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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT PAPER ON A PROPOSED THIRD ADDITIONAL FINANCING CREDIT AND GRANT IN THE AMOUNT OF SDR80.7 MILLION (US$125 MILLION EQUIVALENT) TO THE CENTRAL AFRICAN REPUBLIC FOR THE CEMAC TRANSPORT AND TRANSIT FACILITATION PROJECT Transport Sector Country Department AFCC1 Africa Region July 2, 2012 Report No: 68036CM This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank s policy on Access to Information.

2 CURRENCY EQUIVALENTS Exchange Rate Effective April 30, 2012 Currency Unit = Francs CFA (XAF) US$1 = 462 XAF US$ = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ADF AF AfDB ARAP ASYCUDA CAR CEMAC COMESA CPS DRC EC ECOWAS ERR ESIA ESMF EU FER FCFA FMA GDP GoS GUCE HIV/AIDS HDM IBRD IDA ISPS METPD NGO NPV OP/BP ORAF African Development Fund Additional Financing African Development Bank Abbreviated Resettlement Action Plan Automated System for Customs Data Central African Republic Economic and Monetary Community of Central Africa Common Market for Eastern and Southern Africa Country Partnership Strategy Democratic Republic of Congo European Commission Economic Community of West African States Economic Rate of Return Environmental and Social Impact Assessment Environmental and Social Management Framework European Union Fonds d Entretien Routier (Road Maintenance Fund) African Financial Community Franc Financial Management Assessment Gross Development Product Government of Spain Guichet Unique du Commerce Extérieur (External Trade Single Window) Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome Highway Development and Management Model International Bank for Reconstruction and Development International Development Association International Ship and Port Facility Security Ministère de l'equipement, des Travaux Publics et du Désenclavement (Ministry of Equipment, Public Works and Desenclavement), formerly Ministry of Equipment and Desenclavement Non Governmental Organization Net Present Value Operations Policy/Bank Procedure Operational Risk Assessment Framework

3 PDO PURISU ONM RIAS RPF RUC SADC SDR SIL TA TFF UEMOA UES VAT VOC Project Development Objective Projet d Urgence de Rehabilitation d Infrastructures et de Services Urbains Office National du Matériel (National Civil Works Equipment Office) Regional Integration Assistance Strategy for SubSaharan Africa Resettlement Policy Framework Road User Costs Southern African Development Community Special Drawing Rights Specific Investment Loan Technical Assistance Trade Facilitation Facility Economic Community of West African States Unité Environnementale et Sociale (Social and Environmental Unit) ValueAdded Tax Vehicle Operating Cost Vice President: Makhtar Diop Country Director: Gregor Binkert Sector Director: Jamal Saghir Sector Manager: Supee Teravaninthorn Task Team Leaders: Nicolas PeltierThiberge/Peter Taniform

4 CENTRAL AFRICAN REPUBLIC THIRD ADDITIONAL FINANCING CREDIT AND GRANT FOR THE CEMAC TRANSPORT/TRANSIT FACILITATION PROJECT CONTENTS Additional Financing Data Sheet... i I. Introduction...5 II. Background and Rationale for Additional Financing in the Amount of US$125 million...6 III. Proposed Activities...16 IV. Appraisal Summary...18 Annex 1: Revised Project Results Framework...22 Annex 2: Operational Risk Assessment Framework (ORAF)...28 Annex 3: Detailed Description Of New Project Activities...31 Annex 4: Economic Analysis of Revised Costs and Main Additional Activities...37 Annex 5: Revised Project Costs...40 Annex 6: Revised Implementation Arrangements...42

5 CENTRAL AFRICAN REPUBLIC THIRD ADDITIONAL FINANCING CREDIT AND GRANT FOR THE CEMAC TRANSPORT/TRANSIT FACILITATION PROJECT ADDITIONAL FINANCING DATA SHEET Country Director: Gregor Binkert Sector Manager: Supee Teravaninthorn Sector Director: Jamal Saghir Team Leader: Nicolas PeltierThiberge / Peter Taniform Project ID: P Expected Effectiveness Date: November 30, 2012 Lending Instrument: Specific Investment Loan (SIL) Additional Financing Type: Financing Gap and Scale Up Basic Information Additional Financing (AF) Sectors: Roads and Highways (85%) Central Government Administration (15%) Themes: Trade Facilitation and Market Access (60%) Regional Integration (40%) Environmental category: B Partial Assessment Expected Closing Date: January 31, 2016 Joint IFC: NO Joint Level: N/A Basic Information Original Project Project ID: P Environmental category: B Partial Project Name: CEMAC Transport and Assessment Transit Facilitation Project Expected Closing Date: January 31, 2016 Lending Instrument: Specific Investment Loan (SIL) Joint IFC: NO Joint Level: N/A AF Project Financing Data [ ] Loan [ X] Credit [X] Grant [ ] Guarantee [ ] Other: Source Total Project Cost: Cofinancing: Borrower: Total Bank Financing: IBRD IDA New Recommitted AF Financing Plan (US$m) Total Amount (US$m) Client Information Recipient: Central African Republic Responsible Agency: Ministry of Public Works (CAR) Contact Person: M. Noël GBEBA, Project Coordinator Telephone No: (236) gbiegbabrunoh@yahoo.fr, i

6 AF Estimated Disbursements (Bank FY/US$m) FY Annual Cumulative Project Development Objective and Description Original project development objective: The project development objective is to facilitate regional trade among the Member States and improve the Recipient s, the Republic of Cameroon's and the Republic of Chad's access to world markets. Revised project development objective: The Project Development Objective (PDO) remains unchanged. Project description: The original project has three components to be implemented in Cameroon, Central African Republic and Chad: (i) (ii) Component 1: Roads and Railway Infrastructure Improvement. Activities include: (a) periodic maintenance, rehabilitation and upgrading works on selected road section along the corridors; (b) paving of existing gravel road sections; (c) harmonization and enforcement of axle load control policies; (d) construction and improvement of rest areas; (e) rehabilitation of critical rail infrastructure; and (f) implementation of Human Immunodeficiency VirusAcquired Immunodeficiency Syndrome (HIVAIDS) awareness and mitigation measures. Component 2: Transit and Transport Facilitation Investments. Activities include: (a) communication between stakeholders, especially within the port community, including Information and Communication Technology (ICT) interfacing; (b) transit regime and border crossing improvements through cargo tracking, border posts constructions and improvement; (c) port safety and security strengthening; and (d) improvement in intermodal interfaces. (iii) Component 3: Customs and Transport Sector Institutional Strengthening and Capacity Building. Activities include: (a) CEMAC Customs Union and national customs strengthening; (b) institutional support for transport facilitation institutions; and (c) coordination and management of the project's activities. Activities to be supported by the proposed Third Additional Financing (AF3) fall under the first, second and third components of the original project and include unallocated funds for an amount of about US$9.8 million. (i) Component 1: Roads Infrastructure Improvement along the Corridor: Periodic maintenance, rehabilitation and upgrading works on selected sections of the Corridor, including: (A) rehabilitation of the BouarBaoro road, including two bridges, being one at the Bouar exit and one on the Vouen river and sections of the Bouar bypass; (B) construction of weight control stations; (C) upgrading of sections of the Bangui bypass; (D) maintenance of selected critical sections of the DoualaBangui corridor located in the Recipient s territory; and (E) carrying out of associated design studies and supervision activities. ii

7 (ii) Component 2: Transport Facilitation Investments: (i) Strengthening the Recipient s border customs services, including upgrading of facilities, computerization and implementation of a custom s strategic plan; (ii) transit improvements, including: (A) carrying out of a technical study and construction of a transit truck rest stop and of a user s survey and studies on transit conditions in the DoualaBangui corridor; and (B) intermodal interfaces improvements, including the provision of equipment for the upgrade of the bus and truck stations in Bouar; and (iii) road safety improvements, including: (A) piloting the implementation of a road safety operational unit; (B) provision of equipment and carrying out of training and communication strategies based on a road safety assessment; and (C) development and implementation of a road safety database. (iii) Component 3: Customs and Transport Sector Institutional Strengthening and Capacity Building: (i) Strengthening CEMAC custom union, including computerization of, and institutional support to, the National Customs; (ii) institutional strengthening for transport and transit facilitation institutions, including the Ministry of Finance, Ministry of Environment, the Ministry of Planning, the Ministry of Transport, the Ministry of Public Works and the Road Maintenance Fund (iii) carrying out of studies to improve transport and transit conditions along the Corridors; and (iv) management and coordination of the Project s activities. Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Does the project require any waivers of Bank policies? Have these been endorsed or approved by Bank management? [X]Yes [ ] No [X]Yes [ ] No [ ]Yes [X] No [ ]Yes [X] No [X]Yes [ ] No [ ]Yes [X] No [X]Yes [ ] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [ ] No Financing Agreement Reference Article V 5.01 Conditions and Legal Covenants: Description of Date Due Condition/Covenant Updating of project Prior to effectiveness implementation manual to include AF3 activities. Schedule 2, Section V (a) The Recipient shall include in its budget the necessary resources for the maintenance of the portion of the Douala Bangui corridor which is on the Recipient s territory. iii Annually

8 Schedule 2, Section V (b) Schedule 2, Section V (c) Schedule 2. Section V (d) Schedule 2, Section V (e) The recipient shall produce and deliver to the Association a semiannual governance report on its activities for the period covered by such report and making recommendations for the future in form and scope satisfactory to the Association. The Recipient shall publish on the Government s website the logging exports statistics through Garoua Boulai The Recipient shall publish the National Customs statistics through a medium satisfactory to the Association The Recipient shall publish its Financial Statements, no later than six months following the end of the year to which they relate, on the Recipient s Government website Every 6 months Quarterly Twice a year Annually iv

9 I. Introduction 1. The Economic and Monetary Community of Central Africa (CEMAC) Transport and Transit Facilitation Project is a regional program with activities in Cameroon, Chad and the Central African Republic. This program is supported by the International Development Association (IDA), the European Commission (EC), the African Development Fund (ADF), France, Japan, Spain and Islamic partners. The CEMAC subregion is constituted of six member states: The Republic of Cameroon, Central African Republic, Republic of Chad, Republic of Congo, Equatorial Guinea, and Gabon. The original credit amount was approved by the World Bank Board of Executive Directors on June 26, 2007, became effective on December 5, 2007 with an initial closing date of January 31, for a total amount of SDR132.9 million (US$201 million equivalent) of which SDR97.2 million were to be spent in Cameroon (Credit 4337CM), SDR16 million were to be spent in Central African Republic (Grant H314CA) and SDR 19.7 million were to be spent in Chad (Grant H315CD). A first additional credit financing (AF1) was approved on November 5, 2009, which became effective on April 8, 2010 with an initial closing date of January 31 2, 2015, for an amount of SDR138.6 million (US$217 million equivalent) of which SDR95.8 million was for Cameroon (Credit 4659CM) and SDR42.8 million for Central African Republic (Grant H522CF). 3 A second additional credit financing (AF2) was approved by the World Bank Board of Directors on June 23, 2011, became effective on December 21, 2011, with a closing date of January 31, 2016, for an amount of SDR70.7 million (US$112 million equivalent) for Cameroon (Credit 4987 CM) This Project Paper seeks the approval of the Executive Directors to provide a third additional financing (AF3) in the amount of US$125 million, of which US$123.4 million will be on IDA credit terms and US$1.6 million on IDA grant terms to the CEMAC Transport/Transit Facilitation Project for the Central African Republic (CAR) to close a financing gap and scale up the project s impact and effectiveness in the CAR for which an official request for this AF3 was received by the IDA on December 14, The financing gap was, for the most part, due to the difference between the actual rehabilitation cost of the road Fambélé Bouar and the initial estimates, which were based on Cameroon cost benchmarks (in the absence of data for CAR), as well as the increase in oil prices and higherthanexpected road maintenance needs on the section 1 The closing date was extended to January 31, 2016 when the second additional financing was approved. 2 The closing date was extended to January 31, 2016 when the second additional financing was approved. 3 In Cameroon, the AF1 funds the rehabilitation of the Dabanga Kousseri road, rail infrastructure improvement, as well as the rehabilitation, reconstruction and enlargement of critical infrastructure along the Ngaoundéré Garoua. In CAR, the AF1 mostly funded additional road works on the corridor, including: (i) an additional 7 km of roads between Garoua Boulai and Baboua, following a cost overrun of another contract financed by the African Development Bank (AfDB); (ii) an additional 33 km of roads between Fambele and Bouar, following a financing gap by the EC; (iii) the improvement of the Bangui bypass; and (iv) selected periodic road maintenance works between Baoro and Bangui. 4 The AF2 finances additional activities in Cameroon to complement the initial project and AF1 by supporting the rehabilitation or partial rehabilitation/maintenance of additional road sections in Northern Cameroon (e.g. between Magada and Dabanga), as well as improvements in road safety conditions. A parallel financing in an amount of US$11,489,423 from the Kingdom of Spain under the Programmatic Trust Fund for the Spanish program in Africa (Plan Africa), managed by the World Bank on behalf of the Government of Spain (GoS) was obtained to complement the AF2. This Trust Fund will help finance the reconstruction of the Tilde bridge, and the rehabilitation of the Kousseri bypass. The EC has also mobilized 18 million euros as complementary funds to help improve 66 km of the Magada Maroua road section in Northern Cameroon through a combination of periodic and routine maintenance schemes. 5

10 between Bangui and Baoro. This Project Paper also seeks approval for slight restructurings of the initial project and AF1 for the Central African Republic (CAR) portions of the CEMAC Transport and Transit Facilitation Project. 3. The proposed AF3 will complement the initial project, AF1 and AF2 and scale up the project s impact and effectiveness along Central African Republic (CAR) sections of the Douala Bangui corridor. It will address both a financing gap and scale up road rehabilitation works on the corridor to support the objective of having most of the corridor in fair to good condition by the end of the program and ensure allseason access between Douala and Bangui. The proposed AF3 will also include road safety and transit facilitation activities as well as institutional and capacity building of key institutions such as customs, and ministries of transport, environment, planning and public works involved in the project. 4. This corridor is critical to provide access to landlocked CAR to regional and international markets, to promote greater trade integration within the CEMAC subregion, and to reduce transport costs. As a result of poor infrastructure and trade integration policies, the CEMAC region remains the least integrated region on the African continent in terms of trade. The Douala Bangui corridor has been identified as one of Africa s key infrastructure backbones supported by IDA as part of its 2010 Regional Integration Assistance Strategy for SubSaharan Africa (RIAS). In the 2011 RIAS progress report, IDA stressed the need to continue improving crossborder growth corridors through focusing on the missing links. 5. The proposed AF3 meets the criteria of suitability and appropriateness as defined in Operations Policy/Bank Procedure (OP/BP) for the following reasons: (i) it allows for the completion of the AF1 and AF2 project activities for which there is a financing gap; and (ii) it finances additional or expanded activities that allow the scaling up of the project s impact and development effectiveness. II. Background and Rationale for Additional Financing in the Amount of US$125 million 6. Regional Context. The project is part of the CEMAC Trade and Transport Facilitation Program adopted by CEMAC on March 11, This program aims at promoting greater trade integration within the CEMAC subregion by reducing physical and nonphysical transit bottlenecks along two key corridors: Douala N Djamena and Douala Bangui. With interregional trade of only 0.5 to 1 percent of the total trade of its member states, the CEMAC subregion is the least integrated subregion in subsaharan Africa (SSA), far behind the Common Market for Eastern and Southen Africa (COMESA) (five percent), the Southern African Development Community (SADC) (10 percent), the Economic Community of West African States (ECOWAS) (10 percent), and the Economic Community of West African States (UEMOA) (15 percent). 6

11 Box 1: The CEMAC subregion The Economic and Monetary Community of Central Africa (CEMAC) was officially created in March 1994 to replace the Union Douanière des Etats d Afrique Centrale the old institution that governed trade policy and regional integration since independence. CEMAC includes six member states: Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon. Wider regional trade integration has been pursued recently with other Central African countries, particularly the Democratic Republic of Congo (DRC) and Sao Tomé and Principe through the ongoing negotiations for an Economic Partnership Agreement (EPA) with the EC. The CEMAC subregion has an estimated population of 36 million people. Two countries (Cameroon and Chad) account for 72 percent of the CEMAC population while Chad and Central African Republic account for 63 percent of the subregion s area. 7. High transport costs and transit logistics inefficiencies have been identified as one of the main barriers to trade in the CEMAC subregion. While some progress has been observed as a result in particular of the ongoing road improvement works financed by IDA and other donors, transporting a 20ton, 40foot container between Douala and Bangui still takes between 15.5 and 28 days (compared to 30 days in 2007) but this delay can vary significantly due to frequent road closures in the rainy season. The cost of transporting this container is in 2012 about three million FCFA (about US$6,000), or US$0.21 per ton km, remaining among the highest in SSA, compared to US$0.06 to US$0.08 in West Africa (corridors Lome Ouagadougou and Cotonou Niamey) and in East Africa (corridors Mombasa Kigali and Mombasa Kampala), and far above the costs observed in Southern Africa (US$0.05 to US$0.06 for the corridors Durban Lusaka and Durban Ndola). 5 Because of noncompetitive practices within the freight transport industry, there is a concern that reduction in vehicles operating costs will be captured by transporters instead of being transferred to users of transport services. 8. Efficient transit logistics are indispensible for the landlocked countries in the region (Central African Republic and Chad) whose main business centers are at least 1,500 km away from the nearest port in DoualaCameroon and major transit bottlenecks in the CEMAC region are caused not only by poor physical infrastructure, but also nonphysical barriers and transit logistics inefficiencies. Previous trade and transport sector work by the World Bank and other donors have identified noninfrastructure bottlenecks to transit as one of the most urgent trade facilitation issues in the region. More specifically, there is a need to reform the policies on bonds for shipped goods, issues with delays of goods in transit (data shows that containers spend on average 19.5 days at the port terminal before processing, although port transit procedures are generally cleared in seven days), lengthy transit procedures that could be reduced with computerization and data exchange between agencies and countries, lack of transparency and accountability on the axleload controls, and excessive amount of checkpoints. For the CAR, there can be up to seven different transit documents issued by different agencies. 6 Likewise, two 2009 surveys of corridor operations reported between 70 and 150 check points (legal and illegal) between Douala and N Djamena and 45 between Douala and Bangui. Each control generally lasts less than an hour and on a return trip between Douala and N Djamena, transporters have to pay on average FCFA270,000 (US$580 equivalent) in fees and illegal bribes. 5 Source: Transport prices and costs in Africa: study of the main corridors. Teravaninthorn, S. and Raballand, G. World Bank (2009). 6 Source: Central African Republic Trade and Transport Facilitation Audit,

12 9. Thanks to funding from IDA, European Commission (EC), African Development Bank (AfDB) and bilateral donors (France, Spain, Japan, Islamic Development Bank), at least 90 percent of the Douala N'Djamena corridor is expected to be in fair to good condition by the end of However, for the Douala Bangui corridor, about 15 percent of its length (all located on the CAR portion of the corridor) still remains in poor or very poor conditions and with no financing identified (some of the sections in CAR that are in very poor condition are regularly cut during the rainy season). The proposed AF3 would finance the full rehabilitation of an additional 61 km of roads in CAR and would provide basic improvement and maintenance on other sections of roads on the corridor. The ultimate objective is to reach at least 90 percent of the Douala Bangui corridor in fair to good condition by the end of Lessons learned from the parent program. The parent project and its two additional financings have provided the following important lessons that were incorporated in the design of the proposed AF3. First, the limited number of reference unit prices and the reduced competition between road contractors in CAR calls for prudent cost estimates and inclusion of sufficient unallocated funds in order to avoid financing gaps on road works contracts, as well as contractual arrangements that would reduce the risk of cost overruns. Second, transit facilitation activities are critical to attain the project s development objectives but are slower to implement due to institutional weaknesses and, in some cases, strong vested interests and opposition to reform. It is therefore important to provide sufficient support and analytical works including political economy assessments and promotion of a dialogue at regional level. Complementarities with other assistance programs (e.g. Trade Facilitation Facility (TFF)funded activities) should also be developed. Thirdly, adequate and sustained financing for road maintenance is critical to the sustainability of road network and has therefore to be closely monitored. Specific policy dialogue is needed in this area, in order to provide the Government with recommendations on mid to longterm planning of maintenance needs and on options to raise funding for infrastructure asset management. Finally, institutional strengtening activities can help ensure sound project implementation, particularly for fiduciary and safeguardrelated issues but also for monitoring and evaluation reporting. They have also been found to generate positive externalities to strengthen CAR institutions, that benefited other development programs. 11. CAR context. The CAR is one of the world s poorest and least developed countries. The 2010 United Nations Development Program Human Development Report ranked CAR 159 out of the 169 countries. The most recent national household survey carried out in 2008 showed that 62 percent of the population was living below the poverty line. Poverty and underdevelopment in CAR are the twin legacies of a prolonged history of political instability. Institutional capacity and human resources were severely weakened during the protracted periods of political conflict and weak macroeconomic context, as many of the most educated and skilled people left the country. Private capital has stayed away, discouraged by the challenging business climate and the unfavorable investment environment. Therefore, deprived of human capital, investments and financial resources, the economy has chronically underperformed. 12. Since the political situation started stabilizing in 2003, economic growth has continued to be sluggish, averaging only 2.5 percent per annum, and poverty remains pervasive. Meanwhile, the economy has been buffeted by a series of internal and external shocks, including the 8

13 breakdown of the country s major hydropower plant, steep increases in the prices of imported food and fuel, and weak demand for exported products in the face of the global financial crisis and recession. The recent disappointing trends may now be reversing: preliminary estimates show that a recovery began in 2010, with real gross domestic product (GDP) growth of 3.3 percent and an inflation rate at 1.8 percent (down from the 9.3 percent observed in 2008). The more stable political situation has also produced some progress in terms of security. 13. Project financing in CAR. The proposed AF3 would include US$19.7 million to close the financing gap of some activities that were included under the original financing and AF1, as well as US$105.3 million to finance new activities. A US$9.8 million contingency has been included to protect the project against the risk of additional cost overruns on the road works. An overview of the overall proposed project financing in CAR is given in Table 1 below. Table 1: Project Financing in CAR (US$ million). 1 st additional 3 rd additional Activities Original financing financing Actual financing Financing Scaling Financing Scaling gap up gap up Rehabilitation Garoua Boulai Baboua road (7 km) Rehabilitation Baboua Fambele road (27 km) Rehabilitation Fambele Bouar road (33 km) Fambele entrance of Bouar road (27 km) Bouar Bypass road (6.5 km) Rehabilitation of Bouar Baoro road (including two bridges) (52 km) 80.4 Bangui bypass International corridor road maintenance Bangui Baoro maintenance works Sibut Bambari road maintenance acquisition of civil works equipment for ONM Garoua Boulai Baoro road maintenance Road design studies and supervision Other activities including transport facilitation and institutional strengthening Contingencies Total Financing gap and cost overruns. Two activities planned to be financed under the original program and AF1 ended up costing more than initially expected, and are as follows: (i) the rehabilitation of a 33 km road section between Fambele and Bouar (with a parallel financing by the EC); and (ii) road maintenance activities between Baoro and Bangui. These cost overruns generated a financing gap for the project which was filled through the cancellation of some activities (e.g. Bangui bypass) and the downsizing of the transit facilitation and the institutional strengthening components. The proposed AF3 will help close the financing gap on the ongoing Fambele Bouar road rehabilitation contract. While this contract was initially estimated at US$32 million, it ended up costing US$36.1 million after contract award and 6.5 km (Bouar bypass) had to be taken out from the original scope of works. The difference with the initial cost estimate is due to the limited availability of adequate benchmarks for unit costs when the road design studies were prepared. At that time, no significant road contract had been implemented 9

14 for several years in CAR. Cameroon benchmarks were therefore used but, retrospectively, they were found to be at least 20 percent lower than those used in CAR due to the poor security context in CAR, the small size of the CAR construction market, higher costs of construction related inputs and scarcity of construction related skilled manpower. 7 Similar cost overruns were observed on the neighboring ECfinanced contract between Fambele and Bouar (with even higher unit costs), as well as, although to a lesser extent, on the AfDBfinanced contract between Garoua Boulai and Baboua. 15. Sector Policy and Strategy. The effectiveness of transport policies in the CEMAC region is reduced by poor planning and dispersion of resources as well as by poor asset management practices. Although the three countries have set up road maintenance funds financed by earmarked gasoline charges, maintenance activities are poorly planned and ineffective in optimizing the life cycle of road assets. To address these challenges, a policy dialogue has been engaged with the three countries involved (Cameroon, Chad and CAR), the various National Road Maintenance Funds and Ministries of Public Works specifically by the Bank and EC on how to effectively improve asset management practices. 16. Road maintenance in CAR constitutes a particularly difficult challenge to address. This is because the US$7 million per year fuel levy that is collected for road maintenance is not sufficient to cover the core road network maintenance needs of the country. What is collected represents only about 30 percent of the needs to maintain the core road network, leaving no funding for the maintenance of the secondary and tertiary road network. Furthermore, the tax base that the road fund can tap to collect revenues, be it vehicle or oil use, is very limited. Competing fiscal measures on the structure of oil prices make it difficult to increase the proceeds allocated to the road fund. Despite mounting pressures to revise the structure of oil prices, the CAR authorities have committed to maintain the current levels of the fuel levy. Under the proposed AF3, a strategic study on the projected evolution of the financing needs and available resources for the maintenance of transport infrastructure will be prepared, including policy recommendations. 17. Another challenge for the sector is the limited capacity of national contractors to execute routine road maintenance works. There are very few small private sector contractors which can undertake small civil works on paved roads, and there is only one private supplier of crushed aggregates, which are currently sold at about 10 times the price in Cameroon. Considering the still limited capacity of the private sector, one of the few entities which can provide some form of general maintenance support is the Office National du Matériel (ONM), which is owned by the Government of CAR. It benefits from an ECfunded Technical Assistance (TA) but needs to transform itself from a civil works equipment provider to a real civil works contractor, and is slowly getting capacity to carry out paved work routine maintenance. ONM has been equipped with a crusher under the AF1 and with several civil works equipment under the ECfunded TA. The ONM has also suffered from difficulties in being paid for works contract payments although this situation has recently improved. 7 Source: detailed review conducted by IDA and the EC on the unit prices for all major Bill of Quantities items that were submitted by bidders for all of the road works that were procured under the IDA, African Development Fund (ADF), France (C2D) and EC funded parts of the Project in Cameroon and CAR. Most of the bidding processes were conducted between early 2008 and early

15 18. Project performance and results achieved so far. The CEMAC Transport and Transit Facilitation Program (Program) is financed by six IDA credits and grants, totaling US$530 million (approved in 2007, 2009 and 2011). As of April 17, 2012, US$176 million have been disbursed (33 percent of the total amount) and the contractually committed amount is US$375.7 million (71 percent of total amount). This comprehensive program tackles most of the transport and transit facilitation needs along the two targeted corridors, such as: (i) road rehabilitation; (ii) road safety; (iii) railway modernization; (iv) customs reform; (v) transport regulation; (vi) support to the Douala single window; and (vii) port modernization. A key project objective is to reduce the dwell time in the Douala port and the transit time from Douala to N Djamena and from Douala to Bangui. In addition to the IDA support, this program is also supported by the AfDB and the European Commission. The project is implemented by the three governments, in close coordination with the CEMAC. Table 2: Performance ratings of the CEMAC Transport and Transit Facilitation Project AprilMay 2011 NovemberDecember 2011 Cameroon Satisfactory Moderately Satisfactory CAR Moderately Satisfactory Moderately Satisfactory Chad Moderately Satisfactory Moderately Satisfactory Overall Moderately Satisfactory Moderately Satisfactory 19. The project has passed in 2011 its midterm implementation stage with almost all the large scale infrastructure works being contracted and ongoing. As a result of the project and the overall program which it supports, the proportion of roads in good condition between Douala and N Djamena (1,850 km) and Douala and Bangui (1,450 km) has increased between 2007 and 2012 from about 40 and 53 percent to about 65 and 67 percent, respectively. As a result, traveling time between Douala and Bangui has been reduced from 30 days in 2007 to less than 28 days in but this delay still varies significantly between the dry and the rainy season when frequent road closures occur. On the rehabilitated sections between Garoua Boulaï and Bouar in CAR, the travel time has been more than halved and a significant increase in traffic and economic development has been observed between Bouar and the border with Cameroon, as well as an increased availability of regular passenger and freight transport services. 20. However, transit facilitation activities transport regulation, customs reform, port modernization, support to Douala single window, are progressing more slowly, partly because of technical and capacity limitations and partly because of political economy issues, including the reluctance for greater transparency of some key stakeholders involved in transit activities. In particular, while a modern customs management system (ASYCUDA) has been deployed in the customs of the three countries, the three systems are yet to be connected in order to be able to exchange transit data, which would improve the efficiency of custom procedures and reduce the need for multiple check points along the corridor. Several initiatives have nevertheless recently progressed and are already making a positive contribution to advance the transit facilitation agenda, including: (i) the computerization of external trade procedures by the Cameroon customs and the Douala singlewindow (GUCE) with five procedures being automated to date; (ii) the 8 A significant part of the total transit time between Douala and Bangui occurs in the Port of Douala 11

16 establishment of a transit observatory to monitor selected indicators along the corridor 9 ; (iii) the implementation of the new CEMAC transit regime with the training of customs officers in the three countries; (iv) the equipment of border posts in CAR and Cameroon; (iv) the tracking of goods in transit, building on an initiative from the Cameroon customs; (v) the successful implementation of performancebased labor contracts by the Cameroon customs; and (vi) the preparation of transport sector strategies as well as the definition of work plans for road safety. Other activities have however shown little progress, particularly the reduction of check points along the corridor. To date, two of the most difficult challenges affecting the performance of transit along the two corridors are the reduction of dwell times in the port of Douala and the noncompetitive practices in the trucking industry in the three countries. 21. In CAR, the road rehabilitation works have been completed on the Fambele Baboua road section and are close to completion between Fambele and Bouar. By the end of 2012, the 150 km long road section between Bouar and the border with Cameroon should be fully rehabilitated. A road maintenance contract is also under way on specific sections between Baoro and Bangui (i.e. Baoro Bossemtélé and Bossembele Bangui) but fell short of the target due to continuous deterioration of sections in already bad conditions between identification and procurement. The top priority to ensure a consistent riding quality on the corridor now is Bouar Baoro (52 km), a highly deteriorated unpaved section which is closed on average 30 days during the rainy season. The next priority is the Bossentele Bossembele (141 km) road section which is more passable than the Baoro Bouar section but rapidly deteriorating. The CAR Government has requested the financial support of the African Development Bank (AfDB) in order to improve the condition of this last remaining section. Road maintenance of newly rehabilitated road sections and axle load control are also critical to ensure the sustainability of the significant road investments about to be completed. Finally, like in the other countries, transit facilitation and institutional strengthening activities have progressed slowly despite the acquisition of some equipment and the construction of customs facilities. Additional resources are needed to continue advancing this complex agenda and promote in particular the interconnection between the customs management systems of the three countries (ASYCUDA). 22. Disbursements. As of April 17, 2012, about 35 percent of the project s funds or US$188 million have been disbursed. The disbursement rate is the highest in CAR with 74 percent of the funds disbursed, compared to 28 percent for Cameroon, and 25 percent for Chad. However, it is to be noted that the disbursement rate for Cameroon was reduced in 2011 after the approval of the AF2. In Chad, the disbursement rate remains low due to delays incurred in procuring the main works contract (rehabilitation of the road Bongor Ere Kelo). However, disbursements have recently accelerated with the awarding and actual implementation start of this contract. 9 In partnership with the CEMAC and the customs general directorates in the three countries (activity supported by the Trade Facilitation Facility managed by the World Bank). 12

17 Country Table 3: Latest Disbursements and Contractual Commitments Available amount Disbursed Undisbursed Committed (original project US$ % of US$ % of US$ and first & second million available million available million AF) amount amount US$ million % of available amount Cameroon CAR Chad Total Fiduciary Performance. The implementation of the procurement and financial management arrangements has been rated Moderately Satisfactory for the three countries. However, implementation performance in CAR has been upgraded to Satisfactory after the last supervision mission (December 2011) due to the high disbursement rate and to the satisfactory implementation of a specific action plan for environmental safeguards. There are no outstanding audit reports in CAR. The 2010 audit report for the CAR component of the project was qualified, pending some clarifications by the implementing units but these issues were adequately addressed through the implementation of a specific action plan. Overall, the project technical teams in the implementing agencies in all three countries are adequately staffed with qualified and experienced Procurement and Financial Specialists with track record in World Bank financed project that enable them in carrying out their functions effectively. Table 4: Latest Available Fiduciary Performance Ratings (NovemberDecember 2011) Country Implementation performance Financial Management Procurement Central Satisfactory Moderately Satisfactory Moderately Satisfactory African Republic Cameroon Moderately Satisfactory Moderately Satisfactory Moderately Satisfactory Chad Moderately Satisfactory Moderately Satisfactory Moderately Satisfactory Overall Moderately Satisfactory Moderately Satisfactory Moderately Satisfactory 24. Safeguards performance. Safeguards performance is Satisfactory in CAR. Some issues such as poor management and rehabilitation of borrow pits were reported in November 2010 for the Fambele Baboua road rehabilitation works but these issues have now been adequately addressed thanks to the implementation of a specific action plan. A thorough review by the Bank supervision team in December 2011 has confirmed the satisfactory implementation of the plan. A robust safeguards team has been put in place jointly by the Ministry of Public Works and the Ministry of Environment in order to monitor the implementation of all ongoing road rehabilitation works in CAR. Country Central African Republic Table 5: Latest Available Safeguards Performance Ratings (November 2011) Overall Environmental Natural Physical Cultural Involuntary Safeguards Assessment Habitats Resources Resettlement Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory 13

18 Cameroon Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Chad Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Overall Satisfactory satisfactory Satisfactory Satisfactory Satisfactory 25. Legal covenants. Legal covenants have been substantially met in the case of CAR, although some of them were met with some delays: Wood export statistics, key customs statistics and the project s financial statements are now all periodically published on the internet and the Bank is receiving, twice a year the project s good governance reports, with no critical issue being reported. For the purpose of the proposed AF3 and in agreement with the CAR Customs, the legal covenant concerning the publication of national customs statistics is amended to reflect an increase in the frequency of such publication (from once a year to twice a year). Some concerns were however raised late 2011 regarding the level of the gasoline levy earmarked for road maintenance. After careful consideration and discussion with the Bank teams, the CAR authorities finally committed to maintaining the level of the gasoline levy despite competing demands to modify the structure of the gasoline prices. Compliance with the legal covenant agreed for the original financing 10 was therefore ensured. 26. Alignment with CAR Country Partnership Strategy. The initial project and its three AF continue to fully support the CEMAC commission's regional trade and transit programs on the major transit corridors, as defined in The proposed AF3 is also in line with the CAR s recently adopted Poverty Reduction Strategy. The principles for the proposed additional financing to the Project appear in the Country Partnership Strategy (CPS) for CAR, discussed by the IDA Board in September 2009 (Report No CF). More specifically, the CPS (prepared jointly with the AfDB) for CAR proposes to rebuild and diversify the economy as its third pillar, and one of its key principles is to maximize opportunities for regional integration. The project is consistent with the strategy s outcome 5 (improved infrastructure for regional economic integration). Finally, the proposed additional financing remains fully consistent with the Regional Integration Assistance Strategy for Central Africa 11 and the Bank s new Africa Strategy pillar of competitiveness and employment. 27. Eligibility criteria for regional IDA. The proposed AF3 for the Project fully meets the eligibility criteria 12 for funding under the IDA16 regional envelope for the following reasons: (i) it covers three contiguous economically interdependent countries (CAR, Chad and Cameroon); (ii) the expected trade efficiency gains cannot be fully achieved without the direct and integrated involvement of all the countries sharing the corridors; and (iii) the expected benefits can only be achieved through the simultaneous implementation of an integrated set of infrastructure and facilitation measures in the countries along the corridor. Moreover, the additional activities which were not in the initial project and its two previous AF are considered critical in reaching the project s Development Objectives. 10 Covenant Schedule 2, Section V, (d): The Recipient shall include annually in its budget the necessary resources for the maintenance of the portion of the Douala Bangui corridor which is on the Recipient s territory. 11 Regional Integration Assistance Strategy (RIAS) for Central Africa (Report No.25328). This strategy, which is designed to support the CEMAC in areas of integration and cooperation, sets out Customs Union improvement and Trade and Transport Facilitation as a core activity

19 28. Foreseen Risk Factors. The Operational Risk Assessment Framework (ORAF) attached in Annex 2 describes in details the associated preparation and implementation risks. The overall risk rating for implementation is rated High because of the factors outlined below. Security/economic environment. Insecurity remains a substantial project risk for the AF3 as it was for the original project. Even if there has not been major unrest in CAR since the Project start, activities were on hold for a period of time and banditry remains a significant issue on both corridors. Fiduciary risks. The fiduciary risks analysis and resulting action plans initially defined for the project have been completed. The country specific risks remain substantial for CAR as development partner support on a large scale has only resumed over the last four years. However, the fiduciary agency on which the project relies has adequate financial management systems in place (internal and external auditing system, accounting system, and an administrative and accounting manual of procedures etc.). Procurement capacity needs to be reinforced inside the Government beyond the project s procurement specialists, and this will be done as part of the overall procurement reform in CAR. The limited capacity of several administrations as well as the governancerelated risks linked to the procurement of several civil works contracts is mitigated by close joint donor supervision and robust risk management mechanisms involving high level Government officials. High construction costs. Higher than expected construction costs remain a major risk and is one of the primary reasons for the proposed AF3. To reduce the risk of higher than expected construction costs, the following actions have been taken: (i) Procurement: All the road construction activities will be tendered, with procurement methods using the World Bank Guidelines, which will broaden competition. Moreover, most of the procurement is for large contracts and potentially attractive to both internal and external contractors; (ii) Reevaluation of cost estimates: all cost estimates have been reviewed taking into account the results of recent similar bids procured between 2007 and 2011 and the need for higher insurance provisions for the mobilization of civil works equipments, as well as the differences observed between the various donors procurement arrangements. Appropriate contingencies were considered, which now gives a much more solid set of estimates than in ; (iii) Increase in competition: Three contracts funded by ADF and IDA are now being executed by new contractors to the CAR market. This means that with these three contractors competition should improve, and the risk of collusion should decrease. This should result in more competitive prices when bidding processes are undertaken under the AF3 in this country. 29. Institutional and Capacity Issues. Though limited in scope, the proposed AF3 is further increasing the complexity of the CEMAC Transport and Transit Facilitation Project. It is therefore important to make sure that the implementing agency (the CAR Ministry of Public Works) has the capacity to handle the additional activities. Two junior engineers based on the site have been mobilized to reinforce supervision in CAR. The safeguards unit of the project in CAR has the necessary capacity with professionals who have been trained in dealing with World Bank safeguards policies. However, while this unit has a good capacity for the preparation and 15