CIRCULATING COPY la BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use D w Report No. P-1177-a-MLI REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALI FOR A SECOND RAILWAY PROJECT April 3, 1973 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Currency Unit: Mali Franc (MIF) us$ 1.00 = XF 460 MF 1 = us$ 0.002 ..IF 1,0(00- Uoj 2.17 MF 1,000,000 = US$. 2,.174 Fiscal !epxr Jaauary 1 through December 31. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALI FOR A SECOND RAILWAY PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Mali for the equivalent of US$6.7 million on standard IDA terms to help finance a railway project. The proceeds of the credit would be re-lent to the Regie du Chemin de Fer du Mali (RCFM) for 25 years, including 4 years of grace, with interest at 7-1/4 percent per annum. PART I: THE ECONOMY Background 2. A report on "Recent Developments in the Economy of Mali" (AW-30a) was distributed to the Executive Directors on November 10, 1971. A Country Data Sheet is attached in Annex I. An updating economic mission visited Mali in early 1973, and a new report is being prepared. 3. With a per capita CDP of around $70, Mali is one of the poorest countries in Africa and one of the 25 "least developed" countries identified by the United Nations General Assembly. Agricultture, livestock and fisheries are the mainstay of the economy and the principal source of foreign exchange. Manufacturing output accounts for onlv about 4 percent of GDP. The recorded real growth of total GDP during the 1960's was about 2.8 percent a year or marginally higher than the population growth rate of 2.5 percent. A series of drought years has created new problems for Mali and neighbouring countries, causing marked flucttlations in food grain production and heavy losses of live- stock. Total agricultural and livestock production in Mali is estimated to have fallen bv 5 percent in 1969, and after a good recovery in the following year, which was matched in other sectors, agriculture has barely kept pace with the annual increase in population. Consequently, CDP growth has been even more sluggish since 1970, and in 1973 there is likely to be an actual decline because of exceptionally low rainfall last summer. 4. Reports on previous credits to Mali have drawn attention to the legacy of difficult economic problems inherited from the regime of Modibo Keita which was overthrown by the militarv in November 1968. Many of these problems persist in spite of the efforts made by the present government at the beginning of its administration to correct the most serious distortions in the economy by raising agricultural prices, removing some of the restric- tions on trade, stimulating the inflow of private capital and increasing tax revenues. Food prices continue to be held down for the benefit of urban consumers, with consequent disincentives to production and an incentive to - 2 - smuggle grain to neighboring countries where prices are higher, thus reducing domestic availabilities and increasing import needs. The established govern- ment policy of hiring all graduates of the nation's "ecoles superieures1' un- able to find employment in the private sector has been a factor exerting con- stant upward pressure on public expenditure. Most state enterprises appear to be still operating at a loss. Action to deal with these problems will at best be taken only very gradually, and with the additional difficulties created by the drought, the economy remains weak and its foreign exchange reserves neg- ative - a situation made tenable only by the French guarantee of convertibil- ity for the Malian franc and French financial assistance. 5. There are nevertheless a number of encouraging developments. Pro- duction of cotton and groundnuts, the two principal expor; crops, appears to have been fairly well maintained in spite of the drought.- However, cotton and groundnut production remain about 10 percent below plan target. Substantial amounts are being invested in various programs for expand-ing the output of cotton and rice, including the Mopti rice project, which is being financed by IDA, and further projects for groundnuts and livestock are under preparation. River fisherfes, for which the European Development Fund has provided assist- ance, have also been making good progress, and exports to neighbouring coun- tries are on the increase. 6. Tne balance of payments improved considerably during 1968-71. The overall deficit -fell from MF 9.6 billion in 1963 to WV 1.2 billion in 1970. �owever, in 1971, substantial irports of cereals necessitated by the effects of the drought on domestic food production largely contributed to the deficit of ME 3.4 billion. Tle trade deficit was virtually constant throughout ex- cept for the deterioration already noted in 1971. The net deficit on services was reduced by 30 percent during the period. The main source of improvement, however, was the reversal of capital flows, mostly on private account, from a net outflow of MF 6.6 billion in 1968 to a net inflow of MF 2.2 billion in 1971. Data for 1972 are still incomplete but mid-year figures suggest that recorded exports and recorded imports were running 26 percent and 18 percent lower respectively than in the previous year. The apparent discrepancy between export and production growth may be explained, particularly for groundnuts and fish, by variations in the volume of unrecorded exports and farm consumption, for which data are not available. The decline in exports is likely to continue into 1973 on account of the drought. 7. Public savings have remained negative despite some improvement in tax collection in recent years. Government current expenditures have been rising at the rate of 6 percenIt a year. In spite of this, the budget deficit (excluding investment expenditures financed out of foreign aid) was reduced from 'T 6.3 billion in 1969 to MF 2.4 billion in 1971. Comparable data for 1972 are not yet available. Partial results indicate a deficit of about MF 2.7 billion. 8. The 1973 budget provides for expenditures of HF 28.1 billion as com- pared with ETF 25.8 billion in 1972. Personnel emoluments, which claim over -3 60 percent of total government expenditure, account for most of this increase. Some of it was due to a small general increase in salaries with effect from January 1, 1973. To finance the estimated expenditure, the Government lhas undertaken a number of measures to increase tax revenue. The poll tax, a minimum head tax paid mostly by farmers, was increased by 20 percent. In view of the drought and the prospect of a poor harvest this year, however, additional revenue from this source is unlikely to materialize. 9. The Government's main hope of increasing tax revenue lies in fur- ther improving tax collection. To this end, the Covernment has adopted the policy of closing down toward the end of the year businesses in tax arrears. Such businesses, some of which were still closed when the economic mission left Mali in mid-February, are allowed to reopen only if they pay half of the arrears immediately and the remainder within three months. Nevertheless, a current deficit of MF 2.4 billion is projected for 1973, a substantial in- crease over the 1972 budget estimate (MF 1.8 billion). Foreign Aid 10. Much the greater part of public investment is financed from exter- nal sources. From 1966/67-1970, Mali received an annual average of US$30 million of external aid, including technical assistance of about US$3 million. Nearly half of this aid was provided by the U.S.S.R. and the People's Republic of China in the form of long-term concessionary loans. Close to 40 percent of the total came from France and the European Development Fund in the form of grants. In 1971 Mali received foreign aid disbursements of US$23.6 million,(including US$7.0 million in technical assistance), of which US$17.4 million were grants and US$6.1 million were loans. How much of this was used to finance the emergency grain imports mentioned earlier remains undetermined. Data for 1972 are not yet available. 11. The present drought has prompted special emergency aid to Mali from various sources. Of the emergency aid which FED recently approved for the six drought-stricken Sahelian countries, US$8.6 million is earmarked for Mali. The FAO has announced an emergency crash program for all six countries and, in this connection, a special FAO mission visited Mali at the time of the most recent Bank economic mission to that country. The FAO operation, with which the World Food Program (WFP) and the UNDP are associated, has already allo- cated 50,000 tons of food grains for the six countries. This quantity exceeds last year's allocation by tenfold and is estimated to claim some three- quarters of the WFP emergency resources for 1973. 12. Mali's total external public debt outstanding of US$317 million equivalent at the end of 1971 (including US$56 million undisbursed) was nearly 10 percent higher than the year's GDP. Total repayments of principal and interest due in 1971 would have claimed about 12 percent of the year's total foreign exchange earnings as compared with a debt service ratio of 8 percent in 1970. Actual debt service payments, however, were small owing to the 1970 rescheduling of Chinese and Russian debts, which constitute two-thirds of the country's total foreign debt. 13. Mali's prospects for accelerating economic progress are primarily dependent on raising agricultural and livestock production for export and on improving its infrastructure with investments geared closely to the needs of the productive sectors of the economy. In view of its limited capacitv to raise public savings and its difficult balance of payments position, Mali will continue to rely heavily on foreign assistance. The present external debt situation and the poverty of the country suggest that this assistance should be on the most concessionary terms possible and cover a high proportion of total project costs, including substantial local expenditures. PART II: BANK, GROUP OPERATIONS IN MALI 14. The proposed credit would be IDA's fifth operation in Mali, bringing the total of IDA funds committed to US$34.0 million. 15. Bank Group lending during the 1960's was handicapped by the country's poor economic performance and the lack of well-prepared and econemically justi- fied projects. A US$9.1 million IDA credit (95-MLI) was made, however, in 1966 for the improvement of the Malian section of the Bamako-Dakar railway. 16. Since the end of the 1960's, project preparation has been sharply stepped tup. The Bank's 1969 economic mission and other reconnaissance and preparation missions provided the basis for formulating a substantially expanded and diversified Bank Group lending program. The first results of these efforts have already materialized. An IDA credit (197-ME,T), of US$7.7 million, helped finance a first highway maintenance project in 1970. Credits respectively amounting to $6.9 and $3.6 million for the Mopti rice project (277-ETI) and a telecommunications project (321-111,I) were approved in 1972. Annex II contains a summary statement of IDA credits as of Februar- 28, 1973, and notes on the execution of on-going projects. The total amount disbi!rsed as of February 28, 1973, was US$14.9 million; the amount undisbursed was TS$12.4 million. 7. Apnraisal in the field of a first educational project, which should be presented to the Board in the next few months took place in Novemoer 1972. mTh project would aim principally at reorganizing the educational system to make it more responsive to manpower requirements. 15. Mali has considerable potential for agricultural and livestock development. In fact, most of the operations envisaged by the Bank Group for the period 1974-1975 directly or indirectly concern the rural sector, and include groundnut/millet and livestock development projects being prepared with the assistance of FAC experts and PMWA and scheduled for Board presentation in FY 1974. The groundnut/millet project would provide for improving feeder roads, constructing wells, and training extension workers. A cotton project (FY 1975), which would include processing and storage facili- ties and feeder roads, has been identified. Finally, the Mopti rice project of 1972 includes feasibility studies for a second rice project to be financed at some later stage. PART III: THE TRANSPORT SECTOR IN MLI The Transport System 19. Mali has an extensive transport system with .an adequate geographical layout. At present it consists of a 642 km railway (Regie du Chemin de Fer du Mali - RCfl); about 13,000 kn of roads, of which 3,100 km provide all- weather service; about 1,650 km of inland waterways which are navigable for about seven months each year; and an international airport at Bamako as well as about a dozen airfields serving domestic commercial needs. The two main international routes (catering to some 35 percent of total export-import freight traffic) are: (a) the railway from Bamako to the Port of Dakar --- 1,283 km, 642 km of which are in Mali -- which serves about 60 per- cent of total international traffic; and (b) a road/rail combination from Bamako to the Port of Abidjan, approximately 1,230 km in length. (A paved road leads from Bamako to Ouangolodougou, Ivory Coast, which is on the railway to Abidjan.) Approximately 25 percent of the international traffic is carried on this route which was developed to avoid total reliance on access to the sea through Senegal and to serve mainly the areas of south and southeast Mali. 20. Like other vast land-locked West African countries, Mali's transport infrastructure requires substantial investments, and, as noted, several Bank projects (Credits 95 and 197-MLI) are underway with a view to improving the transport sector. The railway credit proposed in this report and the road credit proposed in an accompanying report would provide new investments in track renewal and rolling stock as well as in highway rehabilitation and feeder road betterment. The European Development Fund (FED) is financing the construction of a new international airport at Senou, just south of Bamako, to replace the existing facility which is severely limited in capacity. Judged by the current economic plan and by the investments in transport under preparation, the planning of infrastructure is well geared to the needs of the country. 21. Most domestic trade is carried by either road or rail. Road transport accounts for close to 75 percent of all passenger traffic; the railway carries about 15 percent; water transport, 8 percent; and air transport, the remainder. Domestic freight traffic is handled 45 percent by road, 40 percent by rail, and 15 percent by water transport. For external transport, the railway is the more important mode. Of the total import- export traffic, estimated at about 400,000 tons per year, 55-60 percent is shipped via the railway to and from Dakar. About 20-30 percent is transported by road/railroad to and from the Ivory Coast, about half of it being overseas trade directed through the Port of Abidjan. Remaining import-export traffic consists of trade with neighboring countries. 6- The Highway Network 22. Mali's highwav network comprises about 13,000 km of roads and tracks. It includes a well-developed network of primary roads linking the main popu- lation centers of the central region (Bamako, Segou, Sikasso and Mopti) with each other and with the transport networks of Upper Volta and the Ivory Coast. The 3,100 km of primary road network include about 1,630 km of paved roads and 1,470 km of all-weather gravel roads. The primary road network, together with the railwav and river, form the backbone of the transportation system. They are comiplemented by a scattered network of secondary roads and earth tracks, which provide access to rural areas. 23. The condition of most primary roads is adequate for present traffic levels, although several paved roads built more than 15 years ago require strengtheeting and rehabilitation. The condition of the secondary network is less satisfactorv and manv rural areas are not provided with reliable commulnication. The highest priorities in the highway sector are adequate highwav maintenance, rehabilitation of existing primarv roads, and the improvement of specific secondarv roads in support of agricultural development programs. The first highway project as well as the recently ne7otiated road oroject are directed towards these objectives. The Role of the Railway 24. The Regie du Chemin de Fer du Mali orovides the only mode of tranisport in the western part of Mali, providing a link between Bamako and Kayes (second largest city in the country), and numerous small. towns and villages in between. Passenger services by road between Bamako and Kayes can be provided onlv by landrovers over dlifficult terrain and only for a limited oeriod during the year. The roads in that area are not passable for trucks under any condition. The main national freight traffic is from the cement plant of Diamou, near Kaves, whose expected output in 1976 is 60,000 tons (currently 40,000 tons), equivalent to about US$3.6 million of import substitution, based on the CIF price of imported cement. 25. The RCFM carried about 250,000 tons of imports and exports in 1971; this ficure represents about 75 percent of total rail freight traffic, the principal commodities (by weight) being foodstuffs (63,n00 tons), petroleum (36,000 tons), groundnut products (42,000 tons), salt (17,000 tons), and cotton products (16,000 tons). The railway provides the cheapest means of transport for this international traffic. A comparison of transport costs from the Bamako region to the ports of Abidjan and Dakar demonstrates that transport oni the railway route to Dakar, compared with the road/rail combina- ttoII to Abidjan. is substantially cheaper for al] products. The difference in cost ranges from US$10 per ton for flour and sugar to US$28 per ton for petroleum products. 2o. The railway provides an international passenger service twice a week to Senegal at a tariff which is about 80 percent lower than that by air and caters mainly to the less affluent segments of the population. -7- Transport Coordination 27. Government control of the transport industrv through public owner- ship applies to: the Malian railroacl (RCFM), the Mali Navigation Company, Air lMali, and the Mali Road Transport Company (CNTR) which enjoys a 20 percent share, in terms of ton-km, of Mali's road freight transport. Although these companies are responsible for their operations, the Government decides upon their investments in infrastructure and equipment and maintains fixed tariff levels for all modes of transport. These decisions are made by the Council of Ministers, based on recommendations from the Minister of Transport and the Minister of Finance. 28 There are no major problems of investment coordination, since the road system caters mainly to areas not served by the railway (Bamako- Sikasso-Mopti triangle). Part of the road system, however. serves the international route to Abidjan, which competes with the railway route to Dakar. The policy of the Government, however, is to keep open the two routes to the ocean; past circumstances (disruption of traffic between Mali and Senegal in the period 1960-1963), as well as intraregional traffic, justifv this policy. PART IV - THE SECOND RAILWAY PROJECT 29. A report entitled "Appraisal of a Second Railway Project" (No. 32a-MLI) is being circulated separately. A Credit and Project Summary is provided in Annex III. The Government of the Republic of Mali and the Regie du Chemin de Fer du Mali (RCFM) asked the Association to help finance a 1973-1976 in- vestment plan designed to continue the physical rehabilitation of the RCFM's equipment and to improve its management, operations and finances. The proposed railway project comprises this investment plan, the total cost of which is estimated at MF 4,300 million (US$9.3 million equivalent). 30. This proposed credit would be the second to the Regie du Chemin de Fer du Kali since the country gained independence in 1960; the first credit (95-MLI) in 1966 amounted to US$9.1 million equivalent, 98 percent of which has been spent, with the remainder to be disbursed by the end of June 1973. After allowing for depreciation, the operating ratio of the RCFMI decreased from 127 percent in 1965/66 to 97 percent in 1971. These ratios reflect a steady improvement but not as substantial as that proposed at the time the project was appraised. Progress toward achieving financial targets has lagged primarily because traffic growth has been inhibited by low trac- tion availability. 31. At the same time as the first credit to Mali, the Association had granted a credit of US$9.0 million equivalent to Senegal for the development of the Senegal Railways. A second loan/credit was made to Senegal (Loan 835/Credit 314-SEN) on June 23, 1972, by the Bank Group to carry on the rehabilitation and modernization of the Senegal Railways in -8- parallel with similar work for the Mali Railway. Since the two railways, in Mali and Senegal, basically form a single operating entity, the loans/ credits to each are mutually beneficial. The Project 32. The pronosed project would consist essentially of: (a) traclc and buildings: (i) equipment for and renewal of 21.5 km of track; (ii) ballasting of 210 km of line; (iii) joint welding of 380 km of rails; and (iv) minor repairs to bridges; (b) motive power and rolling stock: 4 maini line locomotives; 5 shunting locomotives; 2 railcars: 8 trailers; 4 passenger coaches; 125 freight cars and spare parts for rolling stock; and (c) management: equipment for accounts/statistics, consulting services and training. 33. Under Credit 95-MLI, 71 km of track material is being renewed between Kaves, Mali's second largest city after Bamako, and the Senegalese border out of a total of 98.5 km. There thus remains 17.5 km to complete the relaying of the section. In addition, there are 4 km of track on sharp curves, near Bamako, which are in poor condition and in need of replacement. A total of 21.5 km of track materials is therefore included in the proposed railway project as well as stone ballast, which is lacking on about 210 km of main line track between Kaves and Toukoto. Welding of rail joints on sections totaling about 380 km is also included. Both ball�stina and joint welding need to be done to (a) improve track strength, (b) prolong life of track material, (c) reduce maintenance costs on track and also on rolling stock, and (d) permit higher average speeds. 34. A review of future train service requirements to meet the traffic forecast and of the prospective availabllity and utilization of locomotives and railcars shouw that the provision of four additional main line diesel locomotives, two additional shunting locomotives (plus the replacement of three existing units not now operational), four additional passenger coaches and two additional railcars (plus eight trailer cars) is justified. The main line locomotives are to be similar in type to existing units for maximum flex- ibilitv and ease of maintenance and spares provision. The new shunting locomo- tives will be able to handle larger, heavier freigj-ht cars, and the railcars will also be larger than existing units to allow for hauling additional trailer cars on an increased regular service between Kayes and Bamako. The passenger coaches will complete the Mali train set for the international Bamako-Dakar connection, eight coaches having already been provided under Credit 95-MLI. In addition, some 70 freight cars are between 40 and 55 years old, in poor condition, and not suited to regular use on long distance freight service as requiired between Dakar and Bamako; the project under consideration proposes -9- to replace them with larger capacity cars having roller bearings and improved brake gear. Further, to carrv the increased traffic of oils and general cargo, and also to cater for the track ballasting program, a total of 55 additional freight cars is proposed. Finally, spare parts are included to continue thle build-up of spares and replacement units (such as diesel and elctric motors) which are essential for obtaining regular maintenance, reducing workshop time, and improving the availability of units. 35. The plan of action outlined in conjunction with the proposed project and accepted by the C.overnmeht and Regie during negotiations calls for the phvsical rehabilitation and financial viability of the RCWf so as to permit the Regie to meet all operating expenses (including adequate allowances for depreciation and renewal funds) and debt service obligations out of in- ternally generated ftnds, and to make a contribution toward its investment needs. To acliieve these ends, the RCFM will take appropriate measures, in- cludirig: (a) tile implementation of a system of control that will permit prompt evaluation of progress; (b) the setting of rates and fares such that no rate or fare shall be set below the incremental cost of providing relevant service; (c) appropriate modifications to the existing tariff system; and (d) all necessary steps to achieve an operating ratio of not more than 91 percent in its fiscal year 1974, and 89 percent in its fiscal year 1976. 36. Provision is made for consultants to carry out an examination of RCFV management requirements and to introduce new procedures and equipment for planning, statistics and management information, accounting services, storekeeping and personnel management. In addition, although simple training schemes exist for new entrants and for present staff, improved facilities are needed for the extension of these courses. Allowance is therefore made under the proposed project for new buildings and equipment, in accordance with a scheme prepared by the RCF.M and endorsed by a recent UNESCO/Bank mission. Moreover, allowance is made for the provision of practical, tecbni- cal training periods overseas witlh suitable railwavs for senior Malian staff to the extent of three or four persons a year for three to six montlhs. Financial Aspects 37. The RCF! had operating losses for several years from its creation, but the situiation improved gradually until 1971. Operating revenues covered working expenses in 1967/68 and 1969 and covered working expenses plus depre- ciation charges in 1970 and 1971. Between 1966 and 1971 revenues doubled; operating costs increased but onlv by about 50 percent. Owing, however, to - 10 - the retirement of four locomotives and serious damage to two others during the period 1969-1972, rail traffic as well as revenues decreased by early 1972. Nevertheless, the situation is expected to improve in 1973 as new lo- corotives become operational and better maintenance facilities and procedures become effective. As recards the financial objectives for the RCFM, it was agreed during negotiations that the Regie would earn rates of return of at least 2 percent in 1974 and 1975, 3 percent in 1976, and 3.5 percent in 1977. Forecasts of the Regie's financial situation indicate that internally generated funds, amounting to MF 1,070 million in 1977, would be adequate to cover fully maximum debt service requirements of MF 721 million (reacihed in 1978) and pro- vide funds for investment needs. As noted, it has been agreed that RCFM will take all necessary steps to achieve an operating ratio of not more than 91 percent in its fiscal year 1974, and 89 percent in its fiscal year 1976. 38. The RCFM'Vs liquidity position has been poor due to the large volume of debt owed partly to the Government and partly to the Senegal Railway. The Government, lhowever, has recently acted to lessen RCFM's debt burden by waiv- ing MF 788 million owed to it by the Regie. Further, Government has agreed to continue waiving RCF,?t pavments of interest and principal on the proceeds of Credit 95-TLI, relent to the Regie, and to continue compensating the RCnI' for Dayments made by the Regie to the Senegal Railways for the use of inter- changed equiDment. 39. In their recently completed study, consultants SOFRERAIL (France) propose certain changes in the tariff structure in order to relate tariffs more closely to costs and to increase revenues. During negotiations, the consultants' recommendations were reviewed wittl the Government and the RCFM, and it was agree6 that selective changes would be made and a new tariff structure would be introduced not later than January 1, 197J. The tariff changes would be such as to yield an 8% increase in revenues. Cost and Financing 40. The total cost of the project, net of taxes, is estimated at US$9.3 million witlh a foreign exchange component of US$8.5 million. The proposed IDA credit of US$6.7 million would meet about 72 percent of tne total cost of the project and finance 79 percent of the foreign exchange cost. The remaining foreig-n exchange requirements of US$1.3 million would be met by the French Fonds d'Aide et de Cooperation (FAC) and cover costs for four main 'ine and two shunting locomotives as well as spare parts. Local currency expenditures amounting to about 9 percent of total project cost, or about US$0.8 million, would be covered by the RCFM out of its own resources. The proposed IDA credit of T!S$6.7 million to the Government would be re-lent to the RCFM for repayment in 25 years including L years of grace, and would bear interest at 7-1/4 per- cent per annum. Funds available to the RCFM from the FAC would come partly in the form of a concessionarv loan bearing an interest rate of 3 percent per year and repayable over 16 years, including one year grace, and partly as a grant. - 11 - Project Execution, Procurement and Disbursement 41. The RCFM is competent to carrv out the project. Track renewal, ballasting and rail joint welding will be handled by RCFIs4's own work forces which have obtained adequate experience during the previous project and produce good quality work. 42. The Government relieved CFM of duties levied on imports for goods financed under Credit 95-MLI and has confirmed that this policy will be con- tinued for the proposed second railway credit. Imported track material and equipment for ballasting, rail joint welding, and maintenance, as well as railcars, trailers, passenger coaches and freight cars will be obtained through international competitive bidding. The four main line and two shunting loco- motives, financed by FAC, will be purchased in France. 43. Disbursements will be made on the cost of imported equipment and materials at the Mali frontier, as well as on the foreign cost of consultant and technical services and training, and will extend through FY 1977. Benefits 44. The economic evaluation of the proposed project compared the two most economic routes for export-import transport, including the road/rail connection to Abidjan and the railway to Dakar. The comparison demonstrated that transport costs for the Abidjan route, including costs for petroleun products, exceed those of the alternative route by about US$13.8 per ton. This difference between the two routes stems mainly from the higher cost of road transDort and the additional unloading and loading at Ouangolodougou, Ivory Coast. that occurs when using the road/rail combination to Abidjan. The benefits associated with the avoidance of the higher cost involved in diversion of traffic to the Abidjan route would yield a satisfactory 18 per- cent rate of economic return on investmenit. PART V - LEGAL INSTRUMENTS AND AUTHORITY 45. The draft Development Credit kgreement between the Association and the Republic of Mali, the draft Project Agreement between the Regie de Chemin de Fer du Mali and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the text of a resolution approving the proposed credit are being distributed to the Executive Directors separately. 46. The draft agreements conform to the normal pattern for credits for railroad development projects. 47. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. - 12 - PART VI - REGOMMENDATION 48. I recomnmend that the Executive Directors approve the proposed credit. Robert S. McNlamara President Attachments April 3, 1973 iNNEt I COUNTRY DATA - MALI ARA 1,2..0,JOC Km2 POPULATION: 5.14 million (mid-1971) A/ DENOPY: 4.1 per K. Rate of Growth: 2.2% ifvopJlO66 to 1971) i3.3 per Km2 of arabl. land MPUPIATK1B CRARACTERISTTCS (1967-1971) 00A2LTH (1968) Crude Brth Rae per ,ooo) 6o-65 Population per physician 56,320 3/ CrdeothRte: ~per~ 1,000) 35-1,0 Population per hospital bed 1,570 Infant M.os1ttly per 1,00O live. births) 120 AttEiCS Tt POPES WiCER (1970) ACCESS Ti ElECTRICITY (1970) % of 5BrIarPopulation 40 % of Urban Population 55 MIJTR2TION (:970) EDUCATION (1969) Colo-ie itocke n of requirnoenie t 100 Adult literacy rote. 10%, Pcr capita protein intk.c 75 gper day Primay school enrollmet 19% GNiP PER CAPITA in 1971: 01570 5/ G100S YOMEifTIC PRODUCT IS 0970 ANNUItfA RATE OP GROWSH (%, cenotant 1969 prices) GIIP t Markt P 00$s. Ef a!. %1960-65 1965-70 5/ 1971 5k/ 10SF ci Machot Prices 274.8 ~1oo.0 3.037 trues Domestic Iccetment 41.1 15.0 .- 4*9 8.5 Gove- uoo-lic loving 32.8 11.9 11.5 6.8 Corret Aco-tn Balance -2.2 7Y/ icpurc- of lucAs, NF1 4.9.7 iS.i * 14. 1 6.6 Ioot f luca,RI 55.0 21.1 1.1 5.6 COYTPC WAOO. FODRCE ARt PRODUCOPIVITY INi 1970 Value Added Labor Force V.A. Per Worker ML i-- mmt 54U1 Agri-ult-n 121.2 44.1. C-d_try 39.3 14.3 Jorvices 114.3 4.6AL Totol/Ave-ugo 274,8 200.0 JO7EAOMERT FCNB.RCI General Governmet 1971 1971 1969-1971 Corret Reusipis 21.5 13.3 13.0 Current Exp-edit-rcincl.trnfr) 22.4 13.8 14.4 C-rot Ouaploo - 0.9 - o.6 - 1.3 Capital Eap-dituras 1.7 1.1 0.6 E. ternal Aoviatanoce 2.0 1.2 2.2 MONtY. CREDIT ADO PRICES i960 33 1970 1971 A,ns 1971 June 1972 (R%illien MP outstanding end of period) Money and Quceti-Monc.y 19.04 25.07 27.80 30.33 31.78 34.24 Rank Credit to Public Sector (net) 17.59 41.21 40.46 40.74 40.24 40.62 Panic Credit to Private Sootor 11.914 19.56 23.48 27.68 27.86 32.98 of ohich: State Enterprises (8.66) (12.41) (15.07) (17.65) (17.49) (19.95) Mioney and Quash-Money as 52 of GDP 21.1 20.0 18.2 18.7 GCrno1 Price Indsin (1966/67=100) 5 .. 128.1 136.9 143.7 Annual percentage changes in: General Pubs. Indso .. .l 6.9 5.2 Bank trouit to Public Sector (net) 5/ 13.0 - 1.8 o.6 Bank Credit tc Private Sector- 50.7 19.9 17.9 of which: State Ecterprisse 5 (33.6) (21.4) (17.1) RALANCE OP PAY8001S LO/ MERCHARIIE EXPORTS (AVERAGE 1969-1971) j12/ 1969 11 1970 1fU)971 US8 MKIn. ..... Million o0$)Livestock 10.1 34.B Experts of Goods, RIO 30.6 49.7 54.5 Cottom (lint and see d) 6.4 22.6 Imparts of Goods, N71 66.7 66.2 82.1 Gr-und-ute, g-oundout oil end cake 4.7 11.0L Resource Gap -367I -_TS7 --7r77 Fish 2.5 6.5 All other -osidtias IV/ 6.o 2f.-5 Inveotmast Ienn cPymasts (net) - 2.0 - 5.3 - 5.7 Total 29:g 10 0. 0 Workers' Ha-lttanass 6.2 5.8 6.7 Other Factor Peyets (net) -0.6 -5.7 -2.0 ESTEOREAL DMR. DECEMBER 31. 1971 NT 'rmaofora 2.49: 195 18.9 55 So oaac n Current Account -11.6 -2.2 -9.7 Public Debt, inel. guaranteed22. Rem-guaranteed Private Debt ____ Ntie M K V.P Borroing 4.7 1.4 5.2 Total Outstanding end Disbursed IV/ 262.1- Anorti-ati. (-6.7) (1.4) (2.19) DERT SERVICE RATIO FOR 1971 Oilers Capital (net) -9.6 -. -. SDR All.-ti- N~~~~� 2.4 Public Debt, ind. guaranteed 0.9 45/ Cocrecee in Ra..erve . -11.1 2.2 -6.i IDA LFMSIRG. PEBRRORT 28. 1973 (Nillion US8) Gross RSesarvoa (end year ll.B 8.6 7.6 B'et Reserves (end year) -13.1 -55.3 -61.4 Outstanding and Diabursed 15.94 Ondisbarsed j6/ 8.813 Outstanding inc. Ondisbureed 2.6/ 24.7-7 BiTE OF EXCHRANGE Through dAget 10, 1969 00$ 1.00 M N 493.71 iu6ust 11. 1969- August 14, 1971 00$ 1.00O MP 555.42 decenber 20. 1971 - February 13, 1973 008 1.00 NP 511.57 Pro February 26, 1973 USR 1.00 PT 460.41 3/TentatIve estimate; the lest cenaus van conducted bet.sen.. Arabl land and land under perannt crops; 1970 eatinate. June 1960 and May 1961. 4/ 5,000 including technical ass istance personnel; 1970 estimate. 5/Preliminary estimate rounded to the nearest ten dollars. 5/1966/67 - 1970. 5/Preliminary. 3/ Pro. the baiance of payments. 5/Implied G2P deflator. I/ Prior to 1965 credit to the psi-rts sector includes some lo/ Exports -an imports of guods and RI do not agese aith credit tc the g-veo-et. national accounts eaticotee; reconciliatios efforts have st been successful so far. Cunverted from MO at the weighted rote of 517.7 Psr dollar. 12/ Offioially recorded emports cr1l1 (cuatoa statistics). 3/Including r.esporto. !L/ Includee I06 13.3 million principal in arer , emludas US8 2.2 million itotrest in arears. 5/If the tutnl debt -arice due had bces. paid. the debt service 156/ Including a credit of U00 3.6 millIon (321 - MI) which is ratio in 1971 would h-es bees 11.7 percest (See AW-30a, nat yet effective. itatie.tiQal nAs-, Table 23). - nt applicable =not available ANNEX II Page 1 of 2 THE STATUS OF BANK GROUP OPERATIONS IN MALI A. Statement of IDA Credits as of Februarv 28, 1973 Credit Amount (US$ million) Number Year Borrower Purpose IDA Undisbursed 95--MLT 1966 Republic of Mali Railway 9.1 .6 197-MLI 1970 Republic of Mali Highway 7.7 1.4 Maintenance 277-HLI 1972 Republic of Mali Rice Development 6.9 6.8 321-MLI 1972 Republic of Mali Telecom- munications 3.6 3.6 Total 27.3 of which has been repaid 0.0 Total. no', outstanding 27.3 Total nov. held by IDA 27.3 Total undisbursed 12.4 3. Projects in Execution Credit 95-NKLI: First Railw_.L Project The US$9.1 million First Railway Project of 1966 (95--IU), the physical program of which lagged behind schedule at one time bv about three years, is now almost completed in terms of physical content. The closing date, set initially for June 30, 1970, was first postponed to December 31, 1971. The Association, however, agreed that savings of $480,000 under the credit should be used for track renewal on an additional 14 km of track and therefore ex- tended the closing date to December 31, 1972. Mkst recently, the credit's closing date has been further postponed to June 30, 1973, because of a delay in delivery of equipment. Progress toward the financial targets of the project has also been slow. In particular, the Railway's financial situation has been precarious but is now improving (see paragraphs 37 and 38). ANNE X II Page 2 of 2 Credit 197-MLI: First Highway Project The US$7.7 million First Highway Project of 1970 (197-MLI) is being carried out with the assistance of two teams of experts, from the International Labor Organization (ILO), which are providing technical assistance, including help to reorganize the Equipment Department of the National Directorate of Public W4orks (DPW). The Borrower's performance is good and the project is nrogressing satisfactorily after a slow start. Credit 277-71LI: lMopti Rice Project The US$6.9 million Rice Development Credit of January 1972 (277-MLI) is IIow makinc satisfactory progress after initial delays due to Government budgetary constraints and the lack of 'Knowledge of IDA procedures by officials of tne relevant Ministry. It is expected that the project's main civil works contract, awarded recently, should be completed within two years, or one year alhead of appraisal schedule. Credit 321-MLI: Telecommunications Project The US$3.6 million Telecormunications Project of June 1972 (321-N.lI) is not yet effective. The date of effectiveness, originally November 1, 1972, has been postponed several times. The new date is April 20, 1973. The credit is expected to become effective upon receipt of a duly prepared legal opinion from Government. ANNEX III Page 1 of 3 MALI Second Railway Project Credit and Project Summary Borrower: The Republic of Mali Beneficiary: Regie du Chemin de Fer du Mali Amount: US$6.7 million equivalent Terms: Standard Reletnqiin Terms: 7-1/4 percent annual interest for 25 years, including a four-year grace period and a 3/4 of 1 percent commitment charge on the undisbursed amount of the loan. Project Description: Rehabilitation and provision of equipment, including track works, motive power, and rolling stock; training of staff; and reorganization of the manage- ment administrative services and improvement of finances of the Regie du Chemin de Fer du Mali (RCE-). Estimated Cost: The estimated cost of the project is US$9.3 million equivalent, including a foreign exchange component of US$8.5. Details are given below. Track & Buildings Foreign Local Total (US$ million) Renewal track material 0.67 0.15 0.82 Ballasting and joint welding 0.76 0.26 1.02 Track maintenance equipnent 0.11 - 0.11 Repairs to bridges 0.26 0.06 0.32 Improvement to Bamako Yard 0.03 0.07 0.10 MLiscellaneous works - 0.13 0.13 Subtotal 1.83 0.67 2.50 ANNEX III Page 2 of :3 Rolling Stock Mainline locomotives 1.26 - 1.26 Shunting locomotives 0.72 - 0.72 Railcars and trailers 0.80 - 0.80 Passenger coaches 0.40 - 0.40 Freight wagons 1.78 - 1.78 Spare parts 0.37 - 0.37 Subtotal 5.33 - 5.33 Management Equipment for accounts/statistics 0.22 - 0.22 Consultants & training 0.41 - 0.41 Subtotal 0.63 - 0.63 Contingencies Phvsical - 0.07 0.07 Price 0.67 0.13 0.80 Subtotal 0.67 0.20 0.87 Total Cost of Project 8.46 0.87 9.33 Financing Plan: The proposed credit of US$6.7 mi.llion will meet 72 percent of the total cost of the project. It will finance 79 percent of the foreign exchange cost with the balance (for four main line and two shunting locomotives and spares) being met by the Fonds d'Aide et de Cooperation (FAC), and the local cost of US$0.8 million equivalent by RCFM. The following sumnarizes the financing of the project. US$ million Association 6.7 FAC 1.8 RCFI 0.8 Total 9.3 Estimated Disbursements: Fiscal year Cumulative Disbursements (US$ million) 1973/74 1.0 1974/75 3.3 1975/76 5.5 1976/77 6.7 ANNEX III Page 3 of 3 Procurement Arrangements: Items to be financed by the Association, including imported track material and equipment for ballast- ing, rail joint welding, and maintenance, as well as railcars, trailers, passenger coaches and freight cars, will be obtained through international competi- tive bidding in accordance with Bank/IDA guidelines. The four main line and two shunting locomotives, financed by FAC, will be purchased in France. Consultants: Consultants will be employed under terms and con- ditions acceptable to the Association to assist the RCFM in the preparation of programs, the imple- mentation of action and the training of personnel in (a) management planning, (b) management inform- ation, (c) accounting practices, (d) inventory control, (e) personnel management and (f) commercial practice. Rate of Return: Economic return on the project is calculated at 18 percent. Appraisal Report: Report No. 32a-MLI dated April 3, 1973. 120 8� 4' To Toodemi 00 40 M A L I Imle boiidaries s eim (on rt/is map do ntk SECOND HIGHWAY PROJECT ' impWoly c o,kcWis r aeeprec he bthee LA L G E R A HIGHWAY NETWORK 8 TRANSPORTATION SYSTEM. 0 10 2?0 300 400 jTo~ai 20L- SECOND HIGHWAY PROJECT C_� '_______ 300 400 t_T unii_ _ -20� Strengthening and rehabiiitation works KILOMETERS - - preinvestment studies ) HIGHWAY MAINTENANCE PROJECT .(Cr. 197 - MLI) Feeder road betterment works -- - - Feasibility studies and detailed engineering . Bituminous roads over 5m width bituminous.roads of 5m and less width _ Gravel roads i , - - Improved earth tracKs .| Poor earth tracks i' I+-I+I-I I I - Railways Z <- Navigable rivers T UCTOU owrno Rha,o.j Flood areas 6) International airport GAO 16- t Airfields NIAFOUNKE T < , 4 O Y -limcn.. jpn t R Norc Lo, 3 \ Douentzobbezonao ) ^~~~'~ ~~tS o _ __. _,4Diemo ? | TenenLg�Pg<evcre y , N | G E R~~~~~~~~~~~~N I E > AESw M- ?hourdioh I I Nion .'.PANIGR \X ilbr Dok Pta NoMA 4N W ~~~Keneba IKOR~~~~Ka on mb 4 '5~~~~~~~~~~~ LL)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ '~~~~~~~~~~~~~~~KR u E R Va 0 L T A mBA B ua ! X kors~~~~ TO~oosO 12' To~~~~~~~ AbTo C0A uooldaouA1/ni Oc.,an d '--.4 *~~~~~~~~~~ ~ ~~ Yafl Abid onn To AbidDloulass 0 ~ ~ ~ ~ ~ ~ ~ ~ ' _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _