Document of The World Bank FOR OFFICIAL USE ONLY CONFIDENTL4L Report No. 10641-GUY GUYANA INFRASTRUCTURE SECTOR STRATEGY REVIEW August 14, 1992 Department III Infrastructure Operations Division Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its conteuts may not otherwise be disclosed without World Bank authorizati ABBREVIATIONS GDP - Gross Domestic Product ERP - Economic Recovery Program PSIP - Public Sector Investment Program GEC - Guyana Electricity Corporation GAC - Guyana Airways Corporation GNS - Guyana National Services MOPWCRD - Ministry of Public Works, Communications and Regional Development GUYWA - Guyana Water Authority IDA - International Development Association CDB - Caribbean Development Bank PAP - Public Administration Project IDB - Interamerican Development Bank IMF - International Monetary Fund GUYSUCO - Guyana Sugar Cane Corporation EC - European Community GAIBANK - Bank of Guyana GUYMINE - Guyana Mining Enterprises UNDP - United Nations Development Program UNICEF - United Nations Childrens Fund CIDA - Canadian International Development Agency CDC - Commonwealth Development Corporation MOA - Ministry of Agriculture MOF - Ministry of Finance SPS - State Planning Secretariat CTPU - Central Transport Planning Unit THD - Transport and Harbors Department USAID - (United States) Agency for International Development CHPA - Central Housing and Planning Authority HD - Hydraulics Division UNESCO - United Nations Educational, Scientific and Cultural Organization MCW - Ministry of Communications and Works GSWC - Georgetown Sewerage and Water Commission IDWSD - International Drinking Water and Sanitation Decade CURRENCY EQUIVALENTS Currency Unit a Dollar (G$) GS122 (Jan., 1992) = US$1 FISCAL YEAR = CALENDAR YEAR GUYANA INFRAQTRUCTURE SECTOR STRATEGY REVIEW Table of Contents Page No. EXECUTIVE SUMMARY ........... ........... ............................ i I. ECONOMIC DEVELOPMENT STRATEGY The Setting .................................................. 1 Macroeconomic Performance .................................. 1 The Economic Recovery Program ........ ....................... 2 Economic Prospects ........................................... 3 Infrastructure and the Social Sectors........................ 4 The Public Sector Investment Program......................... 4 II. OVERVIEW OF SECTORAL PERFORMANCE AND POLICIES Current State of the Infrastructure...............I........ 5 Main Sector Is ses ........................................... 6 Sector Strategy.......................*...................... 7 Priority Investments ......................................... 1i Financing Strategy ........................................... 12 III. THE POWER SECTOR Sector Organization and Regulation........................... 14 Current Status and Problems.................................. 15 Power Demand............... ................................. 16 Development Program .......................................... 17 Proposed Strategy ........................... ............... 19 Action Plan.................................................. 21 Proposed Investment Program and Financing Plan............... 21 IV. THE TRANSPORT SECTOR Sector Organization and Regulation........................... 22 Current Status and Problems.................................. 23 Trends in Transport Sector Expenditure...................... 28 Proposed Strategy ........................................... 29 Action Plan .................................................. 29 Proposed Investment Program and Financing Plan............... 31 This report is based on the findings of an infrastructure sector strategy mission that visited Guyana during January 13 to January 24, 1992. The mission members were Marcelo Osorio (LA3TF, Team Coordinator), Peter Gyamfi (LATIE, Transport 'mngineer) and Roy Ramani (LA31N, Sanitary Engineer). Mies. Martha M. Gonzalez and Miriam Allen assisted with the production of the report. Table of Content! Cont. Page No. V. THE WATER SUPPLY/SANITATION SECTOR Sector Organization and Regulation .......................... 31 Current Status and Problem.oooo..oo .......... ... ......... 33 Past Investment Levels and Donor Support.................... 36 Sector Studies .......... 0........ ... # 900...... .... ......... 36 Proposed Strategy.................. . ... ................. 37 Action Plan.. ........................ *..................... 37 Proposed Investment Program and Financing Plan............... 38 VI. '"HE URBAN SECTOR Sector Organization and Regulation..*.o.................... 38 Current Status and Problems..*................................ 39 Proposed Stratey* .*.*................. ... . ..*... 40 Action Plan.. .................................. ........... 40 Proposed Investment Program and Financing Plan............. 40 VII. THE SEA DEFENSE SYSTEM Sector Organization and Cost Recovery........................ 41 Current Status and Problems ........................... . ... 42 Proposed Strategy ................................... ........ 44 Action Plan8 ..** .* ****** .*..*.*.*. *.*** ..*. * .*.*..**. * Proposed Investment Program and Financing Plan............... 45 ATTACHMENTS 1. Sector Strategies .............................................. 46 2. Sector Investment Program, 1992-1997............................. 54 3. Approved and Proposed Infrastructure Loans..................... 55 4. Available Infrastructure Sector Analysis......................... 56 5. Summary of Projects. ................. . ..*..*.*.*....*.*.*.*... 57 NAP IBRD 11683R1 EXECUTIVE SMARY Objective of the Report 1. The purpose of this report is to assist both the Government of Guyana in developing its infrastructure sector strategy for the period 1992-1997 and the donor community in establishing priorities to support it. Background 2. Guyana, with an area of 83,000 square miles and a population of about 750,000, is located on the northeast coast of South America. The country is bordered by Venezuela, Brazil, and Suriname. The country has three major topographic regions: a low coastal plain, a hilly belt with dense forests, and, in the west and south, mountains interspersed by savannahs. Economically, the most important region is the 270 mile long and 10-40 mile wide coastal plain. Although the coastal plain covers only 5: of Guyana's land area, it contains 90Z of its population and generates about 802 of its Gross Domestic Product (GDP). Rich alluvial soils have made the coastal plain the agricultural center where sugar and rice are grown. Much of the coastal plain is below high-tide levels and protected against flooding by dikes. Canals for drainage and irrigation crisscross the region. 3. Guyana, one of the poorest countries in the western hemisphere, faced a decade of economic decline during the 1980s. During 1980 to 1988, real GDP declined by 2.8Z per year on average. In 1988, recorded output was only 68% of that achieved in 1976. A number of technical, organizational, and financial problems in Guyana's main economics activities (sugar, rice, bauxite), combined with inadequate economic policies, led to the economy's deterioration. Consequently, government revenues edeclined. At the same time, the public sector deficit increased from 21% of GPD in 1980 to 32% in 1988, and the current account in the balance of payments also recorded increased deficits. By 1989, total debt exceeded 6002 of GDP. The worsening economic situation led to decreases in real wages and private consumption and, in turn, to the migration of skilled Guyanese. Economic Prosgects 4. In 1988, the Government of Guyana introduced the Economic Recovery Program (ERP) and set a major change of direction in economic policy. The ERP called for the transformation of the state-controlled economy into a market oriented one. The ERP has emphasized the elimination of distortions in the commodity and factor markets, reduction of domestic and external imbalances and of the size of the public sector, and restoration of relations with the donor community. Since the initiation of the ERP, the macroeconomic framework has been greatly enhanced. Real GDP increased by 6% in 1991, and inflation was brought down to 1-22 per month by the end of 1991. In 1992, inflation is projected to fall to about 122, and the economy is projected to grow in the range of 4-5%. 5. In spite of its improved performance, however, the Guyanese economy continues to be affected by a number of problems. Key among these is the need for urgent rehabilitation of the country's infrastructure. The Public Sector Investment Program 6. The Government's Public Sector Investment Program (PSIP) for 1991-1993 is projected to total about US$225 million or about 2M of GDP. Improvements to infrastructure account for 34%Il of the PSIP. The PSIP enphasizes the rehabilitation of roads, sea defenses, river transportation, electrical power supply, Georgetown and rural vater supply systems, sewage disposal, and storm drainage systems. Current State of the Infrastructure Facilities 7. Existing infrastructure facilities are in a state of disrepair; public services are deficient. The electricity service is so unreliable that most existing businesses have had to invest in costly standby generators; potential investors are reluctant to initiate new investments until a reliable service is available. The situation is no better in water supply services; the largest industrial enterprises have dug their own wells, and smaller firms must transport water by truck to large holding tanks. Unreliable and limited ferry services and a deteriorated road network raise transport costs and restrain domestic trade. Frequent breakdowns in the protective sea wall pose a serious threat to agricultural production and to the main coastal roads and towns. Main Sectoral Issues 8. The main sectoral issues are as followst (a) the deteriorated state of basic infrastructure facilities constitutes a major obstacle to the country's sustained economic recovery and to a rapid expansion of private sector activities; (b) weak institutional capacity. Public utilities and government agencies lack the capacity to plan, execute, and maintain investment programs. The decentralized organization adopted in the areas of transport, sea defense, and water supply has been ineffective; (c) lack of skilled manpower. The protracted economic deterioration led to the emigration of talented Guyanese; (d) the large investments required to rehabilitate infrastructure. Infrastructure is so deteriorated that proper rehabilitation will require very large investments. Such investments exceed the country's absorptive capacity; I/ includes social infrastructure investments (water supply). (e) poor maintenance facilities. Infrastructure has received little or no maintenance. Investments to rehabilitate infrantructure would generate negligible long term benefits, if the issue of maintenance is not properly addressed; and (f) lack of adequate cost recovery mechanisms. This is one of the main reasons for both the lack of proper maintenance and of poor public services provided. Sector Strategy 9. The proposed sector strategy for 1992-1997 is aimed at rehabilitating the most seriously d-teriorated and critical facilities, implementing adequate maintenance systems, strengthening institutional capacity, introducing adequate tariff policies, and making optimal use of potential external financing. In this regard, the proposed strategy includes the following: (a) rehabilitating the needed infrastructure to support a sustained supply response in the economy; (b) ensuring adequate infrastructure maintenance by: (i) establishing cost recovery mechanisms to generate funds required for maintenance; and (ii) contracting out maintenance to private companies; (c) strengthening institutional capacity by: (i) promoting private sector participation in the ownership and/or management of: Guyana Electricity Corporation (GEC), the Timehri Airport, Guyana Airways Corporation (GAC), Guyana National Services (GNS), shipping companies and ferries; (ii) recentralizing operation and maintenance functions for roads in the Ministry of Public Works, Communications, and Regional Development %MOPWCRD), water supply in the Guyana Water Authority (GUYWA), and sea defenses in a proposed Coastal Areas Management Authority; and (iii) implementing mechanisms to permit recruitment of qualified staff on the basis of competitive salaries and conditions of service; (d) establishing and implementing tariff policies that ensure, as a minimum, the recovery of operation and maintenance costs; and (e) planning for the most efficient allocation of potential financing. iv- Implemontation StratxSE 10. The followtig measures are recomended in support of the proposed infrastructure sector strategy: (a) recruitment of qualified senior personnel. This coulc be possibly supported under the proposed Public Administration Project (PAP), currev'..y under consideration by the International Development Association (IDA); (b) establishment of a unit for infrastructure planning and coordination in charge of all such actions and decisions required of the Government; (c) the above unit should be responsible for the establishment of: (i) a regulatory framework for the delivery of public services and functioning of infrastructure agencies; (ii) tariff policies for public services and cost recovery mechanisms for infrastructure; (iii) a Tariff Board for public servicest and (iv) mechanisms for the recruitment of qualified staff at competitive salaries; (d) donors should consider financing some operational costs for at least the next two to four years while adequate cost recovery mechanisms are fully implemented. The main operational costs subject to donor financing include: (i) costs of programs for institutional strengthening; (ii) salaries of qualified staff to be recruited; and (iii) costs of maintenance contracts for sea-defense walls, roads, ferries, and, possibly, power generating plants. Private Sector Participation 11. Participation of the foreign private sector should be encouraged in the ownership and/or management of GEC, the Timehri Airport, GAC and GNS, ar-d in the rehabilitation of facilities. Local private participation should be encouraged in the ownership of shipping companies and ferries and maintenarce of existing facilities. -v - Priority Investments 12. The proposed priority investments in infrastructure identified by this report for the 1992-1997 period includes (a) rehabilitation of the power generating - plants, INFRASTRUCTUFE transmission system and distribution CoIII.aN networks to ach.eve a o.es.e reliable level a:sM of electricity services; WA"M Ca4.7X2 (b) installation of new thermal plants generating about 40 NW to I meet electricity demand; (c) rehabilitation of the Essequibo Coast, Georgetown-Timehri, and Georgetown-Mahaica roads and feeder roads to serve the agricultural, mining, and forestry sectors and the farming areas; (d) rehabilitation of ferries, moorings, and the Demerara River bridge to eliminate bottlenecks in the transportation of agriculture products; (e) rehabilitation of the critical sections of sea-defense wall to protect farm land, roads, and urban areas; (f) development of a system for potable water, sewerage, and drainage in the Georgetown area and countrywide implementation of an emergency program for rehabilitation of other water supply and sewerage systems, to ensure potable water and wastewater sanitation; and (g) improvement of port and airport facilities to facilitate trade. 13. The proposed priority investments amount to about US$327 million (estimated at January 1992 prices). About US$62 million are proposed to be invested in 1992-1993 and the remaining US$265 million during 1994-1997. -vi- 1992-1997 INVESTENT PROGRAM (US$ million) Subeect>g Project. 1992-1993 1994-1997 Total 1992..1997 Power - Rehabilitation ~ !17.3 17.3- Expansion 16.3 93.3 109.6 Transport Rehabilitation 19.1 50.1 69.2 Water Supply Rehabilitation 5.5 69.0 * 74.5 Urban. Rehabilitation 20.5 20.5 Sea Defenaea Rehab. 36 km. 4,0 32.0 36.0 Tota `62.2 264.9 327.1 ..... .. Financing Strategv 14. Of the US$327 million proposed during 1992-1997, projects approved ør about to be apprmved amount to about US$86 million; proposed projects for loans under preparation amount to US$146 million; and project financing for the remaining US$95 million has yet to be identified. 15. Financing of infrastructure facilities should b. livked to government actions to strengthen institutional capacity, implement adequate maintenance practices and establish tariff policies that permit the adequate operation and development of the aector. EEPECTED FINANCING FOR INFRASTRUCTURE PROJECTS (US$ million) DONOR Power Tranap.. Water S. Sea Def. UrbfGen Total ZI 45.5 48.0 27.5 12.8 10.0 143.8 IDA .10. 10.S 5. 5...0 30.5 S.~~½»4« . .... ...-.<.YÆ. EEC 7.0 23.0I 10.0~ 40.0 CD. 10.0 4.5. 14. CDC 2.02.0 OTHIERSz 1.4 1.4 Sub-otal ~ 58.9 65,0 61.0 32.3 15.0 ~ 232.2 NÉot Deined 68.0 4.2 1Å3.5 3. 10.5 94.9 T.TAL126.9 69.2,- 74.5~ ' 3.0 20 . 37. ............... . .. . A ..- ........ - Vii- INFRASTRUCTURE SECTOR PROPOSED STRATEGY Objectiveu Problems Government's Strategy Donors' Strategy Assist the Economic Deteriorated state of Rehabilitating infrastructur- Financing wchabilitation Recovery Program infrastructure facilities that help to induce a quick programs. Financing should supply response in the be made cortingent on economy agreement by Government to irmelement appropriate cost re-overy mechanisms Lack of proper maintenance Establishing cost recovery Considering financing of mechanisms to generate maintenance contracts for two enoug. funds for maintenance to foar years Contracting maintenance with private companies Weak institutional capacity Promoting private sector Financial and technical participation in the ownership assistance towards divestment and/or management of GEC, of government facilities Timehri Airport, GAC, GNC, shipping companies, ferries Recentralizing O&M functions Financial and technical for roads in MOPWCRD, ass;itance for organization water supply in GUYWA, and and strengthening of sea defense in a proposed government agencies Coastal Areas Management Authority Strengthening of MOPWCRD, GUYWA and the proposed Coastal Areas Management Authority Limited financial resources Optimal use of potential Reviewing yearly or bi yearly financing from donors programs for assistance Lack of skilled manpower Implementing mechanisms to Financing of qualified permit recruitment of qualified personnel to be recruited staff Lack of cost recovery Tariff policy to ensure mechanisms adequate cost recovery Reduce the fiscal deficit Efficient use of resources Careful prioritization of potential investment I. ECONOMIC DEVELOPMENT STRATEGY The Settina 1.1 Guyana, with an area of 83,000 square miles and a population of about 750,OCO, is located on the northeast coast uf South America. The country is bordered by Venezuela, Brazil, and Suriname. Guyana has three major topographic regions: a low coastal plain, a hilly belt with dense forests, and, in the west and south, mountains interspersed by savannahs. Tho major rivers, Essequibo, Demerara, and Berbice, are navigable inland for only a short distance. 1.2 Sugar, rice, and bauxite are Guyana's key export commodities products. Economically, the most important region is the 270 mile long and 10-40 mile wide coastal plain. Although it covers only 5% of the land area, it contains 902 of the country's population and generates about 80% of its Gross Domestic Product (GDP). Rich alluvial soil has made the coastal plain the agricultural center where sugar and rice are grown. Much of the coastal plain is below high-tide levels and protected against flooding by dikes. Canals for drainage and irrigation crisscross the region. The alluvial soils end numerous waterways make road constructiot expensive. 1.3 The main bauxite mines are at Linden, Ituni, and Kwakwani, which are less than 100 miles inland. Bauxite is shipped to the coast on the Demerara and Berbice rivers. Some 70 miles further inland from Linden, forestry concessions are being exploited; timber is shipped to the coast mostly by truck and to a lesser extent, by river transportation. The country's interior is sparsely settled, with a few cattle ranches in the savannah near the Brazilian border and some scattered gold and diamond mines. Macroeconomic Performance 1.4 With a 1991 GNP per capi.ta of US$670, Guyana is one of the poorest countries in the western hemisphere. Following independance from Great Britain in 1966, Guyana adopted a set of economic policies characterized as "cooperative socialism", which led to government control of the country's main economic activities. By 1988, the Government controlled approximately 802 of recorded import and export trade, and close to 85% of total investment activity. The expansion of the public sector was accompanied by a decline in private sector activity. 1.5 These policies brought about a decade of economic decline. During 1980 to 1988, Guyana's real GDP declined by 2.82 per year on average. In 1988, recorded output was only 68Z of that achieved in 1976. A combination of technical, organizational and financial problems in the sugar, rice, and bauxite sectors led to the economic deterioration. Consequently, government revenues began to decline. At the same time, the public sector deficit increased from 212 in 1980 to 322 in 1988, and the deficit in the current account of the balance of payments increased from 222 of GDP in 1980 to 24% of GDP in 1988. By 1989, total debt exceeded 600% of GDP. The worsening economic situation led to decreases in real wages and private consumption and, in turn, to the migration of skilled Guyanese to more lucrative job opportunities abroad. -2- The Economic Recovery Program 1.6 In 1988, the Government of Guyana introduced the Economic Recovery Program (ERP), and set a major change of direction in economic policy. The ERP called for the transformation of the state-controlled economy into a market-oriented one. The ERP has emphasized the elimination of distortions in the commodity and factor markets, reduction of domestic and external imbalances and of the size of the public sector, and restoration of relations with the donor community. In 1989, the IMf agreed to a monitoring arrangement and, in June 1990, the IMF Board approved a Stand-by arrangement, and IDA approved a Structural Adjustment Credit. Major measures undertaken under the ERP include the elimination of most price controls and import prohibitions, reduction of the structure of imports tariffs, elimination of foreign exchange licensing for imports, establishment of a free market for the sale of foreign exchange (the official rate and the change rate have been unified), and initiation of a program to divest a large number of public sector enterprises. Other important measures include bringing in private sector management into the sugar industry, implementation of new tax measures, elimination of arrears to international agencies, arn; z.aheduling of bilateral debt. 1.7 Since the initiation of the ERP, the macroeconomic framework has been greatly enhanced. Adverse weather conditions, strikes, and power outages affected the output of the key sectors of rice, sugar and bauxite during 1988 and 1989. As a result, real GDP declined by 4.8% in 1989 and 3.2% in 1990. The reform program began to show an impact in 1991 as weather and other conditions wre favorable, with real GDP increasing by about 6%. Moreover, since July 1991, inflation has been averaging 1-2Z per month. -3- MACRO-ECONOMIC INDICATORS GROWT'H RATES (1) 1980-88 J199899gg J,9, GDP(f..ctor cost) -2.8 -4.4 -3.2 6.1 Investment -10.5 63.2 18.9 10.9 Exports -5.7 -6.3 -2.1 12.5 Consumer Prices annual average 21.5 89.3 64.9 102.0 end year--end year 104.7 75.9 7t.0 GDP Deflator 17.0 155.1 55.3 130.4 SARES OF GDP( urrent prices) Investment 29.5 34.2 42.3 43.7 External Current Account Balance -28.7 -29.8 -37.3 -39.7 Net Factor Income -15.6 *22.7 26.2 34.6 Source: Guyana, From Economic Recovery To Sustained Growth. World Bank, Report No. 10307-GUY. Economic Prospects 1.8 The Guyanese economy remains heavily based on agriculture and basic minerals; agriculture output constitutes 39% of GDP, and mining 15%. Manufacturing, excluding rice and sugar milling, is only 7% of GDP. Guyana is highly dependent on foreign markets for critical imports, particularly petroleum, and is therefore vulnerable to fluctuations in the prices of its derivatives. 1.9 Growth prospects for Guyana have been analyzed in the World Bank Report entitled "Guyana From Economic Recovery to Sustained Growth" dated April 10, 1992. There is considerable evidence that an economic recovery is underway, and that this recovery will continue into 1992. The report states that a key factnr will be the ability of the Government to continue the reform program, maiT .ain a system of undistorted factor and commodity markets and a stable macro-economic environment, raise the efficiency of the public sector, and provide an improved level of supporting Public infrastructure. 1.10 The report projects a growth in real GDP of 4.6% in 1992, an average of 4.4% per year during 1992-95, and 4.51 duting 1995-97, based on the assumption that the reforms of the ERP will continue to be in place. This growth would require maintaining investment at around 42% of GDP during 1992-95. Investment would be needed for rehabilitating the sugar and bauxite sectors and for rebuilding related infrastructure. The projected rate of investment depends on raising the domestic savings rate from about 26% of GDP in 1991 to -4- an average of 37-41% during 1993-98. The gradual removal of power and transport constraints are expected to engender further increases in output in general. Infrastructure and the Social Sectors 1.11 Until a Survey of Living Measurement Standards (SLMS) is completed, there is no reliable way to estimate the extent of poverty in Guyana or assess the effects of the adjustment measures on the poor as recent data are not available on household income levels, employment and unemployment rates, or other social conditiuns. Inter-American Development Bank estimates for 1989 show that 67Z of the population was poor, although official estimates place the figure closer to 861. 1.12 The provision of extensive and free social services has historically been a major commitment of the Government of Guyana. Consequently, a large amount of resources have gone into the development of an exteneive eystem of social services. The desire of the Government to provide services, however, is not matched by its ability to meet these commitments. Years of economic decline aud scarce public resources have meant declining allocations for the public services, and inadequate investment and maintenance of infrastructure facilities and public services. Consequently, the quality of the services has dropped significantly. 1.13 In the short-term, effort must be made to cushion the most vulnerable groups as the adjustment process proceeds. To this end, public services should continue subsidizing to the poor. However, these subsidies should be made explicit and limited to only the poorest segment of the population, to avoid the financial deterioration of the public utilities and consequently, further declines in public services. Implementation of policies proposed in this report are expected to improve the quality of services and consequently of living conditions of the population. The Public Sector Investment Program 1.14 The Government's proposed Public Sector Investment Program (PSIP) for 1991-1993 is projected to total about US$225 million or about 23% of GDP. Improvements to infrastructure account for 341 l of the PSIP. The PSIP emphasizes the rehabilitation of roads, sea defenses, river transportation. power supplies, Georgetown and rural water supply systems, sewerage disposal, and storm drainage systems. 1.15 The PSIP's financing sources are expected to originate from external donors, counterpart funds, corporations' funds, and budgetary resources. Capital expenditures call for domestic financing of about US$20 million per year on average. Foreign funding is assumed to average about US$39 million per year in loans and US$18 million per year in foreign grants that will generate counterpart funding. It is not clear whether the Government can generate US$20 million per year in budgetary support for the program since new investments will require increased expenditures on maintenance. The PSIP includes only projects for which financing has already been secured, and R/ Includes social infrastructure investments (water supply). -5- reflects donors' assistance in support of the Government's priorities. The PSIP does not include some important projects for which financing is being sought, such as expanded rehabilitation for sea defense, bridge replacement, and feeder roads. II. OVERVIEW OF SECTORAL PERFORMANCE AND POLICIES Current State of the Infrastructure 2.1 The country's infrastructure are in a state of disrepair; public services are deficient. The electricity service is so unreliable that most existing businesses have had to invest in costly standby generators; potential investors are reluctant to initiate new investments until a reliable service is available. The situation is no better in water supply services; the largest industrial enterprises have dug their own wells, and smaller firms must transport water by truck to large holding tanks. Unreliable and limited ferry services and a deteriorated road network raise transportation costs and restrain domestic trade. Frequent breakdowns in the protective sea wall pose a serious threat to agricultural production and to the main coastal roads and towns. 2.2 The entire electrical power system (generation, transmission, distribution) is old and worn out. The system has an installed capacity of 87MW, but only about 37 MW were available at the beginning of 1992 for use because of inadequate operating procedures and maintenance. The Guyana Electricity Corporation (GEC) hired a consulting firm to prepare an Integrated Investment Plan (IP) based on a least-cost expansion plan for power for the period through 1999. Adequate implementation of this plan is needed to ensure the reliability of the power service. 2.3 Transportation facilities have also deteriorated as a result of lack of road maintenance, inadequate port operations, and unreliable/limited ferry operations. The conditions of the roads are closely related to the performance of the agricultural sector since high domestic transportation costs result in increased distribution costs and, in turn, in increased prices of agricultural commodities (such as tomatoes, bananas etc) in Georgetown and other domestic markets. 2.4 As a result of inadequate maintenance, the protective sea wall has experienced frequent breakdowns. This is a critical issue since the sea wall protects an area inhabitated by over 90Z of Guyana's population and where most of its agricultural activities take place. At present, about 15 miles of the sea wall remain in critical condition because of lack of proper maintenance, and inadequate monitoring of wave action and pressure over time. In addition, a major rice-growing area in which US$130 million has been invested over the past decade, is in serious risk of saline contamination. 2.5 Water supply and sewerage services of Guyana are of unacceptable quality because of lack of proper processing and maintenance equipment. The risk of contamination poses a serious health hazard and is a major hindrance to the expansion of business activity. Services in the urban areas also suffer from.lack of funds and consequently are poorly maintained. -6- Main Sector Issues 2.6 Deteriorated Infrastructure Facilities. The deteriorated state of basic infrastructure facilities constitutes a major obstacle to a sustained economic recovery and to a rapid expansion of private sector activities. Deterioration of the country's infrastructure has been caused by a lack of adequate maintenance and investment, particularly over the past decade of economic deterioration, and by the absence of financially and technically viable institutions. This has further exacerbated the poor quality and reliability of services, particularly water supply and electrical power. 2.7 Weak Institutional Capacity. Public utilities and government agencies lack the capacity to plan, execute and maintain investment programs. The decentralized organization of transport, sea defense, and water supply has not worked. Through the regionalization process begun in the early 1980s, responsibility for maintenance of these activities was transferred to the newly created regions, leaving the Central Government to plan and provide technical advice to the regions. This arrangement has failed to work since the regions have had neither the resources, manpower, nor technical know-how to carry out their responsibilities. 2.8 Lack of Skilled Manpower. Lack of skilled manpower is a critical impediment to Guyana's sustained economic recovery in general and to the rehabilitation of its infrastructure in particular. The past economic deterioration caused a decrease in real wages and private consumption and led to the emigration of talented Guyanese. This situation affects both the public and private sectors, but is more critical in tie public sector, where wages are 1/3 to 1/4 of those prevailing in the private sector. The vacancy rate in all government agencies and public utilities is extremely high. 2.9 Larae Investments Required to Rehabilitate Infrastructure. Guyana's infrastructure has deteriorated so badly that proper rehabilitation would require large investments well beyond the country's capacity. The PSIP for the period 1991-1993 already represents a high percentage of GDP, even without including important rehabilitation projects for which external financing is being sought. Therefore, a careful prioritization of potential investment for the rehabilitation of infrastructure is vital. 2.10 Poor Maintenance Facilities. Because infrastructure has received little or no maintenance in 4he past, investments in its rehabilitation would generate little if any long-term effects if the maintenance issue is not properly addressed. The Government realizes that the continued deterioration of the infrastructure is a major constraint to the sustained economic recovery and, thus, allocated a larger share of its 1991 PSIP (22Z) to infrastructure rehabilitation. 2.11 Lack of Cost Recovery Mechanisms. One of the main causes for both lack of proper maintenance of infrastructure and poor public services has been the absence of adequate maintenance budgets, in large part owing to inadequate cost recovery mechanisms. -7- Sector Strategy 2.12 A strategy is proposed to enable infrastructure to support the ERP. It is designed to rehabilitate the most deteriorated and critical facilities, implement adequate maintenance systems, strengthen the public sector institutional capacity, implement adequate tariff policies, and make the most eff .ient use of external financing. SECTOR STRATEGY (a) rehabilitating the needed infrastruature to support a sustained tupply response in the economy: ( , ensuring .adequate infrastructure maintenance by: (i) establishing cost recovery mechanism. to generate fund. required for maintenance; and (ii) contracting out maintenance to private contractors; (c) etrengthening institutonal capacity bya promoting private sector participation in the ovnerahip and/or management ofo Guyana Electricity Corporation (EC), the Timehri Airport, Guyana Airways Corporation (GAC), Guyana National Services (GNC), shipping companies, and ferries (ii) Ircentralizing operation and maintenance functions for roads in the Ministry of Public -Worka, "Comuniations and Regional Development (MOPWCRD), water supply in the Guyana Water Authority (GAYWA), and sea 'defenses in a proposed Coaastal 'AreaS Management Authorityl and (iii) implemnting mechanism tø permit recruitment of quaified staff on the basisof competitive salaries and conditions of ervice; (d) establishing and implementing ta. ff policies that en8ure as A minimum,' the recovery of operation nnd maintenance cost and (e) planning for the most efficient allocation of potentialfinancing. 2.13 Rehabilitation and Expansion of Infrastructure. Preliminary cost estimates for the complete rehabilitation of the existing infrastructure are close to US$300 million, half of which would be required for the rehabilitation of the sea defenses only. Given existing macroeconomic constraints, a careful prioritization of potential 2avestments in rehabilitation should be made. 2.14 Rehabilitation of sea defenses is vital. The European Community (EC) has carried out a study to define priorities in this area, which urgently recommends that 36 km of sea defense, that are in a critical state of disrepair, be rehabilitated immediately. Rehabilitation of some additional 71ka of the sea defense wall could be carried out during the next decade. 2.15 Rehabilitation of power facilities is underway. Once their rehabilitation is completed, generation, transmission, and distribution facilities will need to be expanded. 2.16 To improve the electricity service's reliability in the mid term, it will be necessary to expand electrical power facilities. In the short term, however, current programs for rehabilitating existing generating and distribution facilities would improve the reliability of the service. However, since these existing generating units are quite old, many will need to be replaced between 1995 and 1998, at the latest. As a least-cost expansion plan has been prepared by consultants (Canadian Power International Services, C.I.Power) to meet power demand through 1999, it should be taken as a guide for investments in electrical power and revised annually to take into account actual demand requirements. 2.17 Most existing roads need rehabilitation. Proposed rehabilitation of roads has been spread out on four years, in priority order, according to their condition and contribution to the economy. No new roads, other than the road between Brazil and Guyant presently under construction, are considered necessary in the short term. 2.18 Part of the distribution system of Georgetown's water supply requires urgent rehabilitation. Preparation of a master plan for the Georgetown area water supply and sewerage systems is about to start. The plan would provide the necessary technical basis to commence a major water supply/sewerage project in the mid 1990s. 2.19 Maintenance of Facilities. Proper maintenance of facilities is crucial to secure long-term effects of the proposed rehabilitation of infrastructure facilities. The success of this uill depend on the implementation of the other proposed strategies including a tariff policy, cost recovery mechanisms, assistance by donors in financing maintenance contracts, participation of the private sector, and institutional strengthening. Availability of funds and skilled manpower are crucial for proper maintenance of any facility. Implementation of an appropriate tariff policy and cost recovery mechanisms wou- be necessary to secure funds for maintenance. However, to have these mechanisms Ln place will require time. Thus, external financing for maintenance activities would be the only financing source to secure proper maintenance in the next two to four years. To ensure participation of skilled manpower, the contracting out of maintenance to the private sector seems to be the best or, possibly, the only option given present salary constraints for government agencies. Units in charge of maintenance should be strengthened to acquire the capability to procure and supervise maintenance contracts. 2.20 Strenathening Institutional Capacity. A framework to allow competition and private sector participation in investment construction, management, operations and maintenance of infrastructure facilities would accelerate the improvement of infrastructure. The electrip-al power supply system should be -9- the first service to be opened to private sector participation. First, a reliable electricity service is crucial for expanding economic activity. Second, the country is making substantial investments in power that should be carefully maintained and conserved. Third, GEC has proved unable to maintain its facilities properly and to provide acceptable service. Fourth, GEC lacks qualified management and technical staff. And finally, the power service, if well managed, could become a lucrative business. For about two years, the Government has been discussing a proposal submitted by Leucadia, a US company, for a 60Z share in GEC, without reaching an agreement. The Government should explore competitive approaches to the private sector and the option of leasing assets under a concession or management contract. 2.21 The purpose of the proposed above-mentioned strategy to improve the public services and infrastructure management is twofold. It is intended first to address the existing manpower constraints being experienced in virtually all sectors of the economy. And second, to promote participation of the private sector. 2.22 The proposed measures to supplement manpower are designed to create arrangements for temporary managers and professional staff to fill the many vacancies in public agencies. Such staff would conceptualize development programs and projects, manage the budget process, including the preparation, evaluation, and procurement of works and goods, and supervise execution of contracts. There should also be funding for training incumbents in public administration. 2.23 Pricing Policies and Cost Recovery Mechanisms. Implementation of sound and clear pricing policies and cost recovery mechanisms for public services and infrastructure is indispensable for ensuring adequate maintenance, financing their required expansion, and facilitating the participation of the private sector. 2.24 Pricing for public services, namely electricity, water supply, and sewerage, should be based on economic costs and financial requirements. The tariff structure should be based on long-run marginal cost, while its level should be based on financial requirements to meet operational, maintenance, and expansion costs. Tariff structure for electricity should be based on a study of marginal cost carried out under the Inter-American Development Bank's (IDB) financing. 2.25 For other infrastructure facilities, namely sea defenses, roads, housing, airports, and ferries, cost recovery mechanisms should be designed and implemented to meet capital, operational, and maintenance costs. However, fully implementation of cost recovery mechanisms would take some time. 2.26 The approval and implementation of tariff policies should be the responsibility of an autonomous Board. It could be a five-member board conformed by independent members appointed by the Prime Minister for a period of about five years. Technical assistance is required for the preparation of tariff policies, and the creation and training of the proposed tariff board. A proposed Public Administration Project (PAP) could possibly include financing for this technical assistance (para. 2.27). - 10 - 2.27 Implementation Strategy. The Government does not have, at present, the appropriate organization and enough resources to implement the proposed actions to rehabilitate and improve infrastructure. In regard to this and the other sectoral issues outlined above, the following implementation strategy is proposed: (a) recruitment of qualified senior personnel. This could possibly be supported by the proposed Public Administration Project (PAP), currently under consideration by the International Development Association (IDA); (b) establishment a unit for infrastructure planning and coordination in charge of .11 such actions and decisions required of the Government; (c) above unit should be responsible for the establishment of: (i) a regulatory framework for the supply of public services and functioning of infrastructure agencies; (ii) tariff policies for public services and cost recovery mechanisms for infrastructure facilities; (iii) a Tariff Board for public services; and (iv) mechanisms for the recruitment of qualified etaff at competitive salaries; (d) donors should consider financing of some operational costs for at least the next two to four years while adequate cost recovery mechanisms are fully implemented. The main operational costs subject to donor financing include: (i) cost of programs for institutional strengthening; (ii) salaries of qualified staff to be recruited; and (iii) costs of maintenance contracts for sea-defense walls, roads, ferries, and, possibly, power generating plants. 2.28 Private Sector Participation. Participation of the foreign private sector shouYd be encouraged mainly in the ownership and/or management of GEC, the Timehri Airport, GAC and GNS, and in the rehabilitation of facilities. Local private sector participation should be encouraged in the ownership of shipping companies and ferries, and in the maintenance of existing facilities. - 11 - Priority Investments 2.29 A proposed Investment Program for infrastructure identified by this veport I NFRAerUcTURE INESTMENTS ffor the 1992-1997 period includes only priority investments. The PSIP is am mestimated to amount to US$327 million expressed in Ums January 1992 prices. About OM cW.o e US$62 million are proposed to be invested in 1992-1993 and the remaining US$265 wmme Cu~s. million during 1994-1997. The investment program has been based on the following: the Guyana Public Sector Investment Program; the Power Integrated Investment Program prepared for C.I. Power; the Economic Feasibility Study on Reconstruction and Rehabilitation of Sea Defense, prepared by DEV Consultants; the status of project implementation at January 1992; and supplementary analysis made by the mission. The proposed investments are as follows: (a) rehabilitation of the power generating plants, transmission system and distribution networks to achieve a reliable level of electricity services; (b) installation of new thermal plants generating about 40 NW to meet electricity demand; (c) rehabilitation of the Eriequibo Coast, Georgetown-Timehri, and Georgetown-Mahaica roads and feeder roads to serve the agricultural, mining, and forestry sectors and the farming areas; (d) rehabilitation of ferries, moorings, and the Demerara River Bridge to eliminate present bottlenecks in the transportation of agriculture products; (e) rehabilitation of the critical sections of sea-defense wall, to protect agricultural land, roads, and urban areas; (f) development of a system for potable water, sewerage, and drainage in the Georgetown area, and countrywide implementation of an emergency program for rehabilitation of the other water supply and sewerage systems, to ensure potable water and wastewater sanitation; and (g) improvement of port and airport facilities to facilitate exports and imports. 2.30 The investments by subsector are shown in the table below. The table does not include the cost of the Brazil-Guyana road, as documented analysis on its priority was not available to the mission. - 12 - 19911997 ZIVESTMENT PRORA% (US$ million) Subasetor Projet 19921993 19941997 Total 1992-1997 Fover Rhbittion 1L7.317 Epnon16.3 93.3 1094 Tran.port Rehabilttion 19.1 ~ 50J. 69.2 Water Supply Rehabilitation ~ 5.5 69.0 74.5 Urban Rehabilitation 20.5 20.5 Sea Defese Rhah. 36 lan. 40 32.0 3 .640 Total 62.1 264.9 32741 Finncing Strategy 2.31 Substantial and coordinated donor financial assistance is essential for the rehabilitation of the existing facilities. Potential donors include the IDB, EC, International Development Association (IDA), Caribbean Development Bank (CDB), United Nations Development Program (UNDP), United Nations Children's Fund (UNICEF), Canadian International Development Agency (CIDA), Commonwealth Development Corporation (CDC) and the governments of the United Kingdom, Canada, USA, Brazil, and Venezuela. 2.32 Approved and proposed loans under preparation would finance about US$232 million of the 1992-1997 investment program (see table below), this would amount to about 711 of total investments during the period. Of this amount, US$86 million (26Z of investment in the period) correspond to loans already approved or about to be approved (see Attachment 3). A summary of the expected utilization of funds from loans for infrastructure, both approved and under preparation, is shown below for each sub-sector. 2.33 IDB has been so far the major donor and is expected to continue so in the near future. For the period 1992-1997, the total financing assistance (approved and under preparation) is estimated at about US$144 million. In the electrical power sector, 1DB recently approved a loan for rehabilitation of power facilities for US$15.5 million to be disbursed in 1992-1993 (a previous loan fov US$16 million was disbursed in the period 1987-1992). In addition, IDB is 1Tesparing a project for the expansion of generating capacity for a proposed loan of US$30 million. In the transport sector, IDB is considering a loan for US$25 million to partially finance the Georgetown-Timehri and Georgetown-Rosignol Road Rehabilitation Project. The proposed loan is expected to be approved in the second half of 1992. Under the Agricultural Sector Hybrid Program (approved by 1DB in December 18, 1991), there are about US$3 million allocated to access road maintenance of tertiary roads. In addition, IDB'e Infrastructure Rehabilitation Program has allocated around US$18 million for the primary/feeder road network, and US$2 million for port and river transport. For water supply/sewerage and urban development, 1DB is financing the preparation of a master plan, and plans to finance US$7.5 million for a Remedial Water and Sewerage Maintenance Program for Georgetown, to be followed by an expected US$20 million loan for the implementation of the master plan recommendations. To rehabilitate sea defenses, IDB has made a loan to finance US$12.8 million in direct costs. In an Urban Rehabilitation Program tentatively estimated at US$15 million, IDB expects to finance about US$10 million during the period 1992-1997. - 13 - APPROVED OR IDENTIFIED LOANS DONOR Power Transp. Water S* Sea Df Urbl/Gen Total IDB 45.5 48.0 27.5 12.8 10.0 143.8 IDA 10.0 10.5 5.0 5.0 30.5 EEC 7.0 23.0 10.0 40.0 CDB 10.0 4.5 14.5 CDC 2.0 2.0 OTHERS 1.4 1.4 Sub-Total 58.9 65.0 61.0 32.3 15.0 231.2 Not Defined 68.0 4.2 13.5. 3.7 5.5 94.9 0 TDTAL 126.9 69.2 74.5 36.0 20.5 327.1 2.34 The EC has allocated US$40 million to infrastructure improvement for the period 1992-1996 (LONE IV). This amount would finance rehabilitation of sea defenses, rehabilitation of a floating bridge, ferries, and the moorings and, possibly, rehabilitation of water supply/sewerage systems. 2.35 IDA is considering financing about US$31 million of the cost of infrastructure rehabilitation through three loans under preparation. One loan of US$15 million is being proposed for roads (US$8 million), port and river transport (US$2 million), and sea defenses (US$5 million). In addition, two loans are being proposed for water supply/severage rehabilitation and urban development, respectively. Projected disbursements from these loans during the period 1995-1997 are US$10.5 million for water supply/sewerage and US$5 million for urban development. 2.36 CDB has also included a sea defense component of US$4.1 million (1992-1994) to its Agricultural Sector Rehabilitation Loan. In addition, CDB is considering a loan to finance rehabilitation of power distribution network and an energy lose reduction program for the amount of about US$10 million. CDC has also expressed interest in financing power facilities for some isolated systems like Anna Regina, and to assist financially and technically in the rehabilitation of the GEC. 2.37 The Government of Brazil is financing the Brazil-Guyana road. The other potential donors, CIDA, UNDP, UNICEF and the Governments of United Kingdom, Canada, USA, and Venezuela, have been providing assistance to Guyana in various forms. 2.38 To secure sustainable benefits from the intended investment program, in addition to the financing of the proposed investments, it is indispensable to secure financing for operational costs, e.g. salaries to hire qualified staff, cost of programs for institutional strengthening, and maintenance costs. The following proposed additional programs would also require external financings (a) technical assistance for the establishment of a public services regulatory framework, the creation of a Tariff Board, and the implementation of public service tariffs and cost recovery mechanisms for the use of infrastructure facilities; - 14- (b) a program to review the framework and improve the structure of infrastructure agencies and utilitiesi and (c) maintenance contracts for the protective sea defenses, roads, ferries, and possibly power generating plants. 2.39 Financing of infrastructure improvements should be linked to government actions to strengthen institutional capacity, implement adequate maintenance practices and establish tariff policies that permit the adequate operation and development of the sector. Rehabilitation of facilities without the above structural changes would have no lasting effect. III. THE POWER SECTOR Sector Oreanization and Repulation 3.1 GEC, a government owned company, was created in 1960 for generating and distributing electricity throughout the country. However, since GEC has been unable to provide a satisfactory electricity supply, private installations of generation units have proliferated, especially in the largest industries like GUYSUCO and GUYMINE. 3.2 GEC's performance has been poor. Its generating units have not been properly maintained, the tranamission and distribution grids are unreliable, system losses are high, and operational procedures are deficient. GEC is operating at a loss, and constitutes a heavy burden on the Government's limited resources. In 1989, its revenues totalled US$7 million, while its expenditure amounted to US$22 millions. Inappropriate metering, billing, and fraud control practices (the collection ratio was approximately 35% in the first half 1991), have exacerbated GEC's financial position. 3.3 The main institutional issues are inadequate organization, low salary levels, shortage of skilled managerial and technical staff, and inadequate tariff level and structure. Government interference has deprived GEC's director of the authority to run the company. Assignment of responsibilities and functions within the utility is unclear. Low salary levels have resulted in the resignation of most of the qualified personnel and made it impossible to hire the necessary skilled staff. At the same time, GEC is overstaffed at lower levels. Tariffs are below the level needed to meet GEC's current costs and losses are currently coverel by government subsidies. 3.4 The Gvernment is interested in privatizing GEC and has been discussing with Leucadia National Corporation the possibility of a joint venture agreement where the Government would transfer GEC's assets to Leucadia. Leucadia is a private company based in Cincinnati, Ohio, and known as a principal shareholder of other Latin America power companies. Discussions are aimed at Leucadia owing 602 of the company with the remaining 40% to be retainad by government or shared with Guyanese private sector. However, the discussions have been at a standstill because of discrepancies on the valuation of GE"'s assets and the Government is exploring other options. 3.5 Guyana lacks a regulatory framework for the provision of electricity service and an explicit tariff policy. Discussions with Leucadia have included terms of a concession agreement, which would have contained a provision to regulate the electricity service to some extent. However, at present, there is no indication that the Government plans to establish a legal framework to regulate the provision - 15 - of electricity service and to establish the rules for eventual participation by the private sector. Tariffs have been profoundly influenced by political considerations. IDB has financed a marginal cost study that would be the basis for the definition of a structure and level of electricity tariffs. Current Status and Problems 3.6 The electricity service is characterized by frequent power outages and scheduled load shedding due to the deteriorated state of GEC's generating facilities and lack of maintenance. The service has improved lately as a result of on-going rehabilitation works on some of its generating unite, but it still remains very unreliable and unpredictable. The present condition of the power service is severely damaging to the country in several ways: (i) GEC's unreliable service is a deterrent to potential investors; (ii) poor electricity service increases normal operating costs for industry, because of the need to acquire and operate private generating units; (iii) GEC demands large Government subsidies to meet its operation costs; and (iv) GEC's poor overall performance raises production costs of electricity. 5.7 Generation Facilities. Current generating capacity falls short of demand. Available capacity in GEC's Interconnected System amounted to about 37MW (GEC's installed capacity is 87MW) at the beginning of 1992, while peak demand is estimated at 45MW. GEC owns and operates nine separate power stations and one frequency converter station, serving two main power systems (Demerara and Berbice) which are interconnected, and three isolated systems. Part of the supply operates at 50 Hz and the rest operates at 60 Hz. 3.8 The largest system is Demerara, which includes the Kingston, Garden of Eden, Power Barge, and Versailles generating stations. Kingston is an oil fired steam thermal plant locatud within Georgetown. All of the generation, other than Kingston, is comprised of diesel units. The Garden of Eden Power Station is situated about 20 km south of Georgetown. The floating Power Barge is presently installed at Garden of Eden. Versailles Power Station is located on the West Bank of the Demerara River across the river from Georgetown. It was formerly linked to the rest of the Demerara System by an underwater cable, but is presently isolated. In addition, two 10 MW combustion turbine units have been borrowed from Brazil and installed at the Kingston Power Station. As of February 1992, they were not yet in service. The available capacity of these units is estimated at 8 MW each. 3.9 The Berbice system includes the Canefield and Onverwagt generating stationz, both of which have diesel generating units. Canefield is the largest of the two and is located in New Amsterdam, which is 120 km southeast of Georgetown along the coastline. Onverwagt Generating Station is located approximately 80 km southeast of Georgetown between Georgetown and New Amsterdam. There is a 13.8 Kv connection between the Demerara and Berbice systems, which represent what is known as the Interconnected System. - 16 - 3.10 The three isolated systems are Anna Regina, Bartica, and Wakenasm. They all possess diesel generating units. The largest of the isolated systems is Anna Regina t tuated 60 km northwest of Georgetown. The Bartica plant is located in the town of Baetica which is approximately 40 km southwest of Georgetown. The Wakenasm Power Station is located on Wakenaam Island which is west of Georgetown and at the mouth of the Essequibo River. 3.11 The Sophia Converter Station is located within the city of Georgetown. It has three rotary units each of just over 10 MW capacity which convert between 50 Hz and 60 Hz, either direction. 3.12 In 1989, the Demerara system provided 82Z of total energy supplied to the country, while the Berbice system and the three isolated systems generated 151 and 3% respectively. In addition, GEC purchases energy from GUYMINE's bauxite processing complex at Linden (up to 4 MW). 3.13 Privately generated capacity totals 83MW. The Guymine generation at Linden is the single largest installation with 32.5 MW of installed capacity, mainly oil fired steam thermal. The Guyana Sugar Corporation Ltd. (Guysuco) has some 22.5 MW of installed generating capacity distributed among several sugar estates. Nearly two thirds of the Guysuco generation is bagasse or oil fired steam thermal and the balance is diesel generation. Both Guymine and Guysuco depend upon their own generation to supply the majority of their electricity needs. The remaining 28 MW have been installed for other private enterprises. The majority of this was installed to back up the customers' GEC supply. Due to unreliability of the GEC supply in recent years, this generation has had to serve more of a primary and less of a standby role. 3.14 Transmission and Distribution. GEC's transmission and distribution facilities are seriously disrepaired and require urgent renovation/replacement. At present, the highest transmission voltage in the country is 69 Kv. The primary distribution voltages for the 50 Hz part of the network are 11 Kv and 4 Kv, and for the 60 Hz part are 13.8 Kv, 11 Kv, 4.16 Kv, and 2.3 Kv. 3.15 System Losses. Energy losses are high; they are estimated to be about 30% of total not generation. This include both technical and nontechnical losses. 3.16 System keliability. Outage statistics, both for generating units and for transmission and distribution lines and equipment have not been available. GEC's systems, particularly the Interconnected System, are judged very unreliable. For years, there has been insufficient generating capacity in working condition to enable GEC to meet customer demand. Load shedding has taken place almost continually. 3.17 Frequency Standardization. The matter of dual frequency versus single frequency in Guyana has been examined over many years. A report prepared by Shawinigan Engineering in 1967 presented the rationale and recommendation to convert the complete electrical system to a frequency of 60 Rz. All new generation should be installed at 60 Hz and the planned expansions and modifications to the transmission and distribution systems should be designed for 60 Hz. Power Demand 3.18 Peak demand and net energy generation in 1992 are estimated at 45 MW and 240 GWh, respectively. The energy projected to be billed in 1992 has been estimated at about 501 for domestic, 291 for industrial, and 21% for commercial consumption and streetlighting. Demand forecasts have been prepared for three scenarios: low, - 17 - medium and high, based on real GDP growth of 0, 2.5% and 4.21, respectively. Under the medium scenario, average demand growth is estimated at 9.61 per year. Demand growth has been projected mainly for industrial consumption, largely because of expected expansions in forestry, agriculture, mining and light manufacturing sectors. Development Pronram 3.19 The Development Program for power is based on a study prepared in 1990 by Canadian International Power Ltd. (C.I. Pover) and financed by IDB, to meet future demand under the medium scenario forecast. The program includes the rehabilitation and expansion of the existing power system, so that they are capable of meeting needs of customers until year 1997. The principal components of the program comprise generation, transmission and distribution system modifications and additions, and includes the balance of a generation and distribution rehabilitation program being carried out by GEC with financing assistance from IDB. 3.20 Generation. About 40 MW of new capacity need to be installed during the 1992-1997 period, in addition to the rehabilitation of the existing capacity, to satisfy future demand. The electrical load on the GEC Interconnected System is forecast to increase from 45 MW in 1992 to 67 MW in 1997 (medium scenario). The energy generation needs are expected to increase from 170 GWh in 1991 to 355 GWh in 1999. GEC's generating are bein3 extensively rehabilitated. When the rehabilitation of the generating units under these loans is completed, some 72MW will be available, as shown in the table below: Capacity Available Nameplate After Rehabilitation Systems Capacity (MW) Demerara System -Kingstone Steam 3x10.0MW 27.0 -Garden-of-Eden 3x 5.7MW 12.0 -Versailles 3x 1.6MW (Operating isolated) Sub-Total: 39.0 Berbice System -Canefield 2x 5.7MW 11.4 -Onverwaght 1x 2.5MW Sub-Total: 11.4 New Units -Diesel Boat - -Japan Diesel 1x 5.7MW 5.7 -Brazil Turbines 2x10.OMW 16.0 Sub-Total: 21.7 TOTAL 72.1 - 18 - 3.21 However, even after this CAPACITY BALANCE rehabilitation, the system may Inter00nnecteCd SystefRs remain vulnerable because most of the units are old and suffer from MW continuous failure. Most of GEC's existing generating equipment will be retired in the next 10 years. The cetirement schedule for so existing generation is as follows: 40-- "Year Units Retired 1996 Kingston 10 MW a -- 1997 Kingston 10 MW "ogo set les eae le4 was IMe Ueer Mee IMe soo 1998 Kingston 10 MW yar 2000 Garden/Eden 2 x 5.7 MW -ma OmeA MiNotammasmn 2001 Garden of Eden 5.7 MW 2002 Onvervagt 2.5 MW It on .mSt Uniespofm 2003 Canefield 2 x 5.8 MW 2006 Versailles 3 x 1.6 MW (High Demand Growth Scerto) 3.22 From a revision of the least cost expaniion program prepared by C.I. Power, the following generation expansions are recommended for the Interconnected System during the 1992-1997 periods Capacity Year T MW 1995 Diesel, low speed 20 1996 Diesel, low speed 20 Total 40 3.23 Although the hydroelectric candidates considered, namely the Tiger Hill (56 MW) and Tumatumari (50 MW) hydro projects, are not part of the least cost program before the year 2000, they constitute attractive options for the next decade. 1DB will finance a feasibility study on the most attractive six potential hydroelectric candidates. 3.24 Transmission. The required transmission line extensions and substation modifications and additions have been determined on the basis of both the C.I. Power Investment Program Report and the Master Plan for Distribution prepared by Monenco. The transmission system additions are least cost, either having the lowest present worth cost or utilizing the lowest practical standard voltage and number or circuits for the intended service. Some major works required to be built in the period 1992- 1997 are as follows: * completion of the 69 kV transmission line between Sophia and Onverwagt in order to have a stronger link between the Demerara and Berbice parts of the Interconnected System; * conversion of the Interconnected System to single frequency, namely 60 Hz, operation; - 19 - * construction of a now substation in Central Georgetown; and * reestablishing the link between Versailles Generating Station and the rest of the Demerara System. 3.25 Distribution. Investments for distribution have been based on the requirements determined in the Master Plan prepared by Monenco. They include frequency conversion, new f3eders, installation of capacitors for power factor improvement, meters and customer service equipment, transformers and ancillary equipment, load management equipment, vehicles and tools, pole replacement and fuse installation. Implementation of the recommended distribution investments would permit substantial reduction of energy losses. Proposed Strategy 3.26 An efficient and reliable power sector is essential for the achievement of Guyana's economic development objectives. Electricity service is basic to any economic activity and the reliability of electricity supply is a pre-condition for the success of the ERP. 3.27 It is essential to establish a legal and regulatory framework for the electricity service to promote efficiency by enabling private participation and competition. This framework should define the following: (i) the composition of a regulatory body; (ii) the rules for concession agreements for the service; (iii) the quality of the service; (iv) the tariff policy; and (v) incentIves to improve efficiency. Technical assistance for the preparation of the above framework may be necessary. The required technical assistance could possibly be financed under one of the IDB's loans, under the proposed Public Service Management Project, or by UNDP; 3.28 In addition to the establishment of a legal and regulatory framework, the strategy for the power sector should be to improve the reliability of the electricity service, make the service financially self-sufficient, improve GEC's performance, reduce energy losses and explore options to reduce energy production costs. 3.29 To improve reliability of the electricity service, it is indispensable to carry out an extensive rehabilitation of existing facilities and expand them. Rehabilitation of existing facilities is being carried out with assistance from the IDB, and is expected to be completed by mid-1993. 3.30 Rehabilitation of existing facilities and expansion of the system should be accompanied by proper maintenance of the system. Even if the sector institutional weakness of the power sector is evercome, the financial constraints on proper maintenance will remain. If these expenses were financed externally, for a period of at least two to four years, the risk from lack of future maintenance would be minimized. 3.31 Improvement of GEC should be based on privatization. Experience in other countries comparable to Guyana has proved that programs for institutional strengthening alone, without a change of ownership, have not been effective. If discussions between the Government and Leucadia resume, the creation of a joint venture with Leucadia or any other partner should be based on the following considerations: - 20 - * any concession period given to the partner should be for no less than 25 years, as an inducement to encourage a foreign partner. This would allow time to study and implement long-term expansion plans based on developing hydropower resources and a robust transmission systems * responsibility for the construction of generating, transmission, and distribution facilities, for operating the system, and for distribution and billing should be delegated to the private partner. Indicative expansion planning and supervision of its implementation should remain as a responsibility of the Government; * the necessary investment to expand the system under the official expansion plan should be developed. This would avoid future deterioration of the electricity supply: * minimum quality of power service, including reliability and ranges for voltage and frequency variations, should be agreed, and a control procedure clearly established; * institutional strengthening of government planning and supervision areas for power sub-sector should be planned to make commercial and financial targets compatible with social and economic aims; and * pricing policy should remain as government responsibility and electricity tariffs be regulated. The tariff structure and rates should be based on marginal-cost principles. 3.32 If the agreement to sell GEC's assets does not succeed, the Government should consider the option of leasing GEC's assets. This option would avoid the necessity of valuing assets. The CDC has expressed an interest in creating a joint venture company with the Government and other financial institutions that would lease GEC's assets. This option seems attractive and one that can be implemented within a short period with Government authorization. 3.33 If privatization is not achievable in the short term, a management contract should be explored as an intermediate step. Under the ongoing IDB rehabilitation project, there is a provision of US$ 2.5 million for a management performance contract with an interested party (probably an electric utility) to take over completely the management of GEC in an interim period. This management would prepare GEC for its further privatization. 3.34 To reduce costs of electricity, cost of hydropower options and interconnection with power systems in Venezuela (Guri Dam) and northern Brazil should be studied for the longer term expansion program. Because present demand for electricity in Guyana is relatively modest, these options are not economically justified in the short term, but they emerge as attractive options for the longer term. To formulate the long term expansion planning, prefeasibility studies of potential projects should be completed and updated periodically. The IDB will finance a prefeasibility study of six potential hydro power sites. If one of these hydropower development proves to be economically attractive, its construction could start by 1995 or 1996. - 21 - Action Plan 3.35 Short Term (1992-1994). Short-term efforts should focus on the fulfillment of immediate needs for power generation, improvement of GEC's management and overall performance, establishment of a regulatory framework for the electricity service, and defining a tariff policy. Proposed actions are as follows: (a) rehabilitating power facilities under the two approved IDB loans; (b) privatizing GEC or, alternatively, leasing GEC's assets to a private firm; (c) establishing proper maintenance mechanisms for GEC's generating units. It is recommended that potential donors consider financing of maintenance contracts with specialized firms; (d) establishing a regulatory framework for electricity services. This framework should encourage participation of the private sector; (e) execution of a feasibility study for hydropower development and for connecting lines with Venezuela and Brazil. The hydropower development to be studied would be chosen from those examined in prefeasibility studies; and (f) design and implementation of a program to reduce energy losses. 3.36 Medium Term (1994-1997). In the medium term, action should focus on the expansion of the system, the improvement of efficiency, and the reduction of electricity costs. Proposed actions are as follows: (a) installation of additional thermal generating plants for about 40 MW (two-20 MW diesel units) to meet the expected electricity demand until 1997. Decision and securing of the necessary financing for the first unit should be made no later than mid 1993; and (b) periodic revision (annually) of the expansion plan and corresponding investment program on the basis of actual demand and fuel costs. Proposed Investment Program and Financing Plan 3.37 The estimated cost of the proposed 1992-97 power investment program amounts to approximately US$127 million, of which US$8P is envisaged for generation and US$39 million for transmission and distribution works. The generation program includes the rehabilitation of the existing units and the installation of some additional 40MW. 3.38 IDB has been the lead donor in the power sector and is expected to continue to play a major role in the near future. Under a first loan of US$16 million, approved in 1987, IDB financed the rehabilitation of GEC's critical generating units. Under a second loan for $15.5 million, appro d in 1991, IDB will finance the following: (i) rehabilitation of the remaining generating units; (ii) partial rehabilitation of transmission lines and distribution network; and (iii) management consultant services for GEC. IDB also financed the preparation of the investment program for the sector and the study on the long run marginal incremental cost of - 22 - electricity. Finally, IDB is considering the preparation of a new loan for about US$30 million to finance expansion of generating capacity (one 20 MW diesel unit), some transmission lines and the expansion of the distribution network. 3.39 CDB and CDC are considering their participation in support of the power sector. CDB is considering a possible financing of a loss-reduction program for about US$10 million, which would include rehabilitation of the distribution network, and CDC is considering to support the electrification of Anna Regina, which will require a financing of about US$2 million. Finally, some US$1.4 million from other sources are expected to finance rural electrification. 3.40 Other multilateral financial institutions could consider financing part of the financial gap of about US$68 million after the above proposed financing. This financial gap corresponds mainly to investments for the expansion of generating (second 20 MW diesel unit), distribution facilities to be commissioned in the period 1995-1997, and investments required in the same period for generating expansion to be commissioned after 1997. IV. THE TRANSPORT SECTOR Sector Organization and Reaulation 4.1 The Ministry of Public Works, Communications and Regional Development (MOPWCRTJ) has overall responsibility for the planning, construction, improvement and operation and regulation of the transport sector. The Ministry of Agriculture (MOA) participates in the development of the feeder road system. The MO is responsible for reviewing and allocating budgetary funds for the sector's agencies while the State Planning Secretariat (SPS) is responsible for putting together the public sector investment program. MOPWCRD is responsible for the planning, construction, and operation of public roads, through its Roads Division. In addition, through its Transport and Harbors Department, MOPWCRD regulates and operates shipping and vessels engaged in river transport. Finally, there is no port authority to coordinate cnd control port activities and to guide the strategic planning of the ports developments. In fact, the harbor master and chief pilot are independently accountable to the general manager of the Transport and Harbors Department, and are responsible for the movement of vessels in and out of the port. 4.2 The Civil Aviation Department nf MOPWCRD has responsibility for the development, maintenance and operation of all airports and airstrips, for the regulation of air transport, for the licensing of aircraft and pilots, and for setting rates and tariffs. 4.3 The Central Transport Planning Unit (CTPU) of the MOPWCRD controls the development of the transport sector by integrating the investment proposals of the sectorial agencies. CTPU also establishes priorities among projects, proposes transport policy changes, and reviews tariffs and charges. 4.4 Institutionally, the transport sector apart from water transport is well coveredl the creation of a port authority would be desirable. All functions required to run the system adequately are in place, but are hindered by the following problems: - 23 - (a) the decentralized responsibility for roads is ineffective. Through the regionalization process begun in the early 1980s, MOPWCRD transferred practically all the responsibilities for the road network to the newly created regions, leaving the Roads Division to plan and provide technical advice to the regions. This arrangement has not worked, since the regions have had neither the resources, manpower nor technical know how to carry out their responsibility; (b) there is excessive central government participation in areas where the private sector could perform well. For instance, the recently incorporated General Construction Company Limited is a government controlled company for construction of large projects. Also government owned, are The Guyana National Services (runs a major quarry), Guyana Trading Company, Guyana Shipping Company and Guyana Engineering Company; (c) the combined effect of low salary and high rates of emigration among qualified personnel means that Mr'OPWCRD, like all other public sector institutions, has a high vacancy rate; and (d) CTPU, because of its lack of staff and the relatively more powerful positions of the government owned transport entities, does not have full control of its transport coordination function. As a result, the entities submit their proposals directly to SPS. 4.5 Steps are being taken to correct problems (a) and (b). In the case of (a), the MCW is considering, informally, the option of regaining full control of the road network from the reg'-1ius in order to lighten the regions' responsibilities. Regarding (b), the Covcnxent is in the process of divesting a number of its holdings including tka quacries, Guyana Airways Corporation, Guyana Transport Services Limited, and r;'.hers. 4.6 The problem described in (c) is applicable to the entire public sector and requires a sector wide solution. However, there might be ways to contract professionals for short periods of time to staff key positions in the CTPU and other divisions within the MOPWCRD. To tackle problem (d), it is essential to raise the prestige of the CTPU through a technical assistance that would include, among other things, the preparation of a national transport plan using the 1975 Transport Plan for Guyana as the basis (see project profile for a complete description of the proposed technical assistance). The 1975 Transport Plan was a study prepared by the CTPU of MOPWCRD with the assistance of the Israel Institute of Transportation Planning and Research. 4.7 Major institutional changes are expected following a recently completed study on the public sector, undertaken by the consulting firm Peat, Marwick and Co. Among Peat, Marwick's recommendations is the reduction of the number of ministries from 18 to 10. Current Status and Problems 4.8 The transport system of Guyana is concentrated in and along the sugar and rice growing areas of the coastal plain, with very little traffic to or in the interior. The main highway system follows the development pattern of the country which is characterized by intensive agricultural activity in the coastal areas and on the banks of its main rivers. Although no recent transport studies are available, it is estimated that roads carry over 90% of the domestic passenger traffic and about a third of the freight. - 24 - 4.9 Water transport plays an important role in the transportation of bauxite and agricultural products (sugar cane), and in the transportation of passengers to and from sizable settlements in the interior that can only be reached by water. Scheduled ferry services are provided across the Essequibo, Demerara, and Berbice rivers as the only bridge is a 1.25 - miles - long floating structure on the Demerara River some four miles to the south of its mouth. Ferry services are also provided across the Corentyne River for international -raffic between Suriname and Guyana. Estimates indicate that water transport makes up over 601 of the country's freight ton-miles. Most of this consists of internationally traded cargo (bauxite and sugar). 4.10 The domestic air transport services provided by Guyana Airways Corporation (GAC) and various private operators, are essential in reaching some remote areas of the interior where there are no other means of transport. With its current fleet of one Twin Otter airplane and the occasional use of two other airplanes (a cargo DC-6 and a passenger HS 748), GAC can only provide limited services. At present, scheduled services are being provided between Georgetown and three airports (Lethem, Mabaruma, and Matthews Ridge), and charter services to airports located mostly in the mining areas. 4.11 Roads. The main road network of Guyana is approximately 1,467 miles long (excluding urban streets and minor trails). Functionally, the network can be divided as follows: (i) a primary network of 328 miles (22%) consisting mostly of paved roads along the coastal area and river banks serving primarily the agricultural sector, and the road to Linden, which serves the mining and forestry sectors; (ii) a coastal area minor road system (feeder roads) of nearly 159 miles (11%) connecting the agricultural areas along the coast to the primary road network; and (iii) a system of interior roads and trails 980 miles (67Z) serving the interior of Guyana. Of these, the road connecting Guyana to Brazil (under construction) is the most important link. Approximately 821 of the primary roads and 501 of the coastal area minor roads, are paved (next Table). Of the total network, only 201 (287 miles) is estimated to be in good condition. - 25 - GUYANA'S ROAD NETWOR (By road claseification, surface type, and condition; in miles) PAVED UNPAVED Sub. Sub- q4CPair Poor -2oo air Pr a Primary Network 95 116 58 269 - - 59 59 328 22 Coastal Area .Minor.Roade' 16 36 28 80 - - 7 9 159 11 Interior roadt and Trails - 13 - 13 176 274 517 967 980 67 TOTAL 1J.1 IA U. I Ai 27.ZA .U2i JAJZ 10 % 8 11 6 25 12 18 45 75 100 4.12 The road system has deteriorated significantly. Negligible maintenance has taken place on the primary road network over the past 15 years. As a result, the deterioration has been rapid, particularly on those road links carrying high traffic volumes. These include the road between Georgetown and Timehri International Airport (19 miles, with about 13,000 vbhicles per day (vpd) near Georgetown), the Georgetown to Mahaica road (18 miles, about 5,000 to 8,000 vpd) and the Essequibo Coast Road (38 miles, about 1,200 vpd). The other paved roads, which carry relatively low traffic volumes and are much never, are still in reasonably good condition but will need resealing, resurfacing or, overlaying soon. Rehabilitation of the first three roads mentioned above is the highest priority in the roads subsector. 4.13 Most feeder roads leading to the farming areas off the primary roads are poorly constructed, poorly maintained, and nearly impassable during the rainy season. The poor condition of these roads has become a real bottleneck in the transportation of agricultural products. A feeder road rehabilitation and maintenance program is urgently needed. 4.14 The streets of Georgetown are in generally poor condition. Most of them are flooded after heavy rains. Some work has been done on the arterial roads. However, the local streets serving residential areas have been left unattended over the last several years. (A program for city streets improvement should be considered as part of an urban project for Georgetown.) 4.15 The Road Transport Industry. The transport industry in Guyana is quite efficient. Public passenger transport is provided mostly by a reasonably new stock of privately owned vehicles. This consists of about 2,400 minibuses and 7,000 hire cars (figures are for 1989 and were provided by the Central Transport Planning Unit of the Ministry of Communications and Works). This fleet provides enough capacity to satisfy current demand. These vehicles came into service to replace the now defunct, government-run Guyana Transport Services Limited. Beginning in 1985, individuals were permitted to import - 26 - minibuses, and in 1986 the import policy was expanded to give duty free concessions for their importation. Minibus and hire car operations are licensed by the MOPWCRD to operate on specified routes. 4.16 Freight transport is being provided by an aged fleet of about 1,800 single unit trucks (2 and 3 axles) and some 140 tractor-trailers. Import restrictions have impeded the acquisition of new trucks. Spare parts are readily available but at a high price. The current liberalization of foreign exchange is already helping to improve truck and spare parts imports. , high proportion of agricultural produce is transported by tractors or by trucks owned by the producers. Freight transport rates are not regulated and customers and truckers negotiate before provision of the service. Existing regulations govern only axle loads, vehicle dimensions, and vehicle safety inspection, but these are unfortunately not strictly enforced. 4.17 Ports. International trade cargo is handled at the wharves of Georgetown near the estuary of the Demerara River, at the bauxite loading installations sixty miles up the Demerara River at Linden's bauxite processing plant, and at another bauxite loading facility at Everton, near the mouth of the Berbice River. In addition, a bauxite storage vessel, where partially loaded bulk ships coming from Linden are topped off, is anchored in the Demerara estuary. 4.18 The comon-user wharves at Georgetown, where all general cargo imports are handled, are owned and operated by two separate nationalized trading companies and two private ones. The wharves are in a very poor state. In addition, the total effective frontage is only some 2,700 ft and the depth alongside, because dredging has been neglected, is only about 20 ft at high tide. The mud-bar across the estuary currently limits entry to vessels drawing 16 to 21 ft, depending on tidal conditions. The lack of navigation lights limits the use of the port to daytime sailing only. Parts of the wharf decks are progressively being renovated, but they still cannot bear heavy equipment so vessels have to unload with their own cranes or derricks onto trailers that are then towed to the adjacent land area. Since almost all the general cargo arrives in containers, and space behind the wharves is only a narrow strip, containers are piled as much as four high in some cases, msking operations very difficult and costly (an offshore container terminal would greatly assist in freeing the port area and lead to more efficient container handling). 4.19 The bauxite loading facility at Linden is also in deplorable condition and suffers the same navigational constraints referred to above. Consequently, bauxite is transported in relatively small vessels of 15 to 20 thousand deadweight capacity, which load no more than 8,000 tons of bauxite products at the plant and top off opposite Georgetown from a floatin3 storage vessel. The navigational aide on the Demerara river have recently been improved, allowing both day and night sailing to Linden. 4.20 Ferries and Large River Crossings. Ferry services are provided across the mouths of the Demerara, Berbice and Essequibo rivers for coastal area vehicular and passenger traffic. The Demerara River can also be crossed on a floating bridge 1.25 miles long. Ferry services are also available across the - 27 - Corentyne River for traffic between Guyana and Suriname. The ferries are often down for lack of maintenance and spare parts. Coastal vessels substitute temporarily for the ferries in such cases. Recently, the ferries have been complemented by a large fleet of privately-owned small speed boats that are heavily patronized despite fares that are twice those of the ferries, The EC, under LOME III and IV, has refurbished one of three vessels and will start rehabilitating a second soon. The EC is also considering purchasing two additional new ferries for Transport and Harbors Department (THD). The interest and efficiency shown by the private sector in the river transport industry suggests that, the Government should allow the private sector to absorb the additional demand. (The EC should therefore reconsider its plans for the new ferries). The private boats should be properly licensed and inspected for sea worthiness and to ensure properly qualified manning . 4.21 The TDH claims to make a profit from its ferry services. This is only true, if only its out -of- pocket operating costs are coasidered without depreciation or rehabilitation. The EC is currently studying the financial cost recovery strategy for the ferry services and intends to insist on the application of tariffs that will ensure cost recovery. 4.22 An extremely important river crossing is the 1.2 mile floating bridge across the Demerara River. It was constructed as a temporary bridge some seventeen years ago and carries about 1,300 vehicles a day. Sections of the bridge have been collapsing with increasing frequency, as a result of insufficient maintenance, a poorly devigned anchoring system and old age. The EC is studying ways to prolong the life of the existing bridge, as a new bridge would be prohibitively costly for Guyana. 4.23 Air Transport. Domestic air transport plays a very important role in Guyana due to the country's topography and physical layout and the dispersed population in the interior. Except for the coastal plains, most of Guyana is covered by forests, mountains, rivers, and swamps, and some of its areas are inaccessible by other modes of transport. There are about 190 airfields scattered thr.ughout the country of which 150 are in use. This situation would change drastically on the completion of the Brazil-Guyana road when almost 502 of the existing airfields would become superfluous. Currently, about 20% of airfields have gone out of use since the partial completion of the road. The Civil Aviation Department is therefore wisely holding off any major domestic airport development pending the realization of the full effect of the Brazilian road, which should be completed soon. Domestic traffic radiates from either Ogle Airfield in Georgetown or Timehri International Airport located 24 miles to the south of the capital city. 4.24 Timehri is the main airport serving Guyana. It has two runways; one 7,500 ft long and 150 ft wide with an asphalt surface and the other, 5,000 ft long and 150 ft wide with a concrete surface. Operations at this airport are limited by the length of its main runway as it is insufficient for wide body aircraft (Boeing 747 etc.), which require about 10,000 ft. It would be difficult to justify the high cost of an extension at this time, as the prospects for tourism are low. Nevertheless, the Government intends to undertake a feasibility study for a runway extension. The Ogle airfield is located about five miles east of Georgetown. Its concrete runway is 2,000 ft long and 33 ft wide. This airfield is designed for short take off and landing type aircraft (STOL) such as the Twin Otter operated by Guyana Airways Corporation (GAC). The Civil Aviatiun Department is currently lobbying hard for the conversion of the Ogle airport into a downtown international airport to receive flights from the Caribbean. The Lethem airstrip is the best in the - 28 - interior, with a runway that is 6,400 ft long and 75 ft wide. The airstrip is equipped with a nondirectional navigation aid and a cargo shed, but it is without lighting, refuelling facilities, or air traffic control services. All other airfields in the country are of a lower standard. 4.^5 The airport infrastructure and facilities in most of the interior airfields have been neglected due mainly because of the limited air services offered to them. At Timehri, the navigational aide, communication equipment, safety aide, security equipment, and terminal building have not been properly maintained. At present, a number of basic navigational aids are unserviceable awaiting repair or replacement. Cargo facilities are practically nonexistent at Timehri. The present insufficient undercover storage space at the airport results in cargo having to remain in the open, exposed to the elements, until it is put on an aircraft. As a minimum requirement, Timehri should upgrade its safety equipment and provide sheds for transit goods. Government's plans to enter into concession arrangements with foreign airport operators for Timehri have failed so far because of the poor existing state of the airport. The Government is currently using local funds to expand the passenger lounges. With the introduction of the US$8 departure tax last year, revenues at the Timehri airport exceed operating expenditures. The Government is in fact planning to create a financially autonomous airport authority. 4.26 Guyana Airways Corporation (GAC) provides regular scheduled domestic services between Timehri Airport and three domestic airports (Lethem, Mataruma and Matthews Ridge) using a Twin Otter airplane. GAC also provides charcer services to other airports located mostly in mining and logging areas. In addition to GAC, the Civil Aviation Department and a number of private companies provide charter air services. There is also a flourishing private charter plane activities (cargo and passengers) as well as privately owned (industry) use at Ogle airport. The GAC and the private operators together have more than sufficient airplanes to meet the demand. However, the lose, through emigration, of qualified pilots, aircraft engineers, and mechanics is hindering the provision of services. Nearly 60Z of the passengers to these remote areas are transported by air. In 1989, the domestic operations of GAC transported about 10,000 passengers. GAC is currently up for divestment. Trends in Transport Sector Expenditures 4.27 Expenditures in the transport sector, both capital and recurrent, for the period 1985-89 are shown in the table below. Capital expenditures has shown a significant increase in 1988 and again in 1989 due mainly to expenditure on the Black Bush Polder Road, on bridges particularly the Demerara Harbor Bridge and on equipment for the Civil Aviation Department. Maintenance expenditure is not recorded separately from MOPWCRD's other recurrent expenditures. It is quite clear that the proposed investments for 1992-97, an average of about US$12 million per year, far exceeds the US$5 million annual average spent from 1985-89. However, practically all tha financing for the 1993-96 program is secured. The only concern would be the capacity of MOPWCRD and the local construction industry to carry out this plans. Expatriate technical assistance, adequate local staff counterpart and foreign contractors will be needed to implement the program detailed below. If no local staff is available, then expatriate staff will not leave any sustainable mark. - 29 - GUYANA TRANSPORT SECTOR EXPENDITURES 1985-89 (current US$ million) 19-85 -1986 19-81 1988 1989 Cutrent Expenditures 3.95 5.67 3.39 4.68 2.21. Capital"Expenditures 98- j_O Z.6A93 TOTAL 7.93 9.07 5.64 9.29 9.14 As a Z of Total coo Expenditures 2.'16% 1.52? .852 2542 4.302 Source: Central Transport Planning Unit of MCW. Proposed Strateny 4.28 Existing transport facilities are adequately distributed to provide access to all economically and socially active parts of thr. country. No new investment is needed, unless and until major new agricultural or mining developments take place outside the areas currently served. In addition, except on very few facilities, traffic on the Guyana transport system is low and will continue to be so for at least the next ten years. A major upgrading of the system or expansion of capacity would therefore not be economically justifiable, except for the sections of main roads close to Georgetown, where traffic congestion is already becoming a problem. But even in these cases, better traffic management - stricter enforcement of parking regulations, the separation or outright banning of horse-drawn wagons from main roads during the peak hour, provision or widening of shoulders - would go a long way towards increasing available capacity. Practically all transport facilities are at an advanced stage of deterioration after more than a decade of little or no maintenance. The emphasis for the short and medium term therefore needs to be placed on the rehabilitation and better maintenance and operation of existing facilities. Those facilities thart help to induce a quick supply response in the economy should be given priority. 4.29 To improve the operation and maintenance (O&M) of the transport system, would require four things. The Government should divest itself of facilities and operations normally handled better by the private sector, such as the two remaining shipping companies, GAC and the GNS quarry operations. Existing vacancies should be filled either through recruitment and training of local staff or by the hiring of expatriate technical assistance. The O&M function should be centralized, at least for the main roads, in MOFWCRD. Charges and tariffs should be set high enough to ensure cost recovery so that the necessazy funds would be available throughout the system for O&M. Action Plan 4.30 Short and Medium Term. In the short and medium term (1992-97), the role of the transport sector is to assist in generating a quick supply response and thereby help the Government's economic recovery program. The plan of action to achieve this objective would be as follows: - 30 - (a) rehabilitating the Essequibo Coast Road, the Georgetown - Timehri Road and the Georgetown - Mahaica road, reseal the Linden Highway and replace the bridges on it, rehabilitate and improve selected feeder roads, carry out studies for the widening of sections of main roads near Georgetown; (b) transferring the responsibility for planning, developing, and maintenance of the main road network and of important secondary and feeder roads back to the central Government, i.e. to MOPWCRD; (c) developing and implement a road maintenance program using private contractors, either domestic or from the region, for the main roads and the most important feeder roades (d) rehabilitating the Demerara River Bridge to prolong its life for another 7 to 10 years while studying alternatives for a permanent solution; (e) completing the rehabilitation of TED's ferries and moorings; (f) improving container handling at the Georgetown port through the building of an off-port container park and rehabilitate the bauxite loading facility at Linden; (g) improving the communications and navigational aids at the Timehri airport and provide crash, fire, and rescue equipment; (h) providing technical assistance to the CTPU and Road Division for implementation of transport sector projects and for programming and managing road maintenance contracts. Initiate training for HOFWCRD staff to take over from the technical assistants; and (i) establishing a financing mechanism for road maintenance. Special consideration should be given to earmarking a portion of road-user charges, which far exceed the maintenance needs of the road network, for maintenance; 4.31 Longer Term. In the longer term, the plan of action for the transport sector should be as follows: (a) upgrading needed to increase the main road sections near Georgetown; (b) rehabilitating the Georgetown streets; (c) carrying out a more e.tensive program of feeder roads improvement and rehabilitation and provide feeder roads in the interior, where economically justifiable, to feed into the Brazilian road; - 31 - (d) encouraging the private sector, through import tax breaks, for example, to increase its participation in the river ferry business in order to take up additional demand which may come with an upswing in the economy; and (e) continuing the training program for MOPWCRD staff and complete replacement of expatriates with local staff. Proposed Investment Proaram and Financing Plan 4.32 The main portion of the financing for the transport sector will be carried by IDA, IDB, and the EC. EC has recently financed, under LOME III, the rehabilitation of two ferries. Moreover, EC is planning to finance, under LOME IV, the rehabilitation of the floating bridge, the ferries, and the moorings. IDB's participation involves a Technical Cooperation Grant (US$1.1 million) to assist Roads Division and MOPWCRD prepare a major Road Rehabilitation Project (US$25 million), and an Agricultural Sector Loan providing about US$3 million for access road maintenance (tertiary roads). In addition, IDA's Infrastructure Rehabilitation Program has allocated around US$18 million for the primary/feeder road network, and US$2 million for port and river transport. Finally, the Government of Brazil has proposed the possible financing of the Mabura-Letham Road, entailing the construction of a Brazil/Guyana road. V. THE WATER SUPPLY/SANITATION SECTOR Sector Ortanization and Regulation 5.1 Organization. The current legislative framework, establishing inatitutions in the water sector, has developed in an ad hoc fashion over time. As a consequence, many institutions have emerged with sometimes overlapping or potentially conflicting roles and responsibilities (para 5.2). The Guyana Water Authority (GUTWA), currently under the Ministry of Public Works, Communications and Regional Development, was established in 1972. GUYWA has been the key central agency responsible for providing water and sewerage services in the country. In the early 1980's, the Government decided to adopt a policy of administrative decentralization (Local Democratic Organs Act), which vested the responsibility for operation and management of water sector facilities in the newly-created Regional Democratic Councils (headed by Regional Executive Officers). Even though GUYWA has subsequently adopted a passive role, it is still resporsible for coordinating overall sector policy, strategic planning and direct policy control of all potable water and sewerage, as well as regulating sector performance. GUYWA also provides technical assistance and support to the regions on a consultant basis, in addition to acting as a contractor for new well installations which constitutes the major capital investment in the water sector. Each region has a Superintendent of Water Works reporting to the Regional Engineer on matters of water facility operations and maintenance. Only recently (Delegation of Functions Order of August 1991), GUYWA's set was amended to back up the decentralization process in the water sector. There has been however no mention of transfer of GUYWA's assets to the Regions. 5.2 The key agencies currently involved in the provision of water and sanitation services are as follows: - 32 - * Georgetown Sewerage and Water Commissioners (GS&WC) - in charge of water supply and sewerage for the capital Georgetown area (a municipal water company); * Guyana Mining Company Limited (GUWHINE) - in charge of water supply for Linden/Wismar (a Government-owned company); * New Amsterdam Town Council (NATC) - in charge of water supply for New Amsterdam (a municipal agency)l * Sugar Industry Labor Welfare Fund Committee (SILWFC) - in charge of water supply (and other infrastructure services) for the sugar plantation areas (a private company); * the ten Regional Democratic Councils (RDCs) - in charge of rural and peri-urban water supply (and other infrastructure services) in the Regions (Regional Government agencies); and * the Ministry of Health - in charge of communal wastewater sanitation (mainly pit privies and septic tanks for schools, health facilities and other public places) (the only piped municipal sewerage system in Guyana is for central Georgetown managed by GS&WC). 5.3 The main problems associated with the Regional and municipal water agencies are the followings (a) lack of qualified personnel to operate and maintain the system facilities; (b) deteriorating financial situation due to: * inadequate budgetary allocations; * poor collection and lack of legal enforcement procedures; * low tariffs (no increase since 1983); and * inappropriate cost recovery policies, exacerbated by poor cadastre and accounting systems; (c) miscellaneous organizations not specifically devoted to water operations (as in the case of RDCs); (d) lack of incentives; and (e) lack of monitoring of the performance of the RDCs. Except for GUYMINE, the capacity of the other water agencies to effectively cope with the problems of operation and maintenance is rather poor. 5.4 The immediate overwhelming sector need is for focus, direction and control. Given the competing priorities and responsibilities of the regional councils, together with their chronic financial problems, the decentralization scheme has not ben effective. While the legislation establishing GUYWA is extensive in the powers that it bestows, there is still a need to clarify GUYWA's role and responsibilities in the sector, vis-a-via other agencies by - 33 - way of introducing regulations or changes in its statute. Compounding this problem is also the fact that GUYWA still owns the assets which are operated by the regional councils. In addition, clear legal guidelines are needed to provide a mechanism for resolving competing demands of water use (irrigation and drinking water supply for the Georgetown system for example). Curreut Status and Problems 5.5 Sector Service Levels. It is estimated that nearly 95% of the urban population (representing about 32% of the total population) and 93% of rural population (or 68Z of the total) have access to potable water through house connections and public standpipes. The Georgetown area sewage collection system serves a limited area (about 7,500 service connections) containing about 50,000 population. Wastewater sanitation facilities (mostly septic tanks, pit privies etc) are, however, available to about 901 of the urban population and 80% of the rural population. Despite a good coverage, the status or the quality of these services (water pressure, quality and hours of service, performance of septic tanks for example) is rather poor, particularly in urban and peri-urban areas. In Georgetown and other urban areas, the contamination of potable water supplies by raw sewage and a poorly-maintained physical infrastructure (back-siphonage of polluted water due .o low pressure, cross-connections to non-potable supplies, faulty joints etc.) poses a significant health risk. There has been a nationwide sharp increase in the incidence of waterborne diseases such as typhoid, gastro-enteritis, hepatitis and malaria cases, as the following figures demonstrate: 140 cases/100,JOO people in 1980 increasing to 670/100,400 in 1988. Severe budgetary constraints in the 1980s caused the neglect of proper peration and maintenance of water and sanitation facilities. ThiL situation was further exacerbated by the increasing dearth of qualified personnel (para 5.9). 5.6 Nationwide, water supply facilities include about 178 groundwater wells and eight surface water sources, three of which are major treatment plants in the large urban areas (the Shelter Belt water treatment works in Georgetown, the New Amsterdam treatment plant and the GUYNINE treatment plant in Linden/Wismar area). Even though Guyana has large resources of water, the majority of the population that live in the coastal strip need to be served with water from deep aquifers (in excess of 1000 feet) to avoid the use of contaminated surface water and shallow aquifers affected by saline intrusion. Some areas, however, benefit from the economics of conjunctive use of surface water - the East Demerara Water Conservancy System for Georgetown, for example - and deep aquifers. For these areas, an assessment of the safe yield of groundwater supplies and the security of the surface water supplies from the conservancy, the latter with regard to the frequently-observed pollutional load of the canals supplying water to the treatment plants need be adequately investigated. Prolonged breakdowns of water schemes, attributable to power outages and poorly-maintained facilities, have been frequently reported in several regions. Heavy pumping of ground water has also caused subsidence problems in several areas, particularly the Georgetown area, a situation that needs to be attended to. In most cases, the water distribution systems are in collapsed, broken or otherwise deteriorated condition resulting in low or negative water pressures and back-siphonage from contaminated water. 5.7 As noted earlier, the only municipal sewerage system in Guyana is for central Georgetown which is largely inoperative. Pumps serving this system are rather inadequate and lack the capacity to grind sewage solids before discharging into the ocean outfall. A majority of the population in Guyana - 34 - use pit privies or septic tanks, the latter often discharging their effluent to street drains with the attendant pollution-related problems. Lack of sanitation in several urban areas is also the result of insufficient attention given to stormwater and solid waste disposal during the past decade. Drainage is particularly difficult in the northern coastal plain, which lies below sea level at high tide and depends on the sea wall defenses and outfalle with shallow slopes. The drainage canals, which also serve the irrigation needs of Georgetown and other coastal towns, are the recipient of septic tank effluent, solid waste, industrial waste discharge, and agricultural run-off. As such they are highly polluted and contaminated, and pose a potential health hazard. 5.8 Financial Issues. Reflecting the fragmentary nature of the water sector, there are seven different tariff regimes operating in the country based on different charging principles. For example, the water and sewerage rates for the Georgetown system are based on property values (most connections are not metered except for commercial/industrial properties). Other charging mechanisms vary from flat rate charges (the regional systems, GUYMINE) to rates depending on the diameter of the supply pipe (New Amsterdam). Water is not charged to customers of public standpipes. Actual levels of charge vary widely from one tariff regime to another and hence geographically. For example, water is charged at G$ 75/year (rural supplies operated by regional councils), at G$ 192/year (GUYMINE Scheme), and at G$ 1200/year (estimated average for Georgetown resident). The above rates, however, are heavily subsidized and do not reflect the true cost of services provided. On the average, most of the rates cover only about 30% of the operating expenditures. Needless to say, the current uneconomic levels of subsidy cannot be sustained indefinitely and future tariff should reflect an increasing degree of cost recovery in the water sector. 5.9 Improvements to existing billing and collection procedures, together with the establishment of financial management system, are also needed for the several water agencies involved. Appropriate auditing guidelines should also be introduced and implemented. 5.10 Human Resource Constraints. As with other infrastructure sectors in Guyana, the development of the water supply/sanitation sector has been considerably affected due to the lack of human resources. In the past decade, the low wages associated with the economic crisis in Guyana caused a massive migration of qualified professionals to other countries. The level of salaries still remains very low and it is extremely difficult to attract the necessary qualified workers to fill the existing vacancies in the sector. The total staff turnover has been estimated at 20Z in recent three to four years. The situation continues to decline as can be seen most clearly in the weakened managerial and technical abilities of GUYWA at present. 5.11 A recent consultant study (by David Horsefield, Nov. 1991) financed by IDB summarized the human resource issues in the sector as follows: - 35 - Ia) currently GS&WC has about 300 total staff to administer, operate and maintain the Georgetown water and sewerage systems. At the same time GUYWA has 102 total staff to administer and provide support to over 170 water systems nationwide. This is not to suggest that the GS&WC is overstaffed, but rather GUYWA is woefully understaffed to perform its intended roles. Irrespective of possible reorganization, staffing and skill levels in the water and sewerage sectors must be increased; (b) the value of the existing human rasources is clearly underestimated. Existing staff are working under virtual 19th century conditions, with no staff amenities, unsafe working conditions, inadequate tools, supplies and equipment, and without recognition of their value to society. Their ability to keep the existing systems functioning in any manner whatever does deserve credit; (c) no organized program exists in the sector to upgrade staff skills. Individuals are occasionally sent out of the country for training. However, the concept of identifying and implementing career paths for workers in the water and sewerage sectors appears to be untried; and (d) support by the Government of Guyana for GUYWA in recruiting and retaining the professional, managerial and technical staff is required to perform its nation-wide task. This support involves such items as recognition of the value of services provided, leadership, working conditions, morale-building, prerequisites, overtime and competitive salaries. It must be recognized also that even though GUYWA is expected to provide only well-drilling and technical support to the Regions, it also has been forced to provide assistance for the actual facility operation and maintenance functions because of the incapability of many regions. This situation does not allow GUYWA the luxury of serving in the primary role of a resource planning and monitoring organization. The Government should also try to expand ongoing educational and training programs in the sector which are currently limited in scope (particularly the water and sewerage courses offered at the University of Guyana and the plumbing courses offered at the Institute of Adult and Continuing Education). 5.12 Operation and Maintenance Issues. In addition to the financial and human resource constraints, the ability of GUYWA and other operational agencies has been severely hampered by the lack of well-equipped and well- furnished maintenance shops. The IDB-study (para 5.11) underscored the need for the following improvements to enhance system maintenance capabilities: (a) rehabilitation of the central GUYWA workshop; (b) establishment of an operation and maintenance center to train personnel; (c) standardization of equipment and spares to increase maintenance efficiency (pumps, generators, valves etc.); (d) establishment of computer-based inventory control and maintenance - 36 - management systemel (a) implementation of a preventative-maintenance program nationwide; and (f) improvements to radio communication and transportation systems at all installations. The afore-mentioned study also pointed out, interalia, the need for use of standby generators, storage of sufficient diesel fuel and purchase of adequate quantity of water treatment chemicals (alum and chlorine) for most water installations. The maintenance needs for the conservancy schemes (for example, the East-Demerara Water Conservancy for Georgetown), including the dredging of the conveyance canal and avoidance of contamination en route, were also emphasized. The water losses remain high for the Georgetown system (in excess of 50%) which needs to be addressed through a systematic program of repair, refurbishment and replacement of water mains over the coming years. Concern regarding the quality of water needs also be addressed through improvements in the operatior%l levels of treatment (particularly disinfection) and by controlling the ingress of contaminated ground water. Past Investment Levels and Donor Support 5.13 Over the period of 1980 to 1988 Guyana received a total external investment of US$8.5 million which compares poorly to the projected need of US$21.2 million. The government's contribution to investment during the above period is estimated to be US$2.5 million. Key donors in the recent years include EEC, PAHO/WHO, CIDA, UNICEF and IDB. EEC has boen the most active agency to date in both water and severLge sectors, under LOME I, II and III. Under the most recent program, LOME III, a new 2.0 MGD water treatment plant is being constructed in New Amsterdam. In addition, GS&WC and GUYWA also have benefitted from the above program in terms of sewerage equipment purchase and central workshop improvements, respectively. Water systems in Linden and Wismar benefitted from CIDA's assistance during 1980-83. PARO has been providing, in addition to small capital works, development and support of training programs in the water and sewerage sectors as they pertain to public health. The assistance from UNICEF includes the provision of community zaps in rural areas, purchase of spare parts for pumps and the provision of a surface water supply scheme for the town if Mahdya in the interior. GUYWA's capital budget has been deplorably low in the recent years. Overall, the investment levels in the water and sanitation sector lagged behind the actual requirements. Sector Studies 5.14 An IDB-financed institutional study (by Baptie Shaw and Morton) was undertaken during 1988-89 against a background of declining standards of water quality within the country, increasing consumer dissatisfaction, and an escalating threat to public health from contaminated water supplies. This study highlighted the development constraints of decentralization and underscored an immediate need to strengthen GUYWA to provide focus, direction and a tight control of the sector. The study also recommended a thorough assessment of the safe yields of the ground water aquifers in the country, particularly along the coastal strip. IDB is also currently financing the preparation of a medium-term master plan for water supply, sewerage and drainage for the greater Georgetown area. It has recently initiated an urban - 37 - renewal study (1992-1994) in 6 regional towns, aimed at identifying the investment needs for the rehabilitation and expansion of urban infrastructure including water and sewerage. The above studies will form a basis for the formulation of future investment projects in the water and sewerage sector. As an emergency measure, IDB has recently undertaken a study to outline the immediate remedial program for Georgetown and five other urban areas in the country. (Georgetown suburban area, New Amsterdam, Linden/Wismar, and Corriverton). Proposed Stratenv 5.15 The recommended strategy for the development of the water/sewerage sector would combine a plan of action that permits the rehabilitation of the physical facilities (meeting their most immediate needs), reorganizes the institutional framework, and prepares future investment programs that will eventually enable the sector to attain financial self-sufficiency. Complementary sanitation facilities will be provided nationwide under the ongoing Bank-financed SIMAP (Social Impact Amelioration Program) loan and PAHO/WHO's programs. Action Plan 5.16 For the short term (1992-1994) the strategy should focus on the strengthening of the sector institutions and the rehabilitation of the dilapidated infrastructure, together with the formulation of an efficient cost-recovery system. Key goals are as follows: (a) assist the Government with the reorganization of the water sector (with emphasis on legal, financial and managerial autonomy of the water agencies), and strengthen GUYWA in the areas of sector planning, management and monitoring; (b) initiate an intensive program of recruiting and training qualified personnel to operate and maintain the system facilities in the regions; (c) introduce more efficient cost-recovery policies to reduce the level of subsidies, in conjunction with improved collection procedures; (d) implement the rehabilitation, replacement and maintenance of facilities (through an emergency program), and put in place a preventative operations and maintenance program; (e) improve operation and maintenance activities in the sector related to the reduction of unaccounted-for water and improvement of water quality (to meet WHO standards); (f) improve sector service levels with less interruptions and avoidance of contamination of water supplies; (g) expedite the preparation of the Georgetown Water/Sewerage Master Plan with the intent to develop a well-functioning system for potable water, sewerage and drainage; and - 38 - (h) introduce and foster the participation of the private sector in the operation and maintenance of water/sewerage facilities. 5.17 For the longer term, the focus of the plan of v. ion for the water/sewerage sector should be on achieving financial self-sufficiency, and on the increasing level of privatization of the sector, in order to enhance its efficiency. Proposed Investment Program and Financin Plan 5.18 Three projects - totalling about US$4.5 million - are to be initiated in the near term (1992-1994). IDB will be the primary donor providing a substantial part of the funding for these projects listed b w: (a) Remedial Measure Program for Georgetown Area: being prepared by IDB. Estimated cost US$9.5 million; Project start-1993; This project will focus on institutional strengthening of GS&WC, improved cost recovery and rehabilitation of Georgetown water/sewerage facilities; (b) Technical Assistance and Water Supplv Rehabilitation Project: being prepared by the Bank (IDA); Estimate cost -US$11.0 million; Project start - 1993. This project will focus on institutional restructuring of the water sector, improved cost recovery, development of human resources in the sector and rehabilitation of water facilities (outside of Georgetown) including improved maintenance; and (c) Master Plan for Georgetown Water, Sewerage and Drainage: (Study to be commenced by IDB in July 1992); Estimated cost for Phase I implementation - US$25.0 million Project start - 1995; This project will focus on the Phase I expansion needs of water supply, sewerage and drainage needs of the agreed Master Plan study recommendations. 5.19 For the medium term (beyond 1994-97), two projects (total estimated cost - US$40.0 million) are tentatively planned to assist the sector: the Rural Water Supply Project and the Secondary Cities Master Plan Water Supply/Sewerage Project. The Rural Water Supply Project has an estimated cost of approximately US$15 million. The Secondary Cities Water Supply/ Sewerage Project would cost approximately US$20 million. The source of financing for both projects is yet to be confirmed. VI. THE URBAN SECTOR Sector Ormanization 6.1 The management of the urban sector of Guyana is mostly the responsibility of municipal councils. As in other sectors, the parformance of these councils has been less than satisfactory due to the lack of experience and limited human and financial resources. The central urban agency for planning and implementation of land-use policies and housing schemes, is the Central Housing and Planning Authority (CHPA), currently under the Ministry of - 39 - Public Works, Communications and Regional Development. CHPA is also in charge of the coordination of technical assistance for the urban sector. 6.2 Due to time constraints and dearth of information, only a cursory review of the urban sector issues could be undertaken as part of the current infrastructure strategy study. Extensive analytical studies will be needed in the future to fully understand the complex nature of the urban sector. Current Status and Problems 6.3 Between 1980 and 1990, the population of Guyana declined from 758,615 (1980 census figure) to 754,768 (1990 Government estimate). This decline was mainly due to a high rate of emigration and a falling birth rate. However, the implementation of the Economic Recovery Program is expected to halt the declining trend. 6.4 Most of the population of Guyana (about 702) lives along the narrow coastal strip. In 1989, the urban and rural population were estimated at 32% and 68% respectively. The key urban centers of Guyana with their current estimated population aret Greater Georgetown (210,000), Georgetown Suburban Area (50,000), New Amsterdam (20,000), Linden/Wismar (40,000), Corriverton (12,000) and Rosehall (7000). The country's urban infrastructure and services in these cities have deteriorated over the past years because of insufficient funding and maintenance. The country's most critical problems in the urban sector are the following: (a) inability to support economic development because of the deteriorated infrastructure (roads, drainage, water supply etc.) and an inadequate delivery of basic services; (b) lack of local resources mobilization and the need to improve managerial efficiency of the various urban institutions; (c) need to strengthen the fiscal performance of the local governments through appropriate taxation, tariff-setting and cost-recovery mechanisms; (d) lack of a national housing policy targeted as the economically vulnerable groups (urban poor); and (e) lack of skilled personnel in the public agencies. 6.5 As a result of the economic decline of the eighties, Guyana's housing deficit increased rapidly. The deficit resulted from a decrease in the number of houses constructed and the lack of maintenance of the existing housing stock. The housing deficit is expected to get worse, and it has been estimated that by CHPS the country would need in excess of 7,000 new units per year to be able to eliminate the deficit by the year 2000. 6.6 Sector Studies. IDB is currently financing an urban renewal study (1992-1994) for six large towns, focussing on short-term actions to put key urban infrastructure back into service and to improve the institutional and financial capacity of the local councils to maintain and operate urban services. The findings of the above study would form a basis for the proposed IDB-financing of an urban development project in 1995. This project would include investments for primary infrastructure, urban services and housing, and institutional support to municipal agencies. Proposed Strategy 6.7 The short-term strategy for the development of the urban sector should involve a quick rehabilitation of the most urgent urban infrastructure and services needed. For the medium term, the strategy would focus on the need to improve the management efficiency of the municipal agencies, local resources mobilization and cost recovery. In addition, a serious attempt should be given to involve the private sector in the provision of urban services, and to develop a viable housing policy. Action Plan 6.8 Short to Medium Term. For the short to medium term, actions in the urban sector should focus on revamping urban infrastructure agencies and developing schemes to finance and implement urban development and to maintain existing infrastructure. The elements of the action plan would be as follows: (a) undertake infrastructure renewal programs (water supply, roads, drainage, and solid waste collection etc) in the nation's major urban areas; (b) formulate and implement schemes to improve municipal finances by expanding the revenue base and improving revenue collection procedures (particularly in the area of property tax); (c) introduce and foster the participation of private sector in the undertaking of operation/maintenance of municipal facilities; and (d) establish a national housing policy and land tenure policy aimed to serve the urban poor and maximize private sector participation in the provision of housing units. 6.9 Longer Term. For the longer term, the plan of action for the urban sector should focus on the attainment of financial self-sufficiency in the provision of services, improved attention to cross-sectoral issues (such as environmental management, land use policies etc), increased privatization of urban operations, and sustainability of growth. Systematic studies are needed to evaluate above issues and explore remedial solutions. Proposed Investment Program and Financing Plan 6.10 The main investment program for the urban sector will be the IDB- financed Urban Rehabilitation Program (Phase I; 1995) with an estimated cost of US$20 million. Possibility also exists for a sites-and-services housing project (Phase 1; US$15.0 million) to be funded by IDB and other donors. - 41 - VII. THE SEA DEFP NSE SYSTEM Sector Organization and Coat Recovery 7.1 Organization. Responsibility for the management and maintenance of the sea defenses rests, by the Sea Defense Act of 1988, with the regional democratic councils, except for those on the Essequibo, which remain under the Hydraulics Division (HD) of the Ministry of Agriculture. The Act also provided for the re-establishment of the defunct Guyana National Sea and River Defenses Board to oversee all matters concerning sea defenses, but the Board has not yet been established. The Hydraulics Division is now responsible for the construction program on all sea defenses, and for technical advice to the regional authorities on the inspection, design, and supervision of construction on all sea defenses. The responsibility for maintenance, however, remains with the regions. 7.2 The regional authorities have neither sufficient funds nor -of particular importance- adequate trained staff to carry out their responsibilities properly. Nor is it likely that the necessary qualified staff can be attracted. Quite clearly, the responsibility for managing the coastal areas needs to be recentralized. At the same time, the Hydraulics Division (HD), does not have sufficient capacity and cannot easily strengthen itself to manage the upcoming large sea defenses activities, especially since it also has responsibility for the drainage of the coastal areas and national parks. HD basically consists of a chief, deputy chief, and senior hydraulics engineer, and the sea defenses alone will involve about US$42 million worth of rehabilitation and maintenance works over the next four years. HD could carry out all design, rehabilitation, and maintenance works by contract and construction supervision by consultants, but it still has the problem of supervising the work of the consultants and contractors. One solution might be to change its status as a civil service unit to allow it to hiring high quality staff at much better salaries than currently obtained in the civil service. The establishment of an effective institutional arrangement for managing the coastal areas, including maintenance, construction, and rehabilitation of sea defenses, is one of the highest priorities in Guyana. A small part of the program included in the PSIP - dealing mostly with emergency stoppage of breaches - can be executed by the HD with its present strength. DNV consultants, under EC financing, are currently studying various solutions to the management problem, including the feasibility of creating a Coastal Areas Management Authority to take over all sea defenses activities in the country. 7.3 Cost Recovery Mechanism. The limited Government financing for sea defenses comes in the form of budgetary allocations to the regional councils and to HD. There is no specific cost recovery mechanism for sea defenses. The Government's argument has been that, since over 90Z of the population benefit from sea defenses, the beneficiaries encompass the total population and a general tax is essentially equivalent to a user tax. There is a strong case, however, for a separate sea defense tax, even if it was made a general tax, as the receipts would then be earmarked for sea defenses maintenance. The EC has been working on a study plan to improve the cost recovery mechanisms for sea defense programs. The study's findings should be available by the end of August, 1992. Donor agencies would have to finance all the rehabilitation and maintenance works for at least the next two years while the Government is putting in place such a tax. - 42 Current Statue and Problems 7.4 The sea defense system is one of the most critical parts of Guyana's infrastructure. For lack of foreign exchange during the past ten years there has been little maintenance to the sea walls and they have progressively deteriorated. The length of the sea coast is approximately 430km and 315km are protected by the vea defense system. The purpose of the system is to prevent flooding to the coastal lowlands, which are located below (0.5-1 m) the sea level at high tide. The composition of the sea defense system is as followst * earth embankments (165km); * earth embankments with slope protection (5km); * Sea wall with reinforced concrete and/or sheet piling (69km); and * natural sand banks (75km). 7.5 The protection of the sea defenses is of critical importance since all the nation's farming and 95% of the country's population lies in the narrow coastal belt, approximately 15 km wide, between the Pomeroon and Corentyne rivers. The majority of the sea walls are 25-50 years old. Ztnce 1983 the number of breaches in the wall has significantly increased year by year, until 1990 when they increased to about 49 per month. The breaches in the sea wall are mainly caused by the following: (a) erosion of the sea bed along the shore; (b) failure of maintenance; and (c) increase in sea level as part of cyclical movements or, as some preliminary studies indicate, due to global warming. 7.6 A recent study by DEV Consultants Holland found that 36km of the concrete sea walls are seriously decayed and require prompt maintenance. Another 71km of the concrete walls would need rehabilitation within the next decade, if they are maintained properly. The remaining 233km, consisting of earth dams protected on the seaward side by a substantial depth of mangrove, are in relatively good shape and could last the next 20 years with proper maintenance. The 36km that are in a critical situation need quick attention in order to prevent Guyana's prime farming areas from being contaminated with salt water. Areas of sugar and rice cultivation are in serious danger, and kitchen gardens are often destroyed. In addition, flooding of the pit latrines has caused health probl&ms. The regions most affected are Essequibo, Essequibo Islands and West Demerara, West Dsmerara, West Coast Berbice and the Corentyne Coast. 7.7 The Government of Guyana has made a significant investment in irrigation and drainage advancement in areas e.;Ljected to sea water flooding. The main projects in the areas include the East Essequibo Development Project, the Mohaica-Mahaicony-Abany Project, and the Black Bush Polder Rehabilitation Project. Protection of the entire coast line to an acceptable standard may cost up to US$300 million. Cu,rently, under the PSIP prepared by the Government, US$9.2 million is allocated from 1991 to 1993 to cover temporary patchwork. - 43 - 7.8 UNDP's involvement is mainly with a study of the mangroves belt expansion and another study of possible technical assistance on mudbanks and coastal erosion. UNESCO is also funding consultants to study of mangrove and courida trees as part of a possible mangrove reforestation project to protect the Guyanese coast from the sea. 7.9 DHV Consultants (financed by EC) have prepared a report on the effect of reconstruction, rehabilitation, and different levels of maintenance on the land use and infrastructure of the coastal area. The study recommends an investment program of US$28 million between 1992 and 1994 and US$163 million starting in 2001 concurrently with an annual maintenance outlay of US$3 million. The economic rate of return of such a program would be, according to the study, over 70%. The PSIP proposals for sea defenses should therefore be for a total of about US$28 during 1993-96, allowing some US$4 million in 1993 and US$8 million annually thereafter. 7.10 A study financed by IDB will design the basic elements of a national shorezone management program. It will include developing an information base through studying erosion and accretion processes, hydrographic surveys, monitoring oceanographic parameters and mudbanks, surveying the vegetation, mapping land uses and proposing regulations. This information will complement data previously collected by the country through its hydrographic service. 7.11 Guyana's capacity to absorb such a program is currently very doubtful. Tn addition to HD's inability to manage it, there are also severe limitations on execution of the physical works as the local construction industry has shrunk and will require considerable time to reorganize itself and the quarries are inadequate. However, since the proposed program needs to be implemented immediately to prevent further deterioration of the sea defenses, foreign contractors should be invited to participate in the works. The current capacity of Guyana quarries to supply the necessary bouldas is also insufficient. The program would require 500,000-600,000 annual tons but local output is less than 50,000 tons per year. This limitation is compounded by the uncompetitive arrangement between the two quarries currently operating in the country, under which one supplies just boulders and the other just crushed aggregate. The Government would need to attract f=reign participation in boulder and aggregate production in Guyana in order to ensure adequate boulder supply. Difficulties in boulder supply during the implementation of the World Bank and ODA sea wall construction during the 1970s led to high contractor claims and costs. 7.12 Sea Defenses Maintenance. At present, the little sea defense maintenance that is being done, is carried out by force account. For the scattered cases of emergency work, this system may be acceptable. For anticipated large volume of maintenance work, private contractors should be encouraged to participate. DHV is also studying the extent to which private contractors could be used for maintenance of sea defenses and the capacity and limitations of the local construction industry. It can be expected that local contractors would handle the bulk of maintenance leaving ED to carry out scattered works in remote areas and minor emergency works. It is also probable that regional contractors will enter the market. In order to give both existing contractors and prospective ones the lead time necessary to set up for the upcoming works, the Government should widely advertize its construction and maintenance plans for sea defenses, especially since financial commitment has been obtained for a substantial portion of the program. - 44 - Proposed Strategy 7.13 The proposed strategy for the sea defense system is to focus on immediate rehabilitation of the areas that are in critical condition, and on a plan to restructure the physical, financial, and organizational problems of the management agencies. This plan for restructuring should incorporate a selection process to choose the most appropriate projects to rehabilitate the entire sea defense system and provide a long term solution to its problems. Action Plan 7.14 Short Term. For the short term (1992-94), the plan of action for the sea defense system should focus on continuing current emergency repairs and on quick rehabilitation of the portions of the sea wall that are in critical condition. This is necessary to remove any immediate danger from key land areas. Short-term actior. should also include the initiation of a long term solution to the management problem. The elements of the plan should be as follows: (a) continuation of the ongoing emergency repairs of breaches, rehabilitation of the portion of the sea wall that is in critical condition to ensure safety of critical areas such as rice production areas and population agglomeration areas (b) appointment of more qualified staff to ED (recommended 6 additional site engineers and 1 additional sea defense coordinator); (c) encouragement of private contractors to take on the maintenance work of the sea defense system; and (d) exploring the creation of a Coastal Areas Management Authority that would include a special task force on flooding. 7.15 Medium Term, For the medium term (1994-97), the plan of action should focus on continuation of the rehabilitation process, and on achievement of self-sufficiency, and include the following elements: (a) search for cost effective solutions to rehabilitate the coastal area; and (b) establishment of financing for chronic maintenance costs (improvement of coot recovery mechanisms). - 45 - 7.16 Longer Term. For the longer term, the plan of action for the sea defense system should focus on ensuring the long term safety of the lands and the population residing in the endangered areas by rehabilitating the totality of the sea defenses. To this end, it will be necessary to (i) carry out a research into the causes of sea wall erosion and mudbank movements; and (ii) upgrade the most vulnerable sections on the sea defense works to last approximately 30 years Proposed Investment Program and Financing Plan 7.17 Between 1987 and 1991, EC financed, under LOME III, a US$5 million Infrastructure Rehabilitation Program. It covered materials and technical assistance for emergency repairs of breaches in the sea defenses and a study (done by Dutch consultants) and training mechanisms for the Hydraulics Department and local contractors. EC is currently allocating to the infrastructure sector an extra ECU26 million (US$40 million) under LOME IV, for the period 1992-96. 7.18 IDB has made a loan to finance US$12.8 million in direct cost for the sea defense system (for projects on the West Essequibo and Corentyne regions), as part of the IDB financed Agricultural Sector Loan. Part of the funds will finance the repairs of 16 km of the sea defense. In addition, IDB plans to finance a US$15 million Coastal Areas Management Program as part of its 1992- 96 lending program, based on the results of a technical cooperation also expected to be financed by IDB (US$600,000). 7.19 CDB has included a sea defense component (1992-94) to its Agricultural Sector Rehabilitation Loan. The sea defense component would amount to approximately US$4.1 million, and would be allocated mainly to 4.8km of sea defense and the protection of the rice production area near Berbice river. 7.20 Finally, IDA's Infrastructure Rehabilitation Project (US$15-US$20 million) would include a sea defense component amounting US$5 to US$7 million. - 46 - ATTACHMENT I Pag. 1 of 8 INFRASTRUCTURE SECTOR PROPOSED STRATEGY Objectives Problems Government's Strategy Donors' Strategy Assist the Economic Deteriorated state of Rehabilitating infrastructure Financing rehabilitation Recovery Program infrastructure facilities that help to induce a quick programs. Financing should supply response in the be made contingent on economy agreement by Government to implement appropriate cost recovery mechanisms Lack of proper maintenance Establishing cost recovery Considering financing of mechanisms to generate maintenance contracts for two enough funds for maintenance to four years Contracting maintenance with private companies Weak institutional capacity Promoting private sector Financial and technical participation in the ownership assistance towards divestment and/or management of GEC, of Government facilities Timehri Airport, GAC, GNC, shipping companies, ferries Recentralizing O&M functions Financial and technical for roads in MOPWORD, assistance for organization water supply in GAYWA, and and strengthening of sea defense in a proposed Government Agencies Coastal Areas Management Authority Strengthening of MOPWORD, GAYWA and the proposed Coastal Areas Management Authority Limited financial resources Optimal use of potential Reviewing yearly or bi-yearly financing from donors programs for assistance Lack of skilled manpower Implementing mechanisms to Financing of qualified permit reemitment of qualified personnel to be recruited staff Lack of cost recovery Tariff policy to ensure mechanisms adequate cost recovery Reduce fiscal deficit Efficient use of resources Careful prioritization of potential investments POWER PROPOSED STRATEGY AND RECOMMENDED ACTIONS Objectives Problems Strategy Government's Actions Donors' Actions Support the Lack of reliable electricity service Promoting efficiency by enabling Establishing a legan and IDB is financing rehabilitation Economic is cause for private participation and regulatory framework for the through two loans Recovery Program competition electricity service (a) existing businesses have to 1DB is considering financing for acquire and operate their own Improving reliability of the Completing ongoing rehabilitation expansion of GEC's generating units, ineseasing its electricity service of generating units and interconnected system production costs; and distribution facilities CDC would consider financing of (b) deterrent of new investments Expanding generation capacity isolated power systems with two-20MW diesel units, and extending transmission lines and IDB wiB finance management distribution networks (1993-97) services for GEC Contracting onagement of GEC. Donors would consider financing for period 1992-1994 of staff to be recruited Establishing mechanisms to permit recruitment of qualified staff with competitive salaries Reduce Fiscal GEC requires large government 'sking the service financially Establishing a tariff policy based Donors would consider to provide Dficit contributions to meet its sei:eufficient on marginal costs assistance for preparing and operations costs implementing a tariff policy Reduce electricity Electricity cost is high due to: Improving GEC's performance Privatizing GEC by selling or CDC would consider to particpate costs (i) inefficient GEC's leasing its assets by 1994, through in joint venture with other donors performance; Reducing energy losses a competitive process to lease GEC's assets (ii) high energy losses; and (iii) inefficient and costly Studying other generating options Preparing and implementing an CDB is considering financing of a > generating units to reduce energy production costs energy loss reduction program loss reduction program Prefeasibility studies of six IDB will finance studies on hydro p potential hydro sites developments co TRANSPORT PROPOSED STRATEGY AND RECOMMENDED ACTIONS Objectives Problems Strategy Government's Actions Donors' Actions Provide accessibility The road system has deteriorated Rehabilitating roads that help to Rehabilitating the G/town- IDB and IDA to consider to all economically significantly sustain supply response in the Timehri Airport, G/town- financing rehabilitation of roads and socially active economy Mahaica, and Essequibo roads; parts of the country Negligible maintenance on the resealing the Linden Highway; primary network over the past 15 Divesting Government facilities improving selected feed roads Assist the Economic years Recovery Program Filling existing vacancies Divesting GNC and Lack of financial resources for through recruitment of qualified Government's shipping maintenance staff companies Recentralizing O&M functions Establishing mechanism to permit Donors to consider financing of in MOPWORD recruitment of qualified staff with staff to be recruited competitive salaries Transferring responsibility for planning, developing and maintenance of main roads to MOPWORD Developing and implementing a Considering a program to finance road maintenance program using maintenance contracts for a private contractors period of 2 to 4 years Establishing a financing mechanism for road maintenance Ferries are often down for lack of Promoting private sector Promoting participation of maintenance and spare parts participation in the river private sector to absolve river transport industry transportation demand Tariffs are insufficient to meet costs Tariffs that ensure cost Establishing a system to license recovery and inspect private boats Bridge across the Demerara River Rehabilitating the bridge Studying rehabilitation of the EEC to assist Gov. in a study to partially collapsing bridge rehabilitate the bridge Page 2 of 2 Objectives Problems Strategy Government's Actions Donors' Actions Improve air At Timberi Airport, navigation aids Concession arrengements with Creating a financially-autonous Considering financial and transportation are unserviceable. There are no foreign operators airport authority, as an technical assistance for creation system cargo facilities intemediate step through of an Airport Authority concession arrangements Guyana Airways Co., GAC, is Divesting GAC Preparing and implementing a lossing qualified staff plan to divest GAC Facilitate exports Wharves at G/town are in poor Improving facilities Building an off-port container Considering financing of an off- and imports state. They cannot bear heavy park port container park equipment 0 01U1 URBAN PROPOSED STRATEGY AND RECOMMENDED ACTIONS Objective Problems Strategy Government's Actions Donors' Actions Support economic Urban infrastructure is Rehabilitation of the most Government to prepare an Donors to consider financing of development deteriorated. Services are urgent infrastructure areas infrastructure renewal program in the infrastructure renewal inadequate and services the six major urban areas program Poor management in the municipal Enhancing the ability of local Government to prepare programs Donors to assist Government in councils. governments to implement, devoted to enhance organization preparing and implementing Lack of skilled personnel operate and maintain urban and management of local programs to enhance ability of infrastructure governments local governments Lack of financial resources Financial self-sufficiency in Government to revise property the provision of services tax appraisal Lack of access to basic housing Developing a national Government to prepare a national Donors to consider financing of and infrastructures housing policy. housing policy through the basic infrastructure to the urban Providing services to existing Central Housing and Planning poor squatters Authority (CHPA) 0 CA 01I WATER SUPPLYISANITATION PROPOSED STRATEGY AND RECOMMENDED ACTIONS Objectives Problem Strategy Government's Actions Donors' Actions Provide potable water Quality of the service (hours of Rehabilitating physical facilities Implementing the Emergency The Georgetown Emergency and wastewater service, water pressure, water that met most immediated needs Program for rehabilitation, Program is being prepared by sanitation throughout quality) is poor replacement and maintenance IDB, for financing in 1993; A country Implementing proper operation and of facilities for Georgetown nationwide rehabilitation Low quality of water is having maintenance programs and the Regions program is under preparation negative impact on health of the by the World Bank (IDA) for populace financing in 1993; EEC should seriously consider the Prolongued breakdowns of water financing of the upgrading of schemes the distribution system in New Amsterdam (under LOME IV); Assistance of CIDA. PAHO and UNICEF should continue as in the past 1 Deteriorated state of facilities due Strengthening maintenance Restructuring the water sector Considering financing for to lack of proper maintenance. functions and institutions in charge to improve accountability and technical assisance to Decentralization of maintenance of maintenance responsibility of agencies in organize and strengthen responsibilities has aggravated this charge of operations and GUYWA's management and problem maintenance. Stregnthening Regional entities GUYWA's management and finances Considering financing of maintenance Strengthen the Regional management of rural water supply systems Severe budget constrains. Efficient cost-recovery policies Introducing more efficient Assisting sector agencies in | cost-recovery policies the design and implementation Water service is not metered of improved tariff mechanisms 4 Objectives Problems Strategy Government's Actions Donors' Actions Support the Economic Large companies have to dig their Organizing a self-financing water Prepare a Master plan to IDB to finance consultant Recovery Program own costly wells. Small supply and sewerage system provide the basis to establish services for preparation of the companies must get costly standby priority in investments Master Plan tanks of water supplied by trucks Exploring privatization Considering financing of Sewerage collection and treatment oportunities major new facilities identified is available only for a small part of in the Master Plan population Insufficient attention to stormwater and solid waste disposal is causing severe environmental problems t'3 Ii O0 cc SEA DEFENSES PROPOSED STRATEGY AND RECOMMENDED ACTIONS Objective Problems Strategy Government's Actions Donors' Actions Prevent prime farming Sugar and rice cultivation are in Immediate rehabilitation of Immediate rehabilitation of 36km Rehabilitation of 36km would be areas from being serious danger because of the most seriously of concrete walls that need financed by IDB, IBRF and CDB contaminated with salt deteriorated state of sea defense deteriorated walls priority attention water walls. They need urgent repairs EEC to prepare study for Rehabilitation of 71km of rehabilitation of 71km Protect health of Health problems due to flooding of concrete walls within next decade population the pit latrines Ensure proper Failure of maintaining the sea wall Conforming a strong Sea Government to recentralie EEC to finance consultants to maintenance of sea Defense Unit responsible for responsibility to manage the assist government in the creation defenses Regional authorities, in charge of the management of the sea coastal areas into a and organization of a Coastal sea defense maintenance, have coast and defenses recommended to be created Areas Management Authority neither sufficient funds nor Coastal Areas Management qualified staff Authority Hydraulics Division (HD) does not Promoting private sector HD to carry out design, Donors should consider financing have sufficient capacity to manage participation reahabilitation and maintenance maintenance of the entire system large sea defense activities works by contract with private for next two to four years companies Local quarry capacity is insufficient HD to attract foreign contractors for boulder and aggregate production Lack of financial resources for Establishing a cost recovery EEC to study cost recovery maintenance. Government mechanism for sea defenses mechanisms for sea defense. contributions come in the form of Study would be ready by August, budgetary allocations to the 1992 regional councils and HD Government to implement a cost recovery mechanism for sea 1H defense M > I- - 54 - ATTACHMENT 2 GUYANA INFRASTRUCTURE SECTOR REVIEW INVESTMENT PROGRAM 1992-1997 (Jan 1992 US$ million) TOTAL SECTOR/PROJECT 1992 1993 1994 1995 1996 1997 92-97 Power 1 Power Rehabilitation 12.0 5.3 17.3 2 New generating units 6.0 21.6 26.6 16.2 70.4 3 Transmission Project 0.7 0.8 3.6 0.6 0.5 2.2 8.4 4 Distribution Project 3.0 5.8 4.5 5.4 11.0 1.1 30.8 Sub-total 15.7 17.9 29.7 32.6 27.7 3.3 126.9 Transport S Demerara Bridge Rehab. 5.0 1.0 6.0 6 Rehab.G/town-Doesdyke Rd 2.1 6.4 2.1 10.7 7 Rehab.Timehri Airport 3.0 4.5 1.5 9.0 8 Demerara River Navigation 1.0 1.0 9 Reseal Soesdyke-Unden Rd 1.5 1.5 3.0 10 Rehab. Ferry Fleet 1.5 1.5 3.0 11 Rehab.Feeder Road Network 1.0 2.0 2.0 1.0 6.0 12 Rehab.W. Coast Berbice Rd 1.0 3.0 2.0 6.0 13 Rehab. Essequibo Road 3.0 4.0 1.0 8.0 14 Container Freight Station/ 0.0 Inner Port Area 1.5 1.5 15 Rehab. G/town-Mahaica Rd 1.5 2.0 1.5 5.0 16 Hinterland Airport I 2.5 5.0 2.5 10.0 Sub-total 5.0 14.1 23.9 14.1 9.5 2.5 69.2 Urban/General 17 Sites and Services 1.5 3.0 3.0 3.0 10.5 18 Urban Rehabilitation 2.0 4.0 4.0 10.0 Sub-total 0.0 0.0 1.5 5.0 7.0 7.0 20.5 Water Supply/Sanitation 19 Remedial Water/Sew. Program 2.5 4.0 3.0 9.5 20 TA&Water Supply/Sewer.Rehab. 3.0 3.0 5.0 11.0 21 Master Plan for Georgetown 1.0 3.0 8.0 9.0 21.0 22 Rural Water Supply Project 3.0 5.0 5.0 13.0 23 Secondary Cities Water/Sewer. 3.0 8.0 9.0 20.0 Sub-total 0.0 5.5 8.0 17.0 21.0 23.0 74.5 Sea Defense System 24 Rehab. Sea Defense 4.0 8.0 8.0 8.0 8.0 36.0 Sub-total 0.0 4.0 8.0 8.0 8.0 8.0 36.0 11GRAND TOTAL 20.7 41.5 71.1 76.7 73.2 43.8 27 APPROVED AND PROPOSED INFRASTRUCTURE LOANS (1992-1997) (Million of US Dollars) DONOR/Project Power Tranap. Water/S. Sea Def. Urb/Gen. TOTAL IDB: Power Rehab. II 15.5 15.5* Generating & Transm. 30.0 30.0 Road Rehabilitation 25.0 25.0 Agricultural Loan 3.0 12.8 15.8* Infr.Rehab. Program 20.0 20.0 Coastal Managem. 1/ Remedial Water Prog. 7.5 7.5 Master Plan for G/Town 20.0 20.0 Proposed Urban Rehab. 10.0 10.0 Total 45.5 48.0 27.5 12.8 10.0 143.8 IDA: Infrastructure 10.0 5.0 15.0* a TA & Water/Sever.Rehabil. 10.5 10.5 Proposed Urban Rehab. 5.0 5.0 Total 0.0 10.0 10.5 5.0 5.0 30.5 EC: Lome IV 21 7.0 23.0 10.0 40.0* CDB: Agricultural Loan 4.5 4.5 Power, Distribution 10.0 10.0 Total 10.0 4.5 14.5 CDC: Rural Electrif. 2.0 2.0 OTHERS: Rural Electrif. 1.4 1.4 Total 1.4 1.4 TOTAL 58.9 65.0 61.0 32.3 15.0 232.2 Notes: 11 Allocation to Infrastructure not yet defined 2/ Definitive Allocation not yet defined. * Loans already approved or expected to be approved shortly (total: US$86.3 million) - 56 - ATTACHMENT 4 INFRASTRUCTURE SECTOR REVIEW Available Infrastructure Sector Analysis Background: - Guyana, Recent Economic Developments (IDA, 6/91). - Guyana, Country Strategy Paper (IDA, 6/91). - Guyana, From Economic Recovery To Sustained Growth (World Bank, 12/91). Sea Defense System: - Sea Defense Project (IDA, SAR, 1968). - Restoration and Expansion of the Mangrove Belt in Guyana (FAO, 5/90). - Report on Sea Walls from the Hydraulics Division of the Ministry of Agriculture. - Sea Defenses Guyana, Economic feasibility study on reconstruction and rehabilitation (interim report, 9/91), DHV consultants (financed EEC). Power Sector: - GEC rehabilitation program, phase I (IDB, SAR, 1985). - GEC rehabilitation program, phase II (IDB, SAR, 1990). - Second Power Project (IDA, SAR, 1982). - Feasibility study of Tumatumari Hydropower Development, Montreal Engineering Co., 1982. Transport Sector: - Technical Cooperation for the preparation of a road maintenance and rehabilitation program (IDB, 1991). Water Supply/Sanitation and Urban Sectors: - Institutional Study of the Water Supply and Sanitation Sector (Babtie and Morton Shaw 10/89), financed by IDB. - Stormwater Drainage, SIMAP, 10/91. - Water Supply and Sanitation, SIMAP, 9/91. - Technical Cooperation for the Georgetown water and sewerage master plan (IDB, 1990). - Technical Cooperation for the design of an urban rehabilitation program (IDB, 1990). - Remedial Measures Program for Water and Sewerage Systems in the cities of Guyana (David Horsefield, 1/92) - 57 - ATTACHMENT 5 GUYANA INFRASTRUCTURE SECTOR REVIEW Summary of Proiects Power sector Power Plant Rehabilitation Project Executing agency: Guyana Electricity Corporation (GEC) Date to be started: 1992 Total estimated cost: US$ 17.3 million External financing sought: US$ 15.5 million Possible lending agency: IDB Description of the project: This US$15.5 million loan from IDB complements the previous US$13.8 million loan granted for the rehabilitation of the power station at Kingston (repairing 3 units), Garden-of-Eden (repairing 2 diesel unite), and Canefield (3 steam units to be repaired). Low-Speed-Diesel Plant (1x20 MW) Executing agency: Guyana Electricity Corporation (GEC) Date to be started: 1993 Total estimated cost: US$ 43.0 million External financing soug,ht: US$ 37.0 million Possible lending agency: IDB Description of the project: In order to meet the future demand, IP recommended the installation of some 80 MW of low-speed-diesel units and 52 MW of peaking combustion turbire units, substituting all existing thermal plants. This project puts in place the first 20MW low-speed-diesel unit of the program set by IlP. Transmission Proiect Executing agency: Guyana Electricity Corporation (GEC) Date to be started: 1993 Total estimated cost: US$ 7.3 million External financing sought: US$ 6.9 million Possible lending agency: IDB Description of the project: The study done by CI Power suggested a Least Expansion Cost Plan (IP) that would considerably strengthen the condition of the transmission system. This transmission project includes the construction - 58 - of 69 KV lines and transformer substations. Investments for studies or works for international or some isolated interconnections are not included. Combustion Turbine Plant (2xl3MW) Executing agency: Guyana Electricity Corporation (GEC) Date to be started: 1994 Total estimated cost: US$ 24.6 million External financing sought: US$ 24.1 million Possible lending agency: IDB Description of the project: This particular projects constitutes the first two internal-combustion-turbine units of 13 MW each, as specified by IIP. Distribution Proiect Executing agency: Guyana Electricity Corporation (GEC) Date to be started: 1995 Total estimated cost: US$ 29.4 million External financing sought: US$ 26.5 million Possible lending agency: IDB Description of the project: Based on the results given by the program (LIP) derived from the study done by CI Power, this project treats the distribution systems, namely the construction of subtransmission lines (34 Kv and lower) as well as primary and secondary distribution grids. It also includes the construction of distribution substations in the area. Transport Sector Demerara Floatini Bridge Rehabilitation Proiect Executing agencyg Ministry of Communications and Works MCW) Date to be started: 1992 Total estimated cost: US$ 6.0 million External financing soughts US$ 5.6 million Possible lending agency: EEC Description of the projects The Pontoon bridge at Demerara conrects the two banks of the river, and is vital to traffic. In fact, this bridge plays a crucial role in the agricultural development of the western part. The project would complement EEC's financing of the emergency works. The main focus of the project would be on rebuilding the bridge, improving the anchoring/mooring, designing a maintenance program, improving the bridge administration, and instituting toll charge& to cover O&W costs. - 59 - The Rehabilitation of Georgetown - Soesdyke Road Project Executing agency: Ministry of Communications and Works (MCW) Date to be started: 1993 Total estimated cost: US$ 10.7 million External financing sought: US$ 10.0 million Possible lending agency: IDB Description of the project: This 18.9 miles stretch of the main road connects Georgetown with the bauxite facilities at Linden, and has the highest traffic volume in the country. This project would resurface the entire 18.9 miles of the road. The Rehabilitation of Timehri Airport Executing agency: Ministry of Communications and Works (MCW) Date to be startedt 1993 Total estimated cost: US$ 9.0 million External financing sought: US$ 8.4 million Possible lending agency: Unknown Description of the project: This project would enable the airport to be fully operational by rehabilitating all facilities and ensuring proper maintenance. This would eventually increase the interest of private operators to run it. The Demerara River Naviaation Proiect Executing agency: River Authority to be set up (within the Transport and Harbors Department) Date to be started: 1993 Total estimated cost: US$ 1.0 million External financing sought: US$ 0.9 million Possible lending agencyt IDA Description of the project: This project would cover the rehabilitation and upgrading of the Demerara river navigation system from Linden to Georgetown, as well as improving pilot service, upgrading hydrographic survey equipment and establishing regular monitoring systems, and providing auxiliary equipment. Resealina and Bridge Strengthening of The Soesdyke - Linden Road Executing agency: Ministry of Communications and Works (MCW) Date to be started: 1994 Total estimated cost: US$ 3.0 million External financing sought: US$ 2.8 million Possible lending agency: IDA Description of the project: This ptoject would provide for resurfacing of about 30% of the Sosedyke-Linden highway (44km) which is in fair condition, but is - 60 - wearing out in some section3 due to lack of maintenance. Most of this road would be resealed, and 5 wooden bridge decks would be replaced. The Rehabilitation/Modernization of the Ferry Fleet Executing agency; Transport and Harbors Department (THD) Date to be started: 1993 Total estimated cost: US$ 3.0 million External financing sought: US$ 2.8 million Possible lending agency: IDA, EEC Description of the projects The fleet of ferries is old and poorly maintained in spite of the fact that it plays a crucial role in the movement of goods/passengers. This project would fiance the construction of new ferries, and improve the organization and administration of the fleet. The Rehabilitation of the Feeder Road Network Executing agencys Ministry of Communications and Works (MCW) Date to be started: 1993 Total estimated cost: US$ 6.0 million External financing sought: US$ 5.6 million Possible lending agency: IDA, IDB Description of the project: The main focus of this project would be on the preparation and implementation of the restoration of the deteriorated feeder road network through a 5 year program which would involve the following: - identification of the "optimum" feeder road network; - establishing a methodology to select/justify a feeder road rehabilitation projectl and - eventually select 200 miles of feeder roads to be restored over the next 5 years. Rehabilitation of West Coast Berbice Road Executing agency: Ministry of Communications and Works (MCW) Date to be started: 1994 Total estimated cost: VO$ 5.0 million External financing sought: 'IS$ 4.7 million Possible lending agency: IDB Description of the preject: This project would consist of overlaying the 20- year-old West Coast Berbice Road (which has had little maintenance) between Mahaica and Resignol with 2" asphaltic concrete. Rehabilitation of the Essequibo Road Executing agency: Ministry of Communications and Works (MCW) Date to be starteds 1993 Total estimated costs US$ 8.0 million - 61 - External financing sought: US$ 7.4 million Possible lending agency: IDA Description of the project: The purpose of this project is the total reconstruction of the road from Supernaam to Charity (38 miles), and the rehabilitation of existing bridges. Container Freight Station and Inner Port Area Executing agency: Appointed Body - by Shipping Association and the Transport and Harbors Department Date to be tarted: 1994 Total estimated cost: US$ 1.5 million External financing sought: US$ 1.4 million Possible lending agency: IDA Description of the project: This project was designed to improve port operations by providing easy access to the wharves, construction of a 5,000 sqm. shed for stuffing and splitting container cargo, provision of offices for customs, and improve traffic in port area. Rehabilitation of Georaetown-Mahaica Road Executing agency: Ministry of Communications and Works (MCW) Date to be started: 1994 Total estimated cost: US$ 5.0 million External financing sought: US$ 4.7 million Possible lending agency: IDB Description of the project: This IDB financed project will reconstruct and rehabilitate the some sections of the road (Buxton to Better Hope section and Buxton to Mahaica section), as well as shoulders and bridges and culverts. Renovation of Hinterland Airports I Executing agency: Ministry of Communications and Works (MCW) Date to be started: 1995 Total estimated cost: US$ 10.0 million External financing sought: US$ 9.3 million Possible lending agency: Unknown Description of the project: The objective of this project is to upgrade Hinterland's landing fields as an incentive for greater economic activity. - 62 - Urban Sector Urban Rehabilitation I Executing agency: Central Housing and Planning Authority (CHPA) Date to be started: 1995 Total estimated cost: US$ 20.0 million External financing sought: US$ 18.0 million Possible lending agency: IDB Description of the project: The principal objectives of this project are the followings (a) rehabilitation of urban infrastructure and services in Georgetown, New Amsterdam, Linden/Wismar, Corriverton, Rosehall and Anna Regina; and (b) strengthen the above city Governments' ability to finance and execute development programs, and maintain the existing urban infrastructure. Sites and Services Executing agency: Central Housing and Planning Authority (CHPA) Date to be starteds 1994 Total estimated costs US$ 15.0 million External financing sought: US$ 14.0 million Possible lending agency: Udknown Description of the project: This project is scheduled to start in 1994, and is mainly intended to address the housing shortage of Georgetown and of other urban areas. It is designed to assist the urban low income families in the construction of their own housing, and to begin solving the environmental and health problems arising from lack of housing and squatting. Water Supply/Sanitation Georgetown Water Supply-Emergency Project Executing agency: Georgetown Sewerage and Water Commission (GSWC) Date to be started: 1993 Total estimated cost: US$ 9.5 million External financing sought: US$ 8.5 million Possible lending agency: ID Description of the project: The main objectives of this project - for Georgetown area - would include the rehabilitation of water distribution, network booster stations for the three most sensitive areas (Ruinvelt, Kingston and Agricola) of the city, and the central sewerage system, together with the strengthening of GSWC in the areas of management and cost recovery. - 63 - Technical Assistance and Rehabilitation Project Executing agency: Guyana Water Authority (GUYWA) Date to be starteds 1993 Total estimated cost: US$ 11.0 million External financing sought: US$ 10.0 million Possible lending agency: IDA (World Bank) Description of the project: The objectives of the Technical Assistance and Water Supply and Sewerage Rehabilitation Project are the following: (a) restructure the institutional framework for the water sector to improve focus, direction and control; (b) strengthen GUYWA in the areas of sector policy planning, monitoring and management; (c) provide assistance and training to water agencies in the fields of institutional development, financial management and administration; (d) rehabilitate nationwide water supply and facilities (except for Georgetown area) (supporting it with an operation/maintenance program); and (e) introduce and promote the role of private sector in the operat4- and maintenance of water facilities Master Plan for Georgetown I Executing agency: Guyana Water Authority and Georgetown Sewerage and Water Commissioners (GSWC) Date to be started: 1995 Total estimated cost: US$ 25.0 million External financing sought: US$ 23.0 million Possible lending agency: IDB Description of the project: The preparation of a Master Plan (year 2020) leading to a major Water Supply/Sewerage Drainage/Sector Project for the Georgetown area is to be commenced in mid-1992. This IDB-financed Vaster Plan Study is expected to be completed by 1994, and would form basis for the proposed project. This project is aimed at providing investments (Phase I) for a major rehabilitation, replacement and expansion of water supply, sewerage and storm drainage facilities in Georgetown. Rural Water Supply PrLject Executing agencys Guyana Water Authority (GUYWA) Date to be started: 1995 Total estimated cost: US$ 15.0 million -64- External financing sought: US$ 14.0 million Possible lending agency: Unknown Description of the project: This particular project would enhance the economic development of rural water supply systems throughout the country. In order to sustain the improvements brought about by this project, special attention should be given to the implementation of good cost recovery mechanisms and institutional reforms. (This project could be a follow-on to the proposed World Bank's national rehabilitation project (IDA) discussed earlier) Secondary Cities Water/Sewerage Proiect Executing agency: Guyana Water Authority (GUYWA) Date to be started: 1995 Total estimated cost: US$ 25.0 million External financing sought: US$ 23.0 million Possible lending agency: IDB Description of the project: This project will be based on the ongoing (IDB-funded) urban renewal studies in the secondary cities. The main focus would be on continued assistance for expansion and improvements in water supply for the major urban areas, especially New Amsterdam and other large secondary cities. A significant part of this project would concentrate on institution building and financial strengthening. Sea Defense System Reconstruction of Sea Defenses Executing agency: Ministry of Agriculture, Hydraulic Division (HD) Date to be started: 1993 Total estimated cost: US$ 36.0 million External financing sought: US$ 34.0 million Possible lending agency: IDA, IDB, EEC, CDB Description of the project: This project is set to continue the current ongoing emergency works on the sea defenses, and rehabilitate some 36km of critical sections of the sea wall. 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