 2) are appropriate for the country's topography and traffic conditions. For selected routes of international importance, MOW is now considering adoption of a higher standard recommended by the Southern African Development and Coordination Conference (SADCC). Nearly all design contracts for roads have been let to international consultants but the Government would like to use local consultants to some extent. During the project preparation phase, MOW assisted by consultants (financed under an advance from the Project Preparation Facility (PPF)) carried out a preliminary study of the factors affecting the promotion of local consultants (as well as local contractors, para. 1.36). Based upon the study findings and conclusions, the originally proposed privatization study was modified to an implementation-oriented local industry promotion/technical assistance component, which will be financed under the project. 1.35 Contractors for major road projects are employed by the Roads Department following appropriate prequalification and tendering procedures; contracts are generally let on a unit-price basis. The Roads Department has also undertaken some minor force account road construction projects with two road construction units and one bridge construction unit. The Roads Department is planning to do more work by local contractors and will reduce the force account work capacity to cover only emergency needs and on-the-job training requirements for its own staff. MOW operates three units for the improvement of district roads by labor-based methods under DRIMP and performance has been good. The fourth and final phase of DRIMP will be financed under the project. 1.36 The developing domestic construction industry is nearly fully employed on buildings, small structures, estate and other minor roads, as well as the resealing of short sections of main roads and of runways of minor airfields. Domestic contractors lack the capacity for major road works but are capable of carrying out some rehabilitation work on earth and gravel roads. Construction supervision is carried out by the Roads - 14 - Department or by consulting engineers acting as its representatives. Supervision is satisfactory, payment procedures are prompt and, in general, the experience of MOW in dealing with contractors has been satisfactory. MOW, however, is interested in developing the local construction industry and utilizing local contractors to a greater extent without sacrificing quality of work. Toward this end, as noted above (para. 1.34), a component of the project is technical assistance to promote the local industry and to determine ways and means by which this goal can be accomplished. The terms of reference for the services are available in the project file. At negotiations MOW agreed that, by June 1990, an action plan, on the basis of the technical assistance team's work and recommendations, for promotion of the local construction industry would be submitted. Road Maintenance 1.37 In the early 1980s, it became apparent that the road network was not being maintained adequately. For this reason a road maintenance study was carried out by consultants, financed under the Fourth Highway Project, to determine in detail the maintenance needs and establish a program for corrective action over a 5-year period. Part of this program was carried out under the Fifth Highway Project, and major additional rehabilitation, resealing and regravelling works are included in the proposed project. 1.38 The level of funding of regular maintenance has increased significantly in recent years (Table 1.8), but the quality of road maintenance is still inadequate. Improved performance will need to be achieved through greater efficiency in the use of available resources rather than increased funding, given current fiscal constraints. It was agreed at negotiations that the funding level for road maintenance activities would be reviewed annually by the Government and the Association prior to adoption of MOW's budget, and not later than three months before the beginning of each fiscal year. 1.39 The regional offices of MOW are responsible for maintaining the classified road system, with the exception of district roads (para. 1.38). Maintenance operations are largely mechanized although extensive use is made of labor for routine maintenance. The Roads Department rents equipment from PVHO which is responsible for procuring and maintaining all Government-owned equipment and vehicles; rental rates are based on the cost of purchasing and maintaining the equipment. The availability and utilization of equipment and vehicles are not satisfactory mainly because of shortage of spare parts, insufficient equipment replacements and inadequate workshop facilities. These deficiencies will be alleviated by procurements included in the project. 1.40 District roads, built or improved through DRIMP under a series of IDA-financed projects, may gradually be turned over to the district councils as they develop the capability to maintain them. Recurrent maintenance costs are covered by limited district council funds supplemented by Government grants. The project will assist Government by providing financing for this purpose on a declining basis (para. 2.09). - 15 - E. The Water Supply Subsector Water Resources 1.41 Malawi has. substantial water resources. As indicated (para. 1.01), about one quarter of the country is covered by lakes, with Lake Malawi being, by far, the largest. Although available surface water is ample in the lakes (Malawi, Chilwa and others), the Shire River system and various minor rivers, water supplies are heavily dependent on rainfall which has marked seasonality and wide variations in annual levels of precipitation. Some surface water is stored in reservoirs of dams to improve reliability as a source of supply and for conservation purposes. The larger water supply dams are located near Blantyre and Lilongwe; smaller dams have been built for Kasungu, Zomba, and other urban centers. A new dam for Lilongwe is being built under the Second Lilongwe Water Supply Project (Credit 1742-MAI, 1986, SDR 16.6 million) and others would be built under the proposed project. Total storage capacity of all these dams is, however, very small in relation to available water resources in the country. 1.42 Groundwater is widely available from dug wells and boreholes in three hydrological zones: plateau-highland, escarpment and the Rift Valley alluvial plains. Over most of the plateau areas, the geological formation is largely drained by 'dambos" (broad, grass-covered, swampy areas with no defined channels). The highlands have little potential for groundwater supplies because of steep slopes. A study of ground water resources in Malawi, carried out in 1983, indicated that the available groundwater resources have sufficient recharge to support the relatively low level of usage needed to meet present and future medium-term domestic water requirements of smaller settlements. Such resources will continue to serve primarily rural domestic needs. A UNDP-financed National Water Resources Master Plan found that, in 1985, the country had 5,100 boreholes and 3,100 dugwells but that at any particular time 30Z to 50X of them were inoperative, mainly for want of maintenance. Consequently, the project includes a component to rehabilitate a large number of inoperative boreholes and to institute a maintenance management program. Legislation and Institutions 1.43 The provision of piped water in Malawi is governed by the Waterworks Act of 1926 which has been amended several times. Other relevant legal instruments are the Blantyre Waterworks Act and the Lilongwe Waterworks Proclamation of 1984, the main objectives of which are to strengthen the mandate of the Blantyre and Lilongwe Water Boards and provide them with autonomy as financially self-supporting organizations. Water supply in rural and urban areas (except Blantyre and Lilongwe) is the responsibility of the Department of Water (DOW) of MOW. This department plans and implements rural and urban water supply systems (except Blantyre and Lilongwe) besides providing untreated but protected piped water to rural areas wherever and whenever feasible. DOW operates more than 48 urban and institutional water supply systems in the country and has constructed more than 55 gravity-fed piped water supply schemes. - 16 - 1.44 The District Water Supply Fund (DWSF) is a Treasury Fund within the Water Supply Branch of DOW. It is responsible for all urban water supply systems in Malawi except for Blantyre and Lilongwe. Formed in 1977 to implement a water supply project funded by the African Development Fund (AfDF), DWSF is required to be operated on a commercial basis and be self- financing. It is not a separate legal entity and, therefore, cannot have constitutional authority to negotiate loans on its own. Urban Water Supply Systems 1.45 The one million urban population of Malawi, some 12Z of the national total, is growing at the rate of approximately 6Z per year. About 77Z of the urban population has access to safe water. The Blantyre and Lilongwe Water Boards serve about 460,000 people and piped water supply is available to 48 smaller urban centers serving some 300,000 people. 1.46 About 15% of the urban population is connected to community waste water systems, the remainder generally using septic tanks and pit latrines. A Sanitation Feasibility Study was carried out for Lilongwe under the Second Lilongwe Water Supply Project, and a low-cost sanitation demonstration project was implemented for Lilongwe, Blantyre, Mzuzu, and Zomba under the Lilongwe Water Supply Engineering Project (Credit 1272-MAI, 1982, US$4.0 million). In general, expansion of sewerage facilities has not kept pace with urban development in Malawi. A review of possible options and development of an appropriate strategy for the sanitation sector is in progress. Rural Water Supply 1.47 About 36% of the 7.1 million2 rural population has access to safe water through piped gravity systems (1.3 million), boreholes and dug wells (1.2 million), and the rest institutional or private sources. Water collection is generally the responsibility of the female members of the household. Transport demand surveys have shown that the transport component of daily water collection in rural areas takes up more time and load carrying effort than transport for any other purpose, including harvesting and crop marketing. The potential for increasing productivity through improvements in rural water supply is considerable. A Government of Malawi (GOM) survey found that, in 1984, close to 50Z of households in rural Malawi were at least 2 km away from a source of improved water. Government aims to provide at least 27 liters of water per person per day within a walking distance of 500 m. 1.48 Self-help schemes are making a significant contribution to the improved water supplies in the rural areas. District development committees initiate a variety of small scale projects, including gravity systems, wells and hand pump schemes. While the communities rely on Government for advice and training, the key to the success of such projects has been the active contribution of the community, providing labor for operations and maintenance. The project will include assistance for expansion of such self-help schemes. 2/ Excludes about 750,000 Mozambican refugees. - 17 - Cost Recovery 1.49 Thus far, rural water supply schemes have provided water free of charge to consumers who do, however, provide a contribution of labor service. Government plans that this policy will remain unchanged in the foreseeable future. For the urban population, the basic policy is, appropriately, that water supply schemes should be self-supporting, including recovery of capital costs. 1.50 DWSF controls the financial operations of urban water supply schemes except in Blantyre and Lilongwe. Government financial assistance to DWSF was withdrawn in 1983 and DWSF now must generate revenues through its operations to cover its needs. Revenues to date have been barely enough to meet DWSF operating expenditures, and thus existing assets are likely to deteriorate without substantial investments in DWSF. Tariff increases announced April 1, 1988, are expected to result in a positive net balance for the fiscal year 1988/89 and to contribute to writing off the accumulated net losses of DWSF. A detailed analysis of the operations of DWSF is presented in Chapter III. Cost recovery for sewerage and sanitation is limited to Blantyre and Lilongwe where nearly all costs are covered by direct charges on households. Manpower and Training 1.51 DOW management is headed by a Water Engineer-in-Chief supported by three regional managers in Lilongwe, Kasungu, and Mzuzu and a subregional manager in Zomba. DOW is divided into two main branches for water resources and water supply in addition to various support services. There are 365 established posts (regular, salaried labor), of which 325 are filled and another 640 are non-established (occasional labor) posts. Professional staff constituting about 10Z of the established posts include a number of expatriates. DOW uses its own staff to plan and implement water supply projects in the smaller towns and the rural areas but needs to engage consultants at times to undertake more complex works in the larger cities. MOW intends to reorganize DOW, as well as other entities of MOW, and introduce a new management system for administration of water supply functions. The project will assist in accomplishing these changes. 1.52 The manpower resources of DOW and the Blantyre and Lilongwe water boards have been severely strained in recent years as the urban and rural water supply systems have been expanded. Local manpower at the managerial and technical levels has been supplemented by substantial support from expatriate staff and consultants. To carry out plans for further growth in water supply schemes, Government will require not only continued dependence on expatriate staff and consultants but also a heavy commitment to training of local staff. Under the Blantyre and Lilongwe Water Supply Projects (paras. 1.58 and 1.59), substantial progress has been made in training in the two major urban centers. DOW, which has urgent training needs and also must coordinate training in the overall water supply field, will be provided training assistance under the project. - 18 - F. Public Buildings Administration 1.53 The Buildings Department in MOW is responsible for the design, construction and maintenance of government buildings country-wide. Within the department are branches of structural and architectural design, quantity surveying, and electrical and mechanical services. Through its staff of professional and technical personnel, the department carries out some building construction by direct labor and most building maintenance work; it also oversees the work carried out by private consultants and contractors for the Government. Inventory of Buildings 1.54 The Buildings Department is responsible for maintaining a current inventory of the hundreds of government buildings scattered throughout the country. Unfortunately, the existing register is not adequate and a national survey of government buildings, partly financed under a PPF advance, is underway. This survey was begun in August 1987 in the Southern Region and aims to provide current details on the characteristics and condition of each facility. It will be the first physical inventory taken since 1970. As a computerized system would facilitate the initial recording, updating and retrieval of these data, the project includes a component to develop a management system that would rely in part on a computerized register maintained within the department. Building Maintenance 1.55 Numerous schools, hospitals and other types of government buildings have been built in Malawi in recent years, but the provision of funds for their maintenance has generally been inadequate. As a result, the condition of many buildings has deteriorated, in some cases to the point where extensive rehabilitation is required. The planned introduction of a modern maintenance management system is expected to provide a firmer foundation than now exists for justifying annual requests for maintenance budgets. Where major deterioration has occurred, substantial funds are urgently required for building rehabilitation. The project includes a component to assist in this effort. G. Previous Bank Group Projects Transport 1.56 The Bank Group has been involved in Malawi's transport sector since 1966 (Annex 3) when Credit S-2-MAI was approved to help finance detailed engineering of the Zomba-Lilongwe road. This was followed by the First Highway Project (Credit 112-MAI, 1968, US$11.5 million). All of the project's objectives were achieved (see Project Performance Audit Report No. 946, December 15, 1975). A recommendation of the report, that the Government rectify the past neglect of lower class roads, was addressed in the Second, Fourth, and Fifth Highway Projects which included phases of the successful DRIMP. - 19 - 1.57 Gradual extensions of the Zomba-Lilongwe road were financed by a series of Bank Group projects that effectively linked the three regions of Malawi for the first time with a paved road. This series of projects follows: Project Credit Year Amount Segment of Ml Name No. Approved (US$ million) Constructed First Highway 112-MAI 1966 11.5 Zomba-Lilongwe Second Highway 523-MAI 1974 10.0 Lilongwe-Kasungu Third Highway 758-MAI 1977 10.5 Kasungu-Jenda Fourth Highway 1099-MAI 1981 33.0 |Mbowe-Ekwendeni IJenda-Luwawa Turnoff Fifth Highway 12363-MAI/a 1983 18.0 Luwawa Turnoff-Champhoyo/b 11423-MAI 13.1 ISF-6-MAI 13.8 Nor. Trans. Corr. 1879-MAI 1988 13.4 Karonga-Border/c a/ Bank loan. b/ Cofinanced by AfDB. c/ Cofinanced by EDF. All of these projects (except the last one which is in an early stage of implementation) were carried out satisfactorily and the resulting north- south artery has contributed much to economic, social and political integration of the country. 1.58 The Fourth Highway Project included a comprehensive study of Malawi's road maintenance needs and initiated a substantial effort to assist in redressing past neglect of such maintenance. The Fourth Highway Project was carried out in a satisfactory manner. In the Fifth Highway Project, this work became the major project component with particular emphasis on resealing of paved roads, rehabilitation of both paved and unpaved roads and procurement of maintenance equipment. A large technical assistance component was used to improve data collection (traffic, costs, road inventory, etc.) for network planning purposes. A detailed management system for road maintenance was put in place and staff trained in its use. The training needs for the Roads Department staff were studied, training plans were prepared, and implementation is under way. The technical assistance consultant also studied the organizational set-up of the Roads Department, and recommended several improvements, many of which have been implemented. The Fifth Highway Project is still under implementation and is proceeding satisfactorily. However, many of the institutional development aspects of that project would require continuing follow-up and strengthening, which will be provided by this project. - 20 - 1.59 The main objective of the Northern Transport Corridor Project is to assist the Government in improving the corridor from Blantyre through northern Malawi to Dar es Salaam, thus enabling the route to handle one- third of Malawi's external traffic at reduced transport cost as compared with alternative southern routes through Zambia, Zimbabwe and RSA. Approved in February 1988, the project will be carried out over a period of about four years. Project implementation is under way with some minor delays. Water Supply 1.60 The Bank Group has financed three water supply projects in Malawi (Annex 3), the first of which was the Blantyre Water Supply Project (Credit 711-MAI, 1977, US$7.0 million) augmenting the supply of water to that city and strengthening the Blantyre Water Board's management and technical capabilities. The project's primary objectives were achieved and the credit was closed in 1984 (Project Completion Report, June 1986). Financial performance, however, has been below expectations and corrective action is being taken. 1.61 The Lilongwe Water Supply Engineering Project (Credit 1272-MAI, 1982, SDR 3.6 million) was designed to assist the Government and the Lilongwe Water Board in formulating a long-range water supply, sewerage and sanitation program, prepare studies for water supply extension, strengthen the Board through improvements in management and training and help Government develop low-cost technologies for handling sewerage and sanitation. This project proceeded satisfactorily and the credit was closed in 1987. The follow-on project, the Second Lilongwe Water Supply Project, is aimed principally at augmenting the water supply of Lilongwe through the construction of a new dam/reservoir and to expand Lilongwe's water supply system to cater for increased demand. Construction of the dam has been completed and other aspects of the project are being carried out satisfactorily. Public Buildings 1.62 Certain components of projects financed by the Bank Group in Malawi have been concerned with public buildings. The Lilongwe Training Center, road maintenance depots and an extension of MOW Headquarters were constructed under the Fourth and Fifth Highway Projects. In the education sector, many schools have been constructed under a series of Bank Group projects (including the Fifth Education Project, 1330-MAI, 1983, US$34.0 million). In those efforts it was assumed that regular maintenance of newly-built structures would be carried out. Unfortunately, the maintenance of public buildings has been inadequate leading to rapid deterioration and a premature need for rehabilitation. - 21 - H. Rationale for Bank Group Involvement 1.63 The project will support the Bank's country assistance strategy by (1) strengthening the institutions responsible for much of the country's infrastructure representing large elements of the Government's development and recurrent budgets; (2) protecting vital transportation routes in agricultural production areas; and (3) contributing to increased availability of potable water, health services and education services to both rural and urban populations. It will build on previous Bank Group involvement in a number of sectors, particularly transport and water supply. IDA participation in the project would help ensure that certain public works programs and related policy changes recommended by the Bank in the recent past are implemented and that further improvements in strategy, policy formulation and institution-building are pursued. It will also help to mobilize and coordinate financing for the project that may not otherwise have become available. I. Other Donor Agencies' Past Involvement 1.64 The main cofinanciers for this project (para. 2.35), AfDF, EDF, KfW, and ODA, have been regular supporters of the road sector and financed road construction and rehabilitation works since the late 1960s - early 1970s. During the 1970s, USAID also financed some major road works. Malawi has received more than MK 250 million from various donor agencies for development of its road network over the last 20 years. The main contributors to the water supply sector over the last about 10 years have been AfDB, DANIDA, and USAID, with somewhat smaller contributions from KfW, Canada, EEC/EDF, Japan, and UNICEF. The total contributions from the donors amount to about MK 100 million since 1979. While IDA in the past has been the largest financier of public buildings, particularly for education, agriculture and health, other significant donor agencies have been USAID, EEC/EDF, AfDF, and ODA. Expenditures of close to MK 100 million have been financed by these agencies during the last 5 years. Many other agencies have contributed on a more moderate scale to the development of the three sectors over the last several years, financing not only civil works, but also technical assistance and training. - 22 - II. THE PROJECT A. Objectives 2.01 The main objectives of the project are to (i) strengthen the capability of MOW to carry out effectively the construction and maintenance of public facilities; (ii) restore the physical condition of selected main and secondary roads, thus facilitating the movement of traffic and lowering transport costs; (iii) expand the existing system of district roads thus providing improved access for many additional rural people; (iv) expand potable water supply for selected urban centers and rural areas; and (v) rehabilitate high-priority hospitals, schools and other important public buildings so that they contribute more efficiently and effectively to the provision of public services and extend their useful lives. B. Project Scope 2.02 The project will cover MOW's activities for management improvement and training as well as maintenance, rehabilitation and construction works in the roads, water supply, and public buildings subsectors over a four- year period from fiscal year 1989/90 to 1992/93. Virtually all subprojects to be implemented during this period have been included in the project. Most of these subprojects will be completed during the project period, but a few subprojects will extend beyond the period. However, only the portions of these subprojects that are scheduled to be completed within the four-year period have been included in the project. The project will thus comprise: MOW Management Improvement (i) implementation of a management improvement program for MOW, including technical assistance, and consulting services for studies; Roads (i) rehabilitation and strengthening of about 270 km of paved roads; (ii) rehabilitation of about 300 km of earth and gravel roads; (iii) improvement of about 115 km of earth and gravel roads to bitumen standard; (iv) resealing of about 200 km of paved roads; (v) extension of DRIMP to the three remaining districts, about 500 km of extra roads in other districts, execution of spot improvements on previously developed DRIMP roads, and maintenance support; (vi) reconstruction of 8 bridges; - 23 - (vii) preparation and installation of new signs on the road network; (viii) procurement of plant, vehicles and workshop equipment for PVHO; (ix) procurement of equipment and vehicles for the Planning and Design Branches of the Roads Department; (x) construction and furnishing of 9 road maintenance depots, and expansions to existing depots; (xi) a pilot program for rural passenger and goods transport services; (xii) a road safety program; (xiii) a pavement overlay unit; (xiv) technical assistance and training for the Roads Department; Water Supply (i) construction of improved water supply systems for Kasungu, Mzuzu, Zomba, Mponela, Ntcheu, Mangochi, and Karonga; (ii) rehabilitation of about 2,500 boreholes and development of a maintenance management system for boreholes; (iii) construction of 13 gravity-fed piped water schemes in rural areas; (iv) technical assistance and training for DOW; Public Buildings (i) rehabilitation of selected schools, hospitals and other public buildings; (ii) expansion and improvements of the Lilongwe and Zomba Training Centers; and (iii) technical assistance and training for the Buildings Department. C. Detailed Project Description MOW Management Improvement 2.03 The 1987 management study noted above (para. 1.10), which established that MOW management can and should be improved substantially, - 24 - included a plan for achieving that objective. Specifically, the study recommends improved direction and management control, a better functioning organization, development of human resources, and provision of adequate financial and material resources to carry through planned programs. These recommendations have been formulated bearing in mind their likely implementability. The implementation strategy will be to carry out actions and activities in accordance with assigned priorities; a steering committee will oversee implementation progress. The time allocated for the implementation is about 24 months. A major input of technical or managerial assistance is necessary to carry out the changes in the MOW organization as well as implement the detailed management systems required for DOW and the Buildings Department. A detailed description of the management improvement program is available in the project file. The technical assistance is divided into six long-term positions amounting to a total of 132 man-months, and also includes several short-term positions for a total of 29 man-months. Consultancies would be required for studies in the areas of fleet management systems, systems management, maintenance operations and construction, financial management, and promotion of the local construction and consulting industry. The studies above have been allocated a total of 295 man-months. Overseas training integrated with the technical assistance has been provided up to about 180 man-months. Details of the technical assistance, studies, and training requirements are presented in Annex 4. Roads (i) Rehabilitation and Strengthening of Paved Roads 2.04 The project will assist in financing the rehabilitation and strengthening of about 270 km of paved roads over a 4-year period (Annex 5). The particular roads for which the work will begin in the first-year program (201 km), and for which economic analysis and detailed engineering have been completed, or are under way, are designated with an asterisk. (ii) Rehabilitation of Earth and Gravel Roads 2.05 Some 300 km of earth and gravel roads will be rehabilitated to gravel standards under this component (Annex 6). Only one road section (29 km), designated with an asterisk, has been selected for the first-year program for which economic analysis and detailed engineering have been completed. (iii). Improvement of Roads to Bitumen Standard 2.06 Approximately 115 km of earth and gravel roads will be improved to bitumen standard under the project (Annex 7). As indicated by an asterisk, a 25-km road section is to be included in the first-year program and preparation has been completed. (iv) Resealing of Paved Roads 2.07 About 200 km of paved roads will be resealed under the project (Annex 8). The road works will begin in the second year of the four-year project period. - 25 - (v) DRIMP Extension 2.08 DRIMP, for which the first phase began in 1979 under the Second Highway Project, cdntinued under subsequent projects (Phases II and III), and will be extended in a fourth phase to the three remaining districts, Mwanza, Blantyre and Chiradzulu, under the project. Some 350 km of district roads will be built in these 3 districts. Selection of roads for improvement, and planning of maintenance units, was carried out by consultants. Depots and facilities to be provided and a list of roads to be improved during the first year of the program have been agreed. The work program for subsequent years will be agreed not later than three months before the beginning of each fiscal year until completion of the project component. The works will be carried out by the three improvement units already established under earlier phases of DRIMP. 2.09 In addition to the foregoing DRIMP works to be undertaken in the three named districts, the component will include spot improvements on other DRIMP roads already improved in earlier phases. Moreover, about 500 km of existing tracks will be upgraded to district roads in areas of good agricultural potential. The component will also cover, on a declining basis, the incremental maintenance expenditures in districts where DRIMP has been completed under the Fifth Highway Project and would be completed under this project. It was agreed at negotiations that the appropriateness of the maintenance allocations would be discussed annually, not later than three months before the beginning of each fiscal year, by the Government and the Association on the basis of MOW's updated estimates of funds required by the district councils (para. 1.40). (vi) Reconstruction of Bridges 2.10 The project includes reconstruction of 8 bridges (Annex 9) which have deteriorated seriously and require restoration works. These bridges have been subject to detailed technical and economic analysis and the following 4 of them have been included in the first year program: Mwesia on the Ml, Mtedza and Lingadzi on the Sll, and Kasungadzi on the S53. (vii) Preparation and Installation of Road Signs 2.11 In 1988, the Government passed a supplement to the Road Traffic Act introducing new road signs based on proposals promulgated by the Southern African Transport and Communications Commission (SATCC). This Act, together with a reclassification of the designated public roads in Malawi, have created a need for new signs on many roads included in the network. The inclusion of important regional collector roads as a tertiary system and the renumbering of numerous secondary and main roads will make necessary an extensive program of preparing and installing new signs. Some 11,000 signs will be fabricated and installed by the road maintenance teams. - 26 - (viii) Procurement of Spare Parts and Equipment for PVHO 2.12 The capacity of PVHO to provide adequate equipment for road maintenance activities of the Roads Department depends heavily on the availability of plant and vehicles for this purpose, which in turn is dependent upon the import of replacement equipment, spare parts and workshop facilities and the training of skilled personnel. Plant and vehicles included in the project, as shown in Annex 10, represent the major procurement under this component. In addition, miscellaneous equipment will be purchased, including various quantities of motorcycles, asphalt heaters, wheelbarrows, air compressors, pedestrian rollers, concrete mixers, portable generators, vibrators, water pumps and welding sets. Also included in the equipment to be purchased are various items of machine shop equipment intended to augment the capacity of the PVHO workshop in Blantyre to reclaim spare parts, thus extending the life of those parts and reducing import requirements. PVHO has prepared a report showing existing stocks of equipment and spares, anticipated annual depletion of these stocks and replacement requirements. Procurement specification documents are under preparation. (ix) Vehicles and Equipment for the Planning and Design Branches 2.13 The Planning and Design Branches of the Roads Department have a limited capacity to perform the works required of them, in large part because of equipment shortages in its materials laboratory and survey sections. Accordingly, the project includes a list of equipment such as vehicles, drilling rigs, laboratory equipment, survey equipment and so forth. Detailed lists of these requirements have been prepared (Annex 11) together with estimated costs. (x) Construction of Road Maintenance Depots 2.14 This program is a continuation from the Fifth Highway Project. There is still a lack of camps where qualified road supervisors and foremen can be assigned. The basic requirements at each camp are office accommodation, storage facilities for tools and fuels, housing for supervisors and foremen, and fencing for security purposes. Detailed lists of the requirements have been prepared (Annex 12). (xi) Rural Transport Pilot Service 2.15 A recent study by GOPA, consultants (Federal Republic of Germany), determined that bus and goods services were grossly inadequate in remote rural areas of Malawi notwithstanding the existence of roads developed under DRIMP and other programs. Taking account of the substantial demand for transport services identified in the study, the Government seeks to experiment in three areas with rural transport services designed to carry passengers and small shipments of goods. A key ingredient of the service is the selection of a vehicle of appropriate size and characteristics. Another basic requirement is a suitable organizational arrangement to assure the provision of attractive service and continuity of operations. Ultimately, the rural transport service is expected to be based on the concept of the private owner-operator with minimal or no governmental support of operations. The requirements for the pilot scheme include vehicles, spare parts, workshops and technical assistance, all of which are - 27 - detailed in Annex 13, which also gives a description of the rural transport system and the complementary ILO Integrated Rural Transport Project. (xii) Road Safety Program 2.16 Recognizing the high rate of road accidents in Malawi, a safety program has been included in the project with the object of reducing the number of road accidents. A study of the problem and the design of a program to cope with the situation has been undertaken by SATCC. The program will involve both equipment and technical assistance, details of which are presented in Annex 14. (xiii) Pavement Overlay Unit 2.17 MOW lacks the capacity to repair short stretches of asphalt roads showing signs of pavement distress. The repair work would involve patching and provision of bituminous overlays, be limited in scope, widely scattered, and require specialized equipment, and would not be suitable for contract work. MOW has, therefore, decided to establish its own pavement overlay unit, with equipment and technical assistance to train MOW operators. Financing of this unit is included under the project. (xiv) Technical Assistance and Training for Roads 2.18 Longer term technical assistance would be provided under the project to a total of 298 man-months. Five positions have been allocated in the branches of planning, design, and construction, and to the rural roads branch and the soils and materials branch. In addition, specialist services would support the pavement overlay program, rural transport services, PVHO and the road safety program. Shorter term consultancies are required for an urban roads study, supervision of the DRIMP program, specialist services for data processing, and supervision of road works, in a total of 189 man-months. Details are presented in Annex 4. 2.19 Closely integrated with the technical assistance program the project would provide an overseas training program in specialized areas for which no training is available locally. These areas are road planning, soils and materials testing, bridge design, construction management, and road maintenance. In addition to 96 man-motths of overseas fellowships, there is a minor allocation for short courses and seminars to be identified during the implementation period. Local training of technician levels would be provided at the Lilongwe and Zomba Training Centers (see para. 2.26). Water Supply (i) Urban Water Supply Systems 2.20 The urban water supply component (Annex 15) involves augmentation of the source and treatment facilities in three of the nation's larger towns, that is, Kasungu, Mzuzu and Zomba.1 In Kasungu, the existing dam 1/ Thirty-four other urban schemes estimated to cost about MK 42 million and for which financing has been requested from AfDB, are not included in the proposed Infrastructure Project. - 28 - is to be raised by about 4.5 meters (m) to increase storage and provide sufficient water to meet the projected 1995 demand; expansion of the existing treatment plant to cope with the increased water demand is currently under way using mostly departmental labor. For Mzuzu, a new 20 m high earth-filled dam is to be built on the Lunyanga stream together with appropriate expansion of treatment and distribution facilities. In the case of Zomba, a new 17 m high dam and associated expanded treatment plant are to be developed. Detailed design has been completed. 2.21 In addition to the above three water supply systems, four other urban systems, at Mponela, Mangochi, Ntcheu, and Karonga are included in the project (Annex 15). These relatively small investments will not involve dam construction but expansion or construction of intake systems, treatment facilities, storage tanks, and distribution networks. Detailed designs for the four schemes have been completed by DOW and are being reviewed with the assistance of consultants. The first-year program for urban water supply includes the Kasungu, Mangochi, and Ntcheu schemes. (ii) Rehabilitation of Boreholes 2.22 About 2,500 boreholes in widely scattered locations will be rehabilitated under this component. About 500 of these will be included in the first-year program. DOW has determined the inputs required for the borehole rehabilitation and has prepared detailed specifications and bidding documents. An integral part of this program is the expansion of a system of operation and maintenance of boreholes under the responsibility of the local community, with support as needed from DOW. (iii) Gravity Rural Water Supply Schemes 2.23 Thirteen gravity-fed piped rural water schemes will be constructed under this component in various locations in the country to provide water to an estimated 200,000 rural inhabitants. The schemes tap water from perennial streams in protected catchments in the mountains and through a system of pipelines and tanks supply it by gravity to the rural population in the low-lying areas. Construction will be by self-help with the project providing pipes, fittings, cement, and other materials of construction. (iv) Technical Assistance and Training in Water Supply 2.24 At present, the Overseas Development Administration (ODA) of the United Kingdom (UK) is involved in technical assistance and training in DOW. Under the project, consultancy services are to be provided (see Annex 4) for supervision of the urban water supply schemes and the borehole rehabilitation works. In addition, technical assistance will be involved in the expansion of the community-based schemes for operation and maintenance of boreholes. In support of the borehole component, certain equipment including four-wheel-drive vehicles will be provided. - 29 - Public Buildings (i) Rehabilitation of Public Buildings 2.25 On the basis of the Buildings Department's existing registry or inventory of public buildings, operational records and physical inspection, the department has prepared a list of hospitals, schools and other important public buildings that are in seriously deteriorated condition and thus require rehabilitation on a priority basis. Three schemes, requiring attention most urgently and to be included in the first-year program, are the Queen Elizabeth Central Hospital in Blantyre; the Lilongwe Girls Secondary School, and the Mzuzu Secondary School. A list of all buildings to be rehabilitated under the project is presented in Annex 16. Consultants have been engaged to inspect these buildings and prepare detailed specifications, bills of quantities and cost estimates for the planned rehabilitation works. Work on the first year schemes has been completed. (ii) Lilongwe and Zomba Training Centers 2.26 In addition to overseas training to be provided to speed up the implementation of the localization plan, training will also be provided at craft levels mainly as in-service training. Currently, such training is offered at the two MOW training centers located at Lilongwe and Zomba. Although the Lilongwe Center was supported by the Fourth and Fifth Highway Projects, there is still a need for expansion of both centers, which initially would have to be supported by overseas training and technical assistance. For this purpose the project provides for consultant services to assist in course development and staff development planning for a total of 48 man-months2 (Annex 4). As new courses must be developed in response to ministerial demand, instructor training will be required overseas, totalling about 105 man-months and in particular with respect to drawing, building materials testing, road materials testing, surveying, refrigeration, wiring and water testing. 2.27 Also as part of the staff development plan, intermediate officials of MOW would upgrade their technical and scientific knowledge by studying for an engineering diploma at the Polytechnic College of the University of Malawi. Such study will be divided into appropriate segments in a "sandwich-like" fashion and offered as part-time or full-time courses. Initial funds for course preparation, materials development, lecturing, and transportation will be provided under the project. 2.28 In order to implement training programs in the two training centers, training equipment would be required in addition to some extension of physical facilities. This will encompass the provision of three classrooms including a draughting room, one laboratory, one store, and one hostel at Lilongwe, while at Zomba certain existing physical facilities will be converted to provide for a water testing laboratory and a plumbing workshop. 2/ Included in the total of 132 man-months of technical assistance to MOW (para. 2.03). - 30 - 2.29 As skills demand calls for increased practical content in crafts training programs, training equipment will be required. Specifically, equipment will be provided for roads and building materials testing and for the water laboratory, as well as for specialized workshops in automechanics, electrical wiring, refrigeration, and plumbing. In addition, the draughting room and the surveying shop will be appropriately equipped and miscellaneous books, tapes, video films, office equipment, etc. will be provided. (iii) Technical Assistance and Training for Public Buildings Administration 2.30 Included in the project is the preparation of specifications, bills of quantities, and cost estimates for building rehabilitation to be accomplished during the three-year period following the initial year. The component includes consultancy services (see Annex 4) for supervision of building rehabilitation and improvements of the training centers (60 man- months). 2.31 As noted above, the Buildings Department is also responsible for inspection and control of government buildings. In this area, staff development has not caught up with actual demand of skills and hence the project provides for overseas fellowships for that purpose amounting to 144 man-months. D. Project Costs 2.32 The total cost of the project, including contingency allowances, is estimated at MK 431 million or US$158 million. Total cost includes (i) physical contingencies of 10 of base cost on all items and (ii) price contingencies amounting to about 15% of base cost plus physical contingencies. The price escalation is based on the annual percentage rates shown below: 1989 1990 1991 1992 1993 1994 1995 Local Costs 15 10 7.5 5 5 5 5 Foreign Costs 5.3 5.3 4.1 4.1 4.1 4.1 4.1 For the purposes of the cost estimates,-it is assumed that divergence between local and foreign cost escalation will be corrected by exchange rate adjustments. The foreign exchange component is estimated at MK 294 million (US$108 million), or 68% of total project cost. Identifiable taxes and duties are about MK 16.1 million (US$5.9 million) and the total project cost net of taxes and duties is MK 414 million (US$152 million). Past experience on specific investment operations in Malawi suggests that the length of the implementation period will be six years and the price contingencies have been calculated on this basis. The Government is, however, planning to implement the project over a four-year period in accordance with the target implementation schedule (para. 2.47), which would reduce the cost by about 3X or from US$157.7 million to US$153.7 million. Cost details are provided in Table 2.1. - 31 - Table 2.1 Estimates of Project Costs Local For-ign Total Local Foreign Total Foreign ----- ------- ----- ----- ------- ----- Exchange MK Million US3 Million % A. MOW Mgt. Improvement 4.1 16.1 20.2 1.5 5.9 7.4 80 B. Highways Rehab. of Paved Roads 23.2 54.1 77.3 8.5 19.8 28.3 70 Rehab. of Other Roads 7.5 11.3 18.8 2.8 4.1 8.9 80 Road Improvements 11.4 28.8 38.2 4.2 9.8 14.0 70 Reseal of Paved Roads 3.9 9.2 13.1 1.4 3.4 4.8 70 DRIMP Phase IV 7.4 4.9 12.3 2.7 1.8 4.5 40 Bridge Improvements 1.7 3.8 6.5 0.6 1.4 2.0 70 Road Signs 2.0 1.3 3.3 0.7 0.5 1.2 40 Maintenance Equipment 0.5 12.0 12.5 0.2 4.4 4.6 96 Vehicles & Equipment 0.2 4.7 4.9 0.1 1.7 1.8 96 Maintenance Depots 0.8 1.1 1.9 0.3 0.4 0.7 S0 Rural Transport Pilot Program 0.2 0.9 1.1 0.1 0.3 0.4 80 Road Safety Program 0.5 1.7 2.2 0.2 0.8 0.8 80 Pavement Overlay 2.1 5.0 7.1 0.8 1.8 2.8 70 Technical Assist. A Training 2.7 10.7 13.4 1.0 3.9 4.9 80 Supervision 0.8 2.4 3.0 0.2 0.9 1.1 80 Subtotal 64.7 149.9 214.6 23.8 54.8 78.6 69 C. Water Supply Urban Water Supply 19.1 35.5 54.6 7.0 13.0 20.0 es Rehab. of Boreholes 8.7 12.9 21.6 3.2 4.7 7.9 8o Gravity Schemes 1.4 2.1 3.5 0.5 0.8 1.3 60 Technical Asst. & Training 0.6 1.6 2.2 0.2 0.6 0.8 80 Supervision 0.8 3.3 4.1 0.3 1.2 1.5 80 Subtotal 30.6 65.4 86.0 11.1 20.4 31.5 64 D. Public Buildings Rehab. of Buildings 7.3 7.4 14.7 2.7 2.7 5.4 50 Lilongwe & Zomba Training Ctr 0.8 1.1 1.9 0.3 0.4 0.7 50 Training 0.3 0.5 0.8 0.1 0.2 0.3 80 Supervision 0.3 1.6 1.9 0.1 0.6 0.7 80 Subtotal 8.7 10.6 19.4 3.2 3.9 7.1 54 Base Cost 108.1 232.1 340.2 39.6 86.0 124.6 es E. Contingencies Physical (10%) 10.9 23.2 34.1 4.0 8.6 12.6 6s Price 18.0 38.2 56.2 6.6 14.0 20.6 88 Subtotal 28.9 81.4 90.3 10.6 22.5 33.1 68 Total Project Cost 137.0 293.5 430.5 50.2 107.5 157.7 88 Total (excluding taxes and duties) 120.9 293.5 414.4 44.3 107.5 151.8 70 - 32 - 2.33 The base costs are estimated as of April 1989 and have been derived as follows: (i) Road Rehabilitation, Improvements, Resealing and Pavement Overlay: The costs of civil works on roads and bridges were based on quantities derived from detailed engineering and on recent cost experience for similar type works in the country carried out by contractors and force account units. (ii) DRIMP: The costs of improvement works and subsequent road maintenance are based on actual costs incurred for these activities under the third phase of DRIMP. (iii) Road Signs: Cost estimates were based on recent costs of procurement for similar materials (mostly imported) and cost experience in local fabrication and installation. (iv) Vehicles and Other Types of Equipment: Recent procurement costs for similar types of equipment were supplemented by quotations from potential suppliers. (v) Maintenance Depots: The cost of depots is based on actual costs of comparable structures in Malawi. (vi) Rural Transport Pilot and Road Safety Program: The costs of equipment requirements (vehicles and other types of equipment) were estimated on the basis of similar recent procurements to the extent possible, supplemented by inquiries to potential suppliers. (vii) Urban Water Supply Systems: Cost estimates are based on quantities determined from detailed engineering design of the facilities including the dams together with prevailing unit rates for similar works in Malawi. (viii) Rehabilitation of Boreholes: Actual borehole drilling operations in Malawi during recent months provide an adequate basis of cost experience for estimates of rehabilitation costs. (ix) Rehabilitation of Buildings and Construction of Training Center: Actual costs of similar types of civil works in recent months provided the basis for the cost estimates for these components. (x) Technical Assistance and Training: Actual costs of continuing technical assistance and training in various fields constitute sufficient unit cost basis for the cost estimates for these components. E. Financing Plan 2.34 In view of the severe domestic resource constraints, the Government contribution to the IDA-financed project components would be - 33 - limited to 5Z of the capital cost of these components (net of taxes and duties). The overall Government contribution for the entire project would be US$12.7 million, which includes US$5.9 million in taxes and duties. As indicated in Table 2.2, the project requires external financing of about US$145 million to cover the foreign exchange component of US$108 million and a share of the local cost amounting to US$37 million. The external financing will be provided through an IDA credit of US$28.8 million equivalent and soft loans and grants from other donors. Of the IDA Credit, an advance of US$1.5 million has been extended to the Government from the Project Preparation Facility (PPF). The advance covered (i) site and soils investigations on the sites for the water supply dams; (ii) detailed engineering for the first-year program of the public buildings component and initial phase of establishing a buildings inventory; (iii) detailed engineering and preparation of tender documents for the roads rehabilitation program, the resealing program, and bridge reconstruction; (iv) review of engineering documents for four semi-urban water supply systems and finalization of detailed engineering of three urban schemes with dams; and (v) preliminary activities under the MOW Management Improvement Program, including an MOW training needs assessment and preparation of a localization plan for MOW staff (para. 1.08). - 34 - Table 2.2 P,oi.ct Fin.ncina Plan (LOSS i l l ion) Tota l Cost r IDA AfDF DANIDA EDF JICA KfW GTZ OIDA LNCDF LNP USAID COM A. MOW Managemont Imerov. Technical Assi.t.nc. 2.4 1.5 0.9 - Management Systems 4.7 4.2 0.5 Training 1.3 0.5 0.8 - Subtotal 8.4 5.7 05 0.0 0.0 0.0 00 0 0Q 0 _00 0.0 0 5 1 7 B. Roads Rehab. of Paced Roads 34.0 3.9 15.4 14.3 0.4 Rehab. of Other Roads 8.3 7.5 0.8 Road Improvements 16.8 2.2 6.5 7.9 0.2 Res.aling of Pacd Roads 5.8 5.2 0.6 DRIMP Phas. IV 5.7 5.1 0.6 Bridge Improvements 2.4 2.2 0.2 Road Signs 1.5 1.5 Maintenance Equipment 5.8 5.8 Vehicles & Equipment 2.3 2.3 Road Meintenanca Depota 0.8 0.7 0.1 Rural Transp. Pilot Prog. 0.5 0.5 - Road Safety 1.0 1.0 - Bitumen Overlay 3.3 1.7 1.6 Technical Assistance & Trng. 6.0 1.8 1.3 1.2 1.1 0.6 - Supervision 1.4 1.3 0.1 Subtotal 95.6 7.6 24.6 1.5 21.9 8.1 7.9 2.9 15.4 0.0 1.1 0.0 4.6 C. Water Supply LUrben Water Supply 24.1 1.8 12.8 8.0 1.5 Rehab. of Boreholms 9.6 4.4 5.0 0.2 Cravity Schemes 1.6 1.6 - Technical Assistance A Trng. 0.6 0.6 - Supervision 1.9 0.9 0.9 0.1 Subtotal 37.8 7.1 13.7 0.0 0.0 0.0 8 0 0.0 0.0 5.0 0.6 1.6 1.8 D. Public Buildings Rehab of Buildings 6.5 6.2 0.3 Lilongee A Zomba Trng. Ctr-. 0.8 0.7 0.1 Training 0.4 0.4 - Supervision & Design 0.8 0.8 - Subtotal 8.5 6.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 _ 1 0.0 0.4 E. Project Preparation (PPF) 1.5 1.5 TOTAL PROJECT COST 151.8 28.8 38.8 1.5 21 9 8 1 15.9 2.9 15.4 5.0 3 4 3.3 6.8 Lb (net of tapes and duties) ;/ Including contingencies but net of taxes and duties. b/ Net of USLS.9 million in taxes and duties. - 35 - 2.35 The status of other cofinanciers' arrangements is as follows (August 1989): - AfDF appraised its road components in July 1989; AfDF has also made commitments for two of the three dam projects; - DANIDA has expressed interest in the road signs since this component is directly under SATCC auspices and initial preparation work was financed by DANIDA; - EDF has already committed funds for the two road sections in its component and has indicated interest in financing part of the Dwangwa-Nkhata Bay road; - the Japan International Cooperation Agency (JICA) has expressed interest in financing equipment and vehicles; - Federal Republic of Germany has made commitments for part of the Dwangwa-Nkhata Bay road and the Pavement Overlay Unit, and expressed interest in one of the dam projects; - ODA has committed funds for the Lilongwe-Salima road rehabilitation; - UNCDF and UNDP have expressed interest in the items as shown in Table 2.2; - USAID is committed to the gravity-fed water supply schemes and has been approached for part of the MOW Technical Assistance component. 2.36 A condition for negotiations of the IDA Credit was that the Government had received firm commitments from donors for financing of subprojects whose implementation is scheduled to begin in the first year, that is, FY 1989/90 (Chart 2). At negotiations in April 1989, the Government submitted satisfactory documentation to show compliance with this condition. The following conditions would apply to the effectiveness of the IDA Credit (anticipated not later than December 1989): (i) All donor agreements for subprojects to begin implementation during FY 1989/90 have been signed; (ii) The Government has received firm commitments from donors to finance subprojects to begin implementation during 1990/91, that is, the second year of the four-year project period. These conditions would result in about 70X (or about US$110 million) of project financing having been obtained by effectiveness. A mid-term review by April 1990 has been built into the project to provide opportunity to review financing availability and status of the balance of the program. The Government would be required to have obtained the remaining funding by that date. - 36 - F. Implementation and Procurement 2.37 MOW will be responsible for project execution except for the Rural Transport Pilot Program and the Road Safety Program, which will be the responsibility of MTC. These agencies are capable of carrying out the indicated responsibilities. Rehabilitation of paved roads, costing some US$35.9 million, will be executed under unit price contracts awarded after competitive bidding in accordance with guidelines of AfDB, EDF, and ODA. Similarly, road improvements to bitumen standard, costing about US$17.7 million, will also be executed under unit price contracts awarded after competitive bidding in accordance with AfDB, EDF and KfW guidelines. 2.38 The rehabilitation of earth and gravel roads and reconstruction of bridges, costing about US$11.3 million, represent mostly small size works in scattered locations and thus would be suited to implementation by force account. However, the Government seeks to create opportunities for promotion of the local construction industry through provision of work to the industry on a regular basis and will group about 80X of this work, some US$9.0 million, into small packages (less than US$1.5 million each) suitable for local contractors. The work will be tendered through local competitive bidding (LCB) under Government procedures satisfactory to AfDB. The remainder of the program will be carried out by force account. 2.39 Resealing of some 200 km of paved roads, at a total cost of about US$6.1 million, will be carried out partly by an existing MOW force account unit, in order to maintain a minimum capacity for resealing in MOW, and partly by contractors, selected in accordance with AfDB guidelines. 2.40 Because of the small scope and scattered location of DRIMP works, the depots and housing will be constructed by local contractors, following LCB procedures, or if this proves unsuccessful then by force account. The training of local staff in the three districts and improvement and maintenance works under Phase IV, costing some US$5.7 million, will be done by force account with consultants providing technical assistance in line with experience under previous phases of DRIMP. Vehicles and equipment (including hand tools), about US$1.6 million, for the improvement and maintenance units will be purchased over a period of four years under LCB. 2.41 Construction of road maintenance depots, the rehabilitation of public buildings and the expansion of the Lilongwe and Zomba training centers, costing a total of US$8.6 million, will be in widely scattered locations and with low value of works (on average US$300,000 equivalent) at each location. The works will be implemented by contractors following LCB procedures. 2.42 Road maintenance equipment and various other types of equipment and materials including spare parts, amounting to about US$8.1 million, will be procured in accordance with the guidelines of JICA. 2.43 Construction of the facilities for the urban water supply systems, costing about US$25.3 million, will be executed under unit price contracts awarded after international competitive bidding (ICB) in accordance with the Bank's guidelines for procurement for about 7Z and after AfDB and KfW guidelines for the remainder. Borehole rehabilitation packages of - 37 - appropriate size (not less than US$1.0 million each) will be assembled for similar type unit price contracting arrangements, in accordance with UNCDF directives, for about 52Z, and after ICB for the remainder. 2.44 Technical assistance, design of facilities, supervision of works and special studies, costing a total of US$19.5 million, will be carried out by consultants or experts hired on an individual basis, employed under terms and conditions satisfactory to the Association, as agreed with the Government at negotiations. For consultancies financed by the Association, the selection will be in accordance with the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency", April 1981. 2.45 The procurement arrangements are summarized in Table 2.3: Table 2.3 Procurement Methods and Costs (USS million) Project Element Procurement Method Total ICB LCB CB/ Other Cost I. Civil Works A. Road and Bridge Works 74.3 74.3 B. DRIMP 4.1 4.1 (3. 6) (3.6) C. Water Supply 6.8 30.2 37.0 (6.2) (8.2) D. Buildings 8.6 8.6 (7.6) (7.6) Subtotal 6.8 8.6 104.5 4.1 124.0 (6.2) (7.6) (3.5) l17.3) II. Goods A. Vehicles and Equipment 1.6 8.1 9.7 (1.6) (1.6) B. Road Signs 1.5 1.5 Subtotal 1.6 8. 1 1.5 11.2 (1.8) (1.6) III. Consulting Services A. Technical Assistance & Trng. 15.4 15.4 (7.6) (7.6) B. Supervision 4.1 4.1 (0. 9) (0. 9) C. Rural Transp. Pilot Program 0.5 0.5 D. Road Safety Program 1.0 1.0 E. Project Preparation 1.5 1.5 (1. 5) (1. 5) Subtotal 22.6 22.5 (9- *9) 7-(9.9) Total Project Costs 6.8 10.2 112.6 28.1 167.7 (6.2) (9.2) (13.4) (28. 8) a/ Competitive Bidding in accordance with cofinanciers' rules and regulations. Note: Figures in parentheses are the respective amounts financed by IDA. - 38 - 2.46 All documentation for procurement of civil works under ICB and financed by the Association will be subject to Association review prior to issuance of tenders. The LCB bidding packages for civil works, estimated to cost less than US$300,000 equivalent and which will use standard documents satisfactory to the Association, and all other contract documentation will not be routinely reviewed but MOW will maintain copies of bid evaluations and final contracts which will be subject to spot review by the Association supervision missions. 2.47 A target implementation schedule is presented in Chart 2, the details of which were agreed with Government at negotiations. The schedule shows an implementation period of four years, that is, the time slice covered by the project. However, past experience indicates that a typical implementation period for similar projects in the region is closer to six years. G. Disbursements 2.48 The Credit funds will be disbursed on the following basis: (a) 90Z of total expenditures for civil works for urban water supply construction, rehabilitation of boreholes, rehabilitation of public buildings, expansion of Lilongwe and Zomba Training Centers, and road maintenance depots; (b) 90Z of expenditures on civil works under the fourth phase of DRIMP, including: (i) district road improvements; (ii) depots and housing; (c) for incremental maintenance expenditures on district roads: for each district being brought into the maintenance program, subsequent to completion of road improvements, 75% of incremental costs during the first year of maintenance; 50Z during the second year of maintenance; and 25Z during the third year of maintenance; (d) 100Z of foreign expenditures and 90Z of local expenditures for equipment, vehicles, spare parts, and training equipment; and (e) 10OZ of total expenditures for consultants' services. 2.49 All disbursements will be fully documented except for expenditures under force account and for contracts, estimated to cost less than US$300,000 equivalent, for civil works included in parts B, C, and D of Table 2.1 which will be disbursed against certificates of work performed, such certificates to be issued by the technical assistance or supervision consultants. The documents supporting these statements of expenditures will not be submitted to the Association for review but will be retained by MOW for inspection by the Association during project supervision missions. 2.50 A schedule of estimated disbursements is presented in Table 2.4. This schedule is in line with disbursements under comparable projects - 39 - previously implemented in Malawi and takes into account the PPF advance of US$1.5 million, which will be disbursed at effectiveness. In order to expedite disbursement of funds under the above categories of the Credit, a special account with a deposit of US$2.0 million (an amount roughly equivalent to four months estimated expenditures in terms of US dollars) will be established and maintained for MOW in a commercial bank. The special account will be replenished by the Association in accordance with agreed procedures. Table 2.4 Schedule of Estimated Disbursements Bank Fiscal Year Disbursements Cumulative Disbursements and Quarter Quarterly at end of Quarter Ending: (USS million) (USS million) FY90 September 30, 1989 0.0 0.0 December 31, 1989 1.8 1.8 March 31, 1990 0.8 2.4 June 30, 1990 0.7 3.1 FY91 September 30, 1990 1.2 4.3 December 31, 1990 1.2 65. March 31, 1991 1.7 7.2 June 30, 1991 1.7 8.9 FY92 September 30, 1991 1.9 10.8 December 31, 1991 1.9 12.7 March 31, 1992 1.9 14.6 June 30, 1992 1.9 16.5 FY93 September 30, 1992 1.8 18.3 December 31, 1992 1.8 20.1 March 31, 1993 1.5 21.6 June 30, 1993 1.5 23.1 FY94 September 30, 1993 1.2 24.3 December 31, 1993 1.2 26.5 March 31, 1994 1.0 26.S June 30, 1994 0.9 27.4 FY95 September 30, 1994 0.8 28.0 December 31, 1994 0.5 28.5 March 31, 1995 0.2 28.7 June 30, 1995 0.1 28.8 Closing date: December 31, 1995 - 40 - H. Accounting, Auditing and Reporting Requirements 2.51 Project accounts will be maintained by the two executing agencies, MOW and MTC, for their respective project components. In previous Bank Group projects, accounts have been audited by the Auditor General; as this arrangement has proven satisfactory, it will also be followed under this project. It was agreed during negotiations that the Government will have all project accounts, as well as the special account, the statement of expenditures, and accounts of DWSF (para. 3.05), audited by the Auditor General and the audited accounts, together with the Auditor's report, submitted to the Association not later than six months after the end of the fiscal year. For the ongoing infrastructure projects, the Government has been submitting audit reports in a generally satisfactory fashion with only a few delays. The Government also agreed during negotiations on progress reporting requirements and the submission of a project completion report, in a form satisfactory to the Association, not later than six months after the closing date. I. Environmental Impact 2.52 The road components of the project will have beneficial effects on the environment in raising the level of comfort of vehicle occupants now subjected to severe vehicle vibration, noise and dust on poor roads. Many people walking on, or alongside, the roads are favorably affected by the surfacing of roads which reduces the clouds of dust caused by vehicles travelling on earth roads. Also, improved drainage alongside roads often retards soil erosion, thus yielding benefits to adjacent land owners. 2.53 The water supply components will also have beneficial environmental effects. In the urban areas included in the project, the augmented water supply system capacities will help maintain the present standard of water supply and thus the health conditions of the town residents. In the rural areas, the rehabilitation of many boreholes will not only enhance the supply of potable water for rural population, with important health consequences, but also will in many cases reduce significantly the distances that these people must walk to obtain water for daily needs, thus freeing up valuable time for other productive pursuits. 2.54 Environmental assessments of the impacts of the three dams have been completed. No problems were identified for two dam sites but a marsh with unusual features was identified in the catchment area of the Zomba dam. A supplementary study (to be financed under the Credit) of the ecology of the Zomba marsh has been agreed with Government to ensure that no unique features will be lost (para. 2.57) as a result of the project. The Zomba dam is planned for implementation in the third year. 2.55 Kasungu Dam. The existing dam on the Chitete River would be raised by 4.5 m resulting in 0.44 km2 of land being inundated in addition to the existing reservoir. The additional area to be flooded is mainly swampland of no commercial or biological significance. There are no settlements hence resettlement will not be necessary. Also, the land is the property of the Government of Malawi and has been allocated for this purpose, so compensation for the land will not be required. The sparse - 41 - vegetation of the new reservoir area makes the risk of extinction of wildlife unlikely. As a reservoir already exists, no general change in aquatic life is expected. The larger reservoir will enhance stability of thermal stratification, improve the potential for fisheries and flood control and reduce the risk of salination due to evaporation. The longer detention time in the larger reservoir is expected to result in improved reservoir water quality. 2.56 Mzuzu Dam. The Mzuzu dam will be a 19.5 m earth fill dam constructed on the Lunyangwa River, a tributary of the Mzuzu River, and will have a reservoir with an area of 0.72 km2. The area to be inundated is currently natural secondary subtropical forests and swampland (dambo) of no commercial or biological interest. The catchment is owned by Government and there is no present or expected future agricultural use of this area. No human settlements will be inundated as a result of this dam. Eutrophication and algal bloom which will be a hazard during the early years when inundated vegetation is decaying under the water can be minimized by removal of vegetation in the reservoir area prior to inundation. The dam is unlikely to result in serious negative environmental impacts and further environmental reconnaissance is unnecessary. 2.57 Zomba Dam. The Zomba dam will be a 15 m earth fill dam to be constructed near the headwaters of the Mlunguzi River on the Zomba Plateau. The Plateau is at the top of the Zomba Montain and supports a rich and possibly unique vegetation (high marsh) and wildlife community. This marsh is a rare biotope which is seldom found in Malawi. The dam will regulate river flow (between the marsh at the headwaters and the present water intake) to produce more reliable water supply for Zomba as well as benefit the trout hatchery. The catchment area (2.3 km2) is almost entirely covered by dense forest. The only settlements are forest service houses and these will not be affected by the dam. Agriculture is not practiced in the area; the marsh vegetation is poor in nutrients and there is little danger of eutrophication following flooding. The main concern with the dam is its impact on the high marsh. A detailed study of the ecology of the marsh together with its functions for the watershed has been agreed with Government to minimize the impact of the project on the marsh. The study will be completed by September 30, 1990, and the Government agreed to implement the study recommendations in agreement with the Association. J. Riparian Matters 2.58 The Kasungu dam is to be built on the Chitete River and the Mzuzu dam on the Lunyama River. Both rivers drain into Lake Malawi, an international body of water, bordered by Malawi, Mozambique, and Tanzania. The proposed Zomba dam will be on the Mlunguzi River which eventually empties into Lake Chilwa bordered by Malawi and Mozambique. As the proposed dams will be on relatively small tributaries of these international water bodies, no potential international water right issues are anticipated. The Government of Malawi, however, has formally notified the concerned riparians of its plans for these bodies of water. Both Mozambique and Tanzania have advised Malawi that they have no objection to the proposed damming of the rivers in question. - 42 - III. FINANCIAL ANALYSIS OF DISTRICT WATER SUPPLY FUND A. Past Operating Results 3.01 DWSF was created in 1978-79 to operate on a commercial and self- financing basis. The fund served as the organizational and financial entity responsible for implementing a project, financed by AfDF, to upgrade and increase potable water supply facilities in certain areas including small towns scattered about the country. At present DWSF operations cover 48 centers and serve over 300,000 people through communal water points and house connections. According to the financial provisions of the AfDB project, DWSF was expected to generate a reasonable return on its net fixed assets, which it has not been able to accomplish so far. / 3.02 DWSF derives its revenues mainly through water charges from about 600 communal water points and about 11,000 house connections based on metering. At present, approximately 156,000 people are served by communal water points and 144,000 by house connections. An additional source of income is the one-time fee for house connections. 3.03 The past financial performance of DWSF is shown in Table 3.1. Despite the requirement that DWSF operate on a self-financing basis, it has suffered a loss in every year since it began operations except FY 1982/83. The causes of this adverse financial performance are mainly (i) increases in operating costs exacerbated by devaluations of the kwacha; (ii) failure to implement needed tariff increases on time despite sharp increases in costs; (iii) the high cost of amortizing substantial debts; and (iv) withdrawal in FY 1982/83 of a Government subsidy received annually up to that point. Table 3.1: Income Statements for DWSF, 1983/84 - 1987/88 (MK 000) Fiscal Year Ending 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 Total Operating Revenues 2,082 1,949 2,254 2,579 3,054 3,822 Agency Fee and Other Receipts 406 54 79 325 134 223 Total Revenues 2.488 2,003 2.333 2,904 3,188 4,045 Operating Expenditures 1,648 2,122 2,894 3,238 3,853 3,908 Income Before Depreciation 842 (119) (561) (334) (865) 139 Depreciation 340 317 334 322 302 382 Income Before Interest 602 (436) (895) (666) (987) (243) Interest 39 21 77 8o 77 51 Net Income (Losses) for the year 463 (457) (972) (716) (1,044) (294) Operating Ratio 161 94 81 90 83 104 Source: DWSF - 43 - 3.04 Separate accounts for the water supply system of individual towns, such as Zomba, are not maintained at present. Thus, it is not possible to ascertain the operating results of each particular system. Revenues from the sale of water are available, and the data for the seven urban water supply systems included in the project are shown in Table 3.2. The systems vary substantially in size. The Zomba system is relatively large, generating 51Z of total revenue, and the Mponela system is relatively small, generating 3Z of the revenue. Cash receipts are generally somewhat lower than sales, indicating some problems of collection; however, both sales and revenues rose in most of the seven systems between FY 1984/85 and FY 1986/87. Table 3.2 Revenues from Water Sales in Selected Systems /a (MK 000) Fiscal Year 1984185 1985/86 1986/87 Revenue Sales Revenue Sales Revenue Sales Kasungu 73 73 101b/ 81 88 101 Mponela 16 23 32 36 51/b 44 Mangochi 59 71 65 73 73 99 Zomba 470 587 528 564 566 618 Mzuzu 234 240 197 284 251 371 Ncheu 27 70 48 80 54 90 Karonga 27 75 47 83 58 97 Total 906 1,139 1,005 1,201 1,123 1,420 Notes: a/ Sales represent invoiced amounts while revenues constitute cash receipts. b/ Revenues exceed sales due to inclusion of receipts from previous years. Source: MOW, DWSF. 3.05 DWSF's accounting system is operated on a commercial basis. Annual accounts are prepared in a commercial format and audited by the Auditor General. The audit reports through March 31, 1988, were reviewed and are satisfactory. It was agreed during negotiations that DWSF will continue to have its annual accounts independently audited and submit audited accounts, together with the auditors' reports, to the Association no later than six months after the end of the fiscal year (para. 2.51). 3.06 Present accounting practices and procedures are adequate for recording transactions and preparing financial statements and annual budgets for DWSF at its present level. However, the increase in size and complexity that will result from the project investments will necessitate more detailed accounts. It was agreed during negotiations that separate accounting arrangements will be established by December 1990 for the three urban schemes located in Zomba, Mzuzu, and Kasungu. - 44 - 3.07 As of November 1988, there were 36 accounting staff in the Water Department and the number of staff is adequate. Out of the 36 staff, there were 21 in Headquarters (Lilongwe), 8 in the Southern Region, 4 in the Central Region, and 3 in the Northern Region. The expected increased accounting demands of the larger system resulting from the project will require that more qualified accountants or certified accounting technicians be hired for each region. In addition to handling the accounting work of the three schemes, these accountants would supervise and train accounting clerks in the regions. B. Financial Position 3.08 The balance sheet data for DWSF over the fiscal years 1983/84 - 1987/88 are presented in Table 3.3. No major investments were made by DWSF for several years, and while gross fixed assets increased marginally, net fixed assets declined until 1987/88. Receivables (57Z of the outstanding amount in 1986/87 and 1987/88 was owed by government agencies) and payables have increased substantially in the past few years. DWSF's working capital has shrunk and its year-end cash balance has been negative for the past two fiscal years. Since much of the outstanding amounts is owed by government agencies, during negotiations, Government agreed to ensure that all outstanding (over 90 days) water bills are paid before March 31, 1990. Servicing of a large Government loan (68Z of total long-term debt) has been postponed indefinitely and the accumulated losses have led to a negative equity position for DWSF. - 45 - Table 3.3 Balance Sheet for DWSF, 1983184 - 1987/88 (MK 000) Fiscal Year Ending 1983/84 1984/85 1985/86 1986/87 1987/88 ASSETS Fixed Assets Gross Fixed Assets 6,194 6,395 6,537 6,647 7,649 Less: Depreciation 1,306 1,640 1,961 2,264 2,645 Net Fixed Assets 4,888 4,755 4,576 4,383 5,004 Current Assets Cash 985 782 325 0 0 Inventories 298 357 419 616 806 Net Accounts Receivables 1,225 1,256 1,396 1,793 1,558 Other Current Assets 92 91 49 49 51 Total Current Assets 2,600 2,486 2,189 2,458 2,415 Total Assets 7,488 7,241 6,765 6,841 7,419 EQUITY AND LIABILITIES Total Equity 1,152 328 (350) (961) (273) Long-Term Debt Government Loan 3,688 3,688 3,688 3,688 3,688 AfDF Loan 1,800 1,750 1,750 1,750 1,750 Total Long-Term Debt 5,488 5,428 5,428 5,428 5,428 Current Liabilities Creditors and Payable 782 1,363 1,547 2,057 1,789 Water Deposits 66 72 80 89 96 ADF Loan Repayment 50 50 50 50 Bank Overdraft 178 329 Total Current Liabilities 848 1,485 1,677 2,374 2,264 Total Liabilities 6,336 6,913 7,105 7,802 7,692 Total Equity & Liab. 7,488 7,241 6,765 6,841 7,419 Current Ratio 3.07 1.67 1.31 1.14 1.04 Source: DWSF - 46 - C. Future Performance 3.09 The financial forecasts for fiscal years 1988/89 to 1995/96 and the assumptions on which they are based are shown in Annexes 17 to 20. During the project period the volume of water sold is expected to double due to the project and other investments. This, coupled with the tariff increases assumed (para. 3.20), would increase revenues by about 45Z from the present levels. In the same period operating expenses would increase by about 53Z. With significant cash balances in the years following project completion, DWSF should be able to finance minor expansions from its own resources and reduce its dependence on government allocations. Agreement was reached with Government during negotiations that DWSF will generate total revenues at a level sufficient to: (i) not later than the end of fiscal year 1991/92 cover its expenses for operation and maintenance, and depreciation or debt service requirements, whichever is higher; (ii) not later than the end of fiscal year 1993/94 generate positive net income after allowing for DWSF's expenses for operation and maintenance, depreciation, interest, and other charges on debt and maintain a ratio of current assets to current liabilities of not less than 1.4. 3.10 To increase further DWSF's potential revenues, DWSF's connection charge policy needs to be changed. At present, DWSF requires advance payment of the actual connection cost of MK 250 plus 15Z overhead for all new connections. As the connection charge is beyond many potential domestic customers' ability to pay, the substitution of a monthly charge on new connections could attract many new customers. There is a precedent for this approach as the Blantyre Water Board allows the fee for new connections to be paid in monthly installments. As a precaution, a down- payment of 15-20Z could be charged with the rest in monthly installments. Agreement was reached with Government during negotiations that DWSF will substitute a monthly charge on new connections instead of the advance payment currently required. 3.11 DWSF presently has a negative equity position and its debts are larger than its assets largely due to the Government loan it has failed to service in the past. Since DWSF has been using its income to finance development projects without compensation from Government, it was agreed with Government during negotiations that the DWSF debt will be converted to a government contribution to the capital of DWSF. 3.12 DWSF's liquidity, which has been precarious for the past several years, should also gradually improve with current ratios above 1.8 for the years following project completion (Annex 20). It is important, however, for DWSF to follow a consistent plan of action in order to prevent it from falling into the serious financial difficulties of the past. Agreement was reached with Government during negotiations that DWSF will not incur any debt, other than that specified for the purposes of this project, unless a reasonable forecast of its net cash generation before depreciation and interest exceeds 1.5 times its debt service in any future years, including debt service on the amount to be borrowed. 3.13 DWSF's present asset base is about MK 7 million. At the end of construction of this project, DWSF's assets are going to be over ten times higher. Consequently, a revaluation of existing assets is deemed to be - 47 - unnecessary at this time. Agreement was reached with Government during negotiations to revalue annually the assets of DWSF starting October 1, 1990 and every October thereafter. D. Financing Plan 3.14 The financing plan for DWSF covers the fiscal years 1988189 through 1992/93, which is approximately the period of physical implementation of the project. Table 3.4 presents the financing plan in terms of both Malawi kwacha and US dollars, while Annex 19 gives a detailed forecast of DWSF's sources and application of funds. Table 3.4: Financing Plan MK US$ Z of Total ----(000)----- Sources Internal Cash Generation: - Net Operating Income (115) (42) (1) - Depreciation 4,308 1,578 5 Grants and Contributions: - Government 5,040 1,846 6 - KfW 26,042 9,539 30 Borrowings: - AfDF 44,524 16,309 50 - IDA 8,402 3,678 10 Total 88,201 32,308 100 Requirements Project Cost 84,008 30,772 96 Debt Service 1,794 748 1 Increase in Working Capital 2,399 788 3 Total 88,201 32,308 100 3.15 Based on present estimates, it is expected that DWSF's internal cash generation during the period of project construction will be about 3% of its overall funding requirements. This will be sufficient to cover debt service and provide adequate increases in its working capital. 3.16 The costs of project construction, which represent 96% of DWSF's requirements during this period, would be met from grants and contributions (36X) and from borrowings (60%). KfW is expected to provide about 30% of total funds on a grant basis, which, with the Government's contribution of - 48 - about 6% plus conversion of the existing debt to equity, will help overcome DWSF's current negative equity situation. 3.17 It is assumed that the AfDF loan will be passed on to DWSF on the same terms and conditions as the loan is made available to the Government (for 50 years including a 10-year grace period and a service charge of 0.75Z). It was agreed during negotiations that IDA funds will be passed on to DWSF for a period of 25 years including a 5-year grace period at an interest rate of 5% on amounts disbursed and outstanding, and that the Government will bear the foreign exchange risk. E. Tariffs 3.18 DWSF's tariff structure is progressive, with the intention of cross-subsidizing the poorer segments of consumers, and applies to all DWSF schemes. While the tariffs have not been reviewed each year as they are supposed to be, increases of about 50% in April 1988 and 20Z in April 1989 have resulted in the following tariff schedules: April 1, 1988 April 1, 1989 Communal Water Points MYK 0.23/m3 MK 0.23/m3 Domestic Water (monthly consumption): Consumption of 0 - 6m3 MK 2.00/m3 MYK 2.50/m3 flat charge Consumption in excess of 6m3 up to and including 8m3 MK 0.30/m3 MK 0.36/m3 Consumption in excess of 8m3 up to and including 30m3 MK 0.65/m3 MK 0.78/m3 Consumption in excess of 30m3 MK 0.75/m3 MK 0.90/m3 3.19 Tariffs for water from communal water points were not changed during the recent revision because of affordability concerns (para. 4.34). Each communal water point is equipped with a meter and consumer groups have been formed which, as a whole, are responsible for meeting the cost of water passing through the meter. The tariff of MK 0.23/mn is charged to a "Tap Committee". The Tap Committee in turn raises revenues from members of the consumer group through a flat rate, normally about MK 1.00 to MK 1.20 per family per month. The construction costs of communal water points have to date been financed by the Government and a grant from UNCDF. Government's policy is to provide water to those who cannot afford individual connections through communal water points; 52% of the population served by DWSF is served by communal water points. - 49 - 3.20 It is estimated that in FY 1988/89 DWSF will collect an average tariff of MK 0.741m3 for its domestic water sales (Annex 18). Based on projections of water sales, DWSF would only require small increases in its average tariff to meet its overall financial obligations for the next two to three years. However, the tariff that would be required upon project completion in FY 1992193 would be much higher. To avoid a large one-time rise, the tariffs should be increased gradually for DWSF to maintain financial viability. Therefore, agreement was reached with Government during negotiations that the Borrower shall ensure that, in each year of project implementation, DWSF generates total revenues at a level sufficient to: (i) not later than the end of fiscal year 1991/92, cover DWSF's expenses for operation and maintenance, and depreciation or debt service requirements, whichever is higher; and (ii) not later than the end of fiscal year 1993/94, generate positive net income after allowing for DWSF's expenses for operation and maintenance, depreciation, interest, and other charges on debt and maintain a current ratio of not less than 1.4. Agreement was also reached that starting in FY 1989/90 the DWSF will submit to the Association, four months from the beginning of each fiscal year, its plan of action related to tariffs for the coming fiscal year as a result of annually updated financial forecasts. F. Financial Covenants 3.21 Based on the financial analysis of the water supply component of this project, the following financial covenants have been agreed at negotiations: (a) DWSF will have its annual accounts independently audited and submit to the Association the audited accounts, together with the auditors' reports, no later than six months after the end of the fiscal year; (b) Separate accounting arrangements would be established by December 1990 for the three urban water supply schemes in Zomba, Mzuzu, and Kasungu; (c) The Government will ensure that all outstanding (over 90 days) water bills owed by government agencies will be paid by March 31, 1990; (d) DWSF will generate total revenues at a level sufficient to: (i) not later than the end of fiscal year 1991/92 cover its expenses for operation and maintenance, and depreciation or debt service requirements, whichever is higher; (ii) not later than the end of fiscal year 1993/94 generate positive net income after allowing for DWSF's expenses for operation and maintenance, depreciation, interest, and other charges on debt and maintain a ratio of current assets to current liabilities of not less than 1.4; (e) DWSF will substitute a monthly charge on new connections (for domestic consumption) instead of the advance payment currently required; - 50 - (f) The Government will convert its loan of MK 3,688,000 to DWSF as a government contribution to the capital of DWSF; (g) DWSF will not incur any debt, other than that specified for this project, unless a reasonable forecast of its net cash generation before depreciation and interest exceeds 1.5 times its debt service in any future years, including debt service on the amount to be borrowed; (h) DWSF's assets will be maintained on a current value basis; (i) IDA's funds will be passed on to DWSF for a period of 25 years including a 5-year grace period at an interest rate of 5Z on amounts disbursed and outstanding; (j) Government will bear the foreign exchange risk; (k) Starting in FY 1990/91, DWSF will submit to the Association, four months prior to the beginning of each fiscal year, its plan for tariffs for the coming fiscal year. - 51 - IV. PROJECT JUSTIFICATION A. Economic Evaluation of Project Components General 4.01 The project is consistent with sectoral development objectives and represents a continuation of developments achieved under previous IDA- financed projects. The primary objective is to strengthen the management capabilities of MOW. Thus a significant portion of the project focuses on the management aspects, the benefits of which will be realized within the context of the road, water and public building components. The severe funding and expenditure constraints facing Government at present underscore the importance of maintaining the infrastructure that exists and of maximizing benefits through effective project identification, programming and implementation. Accordingly, the focus is not only on the subprojects themselves but also on the process required to plan and manage these assets in a cost-effective manner. 4.02 The overall project is based on a listing of subprojects prepared by MOW and subsequently pared down according to specific criteria and to meet prescribed spending limits. In addition to the management improvement component, there are subprojects in the areas of road rehabilitation and improvement, road safety, rural transport, water resource development and rehabilitation of public buildings. A preliminary evaluation indicates that all of the subprojects are economically viable. This general finding will be supplemented each year by detailed analyses of subprojects to be initiated in the subsequent year. Consistent with this approach, only those subprojects scheduled to begin in the first year have been evaluated in detail. Evaluation of Project Overall 4.03 The road rehabilitation and resealing components, a continuation of work begun under the Fifth Highway Project, will improve road conditions on major routes, thereby reducing transport costs, enhancing the reliability of transport and preventing progressive road deterioration. The extension of DRIMP to the three remaining districts and further spot improvements in other districts will afford rural populations better access to markets, supplies and public services. The improved transport to be realized through various road components of the project, supplemented by the pilot rural transport scheme, will help to stimulate the economic development of the country, particularly in rural areas. 4.04 The urban water supply component will greatly expand the capacity of seven urban water systems and enable them to accommodate a growing demand for potable water. In addition to providing an adequate and reliable supply of water, the project is directed toward strengthening the operational and institutional capacity of DWSF and, in particular, to help the larger systems become self-supporting. The rehabilitation of boreholes and construction of additional gravity-fed schemes will improve the water supplies of many rural people throughout Malawi, as well as assist in meeting the needs of the Mozambican refugees. The time savings associated with the improved rural water supply are likely to be significant; a recent - 52 - study by ILO estimates that rural households in Malawi spend more than 2,500 hours a year on transport, over a quarter of which is spent collecting water, usually (as much as 70Z of the time) by women (Annex 13c). 4.05 The rehabilitation of selected public buildings will improve the utility of those buildings in the short term and extend their useful lives. In addition to renewal of specific buildings, the public building component demonstrates the substantial savings that can be gained from timely maintenance and rehabilitation. The potential exists to realize long-term benefits from development of an ongoing maintenance program that would obviate the need for premature major rehabilitation or replacement investments. 4.06 Economic rates of return (ERR) have been calculated for each of the subprojects scheduled to begin in the first year program. These ERRs are summarized in Table 4.1. Table 4.1 - Economic Rates of Return for Project Components ERR (Z) Rehabilitation of Paved Roads 17 Rehabilitation of Earth/Gravel Roads 19 Improvement of Earth/Gravel Roads to Bitumen 16 Bridge rehabilitation >50 DRIMP - 3 new districtsl/ >12 Urban Water Supply1! 6.1 Borehole Rehabilitationl/ 20 Public Buildings 29 1/ ERR is for total investment. Source: Annexes 22 - 26. 4.07 All of the foregoing ERRs are satisfactory. Comparable returns are expected for similar subprojects in subsequent years. During negotiations, it was agreed that: (i) the Association must approve each subproject prior to its inclusion in the project in subsequent years; (ii) all subprojects proposed for roads and public buildings must have an ERR of at least 12Z; and (iii) the list of subprojects for the next year must be submitted to the Association three months before the beginning of the fiscal year. 4.08 No calculation of ERR has been made for other project components representing approximately 20Z of the total cost of the project. These smaller subprojects, which include a rural transport pilot scheme, road maintenance depots, road safety program, rural gravity-fed piped water schemes, training and technical assistance, complement the larger project components and are well justified. - 53 - Road Maintenance 4.09 The road maintenance component comprises (i) paved road rehabilitation; (ii) earth and gravel road rehabilitation; (iii) resealing of paved roads; and (iv) bridge reconstruction. The principal benefits from road maintenance will be savings in vehicle operating costs. Additional benefits will be derived from the avoidance of both road closures caused by poor road conditions and the premature rehabilitation of poorly maintained roads. The benefits will accrue largely to road transporters and farmers living in the areas of road influence. As the road transport industry is relatively competitive and users of the main and secondary roads are diverse, transport cost savings from this project component should be realized by virtually all economic groups in the country. 4.10 The economic justification of this component is based on an assessment of economic costs and benefits with and without the project over the estimated economic life of the renewed road or bridge facility. The traffic forecasts used to estimate savings in vehicle operating costs were derived from baseline counts, information on past trends, and growth rates consistent with conservative forecasts that take into account such factors as estimated future geographical distribution of population and employment, and growth in GDP. The resultant average annual growth rates range from 3% to 5Z, depending upon the type and location of individual subprojects. As these subprojects involve rehabilitation of existing facilities, it was assumed that they would neither divert traffic from other roads nor generate significant new demand. The economic vehicle operating costs are based on vehicle operating cost factors for Malawi and the differential in vehicle operating costs for different road categories, road standards and types of terrain (Annex 21). Subproject costs include physical contingencies but are net of taxes and price contingencies. 4.11 The ERRs for individual road maintenance subprojects in the first year program are shown in Annex 22 and range from 17% to 19% for rehabilitation of paved, earth and gravel roads, and are more than 50% for bridge reconstruction (Annex 23). The high rates of return for the latter are the result of long distances that would have to be traversed if a bridge were unusable or restrictive weight limitations were imposed and enforced. 4.12 Selection of the particular roads included in the road maintenance component was based on a systematic analysis of a large number of candidate roads. MOW used the System for the Inventory and Analysis of Highway Projects (SIAP), a network model in some ways similar to the Bank's Highway Design and Maintenance model (HDM), to identify critical links in the road network and evaluate each potential subproject's rate of return. ERR was a key factor in the selection of particular roads; other considerations included regional distribution and the practicality of organizing the work on the roads in an efficient manner. A large number of bridges initially identified in a road planning inventory were similarly screened and the potentially most beneficial projects analyzed using the HDM model. As HDM provides important detail and versatility, it was agreed during appraisal that MOW will use HDM for all analyses of road projects in future years. - 54 - Road Improvement to Bitumen Standard 4.13 The improvement of earth and gravel roads to bitumen standard constitutes new construction rather than maintenance and rehabilitation. However, the analysis is similar to that for maintenance and rehabilitation, as the improved road will replace a functioning road of lower standard. As before, the principal benefits are savings in vehicle operating costs with and without the project over the estimated 20-year life of the new road. Additional benefits are reduced maintenance costs and avoided premature rehabilitation. Only one such improvement is included in the first year program, with an ERR of 16Z (Annex 22). DRIMP 4.14 Phases I through III of the DRIMP program have demonstrated significant benefits throughout Malawi. Phase IV will complete coverage of all districts, extend the DRIMP network by about 850 km, and make spot improvements where needed in the existing network. The principal benefits are savings in vehicle operating costs in the transport of non-agricultural goods and increases in agricultural production made possible by better access to farms and markets. Improved access to agricultural extension services and markets is expected to induce farmers to increase productivity and expand somewhat the area under cultivation. 4.15 Based on past experience, significant project benefits also can be expected in the context of institution-building within district councils. In particular, capabilities for road maintenance will be developed through the provision of training, equipment and depots under the project. Other anticipated benefits are reduced spoilage of produce and improved access to health, education and other social and administrative facilities for people residing near the roads. 4.16 Most of the benefits from the reduction in transport costs will accrue to the road transporters, since the Agricultural Development and Marketing Corporation (ADMARC) pays them fixed rates for transport of goods to and from rural market centers, and to the farmers living within the roads' area of influence because of the competitive nature of the road transport industry. The main beneficiaries of the increased agricultural production and improved access to social services will be residents near the roads. 4.17 Selection of the district roads to be improved in this phase was based on socio-economic criteria, and all project roads have an estimated ERR of at least 12Z. The economic analysis of DRIMP roads considers benefits from vehicle operating cost savings plus incremental agricultural production estimated on the basis of farm models representative of farms in the proximity of the roads. Spot improvements in other districts will be made where inspection indicates a need for such measures on roads of high priority. Urban Water Supply 4.18 The urban water supply component will provide essential water supply to seven urban centers whose demand for water cannot be met from - 55 - existing facilities. This project would greatly expand the capacity of the seven systems and thereby enable them to satisfy water supply needs for these communities. The three towns requiring dam construction are important commercial and governmental centers that will continue to play an important national role in the years ahead. The four smaller towns in need of less extensive improvements are important from a predominantly regional perspective. All presently suffer from the lack of a reliable supply of potable water. 4.19 The composition of the urban water supply component represents the least cost solution among possible technical alternatives considered for the seven towns. Although the project represents a significant increase in scale, especially for those systems requiring the construction or raising of dams, soil conditions and available ground water preclude further expansion of existing sources of supply. Furthermore, the existing sources of supply are unreliable and frequently inadequate, even during relatively short periods of drought. The project will significantly reduce the risk of source failure. 4.20 The existence of some excess capacity during the early years of the project is unavoidable due to the lumpiness of the investment required, especially in those systems requiring new dams. The extent of the problem varies by town. In Mzuzu the building of the dam cannot be staged because of topography and foundation conditions. Both the Kasungu and Zomba dams are staged; the Kasungu subproject entails raising the existing dam to meet increasing demand, and the Zomba subproject entails building the first stage of a potentially multi-stage dam. All related investments in water treatment and distribution facilities will be staged in accordance with the demand. 4.21 The ERR of the seven systems is 6.1X, with aggregate benefits from the subprojects calculated using incremental water sales at an average tariff of MK 0.74 per m3, increasing to MK 0.81 per m3 in real terms as the systems become operational (Annex 24). The incremental water sales include the additional demand met by the project facilities and the reduction in the proportion of unaccounted for water that will occur as the new systems are put in place and large obvious leaks are repaired. Investment costs include physical contingencies but are net of taxes and subsidies. Use of incremental water sales as a proxy for benefits clearly understates the real economic return, as benefits that are not easily quantified are excluded. Recent literature also indicates a correlation between improved water supply and better health, with implications for enhanced productivity, which is not captured in this estimate. 4.22 The average incremental cost estimates of water supplied under the project range from MK 0.98 per m3 at a discount rate of 8% to MK 1.42 at a discount rate of 12Z. The average tariff rate of MK 0.81, which meets the basic financial requirements (para. 3.20), is below the average incremental cost but was kept low in view of affordability concerns (para 4.34). The magnitude of the average incremental cost is largely due to the lumpiness of the investment in dams and the existence of excess capacity in the short run. Once the dam is in place, the marginal cost of expanding the system will be relatively low. Thus the average incremental cost of the project will be higher than the long run marginal cost of providing water to these communities. - 56 - Borehole Rehabilitation 4.23 The rehabilitation of 2,500 boreholes will improve the quality and quantity of water available to rural households throughout Malawi. This broadly based program supports Government's objective of providing a minimum of 27 liters of water per person per day within a walking distance of 500 meters or less. As an estimated 50Z of rural households are 2 km or more away from an improved water source (para. 1.47), the project should substantially reduce the time required for collection. The principal benefits thus will be time savings, plus the additional water consumed as a result of greater convenience. The benefits can be expected to accrue to all members of the affected households, but especially to women, on whom the burden of collecting water usually falls, consuming as much as a quarter of their time every day. 4.24 In the estimation of benefits, the value of time saved reflects the reduction in distance traveled and a conservative estimate of average rural household income.l/ The latter is based on a recent sample of 250 households with children and includes marketed income, any off farm income, and the value of non-marketed agricultural production; the average income oft MK 75 per capita per year falls in the second lowest quartile of the sample and is slightly below the average for female headed households. As the shape of the demand curve is not known, it was assumed that households value the time savings associated with the incremental water collection about half as much as the basic supply. Households also contribute a small amount, in the order of MK 2, to district councils for maintenance each year. 4.25 Project costs include the initial cost of rehabilitation, annual maintenance, and periodic renovation consisting primarily of pump replacement every ten years. The annual maintenance costs reflect gradual implementation of a program to transfer responsibility for operation and maintenance of boreholes to the local community over a nine-year period. Costs include physical contingencies but are net of taxes and subsidies. Based on these benefits and costs, the ERR for the borehole rehabilitation component is 20X (Annex 25). Rehabilitation of Public Buildings 4.26 The deteriorated condition of a number of priority public buildings has become so serious that the Government must either (i) recognize that the effectiveness of the buildings in serving their public purposes is seriously compromised and replacement of the buildings with new structures will soon be required, or (ii) rehabilitate the existing buildings to improve their efficiency and extend their useful lives. The latter course will be taken under this project for 21 key building schemes, with two schools and one hospital scheduled for rehabilitation in the first year. The beneficiaries of the project will be the buildings' occupants and the Government of Malawi, which owns the structures to be renewed. 1/ Anthony A. Churchill, et al., "Rural Water Supply and Sanitation: Time for a Change", World Bank Discussion Paper No. 18, 1987. - 57 - 4.27 The 21 sites were selected from a larger list of 60 building schemes, and are the sites deemed by MOW to be most in need of rehabilitation and repair. The final selection was based on the importance of the services provided by the buildings, operating costs and site inspections that identified the most essential items of work. Priority was given to rehabilitation and repairs needed to prevent continuing and/or imminent damage, and to cases where faults were deemed to be dangerous and/or to constitute a health risk. In choosing the sites for the first year of the project, preference was given to the social sectors, with some consideration of geographical distribution as well. 4.28 Once the determination was made that the building's services are required, the approach became one of least cost, e.g., whether the building should be maintained at some minimal level and then rebuilt, or rehabilitated and subsequently adequately maintained. The principal benefits from rehabilitation thus are reconstruction costs avoided and savings in annual maintenance costs. Other benefits, more difficult to quantify, are the increased efficiency of the operations of the buildings' users and occupants, and reduced injuries and health hazards. Based on reconstruction costs avoided and savings in maintenance costs, the ERRs for the individual buildings in the first year program range from 23Z to 30Z (Annex 26). Sensitivity Analysis and Risks 4.29 An assessment of the sensitivity of economic returns to variations in the estimated costs and benefits indicates that none of the ERRs would fall to unacceptable levels. In the case of roads, even the assumption of a combined 15Z increase in construction costs and 15Z lower traffic benefits (due to lower traffic growth or lower operating cost savings per vehicle) fails to reduce individual ERRs of main and secondary roads below 12Z, and of DRIMP roads below 10%. Since experience in the region suggests that delays are likely, alternative calculations were made under the assumption that project implementation would require an additional year (with 50% of expenditures in each year deferred until the following year). The change in the overall ERR of the project, as well as that of individual components, is small and does not affect the economic viability of the project (Annex 27). 4.30 In addition to higher costs and-lower benefits, an added risk to the road component is that the Government's financial resources for maintenance of both national and district road networks may be inadequate. To minimize this risk, it was agreed at negotiations that there would be annual review of Government's allocation of funds for maintenance (para. 1.38). Nonetheless, even if priorities were set accordingly, Government's ability to fund these needs will depend on the strength of the economy and overall demands on Government resources. The economy expanded at an average annual rate of 4.1% between 1982 and 1985, and grew by only 1.1% in 1986 and 1.4Z in 1987. However, GDP grew 3.62 in 1988 and is currently projected to grow by about 4X in 1989 and 1990, 4.2% in 1991, 4.4% in 1992 and 4.5Z p.a. thereafter.2/ 2/ "Malawi Government, "Economic Report, 1989". - 58 - 4.31 The principal risks in the water supply component are: (i) that DWSF will not be able to generate sufficient revenue from incremental water sales to cover maintenance, debt service, and needed additional investments; and (ii) that Government may be unable to authorize necessary tariff increases. However, Government recently (April 1989) increased tariffs 202 to meet revenue generation targets, thereby showing its commitment to sound fiscal management of DWSF. Future increases would be guided by the condition requiring Government to implement tariffs that provide sufficient revenue to meet expenses for operation and maintenance, depreciation or debt service, whichever is higher, and adequate working capital (para. 3.09). The additional risk that Government may be unable to finance its share of the project in a timely manner due to budgetary constraints is mitigated in part by the very large proportion of grant financing of the project. Sensitivity analyses of the water supply component indicate that an increase in capital costs of 1OZ without a comparable increase in revenues would reduce the ERR to 5.5Z, and a delay in project completion (with 50Z of expenditures in each year deferred to the next and benefits delayed accordingly) would reduce the ERR to 5.8Z. 4.32 Reflecting the strong economic rationale for rehabilitation of existing assets, sensitivity analyses of the borehole rehabilitation component show the program to be economically justified under a range of more restrictive assumptions. The assumption of a combined increase in costs of 1OZ and reduction in benefits of 1OZ reduces the ERR to 16%. A reduction in per capita income to MK 65 per year would yield an ERR of 15Z. Alternatively, the ERR would be 18Z if either the pumps were to last 5 instead of 10 years, or if the decentralized maintenance program failed and annual maintenance had to be handled centrally at a much higher cost, as now. 4.33 The benefits of rehabilitating public buildings are sufficiently large that even a 30% increase in costs would not reduce individual ERRs below 20Z. The principal risk therefore is that Government will be unable to finance its share of costs in a timely manner due to budgetary constraints. This is unlikely to be a problem in the initial building projects, as the level of investment required is fairly low. However, Government may find it difficult to set aside sufficient funds for the on- going building maintenance required to keep these and subsequently rehabilitated buildings from again falling into disrepair. B. Affordability of Water Supply 4.34 Although Government has adopted a policy that urban water supply should be financially self-supporting, it is also concerned that the cost of water, particularly to the low-income segment of the population, should not be unduly burdensome. Under the current tariff for DWSF's urban systems, the consumers from communal water points are charged MK 0.23 per m3 of water consumed (para. 3.18). Approximately 60Z of the urban households in Malawi have incomes below MK 130 per month and 80Z have incomes below MK 260, for a household having an average of 8.5 persons. Based on an average daily consumption of 30 liters per capita, a household of 9 persons would consume about 8m3 of water in a month, for which it would pay about MK 2.00. This represents about 1.5Z of monthly household income, which is considered affordable. - 59 - V. AGREEMENTS REACHED AND RECOMMENDATIONS 5.01 During negotiations, agreement was reached with the Government on the following: (a) implementation of the localization plan for MOW staff, which the Government submitted for review at negotiations (para. 1.08); (b) prior to adoption of the annual budget during the project period, the Government will consult with the Association on the infrastructure investment program (para. 1.15); (c) MOW will prepare an action plan for promotion of the local construction industry, by June 1990 (para. 1.36); (d) maintenance allocations for MOW for the project period, the adequacy of which will be reviewed with the Association annually not later than three months before the beginning of each fiscal year (paras. 1.38 and 4.30); (e) a list of facilities (depots, housing, equipment, tools) to be provided under DRIMP and a list of district roads to be improved during the first year of the fourth phase of DRIMP; the work program for subsequent years will be agreed not later than three months before the beginning of each fiscal year until completion of this project component (para. 2.08); (f) a system of financial assistance for recurrent maintenance to be provided by Government to the district councils and the allocations needed during the project period. The adequacy of allocations will be discussed annually, not later than three months before the beginning of each fiscal year, by Government and the Association on the basis of MOW's updated estimates of the funds required by the district councils (para. 2.09); (g) that consultants will be employed on terms and conditions satisfactory to the Bank (para. 2.44); (h) a target implementation schedule for the various project components (para. 2.47); (i) that all project accounts will be audited by the Auditor General and that the Auditor's report will be submitted to the Association not later than six months after the end of the fiscal year (para. 2.51); (j) MOW will supply quarterly progress reports on the basis of outlines agreed with the Association (para. 2.51); - 60 - (k) MOW will prepare, not later than six months following completion of the project, a Project Completion Report on the basis of an outline to be agreed with the Association (para. 2.51); (1) MOW will conduct a study of the ecology of the wetlands at the Zomba Dam site by September 30, 1990, and implement the study recommendations in agreement with IDA (para. 2.57). (m) DWSF will have its annual accounts independently audited and submit to the Association the audited accounts, together with the auditors' report, no later than six months after the end of the fiscal year (para. 3.05); (n) separate accounting arrangements will be established by December 1990 for the three urban water supply schemes located in Zomba, Mzuzu, and Kasungu (para. 3.06); (o) all outstanding water bills owed by government agencies will be cleared before March 31, 1990 (para. 3.08); (p) DWSF will generate total revenues at a level sufficient to: (i) not later than the end of fiscal year 1991/92 cover its expenses for operation and maintenance, and depreciation or debt service requirements, whichever is higher; (ii) not later than the end of fiscal year 1993/94 generate positive net income after allowing for DWSF's expenses for operation and maintenance, depreciation, interest, and other charges on debt and maintain a ratio of current assets to current liabilities of not less than 1.4; (q) DWSF will substitute a monthly charge on new connections for the advance payment currently required (para. 3.10); (r) the Government will convert its existing loan of MK 3,688,000 to DWSF into equity in FY89/90 (para. 3.11); (s) DWSF will not incur any debt, other than that specified for this project, unless a reasonable forecast of its net cash generation before depreciation and interest exceeds 1.5 times its debt service in any future years, including debt service on the amount to the borrowed (para. 3.12); (t) DWSF's assets will be revalued annually starting in October 1990 and every October thereafter (para. 3.13); (u) IDA's funds will be passed on to DWSF for a period of 25 years including a 5-year grace period at an interest rate of 5Z on amounts disbursed and outstanding, and that the Government will bear the foreign exchange risk (para. 3.17); - 61 - (v) Government will grant DWSF each year, from FY 1991/92 through FY 1992/93, tariff increases that will provide for: (i) expenses for operation and maintenance (excluding depreciation); (ii) depreciation or debt service, whichever is higher; and (iii) a minimum current ratio of 1.4; (w) starting in FY 1990/91, DWSF will submit to the Association, four months prior to the beginning of each fiscal year, its plan for tariffs for the coming fiscal year (para. 3.20); and (x) specific Association approval will be required before any subproject can be included in the project in subsequent years, all subprojects for roads and buildings must have an ERR of at least 12Z, and the list of subprojects for the next year must be submitted to the Association three months before the beginning of the fiscal year (para. 4.07). 5.02 The following conditions would apply to the effectiveness of the IDA Credit (para. 2.36): (a) all donor agreements for subprojects to begin implementation during FY 1989/90 have been signed; and (b) the Government has received firm commitments from donors to finance subprojects to begin implementation during FY 1990/91. 5.03 The project is suitable for an IDA Credit of SDR 22.3 million (US$28.8 million equivalent), on standard terms, with 40 years maturity, to the Government of Malawi. - 62 - ANNEX 1 Page 1 of 4 MALAWI Infrastructure Project Related Documents and Data Available in Project File I. Reports Related to Infrastructure 1. MOF, 'District Water Supply: A Review", prepared by Z. U. Ahmed, Chief Technical Adviser/Expert on Public Enterprise Management, October 30, 1986. 2. Ministry of Agriculture, "Lessons from the Gravity-Fed Piped Water Scheme in Malawi", prepared by Catherine Hill and Katundu Mtawali (Draft) August 1987. 3. GOM, "Budget Estimate and Performance Report on Treasury Funds, 1987/88", undated. 4. MOW Memorandum to Treasury dated Januiary 7, 1988 "Proposed District Water Supply Project - ADB Funding". 5. MOW, DOW "District Water Supply Fund Development" undated (1987). 6. GOM and UNICEF, "A Programme for Child Survival and Development: Plan of Operations and Plans of Action, 1988-1992", two volumes, October 1987. 7. GOM, OPC, EPDD, "Economic Report" 1987, 1988, 1989. 8. GOM, OPC, EPDD, "Statement of Development Policies, 1987-1996,"1 two volumes. 9. GOM, NSO, "Transport Statistics, 1980, 1981, 1983." 10. GOM, NSO, "Transport Performance Bulletin, 1982, 1983, 1984, 1987." 11. GOM, OPC, EPDD, "Annual Report 1985 - Motor Vehicle Registration and Licensing". 12. GOM, OPC, TPU, "Growth of Road Traffic Densities in Malawi," 1985. 13. GOM, OPC, TPU, "Road Network Analysis," 1984. 14. MOW, RPU, "Average Daily Traffic by Regions," December 1987. - 63 - ANNEX 1 Page 2 of 4 15. MOW, RPU, "Road Inventory Data and Bridge Inventory Data, Sorted by Road Link Number," September 1987. 16. GOM, OPC, TPU, "Impact of District Road Improvement and Maintenance Programme in Kasungu District," March 1986. 17. ILO, "The District Road Improvement and Maintenance Programme of Malawi - An Evaluation Study", May 1987. 18. MOW, "Training Management Systems Manual," April 1988. 19. MOW, "Highway Design Manual," April 1978. 20. MOW, "Standard Specification for Road and Bridge Works," April 1978. 21. GOM, "Road Traffic Act: Road Traffic (Traffic Signs) Regulations," 1988. II. Reports Related to the Project 1. DeLeuw, Cather International, Ltd, "National Bridge Study Report", October 30, 1987. 2. MOW, "Management Improvement Programme: Guidelines for Terms of Reference and other Attachments cited in First Infrastructure Project Proposal", undated (1988). 3. MOW, "Terms of Reference" (for preparation of Public Buildings Component of Infrastructure Project), October 1987. 4. MOW, "Financial and Technical Assistance for the Promotion of Small to Medium Scale Contractors and Consultants," February 1988. 5. MOW, "Project Submission for Mponela Water Supply Improvement Phase I" (Brief description of proposed project), undated. 6. MOW, "Project Submission for Mangochi Water Supply - Upgrading of the Source Works, Treatment Works and Distribution System" (brief description of proposed project), undated. 7. MOW, DOW, Financial Statement for DWSF - Fiscal year ending 1984, 1985, 1986, 1987, 1988. 8. MOW, "Capital Works and Technical Assistance to be Considered for Funding Under the Proposed Malawi First Infrastructure Project" (basic report, appendixes listed in item 9), April, 1988. - 64 - ANNEX 1 Page 3 of 4 9. Appendices (terms of reference and background information): - Management Component. - UNDP Technical Assistance, Roads Dept., Water Dept. - PVHO. - Materials Laboratory. - Priority Buildings and Training Centre. - Water: Borehole Maintenance, Mangochi and Mponela Water Supply. - Highways. - Consultancy Services: Promotion of Small to Medium Contractors, Economic Studies of City Council Roads. - Rural Transport Pilot Scheme, Road Safety Project. - Bridges - Phase 1, Status of Design. 10. MOW, "Economic Analysis Report for All Project Roads", (computer printout), September 26, 1988. 11. MOW, DOW, Accounting Data on District Water Supply Fund for Southern Region (Zomba) Extracted February 1988. 12. MOW, DOW, Department of Water Borehole Fund, Profit and Loss Account for period ending July 31, 1988. 13. MOW, DOW, Accounting Manual for DWSF, undated (in use in February 1988). 14. MOW, DOW, Note on DOW Prepared for World Bank Mission, October 1987. 15. LSC Brunette and Partners, 'Bua River Bridge Condition Survey", January 1988. 16. GOPA, Consultants, 'Road Passenger Transport Study', December 1986. 17. Scott Wilson Kirkpatrick and Partners, "Preparation Study for DRIMP Phase IV", 1988, Vol. I and II. 18. SGI Consultants, "Feasibility Study of Mzuzu, Kasungu and Zomba Water Supply Improvements", 1985. 19. Rhein-Ruhr and GOPA, "Dwangwa-Nkhata Bay Road, Feasibility Study, Interim Report, Part II - Economic Study," January 1988. 20. Sir Alexander Gibb & Partners, "Roads Feasibility Study (Lilongwe-Salima Road)", Final Report, Vol. I, December 1987. 21. Institute of Transport Economics, 'Malawi Road Safety Project: Draft Project Description,' SATCC, January 1988. - 65 - ANNEX 1 Page 4 of 4 22. Norman & Dawbarn "Building Rehabilitation Programme," two volumes: Stage 2 Report and Stage 3 Report (Lilongwe Girls School), Drawings. 23. Stewart Scott NCL, "DANIDA Feasibility Study of a National Road Signing Programme in Malawi," March 31, 1989. 24. MOW "Consultant Selection Process: Blantyre School of Nursing", August 1985. 25. "Comparative Table of Authorized and Recommended Establishment - Water Department", no date. 26. "UNDP/UNHCR/GOM Joint Programming Mission for Long-Term Assistance to Areas Hosting Mozambican Displaced Persons in Malawi - Executive Summary," December 1987 and related documents. 27. Price Waterhouse, "Performance Improvement Study: Localization," May 1989. 28. Price Waterhouse, "Phase I PPF for Management Improvement Component," September 30, 1988. 29. MOW, "Management Improvements Component: Overview and Management Systems, (terms of reference)," September 1988. One volume and Appendix A. 30. MOW, "Management Improvement Study Implementation Programme - Draft Action Plans and Terms of Reference," August 1988. 31. Roger Popper, "An Objective Setting and Progress Tracking System for the Malawi Ministry of Works and Supplies," August 20, 1988. 32. Price Waterhouse, "Guidelines for Establishing a Data Processing Resources Management Programme," September 1988. 33. "Management Improvement Component TOR's," received at negotiations, April 1989. 34. Price Waterhouse, "First Infrastructure Project Preparation - Performance Improvement and Localization Study", April 15, 1989. 35. MOW, "Design Report - Bangula-Chikwawa Route," no date. -66- Annex 2 MALAWI Infrastructure Project Road Design Standards Adopted bZ MOW 1. Speed (mph) Terrain Type of Road Normal Mountcinous Deitrable Hinal.u Desirable Mnintim C1ass 60 so so 40 Ciass n 60 50 40 30 Class III Zach project treated loinvidually 2. Sitht Distance. Minimum Radius, Maximou Gradient Speed (mph) 30 40 S0 LO Stopping visibility (ft) 200 273 350 475 Vassing visibility (ft) 500 1,300 1,700 2,000 Laimam radus (ft) 239 477 716 1.146 Maxiema gradie4 t norual 62 5.0S 4.31 4.02 maxi-mu gradient mountainous 9S 7.O2 6.52 6.01 3. Cross Section Type of load Roedvay Width (fi) Carria&S,way plu4 shoulders Class! 22 + W - 32 Cla eI8i + 2x2 - 32 Class! lIS 16 + 2x4 - 24 4. Pavement Structurs D iM TER.L Road Note 31 5. Construction Materials Lys? nDeecription Specifications Subgrade Top 6 in depth (cut) n30. 952 mod. Top 12 In dePth (fill) AAS - Compaction Subbas Natural gravel or l104P1 <15 crusbed stone Cli 2SS at 952 mod. AhSD compactio sfter 48 bre. soaking Natural gravel h!(6 LL<30 CI 852 at 982 mod AASM0 compaction after 48 hour soaking Base Crusbed stone Agregate crushing valueX30 Stabilized gravel Pi-ci LL<40 Unconfined compressive strength 250 lbsjsq in Surfacing material depends on traffic volume and general conditions. 6. Bridges Bridge width - Carriageway width Footpath * 2 x 2 feet Loading: according to IS 153 with 0.8 IA Source: MOW, Roads Department, March 1983. - 67 - ANNEX 3 MALAWI Infrastructure Project Infrastructure-Related Projects in Malawi A. Highway Projects Credit/ Status Year Loan Amount Main Purpose X Complete (USS mill.) 1966 S-2-MAI 0.49 Detailed engineering for main roads. 100 1988 112-MAI 11.5 Main roads construction; study of road 100 transport regulations and road/rail coordination. Refunding of Credit S-2-MAI. 1974 623-MAI 10.5 Main roads construction; pilot scheme 100 for District Roads Maintenance and Improvement Program (DRIMP). First phase extension of DRIMP. 1974 S-17-MAI 2.0 Design of infrastructure requirements 100 for exploitation of the Viphya forest resources. 1977 768-MAI 10.6 Main roads construction; feasibility 100 study and detailed engineering of main roads. 1981 1099-MAI 33.0 Main road construction; main road 100 improvement; second phase of DRIMP; comprehensive study of maintenance needs. 1983 2363-MAI 18.0 Rehabilitation of roads; resealing of 80 1423-MAI 13.1 paved roads; main road construction; SF-6-MAI 13.8 provision of maintenance equipment; third phase of DRIMP; study of northern transport corridor. B. Multi-Modal Transport Project 1988 1879-MAI 13.8 Main road construction; Malawi cargo 5 centers; fuel handling facilities; lake vessel and port improvements. C. Water Supply Projects 1971 711-MAI 7.0 Expanded water supply capacity in 100 Blantyr-; strengthening management of Blantyre Water Board. 1982 1272-MAI 4.0 Formulation of long-range plan for 100 Lilongwe Water Board. 1986 1742-MAI 20.0 Expanded water supply storage in S0 Lilongwe; expanded water distribu- tion system in Lilongwe. Source: Appraisal reports and departmental files. - 68 - ANNEX 4 Page 1 of 6 MALAWI Infrastructure Project Technical Assistance, Studies, and Training Requirements 1. The project will provide a substantial amount of technical assistance to certain governmental entities, particularly MOW, which require consultancy services for project preparation, supervision of implementation, training and other needs. The purpose of this annex is to summarize the various technical assistance components in the project and the types of consultant specialists required. A table summarizing all technical assistance, training, and specialist services required is shown on page 6 of this annex. The detailed description of the services is given below. Preparation Work 2. The necessary detailed project preparation for a substantial part of the four-year program has been completed. Detailed preparations for the remaining project activities have been completed for the first year but for the three subsequent years, they will not have been completed at the time of Board presentation as is acceptable under applicable sector lending procedures. The project will include financing of detailed design/preparation of tender documents of the second, third, and fourth year program of the borehole rehabilitation and public building rehabilitation works. Consultants of appropriate background will be engaged by MOW to undertake in a timely manner all of this design and other technical work. Supervision of Construction and Other Project Implementation 3. Consultants will be required to undertake the supervision of construction of all road and bridge works (110 man-months), DRIMP (24 man- months), urban water supply system expansion (including an ecology study of the Zomba dam site) (110 man-months), borehole rehabilitation (50 man- months), and public building rehabilitation (60 man-months). Also, consultants will be needed to monitor the rural transport pilot service (48 man-months) and to evaluate bids received during procurement of equipment for PVHO (24 man-months). Manpower Development and Training Services 4. Nationwide, about 97Z of formal sector jobs have now been localized, although expatriate participation is most frequent in senior management positions. MOW, being a specialized technical ministry, is an example of somewhat slower progress in localization of engineering and related positions. As an example the Roads Department, with an establishment of 35 professional positions, employs at present 6 expatriates in such positions. - 69 - ANNEX 4 Page 2 of 6 5. The Government policy is to localize these positions as soon as possible and is therefore embarking on a staff development plan that includes training and technical assistance. The plan has been developed in such a fashion that the technical assistance would gradually be phased out during the project period. Expatriate incumbents would be replaced by already identified ministry officials, who would undergo appropriate training overseas in the interim, in accordance with the localization plan for MOW staff agreed at negotiations. 6. The Management Improvement Program for MOW would comprise the following: (i) Technical Assistance - MOW Executive Technical Assistance/Project Management 1. Program Planning and Evaluation Advisor (24 man- months) 2. Staff Development Advisor (24 man-months) - Short-term advisors (12 man-months) - Financial Management 1. Financial Management Advisor (24 man-months) - Management Information Systems/Studies (241 man-months) 1. Water Facilities Maintenance and Operations (20 man- months) 2. Buildings Maintenance and Operations (24 man-months) 3. Roads Maintenance and Operations (6 man-months) 4. Plant and Vehicle Hire Organization (20 man-months) 5. Roads, Water, & Buildings Construction (56 man-months) 6. Accounting and Financial Management (115 man-months) - Local Construction and Consulting Industry Promotion (72 man-months) 1. Construction/Consulting Engineer (24 man-months) 2. Quantity surveyor (24 man-months) 3. Accountant/Financial Advisor (24 man-months) - Data Processing/Training (77 man-months) 1. Data Processing Advisor (24 man-months) 2. Management Development Officer (6 man-months) 3. Training Specialist (24 man-months) 4. Instructional Materials Specialist (12 man-months) 5. Librarian (3 man-months) 6. Industrial Engineer/Systems Specialist (6 man-months) 7. Hydrologist (2 man-months) (ii) Training Conferences, study tours, in-country and overseas training related to management improvement. - 70 - ANNEX 4 Page 3 of 6 7. For the Roads Department and other road and road transport related activities, consultants services would be required as follows: (i) Technical Assistance For the Roads Department 191 man-months of technical assistance would be provided as follows: 1. Chief Civil Engineer (Roads Planning Branch) (12 man- months). 2. Chief Civil Engineer (Design Branch) (24 man-months). 3. Chief Civil Engineer (Construction Branch) (12 man- months). 4. Principal Civil Engineer (Rural Roads Branch) (24 man- months). 5. Assistant Chief Civil Engineer (Soils and Materials Branch) (24 man-months). 6. Pavement Overlay Program, 2 posts (40 man-months). 7. Short-term consultancies of a total of 55 man-months divided into urban roads (40 man-months) and specialist consultancy, i.e., computer programming (15 man-months). Rural Transport Services 2 posts for program administration and supervision (1x12 and 1x36 man-months = 48 man-months). Road Safety Program 90 man-months of consultant services to implement study recommendations for improvement of road safety. PVHO Engineering Manager (24 man-months) (ii) Overseas Training As an integral part of the staff development plan, 96 man- months of overseas training would be provided as follows: 1. Road Planning - 1x2 man-months. 2. Soils and Materials Testing - 3x12 man-months. 3. Bridge and Structural Design - 2x12 man-months. 4. Construction - 1x12 man-months. 5. Road Maintenance 1x12 man-months. 6. Short courses seminars, etc. 7. Short courses overseas for road safety program. 8. The Buildings Department would require assistance for training in building inspection and control (6x24 man-months). - 71 - ANNEX 4 Page 4 of 6 9. In order to carry out the proposed operation and maintenance of boreholes and handpump component, the Department of Water would require the following: (i) Technical Assistance Project Manager (24 man-months) Handpump Production Officer (24 man-months) Short-term consultant (2 man-months) (ii) Community Training Study tours, group training, in-service training (iii) Equipment 2 four-wheel drive vehicles 2 motorcycles Office equipment, components Typewriters, copiers, etc. 10. Training Centers. Within MOW a long tradition of good quality, well-monitored, and adquately financed training has contributed to a rather high degree of localization of positions. Under the Fourth and Fifth Highway Projects provisions were made to establish a training center for mainly in-service training for lower level ministerial staff. This effort will continue under the Infrastructure Project and a further strengthening of the Lilongwe and Zomba centers would emphasize the practical aspects of technical training by providing physical facilities, laboratory and workshop equipment, and overseas training for instructors in the areas of road materials and building materials testing, surveying, specialized technical drawing, electrical wiring and refrigeration. In addition, supporting facilities will be provided for office and reproduction equipment, learning aids and hostel accommodation for trainees. 11. For successful implementation of the proposed training component for lower level of training, the Government has agreed to take immediate action as follows: (i) identification of suitable candidates for instructor training (diploma level in engineering) to fill established or new posts, and (ii) preparation of equipment lists for proposed laboratories, workshops, the draughting room and the surveying shop. 12. Plans for expansion of the training centers at Lilongwe and Zomba in terms of construction are available with the exception of modification of some existing facilities. The expansion of the training centers would comprise the following: - 72 - ANNEX 4 Page 5 of 6 (i) Civil Works Provision of physical facilities for 3 classrooms, including draughting room, 1 laboratory, 1 store, and 1 hostel, totalling 585 m2 Modification of facilities at Zomba and Lilongwe to be converted into two laboratories and improvement of existing space at Zomba for water testing (laboratory and plumbing workshop) (ii) Training Equipment 1. Road materials and soils lab. 2. Building materials lab. 3. Water testing lab. 4. Surveying equipment 5. Auto-mechanical workshop 6. Plumbing workshop 7. Electrical wiring workshop 8. Refrigeration workshop 9. Draughting room 10.Miscellaneous books, tapes, video films, office equipment, paper, etc. (iii) Training Abroad (Instructors) Drawing (2x12 man-months) Building materials lab. (1x12 man-months) Road material lab. (1x12 man-months) Surveying (lx12 man-months) Refrigeration (1x12 man-months) Electrical wiring (lx9 man-months) Water lab. (2x12 man-months) Total - 105 man-months (iv) Internal Training As part of the staff development plan, intermediate officials in MOW would upgrade their technical and scientific knowledge by study for an engineering diploma divided into appropriate segments in a "sandwich-like"n fashion. _ 73 - ANEX 4 Page 6 of 6 Sum ary of Technical Aeaiatance Coneultancies. and Training Technical A-si*tenca Conaultancias Training Total No. of No. of Coat No. of Coat No. of Coat Coat Component Eneerta Man-Mthe MK 00 Purpoae Non-Nths W 0 PUrpOs Mnn-Mth W MC 000 MOW Manag.emnt Inarov^emnt Fleet Mgt. System 20 762 Training related to 1,260 MOW mgt. impromt. E..vutiv- TA 2 60 2,270 Fcin. Maint. and Training for Op-r. Mgt. System SO 1,924 inotructora 105 690 Fin. Mgt. 1 24 910 Data Proc/Trng. 3 77 2,110 Cont. Project Internal Mgt. System 3d 1,566 training - 430 Fin. Mgt. Syatma 115 4,134 La I Con-t. Ind. Protion 72 2,355 Subtotal _ 161 5 290 295 10761 2380 18.431 Reeds 5 96 3,360 Urban Roads Study 40 1,400 Overses training 96 400 DR*IM Superni-ion 24 840 Short courses/sam. N/A 320 Spacialist Service 1S 525 Supervision of Road Worka 110 2,910 Pavement Overlay Program 2 40 1,320 pVHO 1 24 840 Rural Tranaport Services 2 48 550 Road Safety Prog. 5 90 2,205 Training Course N/A 420 Subtotal iS 298 8.275 j8e 5 675 1140 15 090 Buildino Sup-rvision and Bldg. Inspection Design of and Control 144 Soo Public 8ldg-. fO 1 600 wate, SUPalv SO 88S Supervision of Trng. A Equipt. N/A 420 4 105 Improvement Work la 2,800 TOTAL 2 SO9 14Q 4599 20836 4 540 39 826 Note: US$1.00 W MK 2.60 April 1989 - 74 - ANNEX 5 MALAWI Infrastructure Project Candidate Paved Roads for Rehabilitation and Strengthening Length Estimated Cost Road (km) (MK million) *Chikwawa-Bangula 45 9.0 *Chilumba-Karonga 75 15.0 *Lilongwe-Salima 81 30.0 Limbe-Thyolo-Mulanje 69/a 17.0 Total 270 71.0 *First-Year Program a/ 702 of total length Source: MOW, Roads Department. November 1988 - 75 - ANNEX 6 MALAWI Infrastructure Project Candidate Earth and Gravel Roads for Rehabilitation Length Estimated Cost Road (km) (MK million) Jct. Ml-Nkhoma (D21) 15 1.0 *Mponela-Ntchisi (D290) 29 1.8 S73 Loop 14 1.0 Mchinji-Mkanda (S20) 36 2.0 Balaka-Jct. M3 (S55) 29 2.2 Msokera-Lifupa Lodge (D187) 53 2.9 Nsande-Cape Maclear (D39) 19 1.3 K. Banda-Euthini-Mphembere (S49) 54 3.5 Jct. M3-Malindi (S58) 12 0.6 Embangweni Mission-Luwawa (M13) 25 1.0 Total 286 17.5 *First-year program. Source: MOW, Roads Department. November 1988 - 76 - ANNEX 7 MALAWI Infrastructure Project Candidate Roads to be Improved to Paved Standard Length Estimated Cost Road (km) (MK million) *Mzimba-Chikangawa (Ml/M12) 25 5.0 Dwangwa-Nkhata Bay 90/a 30.0 Total 115 35.0 *First-year program. a/ 2/3 of total length Source: MOW, Roads Department November 1988 - 77 - ANNEX 8 MALAWI Infrastructure Project Candidate Paved Roads for Resealing Length Estimated Cost Road (km) (MK million) Nkhotakota-Dwangwa (slurry and chip seal) 58 3.0 Benga-Nkhotakota (slurry and chip seal) 53 2.8 Mzuzu-Nkata Bay (M 12) 37 3.5 Mzuzu-J. Mzumara & S. Rukuru River-Chiweta (slurry and chip seal) 68 2.7 Total 216 12.0 *First-year program. Source: MOW, Roads Department November 1988 - 78 - ANNEX 9 MALAWI Infrastructure Project List of Bridges to be Reconstructed Deficiency S=Strength Road Section Site No. Region O=Opening S 42 20100 1 S S *S 11 11230 1 C S *S 11 11241 1 C S *M 1 2062 2 N S,O *S 53 7060 3 C S S49 4050 1 N S S 49 4572 3 N O,S M 13 4670 1 N S,O *First-Year Program Source: MOW November 1988 - 79 - ANNEX 10 MALAWI Infrastructure Project Vehicles and Plant Required by PVHO Description Numbers Vehicles 4x4 Station Wagon 4 4x4 1/2-ton Pick-Up 5 4x2 2-ton Pick-Up 17 6-ton Flat Lorry 11 4.6-cu m Tipper 17 6000-liter Water Bowser 6 Plant Bulldozer (medium) 1 Bulldozer (large) 1 Pneumatic Tire Roller 3 Vibrating Roller 2 Motor Grader 1 Front End Loader 4 Compactor 1 Source: MOW November 1988 - 80 - ANNEX 11 MALAWI Infrastructure Project List of Equipment and Materials for the Planning and Design Branches The following equipment and materials are to be purchased: Cost Planning Branch MK 000 Station wagons 140 Pick-ups 180 Traffic counters 36 Lorry, 7-ton 105 Miscellaneous 100 Subtotal 561 Design Branch Items for Materials Laboratory Section Vehicles and plant 487 Drilling equipment 680 Expansion of laboratory building 455 Field and triaxial equipment 310 Laboratory equipment 541 Floating drilling platform 100 Miscellaneous 300 Subtotal 2,873 Items for Survey Section Survey equipment 625 Vehicles and caravans 390 Camping equipment 79 Subtotal 1,094 Total 4,528 Source: MOW November 1988 - 81 - ANNEX 12 Page 1 of 2 MALAWI Infrastructure Project Facilities for Road Maintenance Depots Cost Northern Region MK (a) 13 No. Zone Office blocks (at Chisenga, Nthalire, Kaporo, Lufira, Mwazisi, Mchenga, Mchenachena, Chintheche, Kamcocho, Embangweni, Embombeni, Nthungwa and Champhira) 246,700 (b) 14 No. Oils Stores (as at (a) above and also at Nkhata Bay) 59,600 (c) 14 No. Materials Stores as at (a) above 77,280 (d) 4 No. Road Supervisor Houses (at Chitipa, Karonga, Mzimba and Nkhata Bay) 118,680 (e) 8 No. Road Foremen Houses (at Chitipa, Nthalire, Karonga, Kaporo, Rumphi, Kamchocho, Mzimba and Nkhata Bay) 165,600 (f) 12 No. Fences as at (a) above except Champhira 124,200 Total for Northern Region 791,960 Central Region (a) 1 No. District Office Block (at Dowa) 26,000 (b) 8 No. Zone Office blocks (at Santhe, Mbobo, Mkanda, Chipoka, Nambuma, Chilobwe, Sharpevale and Bawi) 208,000 (c) 1 No. Road Supervisor's House (at Dowa) 32,000 (d) 9 No. Road Foremen Houses (as at (b) including Dowa) 135,000 (e) 1 No. upgrade of Road Foreman House (at Namitete) 5,000 (f) 1 No. upgrade of Zone Office (at Namitete) 10,000 (g) 9 No. Fences 54,000 Total for Central Region 470,000 - 82 - ANNEX 12 Page 2 of 2 Southern Region (a) 8 No. Zone Offices (at Madzidzi Bay, Unga, Ulongwe, Neno, Namitambo, Livunzu, Thekerani and Bangula) 68,730 (b) 15 No. Tools and Oils Stores (as at (a) including Phalombe, Nsanje, Thuchila, Matope, Domasi, Blantyre, and Ngabu) 26,800 (c) 4 No. Supervisor's Houses (at Mwanza, Blantyre, Chikwawa and Nsanje) 132,900 (d) 11 No. Road Foremen Houses (as at (a) 178,825 including Mwanza, Chiradzulu, and Ngabu) (e) 14 No. fencing (as at (b) and (d) above excluding Mwanza and Chiradzulu) 95,200 Total for Southern Region 502,455 Summary for the Three Regions Northern Region 791,960 Central Region 470,000 Southern Region 502,455 GRAND TOTAL 1,764,415 November 1988 - 83 - ANNEX 13a Page 1 of 2 MALAWI Infrastructure Project Rural Transport System A. Introduction 1. To date, rural transport investment appraisal in developing countries has not been geared towards meeting the transport needs of the rural population. Indeed, very little information existed on the transport demand of rural households. Recent investigations undertaken by the International Labour Office in collaboration with consultants IT Transport (UK) in Sub-Saharan Africa and the Philippines have focussed on quantifying this demand. These studies have used the household -the productive unit- as the basis for appraising rural transport demand, following the practice in transport planning in urban areas and industrialized countries. The results show that the nature of rural transport is different from what could be inferred from the road emphasis of previous transport investments. 2. Activities which are not conventionally defined as productive are the primary reasons for movement in the rural areas: transport for harvesting and marketing of crops is almost insignificant in comparison to transport for water and fuel collection. Considerable loads are moved around within the rural areas - survey households recorded between 100 and 210 ton-kilometres a year - and huge distances covered. Most of this is "invisible" transport, taking place on the footpaths and tracks in and around villages, away from the recognized road network. The vehicles in this part of the transport system are load-carrying pedestrians. 3. Pending investment, this part of the network has remained rudimentary. Consequently, transport is at present consuming large amounts of households time and energy. In Malawi, the stagnating volume of output from the smallholder sector and the persisting low volumes of visible traffic on the good, well-maintained secondary and district roads are cause for the Government's concern. Given the low ownership of vehicles of any kind and the virtual non-existence of transport services inside the rural areas, rural households have no option but to resort to the most time- consuming and labour-intensive means of transport: walking and headloading. There is thus good reason to believe that the first stage in the transport network, constituted by household transport, is where the bottleneck lies. The Government therefore seeks to expand the scope of rural transport planning and investment to include transport services and household transport. B. Rural Transport Pilot Service 4. Taking account of the substantial demand for transport services identified in a recent study by GOPA, consultants (Federal Republic of Germany), the Government seeks to experiment in three areas with rural transport services designed to carry passengers and small shipments of goods. A detailed description of the scheme is given in Annex 13b. - 84 - ANNEX 13a Page 2 of 2 C. Pilot Integrated Rural Transport Project 5. The Government also wishes to experiment with directing investment to improving the efficiency of household transport. This pilot project (Annex 13c) will assess for the first time the transport demand of rural households living in the vicinity of selected rural market centres. The travel and transport patterns obtained will be used as a basis for planning interventions that will reduce the time and energy rural households currently have to spend on transport. The project will significantly increase the availability and affordability of non-motorized wheeled vehicles in the project areas. Ultimately, it aims to establish a rural transport planning process in the project districts which can then be replicated in other districts. The premise of this integrated approach to rural transport planning is that all the components of the transport system, vehicle ownership, transport services as well as infrastructure require investment if there is to be adequate provision for the movement needs of rural communities. - 85 - ANNEX 13b Page 1 of 3 MALAWI Infrastructure Project Rural Motorized Transport Pilot Scheme A. Introduction 1. Large numbers of people living in remote rural areas of Malawi lack adequate transport services. United Transport (Malawi) (UT(M)) provides some rural bus services but many routes with low demand are not served at all while the service levels on other routes are infrequent. Matola (illegal) passenger and freight services are available at times in some places but service is often unreliable, uncomfortable for passengers and dangerous. 2. The development of small-scale rural transport has been inhibited by several factors, including the high acquisition cost of vehicles and the limited financial resources of potential owner-operators. High operating costs on rural roads is also an unavoidable problem. Although UT(M) and matola services have limitations, as noted above, their fares and rates tend to be low in rural areas because of cross-subsidization and therefore, a new independent owner-operator faces severe price competition. No Government subsidies are available for any road transport service in Malawi. 3. A study of road passenger transport in Malawi was undertaken in 1986 by GOPA, consultants (Federal Republic of Germany). One of the principal subjects investigated in the study was transport in rural areas which were found to be seriously in short supply. In the study, the consultants presented a proposal for a rural motorized transport pilot scheme and this scheme is incorporated as a component of the project. B. Objectives 4. The main objective of the pilot scheme is to establish a highly flexible, motorized small-scale trucking system, localized in selected rural centers to serve surrounding catchment areas. If this initial development proves successful, the program may subsequently be expanded. C. Scope of the Operation 5. Geographically, the pilot program will include all of the three regions of Malawi and will establish operations in a particular rural area in each region. Within each of these areas the operations will be based in a rural center with service to be provided over a catchment area of about 40 km radius. Both passenger and small-scale cargo services will be operated over a period of two years. - 86 - ANNEX 13b Page 2 of 3 D. Main Activities Selection of Pilot Areas 6. The three pilot areas, Phalombe, Dedza, and Chitipa, have been selected on the basis of the following criteria: (i) sufficient demand for service based on sizeable population in the area; (ii) suitability of the area for motorized transport, particularly a minimum network of local and feeder roads; (iii) possible complementary linkage of services with UT(M) services; (iv) agricultural potential of the area; and (v) possible coordination with a rural growth center scheme. Selection of Vehicles 7. Taking into account the nature of the market for services, the vehicles used by UT(M) and matola operators and other considerations, GOPA consultants have recommended that the small Bedford model TJ 340 (Jl) would be the best vehicle available for the purpose. Possible Routing and Frequency of Services 8. There are numerous possibilities with regard to routing, scheduling, number of services, complementary services with UT(M) and joint operations. Selection of these operating features will be made primarily on the basis of the following criteria: (i) five vehicles stationed in or around each of the 3 rural centers; (ii) daily kilometers per vehicle not less than about 150 km but varying somewhat with terrain; (iii) maximum distance limited by the possibility of daily return to center; (iv) linkage with UT(M)'s established services at several points of various lines; and (v) avoidance of service on routes where UT(M) has basic services, except during rainy season when UT(M) may reduce service pilot operations. - 87 - ANNEX 13b Page 3 of 3 Organizational Set-up 9. One of the basic requirements of the pilot scheme is that the vehicle owner should be the operator and that the vehicle must be stationed in a rural center. Unless the owner-operator is individually responsible the pilot scheme will probably fail. 10. Notwithstanding this individual responsibility, there is much to be gained from some kind of association among the owner-operators. For each area, there will be need to assign one locally-based transport expert as head of the association for on-site organization, routing, training, monitoring and control as well as one locally-based mechanic for workshop operations. Also, close cooperation with UT(M) in the pilot areas would be necessary to avoid unwise competition and to optimize routing and scheduling. 11. The head of the association would also handle daily cash management, at least initially. Vehicle financing would be provided by the Leasing and Finance Company of Malawi on the basis of a foreign-aided revolving fund with repayments arranged over the estimated life of the vehicle. An expatriate advisor would monitor the entire operation. Cost Estimates 12. For the three centers the cost has been estimated as follows: MK '000 - Vehicles (15 units) 780 - Spare parts 145 - Workshops 88 - Technical assistance (12 man-months over 3 years) 300 - Project supervision 250 Total 1,563 - 88 - ANNEX 13c Page 1 of 3 MALAWI Infrastructure Project Pilot Integrated Rural Transport Project A. Introduction 1. The transport system which the 7 million Malawians living in the rural areas will be most familiar with is very limited in the range, speed, and carrying capacity of its means of transport. The infrastructure consists of a myriad of footpaths and tracks which link rural households to the places where their daily activities are carried out and link villages to each other and to economic and social facilities. Between 70 and 80Z of rural transport is undertaken on this tinvisible" network. A combination of low purchasing power and high prices ensures that few households have access even to non-motorized vehicles such as bicycles and oxcarts. The most frequently encountered means of transport is thus the human being. Efficient transport services are run in and out of the rural areas by the passenger service United Transport (Malawi) Ltd, but no services exist as yet to meet the rural population's need to move themselves and their many small loads (25 kg - 2 tons) over a typical range of 2 to 40 kilometers. 2. This transport system nonetheless permits the movement of significant numbers of people and volumes of freight comparable to those moved on the conventional network, at however considerable cost to the rural economy. Figures are not as yet available for Malawi, but, based on indications from rural household transport demand surveys carried out in other sub-Saharan countries*, rural households in Malawi are undertaking at least 5,000,000 identifiable trips a day on the rural transport network. The same surveys suggested that in the course of these trips, Malawian rural households are moving in the region of 150 million ton-kilometers a year, almost all of which will be headloaded over the first few kilometers. The largest proportion of this freight will be made up of water, fuelwood and harvested crops. Rural households in the aforementioned surveys recorded total transport time budgets between 2500 and 4800 hours a year. Eighty percent of the freight and 70 percent of the time spent is accounted for by women. Transport,-rhus, adds to the competing demands made on their time and energy by their other productive and reproductive responsibilities. 3. The human and economic cost of this inefficient transport system is high. The time rural households are spending on transport is as inordinate as it is unproductive. It restricts the availability of labour for expanding, modernizing or diversifying production: only 1OZ of maize land in Malawi is planted with high yielding varieties (in Kenya 60Z). It absorbs unacceptable amounts of rural women's time, correlating with one of *(1) Makete Integrated Rural Transport Project, Report of First Village Survey. Barwell and Malmberg-Calvo, ILO, 1987. (2) Study of Potential for Intermediate Means of Transport, Ministry of Transport and Communications, Republic of Ghana. Howe and Barwell, World Bank, 1987. - 89 - ANNEX 13c Page 2 of 3 the highest incidences of infant mortality and morbidity in Sub-Saharan Africa and with the extremely poor health status of women in rural Malawi. The non-existence of rural transport services makes the delivery of agricultural inputs unreliable. In many ways, transport is a severe constraint on growth in the rural economy, borne out by the stagnation observed in output from the smallholder sector in recent years (Economic Report 1988). B. Objectives 4. The immediate objective of the project is therefore, to reduce the time and effort households in the vicinity of selected rural centres are spending on transport. At the end of the project the capacity will have been created at district level to plan and implement interventions for this purpose. C. Scope 5. Initially, rural market centres in 1 district in each of the three regions will be selected. The post of District Transport Officer will be created in each project district by the Ministry for Local Government. The target beneficiaries of the project will be the smallholder farmers (men and women) living within the radius of influence of the rural market centres selected. Special consideration will be given to the target sub- groups consisting of small-scale entrepreneurs, female-headed households and the virtually landless (presently engaged in casual porterage). The project activities will last three years, but the District Transport Officer will be semi-autonomous after 2 years. D. Main Activities Household Transport Demand 6. The project will permit for the first time an evaluation of the total transport demand of households in rural Malawi. Household travel and transport patterns will be established in a baseline survey. Following the start of project interventions, their evolution will be monitored continuously. The link between increases in the capacity of the rural transport system and agricultural productivity wifl be investigated. A study of options for improving the provision of transport services will also be carried out. Increasing the Availability of Non-motorized Wheeled Vehicles 7. The project aims to significantly increase vehicle ownership in the project areas. The project will make available both familiar and new types of non-motorized vehicles: bicycles, donkeys, hand-carts, etc., and associated load-carrying devices. The vehicles will be sold to the target population on a hire purchase basis. The target group will form credit groups for this purpose, as is currently done for agricultural inputs. Different terms will apply to the different target sub-groups, and particular attention will be paid to putting vehicles in women's hands. Under this component, training in the manufacture, repair and maintenance will be organized for local artisans. - 9o - ANNEX 13c Page 3 of 3 Upgrading of Tracks and Trails 8. Improvements in basic infrastructure will be necessary to permit the widespread and efficient use of the vehicles to be introduced. The project will establish a methodology for identifying the most important tracks and footpaths in the project area and for undertaking community up- grading and maintenance. Definition of Non-transport Interventions 9. Interventions that lie outside the scope of transport planning can have considerable impact on transport demand. Improved water supply, better crop storage facilities, more efficient stoves or village woodlots, for example, can all reduce the demand for transport. From household transport patterns and monitoring of traffic at different social and economic facilities, it will be possible to define such interventions and contribute to their planning. Institution Building 10. The District Council (Ministry of Local Government) and the District Development Committee (Office of the President and Cabinet) undertake development activities at district level. The Ministry of Transport has only regional representation: no one is responsible for organizing transport at the district level. The Ministry of Local Government will, therefore, create the post of District Transport Officer within the District Council. The District Transport Officer, answerable to the Senior Engineer in the Ministry, will be responsible for planning and implementing rural transport investments, and for providing inputs to the broader planning process at district level. The Senior Engineer and District Transport Officers will receive training and 2 years technical assistance. Towards the end of the project, rural transport planning will be an established process and periodic consultancy inputs will be provided to assist with extending the planning process to other districts. Selection of Project Areas 11. The project areas will be selected so that they are representative of different types of terrain and agricultural activity encountered in Malawi. At least one (but not all) project district will include a Rural Growth Centre; one will include a pilot Rural Transport Services Scheme. The project districts will be chosen from a shortlist of districts having manifested strong interest in the project's objectives. - 91 - ANNEX 14 Page 1 of 5 MALAWI Infrastructure Project Road Safety Program A. Introduction Road Accidents 1. During 1986, road accidents in Malawi accounted for 537 deaths, 640 serious injuries and 1,931 lesser injuries. With approximately 30,000 registered motor vehicles, there were approximately 200 persons killed per 10,000 motor vehicles which is one of the highest accident levels in the world. Moreover, Malawi has the highest road accident rate among the countries in the Southern African region. Clearly, there is an urgent need to develop an effective road safety program. Major Problems 2. Among the problems being experienced in Malawi with regard to road safety are the following: (i) the Road Safety Board (RSB) (advisory body) lacks adequate staff; (ii) the RSB is not sufficiently engaged in strategic planning and coordination; (iii) the Road Safety Council (acting as secretariat to RSB) lacks sufficient training and equipment; (iv) regional road safety committees are needed; (v) accident records are not computerized which limits analysis and dissemination of data; (vi) traffic education is not yet compulsory in the schools and is poorly adapted to children; (vii) road safety information is not disseminated to the general public effectively; (viii) lack of statistics related to accidents and lack of training and equipment severely limit police enforcement of traffic laws; (ix) vehicle inspection is inadequate, in part because of lack of equipment; (x) weighbridges are not used effectively; (xi) few driving schools are in operation and the courses offered are too expensive for the general public; - 92 - ANNEX 14 Page 2 of 5 (xii) the road system itself constitutes a certain safety problem and many of the danger spots have not been precisely located; and (xiii) shortages of ambulances and the lack of communications equipment makes it extremely difficult to rescue accident victims. B. Objectives 3. The main objective of the program is to improve the organization, staff capabilities and equipment for undertaking road safety work thereby reducing the deaths, injuries and property damage caused by road accidents. C. Scope of the Program 4. The program will be concerned with road safety throughout Malawi and extend over a period of five years. It is divided into three phases, the duration of the first being one year and of the others two years each. The phased program is as follows: Phase 1 - Reorganization of RSB and introduction of the Road Safety Agency (formerly Road Safety Council). - Preparation and introduction of amendments to present legislation. - Initiation of Road Safety Project with expatriate staff. Phase 2 - Implementation of legislation and road safety measures. - Training of road safety staff and other key personnel. Phase 3 - Follow-Up activities and current road safety work. - Evaluation of road safety measures. - Proposal of follow-up activities. - Gradual withdrawal of expatriate staff. D. Main Activities 5. The main activities of the road safety program will be as follows: Planning and Programming The main tasks of RSB would be to compile current information about the road safety situation in Malawi, to develop strategies and to make short and long term plans for the national road safety work, to analyse the road safety activities within the different government bodies. The Board would normally meet three or four times a year, and all preparations would be made by the Road Safety Agency. - 93 - ANNEX 14 Page 3 of 5 In addition to the current planning activities, the Road Safety Agency would develop a handbook on road safety work. Accident Analysis and Research One of the key tasks during phase 1 will be to develop new procedures for accident recording, transfer of accident data and data analysis. A system for the region has been presented in the report "Accident Recording Systems in Southern Africa", (Vaaje 1987); the proposals will have to be adapted for use in Malawi. Training programs and computer facilities will be developed. Computer facilities may be used jointly for accident data, vehicle register and driving license register. Initial black spot analysis will be based on existing police data on accidents until a new system for future black spot analysis based on the revised comprehensive accident recording system has been developed. Information and Education This activity would be carried out with the cooperation of the Ministry of Education. An important step would be to introduce road safety into the curriculum of primary schools, and of the teacher training colleges. Training materials would be adapted to local conditions and to the learning capacity of children in different age groups. The regional Road Safety Secretariats will be mainly concerned with the dissemination of information, and the regional Road Safety Officers would be trained for that work. The cooperation between Road Safety Officers and local police will be emphasized. Driver Training Improvements of driver training will be undertaken. Draft legislation for such a training system has been prepared by SATCC. It may be recommended that driver training courses become compulsory. Recommendations will also be developed concerning possible introduction of requirements as to 'vehicle construction' and "life saving first aid' for the candidates. Driver instructors and driver examiners will receive formal training and the first aid courses will be coordinated with the Ministry of Health, the Red Cross and the World Health Organization. Law Enforcement Amendments to present legislation are required, in particular to deal with the problems of drunk driving, excessive speed, and control procedures and sanctions related to such violations. Equipment and training will be made available to the traffic police. Concerning drunk driving, a pilot study would be carried out in Lilongwe and Blantyre in cooperation with the Kamuzu Central Hospital in Lilongwe; for this study, blood testing equipment will be procured. The Road Traffic Act is presently being revised and the work is based on a draft proposal prepared by SATCC. - 94 - ANNEX 14 Page 4 of 5 Vehicle Testing and Control Considerable time will be devoted to establishing a comprehensive testing and control system with the proposed 7 vehicle testing stations. See the report 'Motor Vehicle Testing in Southern Africa" (Filseth 1987). However, in the short term, the vehicle testing stations in Blantyre and Lilongwe would be properly equipped. Legislation and manpower would be provided to permit the Road Traffic Commissioner to operate an independent Vehicle Testing Group for vehicle control on the road. Manpower training is also to be implemented. Updated registers for vehicle registration and driving license registration and new administrative routines for this work will be developed. Access to computer facilities would be sought for this purpose, independently or in combination with the accident analysis unit within the Road Safety Agency. Road Infrastructure and Environment Black spot improvement which has proved to be a highly cost-effective measure for accident prevention would start as soon as the first analysis of existing accident data has been carried out. Analysis will be undertaken of accidents in the major towns and for parts of the road network which are known to be dangerous. In the future this activity would be one of the normal tasks of the Roads Department within MOW. Road construction and road maintenance would also take into account the accident situation on different parts of the road network. Manuals on road traffic planning with respect to accident prevention would be developed both for urban and rural areas. Control of Overloading Overloading of vehicles, a problem in all countries in the region, in particular on the mountainous parts of the road network, will be analyzed. Heavy overloading is often associated with poor braking systems, and this problem will receive special attention. Proposed legislation for a control system has been prepared by SATCC and the feasibility of such legislation for Malawi will be reviewed. E. Manpower Requirements 6. Short-term consultants will be engaged to assist the Road Safety Agency, the Road Traffic Commissioner, and the Traffic Police. One full- time expert will assist the Executive Road Safety Officer in coordinating the safety work. The requirements have been estimated as follows: - 95 - ANNEX 14 Page 5 of 5 Phase Duration Experts Man-Years (Years) 1 1 1 full-time 1.0 2 short-term 1.0 2 2 1 full-time 2.0 4 short-term 2.0 3 2 1 short-term 0.5 Contingency for short-term assistance 1.0 Total 7.5 F. Cost Estimates 7. Equipment requirements and costs have been estimated as follows: Technical Assistance MK 000 - Consultants (7.5 man-years) 2,205 Equipment - 6 vehicles 900 - Computer facilities 240 - Testing equipment 160 - Communications equipment 65 - Teaching and office equipment 830 Training Courses 420 Total 4,820 - 96 - ANNEX 15 Page 1 of 5 MALAWI Infrastructure Project Specifications for Urban Water Supply Improvements A. Water Supply Mzuzu 1. The water supply system of Mzuzu relies on the Lunyangwa river east of the town. A dam with the following specifications will be constructed on the river's major subcatchment: Design Type: Earthfill Parameters Unit Catchment area 25 km2 Spillway design flood 210 mX/* Active Storage capacity 4.2 million m3 Maximum dam height 19 m Total fill volume 183 thousands m3 Spillway width 36.9 m Construction cost (1988) 11.6 UK million Meets water requirements to year 2006. Kasungu 2. The water supply system of Kasungu town draws water from an existing reservoir formed by an earthfill dam on the Chitete river upstream of the town. To meet future needs, the existing Chitete dam will be raised about 4.5 m and the specifications are as follows: Design Type: Earthfill Parameters Unit Catchment area 44 km2 Spillway design flood 230 m /s Active Storage Capacity 2.5 million m3 Maximum dam height 17 m Total fill volume 70 thousand m3 Spillway width 34 m Construction cost (1988) 5.6 UK million Meets water requirements to year 1996. Zomba 3. The existing water supply to Zomba town draws water from the Mlunguzi river on Zomba Plateau, where there is a small reservoir providing some storage for the dry season. To provide sufficient water for the period to 1995 a new dam will be required on the Mlunguzi river as follows: - 97 - ANNEX 15 Page 2 of 5 Design Type: Earthfill Parameters Unit Catchment orea 2.3 k12 Spillway design flood 70 m /a Active Storage capacity 1.4 million m3 Maximum dam height 17 m Total fill volume 83 thousand m3 Spillway width 20 m Construction cost (1988) 12.6 WK million Meets water requirements to year 2005. B. Waterworks Mzuzu 4. The existing water intake will be replaced by a new one at the planned reservoir. The raw water pumping facilities will be replaced by gravity supply to waterworks and the low-lift pumping stage to the treatment plant will be replaced by gravity supply from the new Lunyangwa dam. Kasungu 5. Raising the Chitete dam will require the relocation of the waterworks approximately 100 m downstream and the provision of a new raw water intake. The existing raw water pumping will no longer be required because of the increased height of the dam, and therefore, raw water pumping will be replaced by gravity supply. Zomba 6. The Mlunguzi river intake will be abandoned as the water supply system will be supplied directly by the existing pipeline/penstock having its intake at the Mlunguzi reservoir. The existing gravity supply to waterworks (no raw water pumping) will be maintained. C. Distribution Systems Mzuzu 7. The existing main pumping station consists of two plants, one in the Old Works and the other in the New Works. To meet future water demand, the discharge capacities of the main pumping station need to be raised by increasing the capacity of the existing plant and installing an additional plant. Kasungu 8. The construction of new waterworks in Kasungu will require the building of a new main pumping station. The two existing booster pumping stations would remain in use. - 98 - ANNEX 15 Page 3 of 5 Zomba 9. Future distribution of treated water in Zomba will continue to be by gravity. Mponela 10. Existing source of supply is ground water from four boreholes. Average daily production is 385 m meeting about 60Z of estimated average demand. The water is chlorinated prior to distribution by gravity. The reticulation has a total of about 10,800 m of PVC and galvanized iron pipes ranging in size from 25mm to 100mm in addition to 3,550 m of PVC transmission mains. Three pressed steel ground level tanks with a combined capacity of 217 m3 provide storage which covers over 12 hours of average supply. The 1987 population of 5600 is expected to increase to 8380 by 1995, about 80X of whom would have access to water service compared with the 60X served presently. 11. The facilities under the project would include: (i) 5 additional boreholes increasing average daily production to 900 m3 which is expected to meet 80X of the projected 1995 average demand; (ii) a 150 m3 reinforced concrete ground level tank to replace the existing 79 m3 and 38 m3 pressed steel tanks; and (iii) about 4,250 m of distribution pipes together with 1,500 m of transmission main. Except for chlorination, there would be no treatment. The estimated cost of these facilities in mid 1988 prices is MK 1,200,000. Mangochi 12. The 1987 population of Mangochi was 15,330, 7500 or 49% of whom were served by the public water supply system. The projected 1995 population is 20,185 and it is intended that service be extended to about 80 . 13. The source of raw water is the Shire River. Production in 1987 averaged 860 m3/d and average consumption was 690 m3/d. Production in 1995 is projected to be 2,765 m3/d with consumption at 2,300 m3Id. 14. Treatment consists of pressure filtration and chlorination. The raw water is pumped to the treatment plant where it is filtered through the two pressure filters each with capacity of 18.1 m3/hr. The filtered water is chlorinated and distributed by gravity. Two elevated, pressed steel tanks, 205 m3 in total capacity, provide storage for the system. Under the project, a new intake structure will be provided together with two new pressure filters with a combined capacity of 115.2 m3/hr to replace the existing filters; the chlorination system will be refurbished and about 5,350 m of transmission and distribution pipes ranging in diameter from 100 mm to 200 mm laid in addition to two ground level reinforced concrete blockwork tanks, capacity 398 m3 each, and one 95 m3 pressed steel elevated tank which together provide about 12 hours of storage. The estimated cost of these facilities under the project is MK 1.1 million in mid 1988. - 99 - ANNEX 15 Page 4 of 5 Ntcheu 15. Ntcheu is a district and main market center situated about 160 km southeast of Lilongwe. The 1987 population of 5800 is projected to reach 9430 by 1995. About 3200 persons or 55Z of the population had access to public water in 1987. By 1995, the fraction receiving public water service is expected to be 80Z. Water production in 1987 was 225 m3/d on average and consumption was estimated to be 210 m3/d. 16. Raw water is obtained from the Mpamadzi and Mariko streams and supplemented with water from a borehole equipped with a diesel driven pump. A 100 mm pipeline transports the raw water by gravity to a 114 m3 ground level concrete tank some 3 km away. The water is chlorinated at the tank and distributed by gravity. The distribution system contains about 3,640 m of asbestos cement and galvanized iron pipes in diameters of 50 mm and 75 mm. The system also has other ground level tanks -- a 150 m3 concrete and two 22.5 mi corrugated iron tanks. 17. To meet projected future water demands and to ensure the safe quality of the water produced, an additional intake on the Ndeka River together with facilities for the treatment of the raw water will be provided under the project. The treatment facilities would include receiving well, aerator, mixing basin, flocculator, two horizontal flow sedimentation units each 2.6 x 9.5 m in area; two rapid gravity filtration units each 4x4 m2 in area and injection chlorinators. The treated water, total output 40 m3/hr, would be distributed by gravity. A total of 2,470 m of 100 mm PVC and 450 m of ductile iron pipe, 100 mm in diameter would be added to the distribution system together with 5,000 m of PVC and 200 m of ductile iron main both of 200 mm diameter for raw water. No additional storage facilities will be provided under the project. The estimated cost of the facilities to be provided under the project in mid 1988 prices is MK 1.72 million. Karonga 18. The 1987 census put the population of Karonga at 19,630. It is projected to reach 27,280 by 1995. Only about 40X of the population had access to public water supplies in 1987. By 1995, and as a result of the proposed project, the population served with public water is expected to increase to 80X. 19. The source of raw water for Karonga is the North Rukuru River. The raw water is pumped to the treatment plant where it is clarified by sedimentation through a vertical flow clarifier (6.4x6.4m) and by filtration through rapid gravity sand filters (2 units each 3x3 m2 in area) and chlorinated prior to storage in a 268 m3 ground level tank and two elevated pressed steel tanks of 145 m3 and 95 m3. The treated water is transmitted by gravity by a 150 mm diameter PVC pipe, 2,300 long to the distribution system which comprises 15,380 m of PVC pipe ranging in diameter from 40 mm to 150 mm and galvanized iron pipes from 2 inch to 4 inch diameter. - 100 - ANNEX 15 Page 5 of 5 20. Facilities to be provided under the project will double the capacity of the existing plant and will include: - a new intake well 2.8 m diameter by 8 m deep together with 4 submersible pumps each capable of pumping 100 ms/h; - a 200 mm diameter PVC raw water pumping main, 2,400 m in length; - 6.4 m x 6.4 m vertical flow sedimentation basin capable of producing 70 m3/h; - 2 rapid gravity sand filter each 3x3 m2 in area and rated at 45 m3/h/unit; - 11,700 m of PVC distribution pipes varying in diameter from 90 mm to 250 mm; - a 268 m3 ground level brickwork tank. The estimated cost of these additions in mid 1988 prices is MK 1.2 million. - 101 - ANNEX 16 Page 1 of 2 MALAWI Infrastructure Project Public Buildings to be Rehabilitated 1. The Building Department of MOW in collaboration with its consultants has reviewed its inventory of public buildings along with other relevant records, carried out physical inspection and has selected the following schemes for rehabilitation under the Infrastructure Project. SOUTHERN REGION A. Health Buildings 1. Machinga District Hospital 2. Chiradzulu District Hospital *3. Queen Elizabeth Central Hospital, Blantyre 4. Thyolo District Hospital B. Educational Institutions 5. Blantyre Secondary School 6. Blantyre Teachers College C. Office Buildings 7. MOW Regional Offices, Blantyre 8. MOW Regional Offices, Chituo CENTRAL REGION A. Health Buildings 1. Kamuzu Central Hospital (including Old Hospital) Lilongwe 2. Dowa District Hospital 3. Nkhotakota District Hospital B. Educational Institutions 4. Dedza Secondary School 5 Lilongwe Teachers College *6. Lilongwe Girls Secondary School C. Offices 7. MOW Regional Offices, Lilongwe - 102 - ANNEX 16 Page 2 of 2 NORTHERN REGION A. Health Buildings 1. Rumphi District Hospital 2. Chitipa District Hospital 3. Nkhata Bay Hospital B. Educational Institutions *4. Mzuzu Secondary School (& staff houses) 5. Mzuzu Teachers College (including staff houses and Demonstration Primary School) C. Offices 6. MOW Regional Offices, Mzuzu *First-year program. _ 103 - Annex 17 Page 1 of 2 MALAWI INFRASTRUCTURE PROJECT District Water Supply Fund Assumptions for Financial Projections A. General 1. The following rates of inflation were assumed in the financial projections for DWSF. Year Local Foreign % z 1988/89 15.0 5.3 1989/90 10.0 5.3 1990/91 7.5 4.1 1991/92 5.0 4.1 1992/93 and beyond 5.0 p.a. 4.1 p.a. B. Income Statement 2. The forecasts assume that the tariff for standpost water would increase by only half the local inflation rate because of Government's requirements to provide water to this group at a minimum cost. Other income agency fees, reconnection fees, meter testing fees, etc., have been adjusted for local inflation and based on past experience. The tariff for retail water has been set to meet the financial covenant, i. e., revenues each year should be sufficient to meet all operating costs, depreciation or debt service, whichever is higher, and working capital increases. 3. Connection charges are assumed to grow by the local inflation rate. Revenues from connections have been calculated as the product of the connection charge and the number of connections projected to be installed each year. 4. Salaries and wages are based on current staffing levels of 1,005 adjusted for growth in production and inflation. Administration costs have been assumed as a proportion of salaries. Fuel and chemical costs have been projected on the basis of increased water production and adjusted for inflation. Maintenance has been assumed as a proportion of gross fixed assets but since most of DWSF assets would be brand-new, this proportion has been reduced for the years immediately after construction is completed. Depreciation has been calculated at only 3Z of gross fixed assets due to the newness of most of the assets and since a substantial part of the new investments are in dams. - 104 - Annex 17 Page 2 of 2 C. Balance Sheet and Sources and Application of Funds 5. Accounts receivable presently stand at about 4.7 months of revenues. These have been projected to be gradually reduced to about 3 months revenues. Inventories have been projected at about 40Z of maintenance costs. 6. Accounts payable presently stand at about half of total operating expenditures. This has been projected to be gradually reduced to about a third of operating expenditures. 7. It is assumed that the Government loan has been converted to equity, and that the existing AfDF loan will be carried at the same value as it appears in DWSF accounts. Since Government will not allow the revaluation of loans to reflect the devaluation of the kwacha, the projection is based on the historical figure. MALAWI INFRASTRUCTURE PROJECT ______________________ DISTRICT WATER SUPPLY FUND __________________________ INCOME STATEMENT As at March 31 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 Water Produced (mill. m3) 11.31 12.88 14.81 18.63 18.65 20.67 22.C1 24.04 Unaccounted (%) 0.35 0.36 0.33 0.32 0.30 0.28 0.27 0.25 No. of Connections 11136 11470 11814 12169 12634 12910 13297 13696 No.of Public Standposts 652 783 929 1065 1244 1378 1674 1700 Water Sold Retail (mill. m3) 6.88 6.70 7.83 9.06 10.44 11.90 13.21 14.42 Water Sold Standposts(mill. m3) 1.47 1.67 1.96 2.26 2.81 2.98 3.30 3.61 Tariff Retail Water (MK/m3) 0.74 0.74 0.76 0.81 0.96 0.97 0.97 0.97 Tariff Standpost Water (MK/m3) 0.23 0.25 0.26 0.28 0.28 0.31 0.31 0.34 -------------------------------------------------------------------MK (000) --------------------------------------------------- REVENUES Water Sales(Retail) 4351.00 4958.00 6961.00 7331.00 9918.00 11543.00 12814.00 13987.00 Water Sales(Standposts) 338.00 418.00 490.00 633.00 731.00 924.00 1023.00 1227.00 Connection Charges 187.00 198.00 230.00 273.00 316.00 366.00 403.00 468.00 Other Income 260.00 269.00 289.00 308.00 326.00 342.00 380.00 378.00 ° Total Revenues 5106.00 6843.00 6960.00 8545.00 11290.00 13168.00 14800.00 16050.00 EXPENSES Salaries and Benefits 1291.00 1486.00 1678.00 1880.00 2088.00 2274.00 2602.00 2751.00 Fuel and Energy 1131.00 1288.00 1607.00 1995.00 2424.00 2087.00 2939.00 3386.00 Chemicals 452.00 564.00 887.00 831.00 988.00 1168.00 1311.00 1486.00 Transport 602.00 693.00 783.00 877.00 986.00 1061.00 1167.00 1284.00 Maintenance 790.00 10S5.00 1382.00 1392.00 1770.00 1810.00 1866.00 1903.00 Administration 258.00 297.00 336.00 376.00 414.00 456.00 500.00 560.00 Sundry 113.00 130.00 146.00 164.00 180.00 198.00 218.00 240.00 Total Expenses 4637.00 5602.00 6619.00 7515.00 8809.00 9843.00 10492.00 11560.00 Income Before Depreciation 469.00 341.00 341.00 1030.00 2481.00 3622.00 4108.00 4490.00 Less: Depreciation 237.00 319.00 423.00 809.00 2757.00 2817.00 2883.00 2968.00 Income Before Interest 232.00 22.00 -82.00 221.00 -278.00 705.00 1226.00 1534.00 Less: Interest 13.00 139.00 304.00 488.00 663.00 764.00 743.00 722.00 Net Income (Losses) 219.00 -117.00 -388.00 -267.00 -939.00 -59.00 482.00 812.00 x Operating Ratio(%) 90.81 94.16 95.10 87.95 78.02 73.25 71.86 72.02 oo MALAWI INFRASTRUCTURE PROJECT DISTRICT WATER SUPPLY FUND SOURCES AND APPLICATIONS OF FUNDS (MK THOUSANDS) -----------------------------------____------____-______--------__-----------__---------------------___-----------------_------ As at March 31 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/96 1995/98 -------------------------------------------------------------__--------------__------------------------------------------------ Sources of Funds Internal Sources: Operating Income 232.00 22.00 -82.00 221.00 -278.00 487.00 981.00 1246.00 Add: Depreciation 237.00 319.00 423.00 809.00 2757.00 2817.00 2883.00 2958.00 Total Internal Sources 489.00 341.00 341.00 1030.00 2481.00 3284.00 3844.00 4202.00 Grants and Contributions Government 0.00 0.00 1843.00 1129.00 2288.00 0.00 0.00 0.00 KfW 0.00 0.00 0.00 13021.00 13021.00 0.00 0.00 0.00 Total Grants A Contributions 0.00 0.00 1843.00 14150.00 15289.00 0.00 0.00 0.00 Borrowings AfDF 0.00 2625.00 13357.00 14988.00 13873.00 0.00 0.00 0.00 IDA 0.00 2621.00 2941.00 1881.00 1260.00 0.00 0.00 0.00 Total Borrowings 0.00 5046.00 18298.00 18849.00 14933.00 0.00 0.00 0.00 Total Sources of Funds 489.00 6387.00 18282.00 31829.00 32703.00 3284.00 3844.00 4202.00 On Application of Funds Project Expenditures 0.00 5048.00 17941.00 30799.00 30222.00 0.00 0.00 0.00 Other Capital Expenditures 0.00 0.00 0.00 0.00 0.00 2000.00 2200.00 2420.00 Total Capital Expenditures 0.00 6048.00 17941.00 30799.00 30222.00 2000.00 2200.00 2420.00 Debt Service Interest: AfDF I 13.00 13.00 12.00 12.00 12.00 11.00 11.00 11.00 AfDF II 0.00 0.00 19.00 119.00 231.00 333.00 333.00 333.00 IDA 0.00 126.00 273.00 357.00 420.00 420.00 399.00 378.00 Total Interest 13.00 139.00 304.00 488.00 863.00 764.00 743.00 722.00 Amortization: AfDF I 0.00 60.00 50.00 50.00 50.00 50.00 60.00 50.00 AfDF II 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IDA 0.00 0.00 0.00 0.00 0.00 0.00 420.00 420.00 Total Amortization 0.00 50.00 50.00 50.00 60.00 50.00 470.00 470.00 Total Debt Service 13.00 189.00 354.00 538.00 713.00 814.00 1213.00 1192.00 Inc./Dec. in Working Capital 456.00 152.00 -13.00 492.00 1768.00 470.00 431.00 590.00 Total Application of Funds 469.00 5387.00 18282.00 31829.00 32703.00 3284.00 3844.00 4202.00 Debt Service Coverage 36.08 1.80 0.98 1.91 3.48 4.03 3.17 3.53 INF. ,..TRUCTURE PROJECT DISTRICT WATER SUPPLY FUND BALANCE SHEET (MK THOUSANDS) ----------------------------------------------------------------__-----------__------------------------------------------------ As at March 31 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/96 1995/9S -------------------------------------------------------------__--------------__------------------------------------------------ FIXED ASSETS Gross Fixed Assets 7904.00 10622.00 14113.00 28969.00 91912.00 93912.00 96112.00 98532.00 Less: Depreciation 3137.00 3456.00 3879.00 4688.00 7446.00 10262.00 13145.00 16101.00 Net Fixed Assets 4767.00 7166.00 10234.00 22281.00 84467.00 83650.00 82967.00 82431.00 Work in Progress 0.00 2328.00 16778.00 34721.00 0.00 0.00 0.00 0.00 Total Fixed Assets 4787.00 9494.00 27012.00 67002.00 84467.00 83860.00 82967.00 82431.00 CURRENT ASSETS Cash -54.00 168.00 266.00 664.00 1399.00 2187.00 3094.00 4139.00 Inventories 949.00 1169.00 1470.00 1687.00 2073.00 2282.00 2442.00 2694.00 Accounts Receivable 1866.00 2076.00 2403.00 2605.00 3273.00 3283.00 3642.00 3863.00 Loan to PVHO 63.00 67.00 61.00 66.00 69.00 73.00 77.00 81.00 Total Current Assets 2813.00 3450.00 4200.00 6021.00 8814.00 7786.00 9155.00 10777.00 TOTAL ASSETS 7580.00 12944.00 31212.00 82023.00 91281.00 91435.00 92122.00 93208.00 EQUITY AND LIABILITIES ______________________ Equity Government Grant 676.00 4264.00 4264.00 4264.00 4264.00 4264.00 4264.00 4264.00 Reserve Capital 216.00 216.00 216.00 216.00 216.00 216.00 216.00 216.00 Additional Capital Account 287.00 287.00 287.00 287.00 287.00 287.00 287.00 287.00 KFW Grant 0.00 0.00 0.00 13021.00 26042.00 26042.00 26042.00 28042.00 Net Surplus (Deficit) -2398.00 -2615.00 -2901.00 -3168.00 -4107.00 -4186.00 -3684.00 -2872.00 Govt.Equity Contribution 1266.00 1400.00 3360.00 4489.00 8305.00 6306.00 6306.00 8305.00 Total Equity -64.00 3652.00 5226.00 19109.00 33007.00 32948.00 33430.00 34242.00 Long-Term Debt Existing Government Loan 3688.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Existing ADF Loan 1760.00 1700.00 1860.00 1800.00 1650.00 1600.00 1460.00 1400.00 New ADF Loan 0.00 2526.00 16882.00 30860.00 44624.00 44624.00 44624.00 44524.00 IDA 0.00 2621.00 6462.00 7143.00 8403.00 8403.00 8403.00 8403.00 Total Long-Term Debt 5438.00 6746.00 22994.00 39693.00 54477.00 64427.00 64377.00 54327.00 CURRENT LIABILITIES __________________ Accounts Payable 2086.00 2420.00 2846.00 3168.00 3612.00 3867.00 4092.00 4393.00 Water Deposits 110.00 126.00 146.00 186.00 185.00 203.00 223.00 246.00 Total Current Liabilites 2196.00 2546.00 2992.00 3321.00 3797.00 4060.00 4315.00 4639.00 TOTAL EQUITY A LIABILITIES 7580.00 12944.00 31212.00 62023.00 91281.00 91435.00 92122.00 93208.00 Current Ratio 1.28 1.36 1.40 1.51 1.79 1.92 2.12 2.32 Debt-Equity Ratio -100.70 1.85 4.40 2.07 1.65 1.65 1.63 1.59 ° Rate of Return (Ave.NFA) 0.10 0.00 -0.01 0.01 -0.01 0.01 0.01 0.02 -108 - Annex 21 MALAWI Infrastructure Project Economic Vehicle Operating Costs a/ AVERAGE RURAL MULTI- ROUGHNESS (4-WHEEL VANS/ 2-AXLE AXLE SURFACE CONDITION (m/km IRI)b/ CARS DRIVE) BUSES MINIBUS TRUCKS TRUCKS ---------------------------------------------------------------__------------__--------- (MK/km) Paved Good 2.0 0.47 0.38 0.90 0.45 0.76 2.00 Paved Average 4.0 0.62 0.43 0.97 0.52 0.91 2.24 Paved Poor 6.0 0.69 0.48 1.04 0.81 1.05 2.48 Paved Very Poor 9.0 0.74 0.61 1.18 0.82 1.26 2.85 Unpaved Good 4.0 0.68 0.44 0.94 0.53 0.89 2.29 Unpaved Average 7.0 0.87 0.63 1.08 0.88 1.12 2.65 Unpaved Poor 9.6 0.81 0.69 1.22 0.86 1.29 2.93 Unpaved Very Poor 12.0 0.97 0.78 1.38 1.08 1.48 3.23 ------------------------------------------- a/ Relatively level, straight alignment; costs adjusted to KW 1988. b/ IRI = International Roughness Index SOURCE: DeLeuw Cather International, Ltd., wNational Bridge Study Report," October 30, 1987, Annex Table 4.B.1. - 109 - Annex 22 MALAWI Infrastructure Project Economic Analysis of 1st Year Program - Road Rehabilitation and Improvement TRAFFIC SENSITIVITY OF ERR a/ CONSTRUCTION --------------- ERR --------------------- PROJECT LENGTH COST 1989 2009 1 2 3 NO. NAME (KM) (MK MILLION) (VPD) (%) (%) (%) (%) A. REHABILITATION OF PAVED ROADS: 1.2 Chikwawa-Bangula 45.0 9.428 206 452 18.9 18.5 17.7 16.4 1.3 Chilumba-Karonga 71.3 15.715 151 314 18.8 14.2 16.7 13.3 1.4 Lilongwe-Salima 81.0 31.430 378 958 16.8 14.4 15.5 13.4 Sub-total 197.3 58.573 17.1 14.8 18.0 13.7 B. REHABILITATION OF EARTH/GRAVEL ROADS: 2.2 Mponela-Ntchisi 34.1 1.886 s0 125 18 .7 15.9 16.9 14.2 C. IMPROVEMENT OF EARTH/GRAVEL TO BITUMEN: 3.1 Mzimba-Chikangawa 24.2 5.239 72 168 18.2 13.7 15.1 12.7 Total 255.8 83.898 17.0 14.7 15.9 13.7 a/ 1: +16% COST 2: -15% TRAFFIC BENEFITS 3: +15% COST AND -15% TRAFFIC BENEFITS SOURCE: MOW and Bank Mission - 110 Annex 23 MALAWI Infrastructure Projoct Economic Analysis of 1st Year Program - Bridge Reconstruction CONSTRUCTION SITE COST ERR ROAD SECTION NUMBER (MK 000) (S) ------------------------------------------------------------- Sl 11230 1 79.8 143.4 Sil 11241 1 138.3 131.8 Ml 02082 2 283.3 71.0 S53 07080 3 79.0 78.8 Sub-total 680.4 97.0 SOURCE: DeLeuw Cather International, Ltd., "National Bridge Study Report," October 30, 1987. - 111 - Annex 24 MALAWI Infrastructure Project Economic Analysis of Urban Water Supply Systems INCR. INCR. REDUCED TOTAL CAPITAL 0 A M TOTAL WATER UNAC- INCR. TOTAL NET FISCAL COSTS COSTS COST CONSUMED COUNTEDa/ WATER TARIFF BENEFITS BENEFITS ENDING (UK 000) (M3 000) (MK/M3) (UK 000) 1989 3960 0 3950 0 0 0 0.74 0 -3950 1990 18238 45 18283 191 5 195 0.74 145 -16139 1991 18532 92 18624 396 106 502 0.74 372 -18253 1992 16710 149 16859 837 349 986 0.74 729 -18129 1993 658 568 2390 560 2960 0.81 2389 1831 1994 659 659 2824 723 3547 0.81 2873 2214 1995 756 756 3240 904 4144 0.81 3357 2601 1996 916 916 3925 1202 6127 0.81 4153 3237 1997 1014 1014 4348 1274 5820 0.81 4553 3539 1998 1118 1118 4790 1346 6136 0.81 4970 38S2 1999 1228 1228 6261 1417 6678 0.81 5409 4181 2000 1343 1343 5756 1489 7244 0.81 6867 4524 2001 1465 1465 6278 1489 7787 0.81 6292 4827 2002 1582 1682 6780 1489 8289 0.81 6698 5116 2003 1682 1582 6780 1489 8269 0.81 6898 5116 2004 1682 1582 6780 1489 8289 0.81 8698 5118 2005 1582 1582 6780 1489 8269 0.81 6698 6116 2008 1582 1682 6780 1489 8269 0.81 8698 5116 2007 1682 1582 6780 1489 8269 0.81 6698 511e 2008 1582 1582 6780 1489 8289 0.81 8698 5116 2009 1582 1682 6780 1489 8269 0.81 6898 511e 2010 1682 1582 6780 1489 8269 0.81 669C 511.6 2011 1582 1582 8780 1489 8289 0.81 6898 5116 2012 1682 1682 8780 1489 8269 0.81 8698 5116 2013 1682 1682 8780 1489 8269 0.81 8698 5116 2014 1582 1582 6780 1489 8269 0.81 6698 5116 2016 1582 1682 6780 1489 8269 0.81 6698 511e 2016 1582 1582 6780 1489 8269 0.81 6698 5116 2017 1582 1582 6780 1489 8269 0.81 6698 5le 2018 1682 1682 8780 1489 8269 0.81 6698 S5le 2019 1582 1682 6780 1489 8269 0.81 6698 Sl1s 2020 1582 1582 6780 1489 8269 0.81 8898 5116 2021 1582 1582 6780 1489 8289 0.81 6898 5118 2022 1582 1582 6780 1489 8269 0.81 6698 6116 2023 1582 1682 6780 1489 8269 0.81 6698 5116 2024 1582 1582 6780 1489 8269 0.81 8698 5116 ERR: 6.1% SENSITIVITY ANALYSIS: ALL COSTS +10%: 6.2% CAPITAL COSTS +10%: 5.S% CONSTRUCTION DELAY b/: 5.8% a/ Physical losses avoided with th. project. b/ It is assumed that 1/2 of the construction work scheduled for each year slips to the next and that benefits are delayed accordingly. MALAWI Infrastructure Project Economic Analysis of Rehabilitation of Boreholes VALUE ANNUAL ANNUAL TIME TIME OF INCR. VALUE CAPITAL MAINT. PERIODIC TOTAL HH SAVINGS SAVINGS TIME WATER INCR. TOTAL NET FISCAL COSTS COSTS a/ REHAB COSTS PAYMENT (WALKING) (WAITING) SAVED b/ CONSUMED WATER c/ BENEFITS BENEFITS YEAR -------------------------------------- --------- ------------------- ---------- --------- -------------------- --------- ENDING (MK 000) (MK 000) (hrs/yr) (MK 000) (1 iters) 1989 5648 0 0 6648 0 0 0 0 0 0 0 -5648 1990 5648 155 0 5803 63 17109375 11406250 1141 1218750 137 1340 -4463 1991 56848 278 0 5928 125 34218760 22812500 2281 2437500 274 2680 -3246 1992 5848 388 0 8016 188 51328125 34218750 3422 3656250 411 4020 -1998 1993 425 0 425 250 68437500 45625000 4563 4875000 548 5360 4935 1994 360 0 360 250 88437600 45625000 4563 4876000 548 5360 6000 1995 313 0 313 250 88437500 456825000 4563 4875000 548 5360 5048 1996 250 0 250 250 88437500 45825000 4563 4875000 548 5360 5110 1997 165 0 165 250 68437500 45625000 4563 4875000 548 5360 5195 1998 100 0 100 250 88437600 45625000 4563 4876000 648 6360 5260 1999 100 1250 1350 250 88437500 45626000 4563 4875000 548 5360 4010 2000 100 1250 1350 250 68437500 45625000 4563 4875000 548 5360 4010 2001 100 1250 1350 250 68437500 45625000 4583 4876000 548 5380 4010 2002 100 1250 1360 250 88437500 45625000 4563 4875000 548 5360 4010 2003 100 0 100 250 68437500 45625000 4563 4875000 548 5360 6260 2004 100 0 100 250 68437500 45625000 4563 4875000 548 5360 5280 2005 100 0 100 250 68437500 45625000 4563 4875000 548 5360 5260 ERR: 20% SENSITIVITY ANALYSIS: ALL COSTS +10% AND BENEFITS -10%: 16% PER CAPITA INCOME -13%: 16% PUMPS REPLACED EVERY S YRS: 18% MAINTENANCE NOT DECENTRALIZED: 18% ----------------------------------------------------------__-----------------__------------------------------------------------- a/ Decentralized maintenance program implemented over nine years. b/ Includes time saved walking for the approximately half of the population at least 2 km away from an improved water source before the project, and time saved waiting for the entire population due to the reduction in people per borehole from 500 U' to 300; the value of time is based on an income per capita of MK 75 per year. c/ Incremental water consumed, valued at half the level of the basic water supply of 27 liters per person. - 113 - Annex 26 MALAWI Infrastructure Project Economic Analysis of 1st Year Program - Public Buildings REHABILITATION RECONSTRUCTION SENSITIVITY COST COST ERR OF ERR a/ PROJECT NAME (MK MILLION) (%) A. Queen Elizabeth Hospital 2.612 24.302 29.5 24.5 B. Lilongwe Girls School 0.564 8.500 23.0 20.3 C. Mzuzu Secondary School 1.818 7.200 29.2 22.8 Sub-total 4.992 38.002 29.4 23.7 a/ -30% COST SOURCE: MOW and Bank Mission ~ 114 Annex 27 MALAWI Infrastructure Project Economic Analysis of 1st Year Program - Road Rehabilitation and Improvement In Case of Delay / TRAFFIC SENSITIVITY OF ERR b/ CONSTRUCTION ----- ERR --------------------- PROJECT LENGTH COST 1989 2009 1 2 3 NO. NAME (KM) (MK MILLION) (VPD) (M) (1) (%) (%) ---------------------------------------------------------------------__------__---------------- A. REHABILITATION OF PAVED ROADS: 1.2 Chikwaw&-Bangula 45.0 9.428 208 452 18.3 16.0 17.1 14.9 1.3 Chilumba-Karonga 71.3 15.715 161 314 15.9 13.6 15.0 12.7 1.4 Lilongwe-Salima 81.0 31.430 378 956 16.2 14.1 15.0 13.0 Sub-total 197.3 65.673 16.5 14.3 16.4 13.3 B. REHABILITATION OF EARTH/GRAVEL ROADS: 2.2 Mponela-Ntchisi 34.1 1.886 60 126 19.2 16.3 17.4 14.6 C. IMPROVEMENT OF EARTH/GRAVEL TO BITUMEN: 3.1 Mzimba-Chikangawa 24.2 5.239 72 168 15.6 13.2 14.5 12.2 Total 265.6 83.898 16.5 14.3 15.4 13.2 a/ It is assumed that 1/2 of the work scheduled for each year slips to the next and that benefits are delayed accordingly. b/ 1: +15% COST 2: -15% TRAFFIC BENEFITS 3: +15 COST AND -15% TRAFFIC BENEFITS SOURCE: MOW and Bank Mission MALAWI INFRASTRUCTURE PROJECT Organization of Ministry of Works MINISTER PRINCIPAL SECRETARY W COMMISSIONER A M ADEPUTY OF PUBLICSERTY WORKS ADMIN. AND GENERAL _ WATER ROADS - ONTRNTB UILDIINGS SERICES m PERSONNEL FINANCE PRDCAETSASN REGIONAL REGIONAL REGIONAL MANPOWER CONTROLLER CONTROLLER CONTROLLER PLANNING AND ADMINISTRATION AUDIT (CENTRAL) | (NORTH) (SOUTH) ||||STAFF DEV. __.II 0.|__ ,S | NG|, I , r | I , | I , U ~~~~STRATEGY i PLANNING DESIGN TCONSTRUC MAINTENANCE ENGINEERING PROJECT |I _ , I h s h ' _ 1 APPRAISAL | | FLEET ADMINISTRATIVE INTERNAL OPERATIONS SERVICE AUDIT ; § r l l IL | ff ~~~ELEC1TRICAL STRUCTURAL ARCHITECTURAL QUANTITY AND l DESIGN l l DESIGN SURVEYING MECHANICAL _ - ~~~~~~~~~~~~SERVICES I PLANNING AND L WATER WATER ADMINISTRATION INTERNAL AND AND WTRWTR~ EVALUATION POLLUTION RESOURCES SUPPLY FINANCE AUDIT CONTROL EK\W43887B PVHO: PLANT AND VEHICLE HIRE ORGANIZATION SOURCE: MINISTRY OF WORKS, APRIL 1989 XUnaEL L MALAWI INFRASTRUCTURE PROJECT Target Implementation Schedule 1 1989 1 990 | 1991 1 1992 1993 1994 PROJECT COMPONENTS 1989/90 1990/91 1991/92 1992/93 1993/94 1994195 .__________._ _ Year 1 4Year 2 Year 3 Year 4 Year 5 Year 6 MOW MANAGEMENT IMPROVEMENT PROGRAM- ROADS REHABILITATION OF PAVED ROADS CHIKWAVA - BANGULA -.- CHILUMBA - KARONGA LILONGWE - SALIMA LIMBE - THYOLO - MULANJE -------- REHABILITATION OF EARTH/GRAVEL ROADS JUNCTION Ml - NKHOMA (D21) MPONELA - NTCHIS (D290) S73 LOOP MCHINJI - MKANDA (S20) BALAKA - JUNCTION M3 (S55) MSOKERA - LIFUPA LODGE (D187) NSANDE - CAPE MACLEAR (D39) K. BANDA - EUTHINI - MPHEMBERE (S49) JUNCTION M3 - MALINDI (S58) EMBANGWENI MISSION - LUWAWA (M13) IMPROVEMENTS EARTH/GRAVEL TO ASPHALT MZIMBA - CHIKANGAWA DWANGWA - NKHATA BAY ---------------- RESEALING OF PAVED ROADS NKHOTAKOTA - DWANGWA BENGA - NKHOTAKOTA MZUZU - NKHATA BAY MZUZU - J. MZUMARA DRIMP PHASE IV ROAD IMPROVEMENTS (3 DISTRICTS) SPOT IMPROVEMENTS _ -------- NEW ROADS ________--_______ NATIONAL BRIDGE PROGRAM ROAD SIGNING ROAD MAINTENANCE PLANT AND VEHICLE REPLACEMENT - .…____ REPLACEMENT VEHICLES-PLANNING & DESIGN - - ROAD MAINTENANCE DEPOTS RURAL TRANSPORT SERVICE - ROAD SAFETY PROGRAM -------- PAVEMENT OVERLAY - TECHNICAL ASSISTANCE & TRAINING WATER SUPPLY IMPROVEMENT OF WATER SUPPLY SYSTEMS KASUNGU - MZUZU- ZOMBA MPONELA NTCHEU MANGOCHI KARONGA BOREHOLE REHABILITATION GRAVITY-FED PIPED WATER SCHEMES - --a---- TECHNICAL ASSISTANCE AND TRAINING PUBLIC BUILDINGS PRIORITY BUILDINGS ______-_ LILONGWE AND ZOMBA TRAINING CENTERS SOURCE: MINISTRY OF WORKS. APRIL 1989 EK\W43730A 3'2- N.. MALAWI C-P. INFRASTRUCTURE PROJECT A RI, FC.ND M--METERS 4 61 0 100 -D IOURTI 117R IROGP- PROG- ILES 2' 4 R-d C-p- 1, Rh.bd.-.- ....... . . .......... c'-I lp.... N" A 11 ATFAII A/ DRIMP Ph- IV 71 wt., S-POYC.--po- 7 D- C-1-1 k- d- P.blk B.dd, S6-, wimu, 0 m Rh.b H., ISTINC, v P-d R-d . . . . . . P-d R..d, 0,,d- C-0- ti- G-, -1 E.," I-d, Z A M A ..... .. R-d, b-, -cl d. 12' RI, I-Y, R.- A Ih ,hd. d R Nl -l C., 1. D,I, cl Ad ,-l , C-1- R,9 I ... d,,,,, M 0 Z A M B I Q U E z Vo. c.b,6 H 9. tA h P.,. IN J ': R., -14- 3) c P M-9 N M 0 Z A AA B I C) A C H N 1- A P, N I LL A E 32' /V 16' 16'- Th,. "I LA kC H I K 4 TH C I A. b IMBABWE r B NA BA BOTSWANA ANJE Illr-AIILIID N.. SOUTH AFRICA 36'