IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-38880) ON A CREDIT IN THE AMOUNT OF SDR81.6 MILLION (US$122 MILLION EQUIVALENT) TO THE

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-38880) Transport Sector Country Department AFCE1 Africa Region ON A CREDIT IN THE AMOUNT OF SDR81.6 MILLION (US$122 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FOR THE CENTRAL TRANSPORT CORRIDOR PROJECT June 29, 2010

2 CURRENCY EQUIVALENTS Exchange Rate Effective December 31, 2009 Currency Unit = Tanzanian Shillings (TZS) US$1.00 = TZS 1, US$1.00 =SDR 0.64 FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS ADSL AfDB BRT CAS CODAP CTCP DCA DP DRC EA/SA EIA EMP EIRR ERR FMR GOT ICR ICT IDA IFC IRP-II HDM JICA KPH LAN LOC M&E MCC MOCT MS NDF NPV Asymmetrical Digital Subscriber Line African Development Bank Bus Rapid Transport Country Assistance Strategy Coordination of Donor Aided Project Central Transport Corridor Project Development Credit Agreement Development Partners Democratic Republic of Congo Environmental Assessment/Social Assessment Environment Impact Assessment/Social Impact Assessment Environment Management Plan Economic Internal Rate of Return Economic Rate of Return Financial Monitoring Reports Government of Tanzania Implementation Completion Report Information Communication Technology International Development Association International Finance Corporation Integrated Roads Project II Highway Development and Management Model Japan International Cooperation Agency Kilometers per hour Local Access Network Letter of Credit Monitoring and Evaluation Millennium Challenge Corporation Ministry of Communication and Transport, Zanzibar Moderately Satisfactory Norwegian Development Fund Net Present Value

3 O&M Organization and Management PCU Project Coordination Unit PDO Project Development Objectives PMMR Performance Maintenance Management Roads PMO-RALG Prime Minister s Office, Regional Administration and Local Government PPIAF Public-Private Infrastructure Advisory Facility PRG Partial Risk Guarantee RAHCO Reli Assets Holding Company RAP Resettlement Action Plan RF Road Fund RRP Railway Restructuring Project TA Technical Assistance TANROADS Tanzania National Roads Agency TAZARA Tanzania Zambia Railway Authority TEMESA Tanzania Electrical, Mechanical and Electronics Services Agency TR Tanzania Railways TRC Tanzania Railway Corporation TRL Tanzania Railway Limited TSSP Transport Sector Support Project TTCL Tanzania Telecommunications Company Limited WAN Wide Area Network VOC Vehicle Operating Costs VPD Vehicles per day Vice President: Obiageli K. Ezekweli Country Director: John Murray McIntire Sector Manager: C. Sanjivi Rajasingham Project Team Leader: Dieter E. Schelling ICR Primary Author: Fang Xu

4 TANZANIA Central Transport Corridor Project CONTENTS Data Sheet... i A. Basic Information... i B. Key Dates... i C. Ratings Summary... i D. Sector and Theme Codes... ii E. Bank Staff... ii F. Results Framework Analysis... ii G. Ratings of Project Performance in ISRs... v H. Restructuring (if any).... vi I. Disbursement Profile... vi 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower s ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP

5 A. Basic Information Country: Tanzania Project Name: Central Transport Corridor Project Project ID: P L/C/TF Number(s): IDA ICR Date: 06/29/2010 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: XDR 80.1M Environmental Category: A Implementing Agencies: TANROADS MOCT, Zanzibar TRC RAHCO Cofinanciers and Other External Partners: Nordic Development Fund (NDF) REPUBLIC OF TANZANIA XDR 81.6M Disbursed Amount: XDR 80.1M B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 05/21/2003 Effectiveness: 08/27/ /27/2004 Appraisal: 03/02/2004 Restructuring(s): Approval: 04/29/2004 Mid-term Review: 05/31/ /15/2006 Closing: 12/31/ /31/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Substantial Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Moderately Satisfactory Performance: Performance: Moderately Satisfactory i

6 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 12 5 Railways Roads and highways Theme Code (as % of total Bank financing) Export development and competitiveness Infrastructure services for private sector development Regulation and competition policy State enterprise/bank restructuring and privatization Trade facilitation and market access E. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E. Madavo Country Director: John McIntire Judy M. O'Connor Sector Manager: C. Sanjivi Rajasingham C. Sanjivi Rajasingham Project Team Leader: Dieter E. Schelling Dieter E. Schelling ICR Team Leader: ICR Primary Author: Dieter E. Schelling Fang Xu F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project's development objective is to(i) upgrade strategic road links; (ii) enhance road management capacity; and (iii) improve operations of Tanzanian railways. ii

7 Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Indicator Indicator 1 : Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Traffic increases on improved roads at least by 10% per annum on average between 2004 and 2009 Singida - Shelui in Singida - Shelui in 2009: 322 vpd 2009: 759 vpd Singida - Shelui Road Mkwajuni - Mkwajuni vpd Nungwe : 294 Nungwe : Mkwajuni - Nungwe vpd 1665 vpd 183 vpd Mkwajuni - Mkwajuni - Matemwe - Pongwe Pongwe: 142 Pongwe: vpd vpd vpd Paje - Pingwe 231 vpd Paje - Pingwe Paje - Pingwe 372 vpd 915 vpd Date achieved 06/01/ /31/ /31/2009 Comments (incl. % On average, this indicator is achieved 130% above target achievement) Indicator 2 : Reduction of poor condition of road network that is under TanRoads' responsibility 30% of the Value 49% of the network in 15% of the network network in poor quantitative or poor condition (14,000 in poor condition condition (8,500 Qualitative) km) (4,250km) km) Date achieved 06/01/ /31/ /31/2009 Comments (incl. % achievement) Indicator 3 : Value quantitative or Qualitative) The proportion of road network in poor condition under TANROADS# responsibility reduced by 50% more than the target value. 150% achieved. Total freight traffic level on TRC 1.45 million tons of traffic 2.0 million tons of traffic 0.41 million tons of traffic Date achieved 06/01/ /31/ /31/2009 Comments Target not achieved. Instead of increasing by 38%, the freight traffic on TRC (incl. % decreased by 72%. achievement) Indicator 4 : Transit traffic level on TRC increase by 20% Value quantitative or 560,000 tons of transit traffic 672,000 tons of transit traffic 140,000 tons of transit traffic iii

8 Qualitative) Date achieved 06/01/ /31/ /31/2009 Comments (incl. % achievement) Indicator 5 : Value quantitative or Qualitative) Target not achieved. Instead of increasing by 19.7%, the transit traffic on TRC decreased by 76.4%. Railway tracks under temporary speed restriction in % of the network 2% under 4.2% under 10% of tracks under temporary speed temporary speed temporary speed restriction of restriction of below restriction of 25 kph below 25 kph 25 kph Date achieved 06/01/ /31/ /31/2009 Comments (incl. % achievement) The target of limiting temporary speed restriction to 2% of track length was not achieved mainly due to grossly inadequate investments in track and infrastructure during the prolonged concessioning period. (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years 169 Kms of roads upgraded to paved standards and five ferries rehabilitated 0 km upgraded and no ferry rehabilitated 169 km which includes Singida- Shelui Rd and 3 Strategic roads in Zanzibar, three ferries rehabilitated and two new ones procured km Singida Shelui Road and 3.3 km at Singida urban completed. 56 km in Zanzibar completed. 2 Ferries rehabilitated (MV Kigamboni and, MV Sengerema 3 ferries procured (MV Kilombero, MV Pangani and MV Rufiji) Date achieved 08/01/ /31/ /31/2009 Comments a) 103% achieved (175 km of road completed) (incl. % b) 100% achieved (Ferries rehabilitated/procured) achievement) Feasibility, detailed design and documentation for rehabilitation and upgrading Indicator 2 : of trunk roads for 713 km of trunk roads completed Bidding Design and bidding Value no feasibility study of documents documents for (quantitative design available for above available for 713 1,320 km or Qualitative) roads km of roads completed Date achieved 08/01/ /31/ /31/2009 Comments 185% achieved (incl. % iv

9 achievement) Indicator 3 : Value (quantitative or Qualitative) TANROADS and MOCT Zanzibar capacity enhanced and key studies for improved road management executed No studies or enhancement executed TA for TANROADS and MOCT Zanzibar implemented; TANROADS HQ building occupied; LAN/WAN operational; All studies completed. All the above executed, implemented and operational, except TANROADS HQ building is not built. O&M study was not done since TANROADS felt that it is not needed. More studies were added during the implementation and were completed. Date achieved 08/01/ /31/ /31/2009 Comments (incl. % achievement) Almost 100% achieved. The TANROADS HQ building is not built because the client changed the original location of the proposed building. The O&M study was not done because TANROADS felt it is not needed. Indicator 4 : TRC Concessioned to a private operator Value (quantitative or Qualitative) Bidding documents issued to prequalified bidders Concession agreement signed by November 2004 and commencement of concession by June 2005 Concession agreement signed on Sept. 03, 2007 and TRC operations handed over to TRL on October 01, 2007 Date achieved 08/01/ /30/ /31/2009 The concession became operational more than two years behind schedule. The Comments concession performed poorly ; the government and the Concessionaire are in (incl. % discussion to terminate the concession and to transfer the concessionaire#s equity achievement) to the government. G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 06/15/2004 Satisfactory Satisfactory /10/2004 Satisfactory Satisfactory /03/2005 Satisfactory Satisfactory /19/2005 Satisfactory Satisfactory /21/2006 Satisfactory Satisfactory /17/2006 Satisfactory Satisfactory /05/2007 Satisfactory Satisfactory /24/2007 Satisfactory Satisfactory v

10 9 04/22/2008 Satisfactory Satisfactory /10/2008 Satisfactory Satisfactory /05/2009 Satisfactory Satisfactory /24/2009 Moderately Satisfactory Satisfactory H. Restructuring (if any) Not Applicable I. Disbursement Profile vi

11 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Tanzania is a poor country with 85 percent population working in the agriculture sector and its economy relies a lot on the exports of agriculture and mining products. Better transport infrastructure and service will reduce the transport costs of those exports, provide the poor with better access to economic and social services and enhance the integration of the national economy, and will therefore, contribute to poverty reduction and growth. 2. The Bank s Country Assistance Strategy (CAS) of Tanzania in 2000 proposed to focus Bank s interventions in four strategic areas: (a) private sector and infrastructure development; (b) sustainable rural development; (c) improved social infrastructure; and, (d) public sector reform and institution building. 3. The government of Tanzania s (GOT) strategy for the transport sector at appraisal was to reduce costs and increase service standard. For the road sub-sector, the government s policy was to provide a core network of about 45,000 km of roads in good and fair condition by For the railway sector, the introduction of private sector management and finance through long-term concession arrangement was central to the strategy. 4. The World Bank transport team has been engaged in improving Tanzania transport system in a systematic and continuous manner aiming at supporting economic growth and poverty reduction through a more efficient transport system. The engagement covers all subsectors including road, railway, aviation and port. Consistently, the focus was on the central transport corridor (both railways and roads) which is an important link to a large part of the country s economic activities and provides access to the landlocked neighboring countries, Burundi, Rwanda, Uganda and Eastern Democratic Republic of Congo (DRC). 5. The Central Transport Corridor Project (CTCP) was supporting the CAS and GOT s transport sector strategy. For the road sector, the government has already put a good amount of resources in addition to donors funding on core road network development. Most sections of the Central Corridor were already improved to paved condition and the paving of some of the remaining sections was ongoing through government and other Development Partners (DPs) financing. The project financed the remaining bottleneck which included the Sekenke escarpment (the worst trouble spot of the entire corridor). 6. Tanzania Railways Corporation (TRC), by the time of appraisal in March 2004, was able to maintain the record level of traffic achieved in However, there were distinct signs of performance decline in the coming years, the main ones being the following: (a) the inventory of spare parts left over from the Railways Restructuring 1

12 Project (RRP), which closed on December 31, 2002, was fast depleting and the government had made no budgetary allocation for support to TRC; (b) TRC s financial performance, as distinct from operational performance, continued to be poor in spite of increased revenue due to overstaffing and high fixed costs and it was in no position to finance the critical repairs needed; (c) the possibility of substantial retrenchment of staff, deteriorating infrastructure and negligible financial support from the government were resulting in a sharp decline in staff morale and productivity; (d) The departure of key RRP-financed expatriate personnel after the closure of RRP negatively impacted TRC s management capacity; and (e) competition from road for small loads and short hauls was accelerating and TRC was finding it difficult to maintain its traffic level in these areas. In the face of these signs, the government s strategy for TRC was three-fold: (a) concession the railways as soon as possible in the expectation that the concessionaire will take all needed actions to improve performance; (b) fund part of the infrastructure rehabilitation needs to make the concession attractive; and (c) permit the concessionaire to decide on the optimal staff strength and finance the retrenchment of the staff rendered surplus. 7. For Tanzania Zambia Railway Authority (TAZARA), the governments of Tanzania and Zambia, the two joint owners of TAZARA, after prolonged discussions between themselves and the Bank, had decided in principle to concession TAZARA in order to reverse its precipitous decline. A grant under the Public-Private Infrastructure Advisory Facility (PPIAF) had been arranged to finance a study to evaluate various concessioning options and make recommendations. At the time of appraisal, the study was due to commence soon. The two governments had requested for support towards decision-making and subsequently implementing the selected option. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 8. The original PDO was to: (a) upgrade strategic road links; (b) enhance road management capacity; and (c) improve operations of Tanzania railways. 9. Key performance indicators are: Road component (a) traffic increases by at least 10 percent per annum on average between 2004 and 2009 on improved roads; (b) the network under Tanzania National Roads Agency (TANROADS) responsibility (28,900 km of trunk and regional roads) in poor condition reduced from 49 percent in 2003 to 30 percent in Rail component (a) total freight traffic tonnage carried (on TRC network) increases from 1.45 million tons in 2002 to 2.0 million tons by 2009; (b) level of transit traffic increases by 20 percent from the 560,000 tons in 2003 to 672,000 tons in 2009; and (c) kilometers of track under speed restriction as a percentage of the total will decrease from 10 percent to 2 percent in

13 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 10. There was no revision to PDO and key indicators. 1.4 Main Beneficiaries (original and revised) 11. The main beneficiaries comprised all users of the central corridor (road and railway corridors) and the regions linked by the central corridor namely: (a) users of the central roads and railway systems; (b) agriculture, mining and tourism industries along the central corridor; (c) large number of people in vast rural areas and inland regions connected through urban centers, ports and border points to the central corridor; and, (d) neighboring countries like Burundi, Rwanda, Zambia, Uganda and the Democratic Republic of Congo. 12. Other project beneficiaries included: (a) TANROADS and the Ministry of Communications and Transport (MOCT) of Zanzibar, whose capacity was improved through capacity building and training; (b) GOT would gain from increased revenue in relation to lease payment and taxes on concessionaire s profits; (c) the railway concessionaire (including the government which had 49 percent share in the total equity of the concessionaire) would accrue higher profits increased railway traffic due to improved physical infrastructure and increased efficiency of operations. 1.5 Original Components (as approved) 13. Component A: Upgrading of strategic road links in mainland Tanzania and in Zanzibar (original cost: US$70.71 million, actual cost: US$88.49 million) aimed at providing better access to isolated rural areas, promote tourism industry and reduce export costs. (a) Rehabilitation and upgrading of the Singida-Shelui section (110 km) of the central transport corridor, including preparing an Environmental Management Plan (EMP) and Resettlement Action Plan (RAP); (b) Rehabilitation and upgrading of the Mkwajuni-Nungwi, Matemwe-Pongwe and Paje-Pingwe-Michamvi roads in Zanzibar (56 km), including preparing EMP and RAP; (c) Carrying out and updating feasibility studies, detailed design and bidding documents for 713 kilometers (four sections) of high priority trunk roads to be rehabilitated and/or upgraded under a proposed follow-on project. Nordic Development Fund (NDF) financed three sections (US$6.05 million) namely Singida-Babati-Minjingu, Dodoma-Babati and Tanga-Horohoro; (d) Rehabilitation of the MV Kigamboni, Pangani, Sengerema, Kilombero and Rufiji ferries. 3

14 14. Component B: Enhancing road management capacity specifically for TANROADS and MOCT Zanzibar (original cost: US$14.83 million, actual cost: US$6.49 million). (a) Design and construction of a new TANROADS headquarters building; (b) Setting up of a Wide Area Network and Local Access Network (WAN and LAN) for TANROADS to improve communication between headquarters, its regional offices and MOCT Zanzibar; (c) Carrying out of a study for the enhancement of the organization and management of TANROADS; (d) Carrying out of studies to identify road investment priorities, such as traffic counts and an update of the ten-year investment plan; (e) Conduct of a local government road inventory and condition survey; (f) Carrying out other transport related studies, including a Dar-es-Salaam Bus Rapid Transit (BRT) and traffic management study; (g) Provision of technical advisory services and training for improved management and operational capacity of TANROADS and MOCT Zanzibar. 15. Component C: Improved Performance of Tanzanian Railways (original cost US$36.46 million, actual cost US$27.32 million) aimed to improving the performance of Tanzania railway by engaging private sector into the operations and financing of the rail sector. (a) Provision of urgently needed rails, sleepers and other material for TRC, for the replacement of the track between Itigi and Tabora (immediate requirement); (b) Provision of other rails, sleepers and materials for TRC for the replacement of the balance of the tracks of TRC between Itigi and Tabora. (to be supplied after concession of rail operations) (c) Preparation of an Environmental Assessment, a Social Assessment and EMPs and RAP for TRC; (d) Financing of clean-up costs based on the Environmental Assessment and EMP, and of resettlement costs based on the Social Assessment and RAP; (e) provision of technical advisory services and training for (i) the handing over of TRC assets and operation of the Railway Operator; (ii) the winding up of TRC; and (c) the building up of the management and operational capacity of the Reli Assets Holding Company (RAHCO); (f) provision of technical advisory services for the future private sector participation in TAZARA, including: (i) the restructuring of TAZARA; (ii) the establishment of the regulatory and legal framework governing the operations of TAZARA; and (iii) preparation of Environmental and Social Assessments (EA/SA), EMP and RAP. 4

15 1.6 Revised Components 16. Although the project was not officially restructured, the following changes were made some of which necessitated Development Credit Agreement (DCA) amendment. (a) Component A (i) Three variations were added to the Singida-Shelui road rehabilitation works contract: a km of roads in Singida Municipality; b. installation of the Njuki weighbridge at km 6.18; and c. construction of Iguguno box culvert. (ii) Pothole repair on the Zanzibar Airport to keep it from falling apart until rehabilitation works financed under CTCP-2 would commence. (iii) The coverage of detailed design and bidding documents of high priority trunk roads was expanded from the planned 713 km to 1,430 km. Four more road sections were added: Dodoma-Iringa, Nzega-Tabora, Arusha-Minjingu and Tunduma-Sumbawanga. Designs for Tabora Nzega road (116 km) could not be completed under the project after TANROADS terminated the contract. The final length hence became 1,314 km. 17. A new activity, Performance-based Management and Maintenance of Road (PMMR) pilot projects in Mwanza, Rukwa and Tanga was added after the mid-term review with contracts commencing in August 2007 through September The PMMR engineering and bidding documents were prepared through a trust fund. The original plan was to tender these in 2005 and finance them under the Transport Sector Support Project (TSSP) under preparation at the time. TSSP preparation and presentation to Board were rescheduled and alternative financing had to be sought, and it was decided to finance the PMMR contracts through CTCP. (b) Component B (i) The design and construction of TANROADS building did not materialize because of the change of the original location and the resulting need to change the design of the proposed building. Redesigning and securing a new lot took more time than envisaged, therefore TANROADS headquarters was not constructed by the end of the project. (ii) The Organization and Management (O&M) study for TANROADS was cancelled following restructuring of TANROADS organization, and the perception at TANROADS that the study was not needed. (iii) The following studies were added: Baseline traffic count on the mainland road network; Road maintenance concession study in mainland Tanzania; Zanzibar master-plan and transport policy; Zanzibar International Airport master-plan; 5

16 (c) Component C Baseline survey of user (dis-) satisfaction at Zanzibar Airport; Feasibility study and detailed engineering design for seven airports; Road fund leakage study. (i) The technical advisory services to TAZARA were cancelled for the following reasons: a. The Tanzania and Zambia governments were undecided on whether or not to go for concession; and b. The preference of the two governments was to award the concession to a Chinese firm if going for concession without going through an internationally competitive process. The reasons advanced by the governments for not deciding in favor of a competitively procured concession were: i. huge outstanding liabilities to Chinese government (close to US$500 million at current prices); and ii. high estimated cost of staff retrenchment (approximately US$25 million) This sub-component was therefore cancelled. (ii) The supply of 197 km sleepers was reduced to 127 km due to the increased cost of steel. 1.7 Other significant changes 18. Amendments to the DCA. There were four reallocations of credit proceeds in April 2007, October 2008, April 2009, and November The first amendment in April 2007 was to: (a) include an additional activity a pilot PMMR component; (b) reallocate the amount for the procurement of ferries from Category (1) Works to Category (2) Goods; (c) retrofit the financing parameters to increase the percentages of financing for expenditure under category (3) Consultants services, training and audits from 93 percent to 100 percent. 19. The second amendment was in October The remaining balances were insufficient to cover the commitments in Category (1) Civil works under part (a) Reconstruction of Zanzibar roads; and part (d) Upgrading of Singida-Shelui road. Therefore, a reallocation of funds from Category 5 Unallocated to the above categories was deemed necessary. 20. The third amendment in April 2009: Some more additional resources were required to meet the expenditures mentioned in the second amendment in Category 1, parts (a) and (d), and Category 2 (c) - Rehabilitation of ferries respectively. 21. The fourth and last amendment in November 2009 was to: (a) fine-tune the remaining activities and increase funds for Category (2) Goods (part b) by SDR5.12 million; and (b) accelerate the activation of the Letter of Credit (LOC) which delayed the contract for the supply of rails and sleepers due to lack of IDA resources. 6

17 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 22. The CTCP had two major components: road and railway. Both components were aligned with the government transport strategy and incorporated the lessons learned from previous projects in the sector. 23. In the road component, the project focused on the central transport corridor which connects North Western Tanzania as well as Burundi, Rwanda, Uganda and DRC to the port of Dar es Salaam. The government and other DPs financed rehabilitation and paving of the corridor and as part of this initiative CTCP financed the paving of the Singida Shelui section which included the challenging Sekenke escarpment The road component also put a lot of effort into the enhancement of institutional capacity including providing training; conducting various studies and installing WAN and LAN systems at TANROADS to improve the communication, etc. The project was also successful in having the majority of designs and bidding documents completed before Board presentation of the CTCP-2 and TSSP to avoid the delays and cost increases encountered in the first Integrated Road Project. 24. The concessioning of TRC was firstly considered as an independent project as a follow on of RRP. However, it was then decided to combine this railway component with the road component under one project to reduce the Bank transaction costs. Also, since the two components are closely linked as part of the Central Transport Corridor, it made sense to combine them in view of their complimentary role in regional trade and transport facilitation. The preparation of this component took into account the lessons from the RRP and reflected those lessons in project design as follows. 25. First, RRP had concluded that in spite of substantial investment and technical assistance (TA) support, TRC s overall performance, particularly the financial performance, as well the railways management capacity remained below expectation. Therefore the railway component was made contingent on the government fully committing to concession the railways. Second, the first concession bid launched by the government in 2000 had failed because the qualification criteria were too demanding and risk allocation was too unfavorable for the private sector. Therefore, CTCP included investment support for track renewal and for addressing environmental and social liabilities to make the concession more attractive to potential bidders. Third, an IDA Partial Risk Guarantee (PRG) of a maximum of US$40 million was proposed to be made available to the successful concessionaire, if requested. 26. However, the project, underestimated the risks for the railway due to concessioning delay, underfunding of track and asset rehabilitation, optimistic forecasting of traffic, and inadequate addressing of social issues, and, consequently, the mitigation measures also proved to be insufficient for the reasons set out below. 7

18 27. First, railway concessioning is a complex process and time slippages are common. While making all efforts to maintain schedules, it would have been prudent to plan for the possibility of delay in the concession becoming operational and to ensure continued efficiency of operations of TRC during the concessioning process. The plan could have included some or all of the following: (a) a short-term management contract (with only a few key management personnel) for the railways with the explicit understanding that the contract will be terminated immediately after the concessionaire takes over; (b) engagement of one or two key experienced management personnel from the market or on secondment from an efficiently working railway; (c) retrenchment of surplus staff as early as possible to save on operating costs and make more funds available for critical spare parts; and (d) availability of enough funds to avoid adding to the backlog of maintenance during the concessioning process. A further contingency plan could have provided for: (a) use of IDA funds for rehabilitation even before the award of the concession, if it became clear that the concession would be delayed; (b) support by the government for rehabilitation of wagons and locomotives to prevent decline of freight handling capacity; and (c) granting temporary and limited-period exemptions for certain expenses and taxes. 28. Second, there was a clear need for huge funds for liquidating the backlog of maintenance and rehabilitation of railway infrastructure. As per the railway records, more than 2,000 km were estimated to be in need of rehabilitation in 2002 and, even at a conservative cost estimate of US$0.2 million per kilometer, the funds needed for rehabilitation would have amounted to US$400 million. The concessionaire was expected to bring in close to US$60 million in equity, directors personal loans, and commercial loans (IFC was under discussion as a potential lender) and that along with US$33 million to be provided through the credit would have enabled the concessionaire to commence rehabilitation of critical areas and then continue the process by ploughing back the surplus from operations (Traffic level in 2005 was still close to 1.2 million tons and revenue close to US$60 million equivalent. With expectations of traffic increase by more than 50 percent, staff reduction by 60 percent, and other cost reduction by 20 percent or so, a progressively increasing surplus could have been expected). It should have been clear at the design stage that the plan for rehabilitation of the infrastructure would not work if the key assumptions of traffic growth, cost reduction, and adequate surplus generation did not materialize. Subsequent events did create serious problems. The concession signing and takeover was delayed by two years (partly because one bidder launched a legal challenge), traffic declined by 50 percent instead of increasing (some of which could have been anticipated as the traffic had already shown a declining trend since 2002), and condition of infrastructure worsened further. Timely induction of funds for the rehabilitation of critical sections of track and rolling stock could have avoided the steep decline in performance. 29. Third, TRC carried a lot of small (wagon load) traffic, servicing many small customers, but did not have many large-volume customers. Even in 2002, when the railways carried close to 1.5 million tons, the top ten customers accounted for only 30 percent of the total traffic, whereas typically in other railways they would account for percent. TRC was able to do that probably because the roads were poor, competition 8

19 was restricted, and commodity trade was dominated by public institutions. However, small load freight is not the preferred segment of business for the railways being too expensive to handle. Small loads normally are better suited for road transport. In any future collaboration with the Government to revive the railways, the revitalization design should be based on realistic traffic projections recognizing the following: (a) TRC does not have an inherent comparative advantage over trucks with regard to small loads; (b) increase in average haul from 1082 km in 2002 to 1151 km in 2009, shows that small traffic is moving away from the railways; (c) main cargoes, i.e., cement, fertilizer, maize, salt, petroleum products, sugar, grains, cotton and tobacco will continue to be the main stay of the railways ; (d) focusing on provision of one-stop services by collaborating with truckers for logistics beyond the origin and end of the railway line could prove attractive; and (e) general and container cargo could grow at a much faster rate compared to others and the railways should develop appropriate strategies to attract this traffic. As far as TAZARA is concerned, agreement needs to be reached with the Zambia Railways concessionaire for Tazara to connect to the mines in Zambia directly. 30. Finally, both staff retrenchment and transfer of staff to the Concessionaire could have been managed more efficiently and sensitively. Even though the government eventually paid close to US$56 million to retrench about 3,500 staff (almost US$16,000 per person), the process of arriving at the package was contentious and took inordinately long to finalize. From the time the concession process commenced in 2002 and until it became operational in 2007, most staff remained uncertain about the terms of retrenchment and that adversely affected their morale and productivity. The final package was too liberal in comparison with average payments for similar retrenchments and the staff identified to be engaged by the concessionaire felt short-changed and envious with consequent impact on their morale and productivity. The staff joining the concessionaire also remained uncertain about the retrenchment and pension benefits pertaining to their service with TRC as TRC had legally wound up and there was no evidence of any alternative institutional or budgeting arrangements by the government. This heightened their anxiety and added to a decline in productivity. 31. In summary, TRL was facing serious problems including tremendous backlog of maintenance and rehabilitation, increasing competition from road, staff challenges, and changing customer requirements, and as such its financial turnaround was not achieved. The Project included best practice features in its design (concession, investment support, and PRG) but inadequate appreciation of the financing needs, social concerns, changing customer requirements, and the need for a contingency plan in case of slippage of the concessioning timeframe, seriously compromised the quality of the project/concession design and adversely affected the outcome. 2.2 Implementation 32. Disbursement: The Project closed on December 31, 2009, as originally planned, with almost full disbursement of the Credit amount. Initial rate of disbursement was slow, with only 21 percent disbursed by the mid-term review in May Effective disbursements only started by the end of 2007 after the equipment and personnel for road 9

20 works were mobilized and the railway was concessioned. The slow start is attributed to three reasons: (a) setbacks in the bidding process for road work, (b) delay in completing Environment Impact Assessment (EIA) and RAP by RAHCO which was a condition for the disbursement of 25 percent of the investment allocation for the railway component; and (c) delay in awarding the railway concession, which was a condition for the disbursement of the remaining 75 percent of the allocation for the railway component. However, appropriate action was taken to accelerate disbursement in the remaining period and ensure full disbursement without resorting to any extension of the closing date. Additionally, various activities for road management capacity enhancement (except the O&M Study discussed later) were implemented as planned and contributed a lot to road management capacity building. 33. Client Responsiveness: The Team was alerted to the changing requirements and acted proactively in making changes and adjustments where necessary in order to maximize the benefits of the project. More specifically: (a) adding the weighbridge to Singida-Shelui road work helped control axle loads, thus, reducing the road damage due to truck overload; (b) expansion of detailed design activity from 713 km to 1,430 km helped mobilize investments for a larger portion of the network in need of rehabilitation on the basis of completed design and thus helped accelerate the rate of road improvement with expanded benefits; (c) financing the first year implementation of PMMR projects amounting to US$5 million, thereafter the financing of the contracts was taken over by the Road Fund (RF); and (d) the O&M study consultancy contract was not processed as TANROADS decided that the study was not needed after change of management and restructuring of the organization and thus unnecessary expenditure was avoided. 34. Poor implementation of the railway component: The railway component did not move smoothly. The unanticipated challenges experienced by the railways during project implementation exacerbated the problems embedded in the project design (detailed discussion on design issues in section 2.1). The Project faced delay in both concessioning process and rehabilitation of rail infrastructure and lack of decision regarding TAZARA. 35. Delay in Railway Concessioning: The railway concessioning was delayed by more than two years for various reasons, two specific ones being beyond the government s control. First, one of the bidders launched a legal challenge in a local court and even though the case was eventually dismissed, close to one year was lost. Second, the preferred bidder selected GAPCO as a local partner, but the same was not acceptable to IFC, a potential lender to the Concessionaire, due to GAPCO being in arrears with regard to IFC payment in another deal. That led to a contentious and time-consuming exchange of views between the various parties and the local partner was finally dropped, and GOT came in and became the minority shareholder holding 49 percent of the shares. 36. Views on the new joint venture structure differed widely. Many perceived it as a bad idea as it represents a conflict of interest with the government being on both sides of the deal: as shareholder of TRL and owner of the railway as RAHCO. Others consider this a good example of public-private partnership. In any event, although the selected 10

21 concessionaire was agreeable to the new structure, the new arrangement instead of resolving the matter created serious problems of coordination and caused further delay in the signing of the concession agreement. 37. Rehabilitation delay: Rehabilitation of the infrastructure also did not proceed satisfactorily. Disbursement of 25 percent of limited funds allocated under the Credit was tied to the satisfactory environment assessment and resettlement action plan and 75 percent to successful concessioning of TRC. Since concessioning was delayed by more than two years, the procurement of the materials for rehabilitation was also delayed by the same period. Rehabilitation of railway infrastructure after the concessioning agreement was signed was further delayed by an earthquake in China as the rail providers could not provide the materials on time. 38. TAZARA Indecision: Tanzania and Zambia governments could not decide whether to move ahead or not with the concession serves. Therefore, the planned TA sub-component became redundant and the amount allocated for this was utilized elsewhere. 39. In summary, in spite of almost 98 percent disbursement and closing on time, the project s PDOs with regard to the railway component were not achieved. The overall outcome provides a mixed picture of satisfactory road related outcome and unsuccessful railway-related outcome. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 40. M&E Design: The M&E framework contained a set of outputs, intermediate and outcome indicators pertaining to various components which were appropriate and linked to PDOs. The framework outlined methods to keep track of the project progress and as a basis for any adjustments during implementation. However, the M&E design could have included more indicators to provide project and PDO-linked information to arrive at quick corrective actions, if needed. For example, additional targets such as wagon turnaround time, business offered by the railways main customers on a monthly basis, and time taken between request and supply of wagons, if specified, could have given a clearer idea of the railways declining trend and could have precipitated urgent action by the government. Also, more intermediate indicators could have been added to provide clearer ideas to achieve the outcome indicators. For example, customer surveys for railways and budgetary allocation by the government for road condition improvement to supplement the plans under the RF and the capital investment for road network should have been included to facilitate better monitoring. 41. Implementation and utilization: The M&E was implemented consistently with the agreed design. Data was collected from different sources to ensure the accuracy and sufficiency of the information. TANROADS, MOCT of Zanzibar, RAHCO were all responsible for providing the related information. In addition, data was collected from the RF, regional offices and the Tanzania Electrical, Mechanical and Electronics Services 11

22 Agency (TEMESA). They were able to track regularly the evolution of indicators through supervision and quarterly reports. 42. Data generated through the M&E framework provided adequate information. Remedial action and the options were regularly discussed with the government and the government agencies. However, the seeming lack of corrective action in the railway sector was not due to any deficiency in the M&E design or the information generated by it but in seemingly difficult remedial actions such as financial inputs by the government which was difficult for the government to mobilize or compromising the terms of the concession considered important by the government. There was definitely a need for uncommon solutions. For example, the Bank Team and the government could agree on reallocating some funds for strengthening the management of TRC and rehabilitating the railway infrastructure which could have prevented the sharp decline in traffic and generated more funds for maintaining the infrastructure and other systems. 2.4 Safeguard and Fiduciary Compliance 43. Environment: The environment category of the project was rated as A at project appraisal. Before appraisal, full EA/SA were carried out for all planned road works. However, the conclusion was that the EA/SA for the three Zanzibar roads, considered as second year sub-projects, be carried out during project implementation subject to Africa Safeguard Policies Enhancement s (ASPEN s) approval. Construction was supposed to begin after the full implementation of the RAP in early The project financed the construction of three Zanzibar roads therefore OP 4.01 and OP 4.12 were triggered. The environment impact of road works were well mitigated as a result of the standards and guidelines developed and included in all road contracts. In addition, a satisfactory EA/SA for the rail component was a condition of disbursement for part of the credit proceeds allocated to this component. TANROADS engaged a full-time social scientist to follow-up and monitor the environment and social impacts. 44. The environmental clean-up of main workshop facilities in Dar es Salaam, Morogoro and Tabora stations was completed by RAHCO and inspection was done by a TRL environmental expert. Cleaning-up for Mwanza and Kigoma was completed in December 2009 using project (IDA) funds after failure by GOT to provide the funds (about TShs 100 million) under FY2008/2009 budget for this activity. 45. Social issues: The Involuntary Resettlement Policy (OP 4.12) was triggered. Resettlement framework and resettlement action plans for roads were implemented based on procedures and guidelines outlined in the governing policies. Specifically the following have been carried out, assessment of: (a) the application of the legal framework and governing guidelines and policies; (b) the eligibility and compensation measures; (c) the valuation procedures applied; (d) the level of community participation and its impact; (e) the resettlement of community structures and sensitive areas; (f) the impact of borrow pits, quarries and camp site; (g) the grievances and appeal and their settlement; (h) the RAP institutional framework organization and its applicability; and (i) the RAP M&E. 12

23 All compensation claims and grievances were settled accordingly based on the monitoring and evaluation plan. S/No Table 1: Number and Type of Affected Properties ROAD SECTION PERSON AFFECTED ON RESIDENTIAL HOUSES PERSON AFFECTED ON COMMERCIAL PROPERTIES PERSON AFFECTED ON PLANTATION 1. Mkwajuni Nungwi Pongwe Matemwe Paje Pingwe Michamvi Total S/NO ROAD SECTION Table 2: Actual Compensation RESIDENTIAL & COMMERCIAL AND BUILDING (TZS MILLION) 13 PLANTATION (TZS MILLION) TOTAL (TZS MILLION) 1 Mkwajuni Nungwi Pongwe Matemwe Paje Pingwe Michamvi Total TRC/RAHCO RAP: A RAP was prepared for the railway component. The RAP was approved by the Bank and disclosed in-country and at the Bank s Info-shop. Resettlement concerned 145 project affected people (total compensation was estimated at about US$600,000) who were considered living on the right of way of Railway network, making it difficult for vehicles attempting to cross the rail line to see an on-coming train in time. The RAP was prepared with a view that through the concession train traffic and speed would increase. However, this did not materialize (actually the reverse happened) and eventually the RAP was not implemented. 47. Financial Management: Overall, the financial management is rated satisfactory. A dedicated unit established within TANROADS with qualified and experienced staff was responsible for financial management throughout the life of the project. The quarterly Financial Monitoring Reports (FMR) were received regularly. Audits were done annually and on-time; and were unqualified, except in The auditors issued a qualified opinion on project financial statements in 2007, due to the following: (a) limitation of scope of audit financial statements submitted did not include balance sheet and cash follow statements; and (b) non compliance with regulations (i) inconsistencies with Bank category allocations, (ii) non recognition of gain on exchange rate fluctuation, (iii) underreporting of counterpart funds, (iv) differences between opening and closing balances of general ledger and bank statements. TANROADS and the Bank s Financial Management Specialist worked out an action plan to remedy the issues in the next audit

24 reporting period as per the auditors recommendations. Since then, all major issues have been resolved and Bank procedures were fully complied with. 48. Procurement. Although the project experienced delays at the start, procurement under the project was rated satisfactory. All procurement activities and post-reviews were satisfactory. 2.5 Post-completion Operation/Next Phase 49. Multiple activities under CTCP are followed up with operations to sustain and expand the project benefits. Most of the detailed design and bidding documents prepared under CTCP, have secured follow up investment. Two IDA projects, the Second Central Transport Corridor Project (CTCP-2, on-going) and TSSP (approved on May 27, 2010), are to finance: (a) the rehabilitation of two sections of trunk roads, Korogwe Same and Arusha Minjingu roads; (b) rehabilitation of selected airports, runways and terminals in three regional airports, Kigoma, Tabora and Bukoba; (c) infrastructure for the BRT system in Dar es Salaam. Other development partners like Millennium Challenge Corporation (MCC), the African Development Bank (AfDB) jointly with the Japan International Cooperation Agency (JICA) have committed investment on selected trunk roads. In addition, GOT is to finance re-design and construction of TANROADS headquarters which could not be done under CTCP. 50. The PMMR project, after the initial financing by CTCP up to September 2008, is since being financed by the RF and is progressing well. With RF revenue increased from around US$60 million to more than US$200 million during the last five years, the RF is able to provide sufficient resources for this activity. 51. For other studies completed under CTCP, many recommendations are already being implemented. For example, the traffic census methodology prepared for TANROADS has been put into use. 52. For the railway component, GOT is in the process of negotiating the termination of the concession agreement with the private partner and has decided to take over all the TRL shares. The Bank is considering support under a follow-on project for the rehabilitation of the railway, provided an appropriate investment and management program can be agreed upon, and GOT is ready to put in place a balanced regulatory framework for the fair competition between rail and road transport, including appropriate management arrangements. Other DPs have shown interest to assist as well. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 53. The objectives of CTCP, designed in 2004, remain highly relevant with the current priorities and in line with the CAS ( ). The project also is closely related to Tanzania s National Strategy for Growth and Reduction of Poverty 14

25 (MKUKUTA, ), particularly growth cluster I, growth of the economy and reduction of income poverty, which strives to further improve prospects of growth, especially improvement of the investment climate, through better informed choices and better financed programs in agriculture, forestry, environment, and mining; reduced infrastructure bottlenecks, notably in transport and energy. 54. The design and implementation was relevant. The road component focused on improving road condition on key sections on the central transport corridor and road management capacity of key government institutions, the two key factors to increasing transport efficiency, reducing transport cost and improving access for isolated rural area. Indeed the expansion of the East African Community to include Rwanda and Burundi has made the Central Corridor even more important as a strategic regional highway. 55. For the railway component, the PDO Improve Operations of Tanzania Railways was highly relevant. Even in 2002 and 2003, when TRC carried close to 1.45 million tones of traffic, the financial performance was still poor. It was obvious that TRC had to do more in terms of increasing traffic and revenues or reduce costs or both. The Project rightly focused on improving railway infrastructure and management through concessioning as a means to achieve the PDO. The linking of investment to success in concessioning the railway was also aimed at ensuring continuing focus on concessioning, which was the main instrument to achieve the PDO. However, as noted earlier, the project could have been better designed by including a contingency plan for a possible delay of the concessioning process. These weaknesses eventually reduced the benefits that the project could have generated. 3.2 Achievement of Project Development Objectives 56. The project development objectives for the road sector were achieved. The traffic on related road sections increased by percent annually, exceeding the target of 10 percent per annum. The portion of road in poor condition under TANROADS responsibility was fifteen percent in 2009 as compared with the target of 30 percent. Contributing to the improved condition of the road network of Tanzania is the fact that many of the roads for which design and bidding documents were prepared under the project (a total of more than 500 kilometers) are currently being rehabilitated by other development partners. In addition to achieving much higher-than-targeted traffic and road condition, the road component also generated economic and social benefits as detailed in 3.5(a). The road management capacity has been enhanced as detailed in 3.5(b) (instructional change and strengthening). It is assessed by the Implementation Completion Report (ICR) team that the outcome of Component A was highly satisfactory and outcome of Component B was satisfactory. 57. The highly satisfactory performance in the road sector resulted from: (a) the improved road network due to capital investment and enhanced road maintenance; the government s capital budget plus donor s funding invested in road sector during the period of have added up to US$859.2 million, far more than the investments on the other transport sub-sectors. At the same time, the road network maintenance was 15

26 also enhanced. The RF revenue has increased from around US$60 million per annum to above US$200 million in 2009, one of the largest in Africa; and (b) the steady growth of Tanzania economy generated more traffic. From , the national economy grew at seven percent annually, though it declined to five percent in 2009 due to the international financial crisis in While the road indicators are indicating remarkable performance vis-a-vis the targets, the railway indicators are indicating the opposite. The outcome of the railway component is being rated as highly unsatisfactory. The total freight traffic and transit traffic carried by TRL network in 2009 was only 0.408mt and 0.14mt as opposed to the target of 2mt and 0.67mt, respectively. The traffic on TRL declined to less than one-third of the level at project appraisal, despite gross domestic product growing steadily at about seven percent per annum during the five year project implementation period. The continuing decline of railways also meant more traffic on road and much faster deterioration of the roads leading to the need for more frequent rehabilitation and increased cost of maintenance. That in turn increased the overall cost of transport for the economy. On the bright side, however, the roads have been able to absorb this diverted traffic which has benefited the economy. 59. TRC s poor performance could be attributed to the following factors: (a) the delayed concessioning process - TRC s performance was already showing a downward trend and by 2005, freight traffic had already declined by about 20 percent. Had the concession become operational by 2005 as scheduled, the deterioration could possibly have been arrested. The two-year delay accompanied by absence of investments by the government and a sound safety net for the staff led to the deterioration of railway infrastructure, low staff morale, increased thefts and vandalism, increased strikes and other irresponsible acts; and (b) Lack of cooperation among the interested parties: Even after the concession agreement was signed, the government and the concessionaire did not work together to solve the problems and improve the railway operations. Instead, they engaged in blaming each other for the deteriorating performance resulting in complete paralysis of action on either side. 3.3 Efficiency 60. At project appraisal, economic analysis was conducted on three activities: (a) Rehabilitation of Singida-Shelui Road; (b) rehabilitation of three road sections in Zanzibar; and (c) concessioning and investing in TRC. At Implementation Completion Report (ICR) stage, Theeconomic analysis on the above three activities was updated. A consultant was also engaged to evaluate the performance of ferry activities and PMMR projects. The economic internal rate of returns (EIRRs) of the road sector at appraisal stage and at ICR stage will be summarized in Table 3. Table 3: EIRR at Appraisal Stage and ICR Stage EIRR% Appraisal stage ICR stage Singida-Shelui Three Roads in Zanzibar Paje Pingwe- Michamvi

27 61. Regarding the road sector, the EIRR of roads at ICR stage is higher mainly due to the much higher than predicted traffic on the improved central corridor. The anticipated traffic increase was 10 percent per annum, and actual traffic increase was percent per annum. Though, due to the heavy traffic, the maintenance cost on the central corridor will be higher, the marginal benefit brought about by the heavy traffic will far exceed the marginal cost due to more maintenance demand. If the railway sector could have performed as anticipated, some of the freight traffic will be shared by the railway, which will result in less damage to the road, therefore, less maintenance cost, the EIRR of road component should be even higher. The detailed analysis is in Annex Regarding PMMR pilots, a general improvement in terms of user comfort, average travel speed and passability has been achieved for the pilot PMMR project. Overall road conditions of the road network are being satisfactorily maintained at required levels. Before the onset of the pilot PMMR project, some roads were not fully passable but they are currently fully passable even during the rainy season, with an obvious increase in traffic levels. Average travel speeds have substantially increased on all roads. Before the project, the average travel speed was below 50 km/hour, after the project, around 70 percent of the traffic has travel speed above 50 km/hour. User comfort has significantly increased and set targets have been achieved in most of the project roads and are continually being sustained through the performance based concept. 63. The performance of two ferries, MV Kigmboni and MV Sengerema, was evaluated. The two ferries are better performing with significant increase in traffic trend i.e Mv Kigamboni- adults has increased from 571,512 daily, November 2003 to 1,168,920 in November 2009, an increase of 51 percent. Similarly to Mv Sengerema, adult traffic increased from 16,462 in March 2003 to 28,268, an increase of 41 percent. Though the traffic in November 2009 only represented the short term post-project performance of the new ferries which were put into use for less than five months, it is a good indication that the new/rehabilitated ferries in a long run will capture all estimated financial and social economic benefits. 64. Regarding the rail sector, the economic rate of return (ERR) and net present value (NPV) at appraisal were computed on the basis of the following key assumptions: The analysis was estimated for twenty years from 2005, the expected starting year of the Project until the end of 2024; The concessionaire is assumed to invest US$60 million from year three to eight; The government (through IDA) invests US$33 million in the first two years; Traffic is assumed to be 1,600 million NTKM in 2005 and grows at 10 percent for the first two years and then at three percent/year; Cost difference in rail and road traffic is assumed as US$0.03cents/NTKM; Fixed and variable costs decrease by 10 percent per year for the first two years; Benefits include road avoidance costs and reduction of operating costs; Repatriation by concessionaire is assumed at a maximum of 25 percent on equity assumed to be US$20 million. 17

28 65. The ERR and NPV at ICR was computed keeping the same assumptions as above plus the following: Actual figures considered for the first five years; Alternative concession will be finalized in 2010; Traffic increases after 2010 at 10 percent for seven years and then at three percent; The new concessionaire will invest US$60 million in six years from 2011 to Based on these assumptions, the ERR and NPV at appraisal and ICR are indicated as in Table 2. Table 4: EIRR of Railway Component at Appraisal Stage and ICR Stage Indicator Appraisal Stage ICR Stage ERR (%) NPV (US$ Million) 200 (-) Sensitivity: If the government fails to identify shareholders to continue the concession or takes more time, the ERR and NPV could drop further. Details in Annex Justification of Overall Outcome Rating 68. The overall rating is moderately satisfactory. The design was relevant and the effectiveness of the road component is good though the outcome of railway component is disappointing. The overall outcome of the project has to take into account the satisfactory rating of road component (including road management capacity building) and the unsatisfactory rating of railway component. Given that the road component is a much larger part of the IDA credit in this project, the overall outcome rating is weighted as moderately satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 69. Though there was no specific survey or evaluation on the project s impact on poverty, gender and social development, positive impacts on these aspects have been observed on site visits and recorded in related reports. The Singida to Shelui road construction removed a major obstacle (the Sekenke escarpment) from the central transport corridor. That obstacle could cut off the entire North West of the country from the rest and would lead to massively increased transport costs. 70. The intervention on three road sections in Zanzibar has boosted the tourism industry. The ICR team was informed that more hotels have been constructed and more tourists are coming to Zanzibar since the roads were rehabilitated. Previously, it would take almost one day to travel from Zanzibar airport to the hotels located along the seaside, now, it only takes one hour. Regular bus services, not existing before, were observed when the ICR team went to site visit. The local communities also benefited 18

29 from growing tourism resulting in more employment and business opportunities and more income. (b) Institutional Change/Strengthening 71. The project has contributed to the strengthening of road institutions management capacity. 135 staff from TANROADS and six staff from MOCT Zanzibar attended training courses. The knowledge and skills of staff working for TANROADS and MOCT of Zanzibar are greatly enhanced through training and workshops. 72. The project also financed the studies to identify road investment priorities and an update of the ten-year investment plan, as well as technical advisory services for improving management and operational capacity of TANROADS and MOCT Zanzibar, all of which has helped the road institutions improve their capacity to strategically managing the road network. 73. The WAN-LAN installed in 38 centers helped cut communication costs, improve the communication between TANROADS headquarters, its regional offices and MOCT Zanzibar, thus enhancing the coordination and management among them. 74. The management capacity of Prime Minister s Office Regional Administration and Local Government (PMO-RALG) of local roads has also been strengthened. Local governments are responsible for the management of about 66 percent of the total road network. With CTCP financing the local roads inventory survey and mapping, the road condition information is available and the bottlenecks have been identified, which has offered the basis for better local roads management. The local governments are increasingly performing better (the condition of local government roads has improved from 50 percent in good and fair condition in 2005 to 58.5 percent in 2009) and a strong private road construction industry has been created, which started from scratch and is now executing the entire road maintenance program funded by the RF. Though those achievements could not solely be attributed to the project, it contributed to it. (c) Other Unintended Outcomes and Impacts (positive or negative) 75. There are two unintended impacts of the project: (a) the heavy truck and bus traffic on the central road corridor which now carries out 95 percent of total freight traffic in this region, is wearing out the road more quickly resulting in a shorter life span and higher road maintenance costs. (b) Subsequent to non-performing TRC after the concession and the collapse of the concession agreement, a marked resistance to concession has emerged. The government has no option but to take over TRC and no concessioning of TAZARA is envisioned for the time being. 19

30 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. Assessment of Risk to Development Outcome Rating: Substantial 76. There are two major risks to the development outcome. The high cost of maintaining the highway carrying heavy trucks and bus traffic is a risk to the sustainability of the improved road condition. In FY2008/09, the routine maintenance needs of the national and local roads network were covered by 82 percent while periodic maintenance needs were fulfilled by 52 percent therefore total maintenance needs were covered by 67 percent. In the long-term the government needs to come up with a strategy on how to control heavy trucks either to impose tax or upgrade the standard of the road. 77. Improving the operation of Tanzania railways is still faced with great uncertainty. If, as is generally expected the government takes over TRC, the TRC performance could be improved with more appropriate institutional arrangements, preferably involving the private participation but with more pragmatic and balanced terms. However, there are still other issues which would need to be seriously considered include the following: (a) the investment strategy is needed to make the railway sector competitive. The rehabilitation cost has been variously estimated around US$400 million in the next ten years. It is still uncertain of mobilization of funds of this magnitude; (b) the railways must focus on traffic for which it has a cost advantage and should develop an aggressive marketing strategy; (c) the regulatory framework must be improved to ensure a level playing field for all transport modes. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 78. The design of the project supported the strategic development of Tanzania s transport sector. The project was designed to contribute to the further promotion of export, tourism and private sector development and eventually contribute to poverty reduction. During project preparation stage, senior Bank experts were involved, the government and stakeholders were also consulted and engaged. As detailed in section 1.2, the quality at entry for the road components was Satisfactory and that of the railway component was Moderately Satisfactory. 79. Even for the railways, the team s willingness to taking the challenge of revitalizing a rundown, low-income generating Tanzania Railway has to be recognized. Concessioning of such a railway was a difficult and complex undertaking. However, as indicated in Section 1.2, a more detailed sensitivity analysis with regard to traffic forecast and timeframe for the concession could have improved the project s quality at entry. Given that the various assumptions did not hold and the railway component design failed 20

31 to consider the fall back position in case of slippages in traffic level and concessioning targets, a rating of Moderately Satisfactory is justified. (b) Quality of Supervision Rating: Moderately Satisfactory 80. The supervision was much more intensive than the regular one since the entire project team was in the field. The Bank team closely watched the progress of various components and assisted in making the necessary adjustment to maximize the project benefit. For example, the expansion of the coverage of detailed road design work from planned 713 km to 1,430 km, financing PMMR projects, etc. The team identified signs of serious decline of railway performance in the very first two years of project implementation and has been working especially hard together with the government expediting the concessioning and investment processes. However, any substantial interventions were restricted by the on-going concessioning process; at the same time, the team was optimistic and expected that once the concessionaire took over the decline will be reversed, which turned out to be an unrealistic expectation. Such optimism was also reflected by the satisfactory project ratings throughout the implementation except the last rating right before the project closure. In retrospect, the team could have pushed for more drastic measured earlier to turn the situation around, but its leverage was tenuous in a politically difficult situation. 81. Overall, the supervision was constructive. The poor outcome of the project (railway component), as discussed earlier, was due to many reasons including the absence of a backup plan to compensate for the setbacks, inadequate appreciation of the urgency of the concession by the government, delay in articulating the staff retrenchment plans even though the government finally allocated adequate funds for this, and less attention paid to the safety net of the staff joining the concessionaire. The supervision team s efforts could not remedy the setbacks of the above-stated factors. While the supervision could be rated as satisfactory, given the disappointing outcome of the railway component, the supervision has been rated as Moderately Satisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 82. The overall Bank performance could be rated as satisfactory on the basis of the Bank team s: (a) proactively supervising the project by making necessary adjustments and working closely with client to address the emerging issues in the road components, which accounted for more than 70 percent of the Project; (b) ensuring full disbursement without seeking any extension of the closing date; and, (c) working closely with the government to make the concessioning process a success though unfortunately the concession did not sustain. However, a rating of MS has been suggested due to the Team: (a) underestimating risks facing the railways leading to sharp decline in the railways performance; (b) inadequate intervention in the face of declining performance and delay in concessioning; and, (c) lack of harmonization of railway and road component at design stage. 21

32 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 83. The government showed strong commitment at preparation stage by advancing the TRC railway concession with pre-qualification completed and agreeing to move TAZARA towards the direction of privatization. During implementation, the government carried out necessary policies to support the project including: (a) increasing the fuel levy to raise the RF revenue from around US$60 million in FY06/07 to US$167 million in FY08/09, an increase of 276 percent; (b) the Parliament to pass the Road Act which sets out clearer responsibilities of the various actors in the sector. These actions proved to be critical to improving the road network management and achieving the project development objectives. 84. However, After the government became the minor shareholder and the concessioning agreement was signed, the government did not actively worked with concessionaire to revive the deteriorated railway system including not taking timely action to fulfill the precondition to activate IFC s loan for improving TRL performance. 85. The government did not handle the retirement benefit of the staff retrenchment most appropriately The retrenched staff had to agitate long for a satisfactory compensation package even though eventually the government allocated enough funds, close to US$50 million, for financing staff retrenchment. Staff apathy has been a significant contributory factor in the poor performance of the railways both in the period prior to concessioning and after concessioning. Frequent strikes and thefts contributed to the destabilization of the concession. 86. In light of the above shortcomings, the government performance is rated as Moderately Satisfactory. This rating is a weighted acknowledgement of government s commitment during the project preparation, yet being less proactive during the implementation especially with railway concession. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 87. There were multiple implementation agencies under this project. For road activities, the implementation agencies were: (a) TANROADS; (b) MOCT, Zanzibar); (d) PMORALG; and (e) Road Fund Board; for ferry, it was TEMESA; for aviation, it was Tanzania Airports Authority (TAA). For railway activities, the implementation agency was TRC and later on RAHCO. TANROADS through its IDA Unit was responsible for the overall financial management and coordination of the project. TANROADS did a good job and RAHCO also did well after it has gone through the necessary learning curve subsequent of its establishment been established However, there was discrepancy of the performances among different implementation agencies and the weighted evaluation of implementation agencies performance is Moderately Satisfactory. 22

33 88. The road agencies have completed multiple project activities (altogether 67 contracts) on time and the outcome is satisfactory. The road network has improved and has generated economic and social benefits for the communities and areas within its radius. The performance of road agencies is rated as Satisfactory. 89. The other agencies responsible for aviation, ferry and urban transport also completed the planned activities on time with satisfactory outcome. Five ferries were purchased or rehabilitated which greatly facilitated the daily commute of local people and the economic activities. The Dar es Salaam BRT and traffic management study was completed and is currently implemented under CTCP-2. All studies implemented by TAA were also completed with satisfactory quality. 90. TRC and later on RAHCO were mainly responsible for procurement of rails, sleepers and other track materials for the rehabilitation of railway. The procurement was delayed by two years; only 25 percent of the materials were procured by the end of Such delay could mainly be attributed to the condition that procurement was tied up with the signing of the concession agreement. However, TRC could have prepared and started the procurement process for the whole lot of materials earlier and finalized the contract soon after the signing of the concession agreement as that would have saved time as well as partially improve the condition of the track in time. Change over to RAHCO did not help as it was a completely new organization and took time to get into stride. TRC was also responsible for environmental cleaning and implementing RAP. The environmental cleanup was initially executed by TRC but delayed severely after retrenchment of staff but later this activity was completed in December Implementation of RAP was delayed and a Consultant was hired and completed the review of the resettlement cost in 2009, the actual implementation will be done later. The performance of TRC and RAHCO was therefore rated as moderately unsatisfactory though its performance was certainly limited by the arrangement. 91. In conclusion, the weighted rating for implantation agencies is moderately satisfactory acknowledging the good performance of road agencies, TAA and TEMESA. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 92. Based on the combination of two ratings above, the overall borrower performance is rated as moderately satisfactory. 6. Lessons Learned (a) M&E Framework 93. The M&E framework should be comprehensive and indicative, showing the path to the project development objectives. The output and intermediate indicators should closely link and be fully reflective to outcome indicators so that the project progress 23

34 could be closely monitored, correct actions could be adopted when necessary, and why outcome has or hasn t been achieved could be clearly identified. For example, various factors could contribute to road condition improvement including more maintenance resources, more capital investment on road and better road network management capacity, etc. All these factors should be part of M&E framework to reflect how outcome is to be achieved. (b) Railway Component 94. The Main Lesson: a railway cannot compete with road transport for multiple small consignments. Such consignments were the core load of TRC prior to concessioning. During the two years of uncertainty between the bidding for the concession and the eventual signing of the concession agreement with the winning bidder the majority of the load was lost to road transport (down from 1.2 million tons to 0.5 million tons per annum) and the concessionaire had no chance to win the lost load share back for the railway. To be viable railways need a constant base load of recurring freight over a long distance. Such base loads normally are mining products (such as TAZARA has with its copper freight from Kapiri Mposhi to Dar es Salaam). A revival of TRL will therefore depend on the development of mines in the North West of Tanzania and in the neighboring countries Rwanda, Burundi and DRC. There are fairly developed mining projects, such as the Kabanga Nickel mine in the Kagera Region with a promised base load of about 200,000 tons per annum, which may warrant efforts for the revival of the railway. 95. Management arrangements leading up to concession. Concessioning a railway is a challenging and difficult task accompanied with serious social, safety, and environmental issues. It also remains a process with serious political overtones and building consensus among key stakeholders and maintaining transparency is critical for success. The process can also throw up many unforeseen hurdles such as legal challenges, parliamentary intervention, natural disasters, economic upheaval etc. which can sometimes delay the process for years. Also, since concessioning involves long-term commitment of both parties, extreme caution on both sides is natural and actually desirable. For all the above reasons, the concessioning process can take longer than the planned schedule, sometimes three to four years in all. It will be a good idea for the governments to make interim institutional arrangements such as short-term management contract, hiring of a few professional managers in key disciplines from outside the railways, twinning arrangement with some of the developed railway, etc. This will ensure continuity of operations and prevent undue pressure to expedite the concession. 96. Financing for rehabilitation. In the current concession designs, the potential concessionaire is faced with obligations to invest in liquidating the backlog of maintenance and subsequently maintaining the assets in workable conditions. When the infrastructure is in very poor condition and heavy investment is required to restore the infrastructure to standard condition, then the burden on the concessionaire becomes too heavy. In such a case, the concession becomes highly risky and unattractive to potential investors. It is no surprise that the concessions in Africa, where the railway infrastructure 24

35 is often in poor state and in need of substantial investment, the response has been very limited and not from the best of the lot. It would be better that the governments commit to offer the railways in a standard condition without any backlog of maintenance. That does not mean that the governments should first take years to rehabilitate poor railways but that they should commit to hand over fund equal to the estimated cost of rehabilitation to the concessionaire over an agreed time. Alternatively, the bidders should be allowed to estimate the cost of rehabilitation and include it in their respective bids with the winning bidder being offered the amount asked for. That would be fair as the responsibility for the backlog rests with the sole shareholders, i.e., the government and it should shoulder the responsibility of liquidating the backlog. While certainly increasing government commitment, this arrangement will attract the best operators in the world and ensure the best possible performance of the railways. 97. Sensitivity to staffing issues. In most concessions, as in the one for TR, the governments made adequate arrangements for the staff rendered surplus but did not ensure an appropriate safety net for the staff selected by and engaged by the concessionaire. The staff engaged by the concessionaire, instead of being lucky to have retained their employment, found themselves at risk of losing their retrenchment and retirement benefits, particularly for the period of their service with the parastatal railways. To ensure staff commitment to the concession and their productive contribution to the railway operations, the governments should make appropriate arrangements to safeguard the pension and retrenchment benefits either through an escrow account, their enrollment in government or government-approved pension schemes, or formal commitments to pay the dues when arising or should consider retrenchment of all the staff and clear their dues and require the concessionaires to engage staff from the market. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 98. The borrower has acknowledged that the outcome of the railway component was disappointing, but the outcome of the road component was satisfactory. So, the borrower assessed that even though there were many lapses, procurement delays, the overall outcome is generally satisfactory. However, given the outcome of railway component and the development objective was only partially achieved, the ICR team concluded that a satisfactory rating overall is not convincing. (b) Cofinanciers 99. The cofinancier was NDF. They financed part of the update of feasibility study and design and preparation of bidding documents. The cofinancier did not raise any issues. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 25

36 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate (US$ millions) Actual/Latest Estimate (US$ millions) Percentage of Appraisal Upgrading of Strategic Road Links Enhanced Road Management Capacity Improved Performance of Tanzanian Railways Total Project Cost (b) Financing Source of Funds Type of Cofinancing Appraisal Estimate Actual/Latest Estimate Percentage of Appraisal (US$ million) (US$ million) Borrower International Development Association (IDA) Nordic Development Fund (NDF) International Finance Corporation (IFC) 14.0 Partial Risk Guarantee (PRG)

37 Annex 2. Outputs by Component The project has three components and the outputs of each component are listed below. Component A: Upgrading of strategic road links in mainland Tanzania and in Zanzibar 1. Subcomponent 1: Rehabilitation and upgrading of the Singida-Shelui road (110 km) of the central transport corridor 2. The implementation of this subcomponent was divided into three sections, namely; Package 1: Singida Iguguno (34 km), Package 2: Iguguno Sekenke Diversion (42 km) and Package 3: Senkenke Diversion Shelui (33 km). Upon closing of the project, all three sections have been completed with satisfactory quality. In addition, three new activities were added, construction of.32 km of Boma and Mandewa Urban roads, installation of the Njuki Weighbridge at km 6.18 and construction of Iguguno box culvert. The addition of three activities expanded the benefit to local community and helped control the axle load so that the road could be better protected from overloaded heavy trucks. 3. Subcomponent 2: Rehabilitation and upgrading of the Mkwajuni-Nungwi, Matemwe-Pongwe and Paje-Pingwe-Michamvi roads in Zanzibar (56 km). This subcomponent involved upgrading to bituminous standard of Pongwe Matemwe (20.4 km), Mkwajuni Nungwi (18.86 km) and Paje Pingwe- Michamvi (16.6 km) roads. 4. Pongwe Matemwe and Mkwajuni Nungwi components were completed in May 2008 with satisfactory quality. The Paje Pingwe- Michamvi (16.6 km) road was substantially completed in July 2007 and some defects were noticed and were presented to the contractor. A joint inspection by the Employer and the Consultant done in November 2008 on the completed road revealed that the defects such as road marking had not been exhaustively addressed to and hence the Employer was unable to release to the Contractor the second 50 percent retention money amounting to US$72, out of which US$70,023 was International Development Association s (IDA s) portion. The contractor submitted the claim to the International Court of Arbitration in June 2009 and the claim is yet to be adjudicated. 5. Subcomponent 3: Carrying out and updating of feasibility studies and detailed design, and preparation of bidding documents for 720 kilometers of high priority trunk roads to be rehabilitated and/or upgraded under a proposed follow-on project, including: (a) the Singida Babati Minjingu road (220 km), (b) the Dodoma Babati road (263 km), (c) the Korogwe Mkumbara Same road (172 km) and (d) the Tanga Horohoro road (65 km). 27

38 6. The Feasibility Study and Detailed Engineering Design for all the sub-projects were completed within the credit period and for some of the projects implementation has started. The details of the status of the projects are as indicated in Table 1. Table 1: Status of Implementation of Roads Projects S/N Road section Planned length (km) Implementation status 1 Singida Babati Minjingu 220 Feasibility Study and Detailed Engineering Design on 220 km completed under NDF funding. Physical works are in progress and are jointly funded by ADB. 2. Dodoma Babati 263 Feasibility Study and Detailed Engineering Design on 263 km were completed under NDF funding. Procurement of Contractor for the Physical works under GOT funding ongoing. 3. Tanga Horohoro 65 Detailed Design on 65 km completed under NDF funding. Procurement of Contractor for the Physical works under MCC funding ongoing 4. Korogwe Mkumbara Same 165 Detailed Engineering Design on 172 km completed under IDA Total km 7. In addition, the following road sections were added and the completion status is listed in Table 2. Table 2: The Implementation Status of Added Road Sections S/N Road section Planned length (km) Implementation status 1 Dodoma Iringa 266 The Detailed Engineering Design and Preparation of Tender Documents under NDF were successfully completed in July The physical implementation of the project is earmarked for jointly financing 28

39 by ADF, JICA and GOT. 2 Nzega Tabora 116 Feasibility study, environmental and social impact assessment, and detailed engineering design including preparation of Tender Documents could not be completed under the project after Tanzania National Roads Agency (TANROADS) terminated the contract. a new Contract was signed between TANROADS and COWI A/S for carrying out the remaining services for the project road. 3 Arusha Minjingu 103 The detailed engineering design and Tender Documents were completed in October The physical implementation of the project is earmarked for financing by IDA 4 Tunduma Sumbawanga 225 The detailed engineering design was completed in June 2009 under IDA financing. The physical works is earmarked for financing under MCC. 8. Subcomponent 4: Rehabilitation of the MV Kigamboni, Pangani, Sengerema, Kilombero and Rufiji ferries. The project involved rehabilitation of two ferries, namely, MV Kigamboni, and MV Sengerema and procurement of three ferries, namely; MV Kilombero, MV Rufiji and MV Pangani. During tendering the lowest evaluated bidder provided the same cost for either rehabilitation of the existing ferry or supply of a new one at the Rufiji crossing. The borrower opted for the supply of a new ferry. 9. The rehabilitation of MV Kigamboni and MV Sengerema were completed in November 2009 while the purchase of a new MV Kilombero was completed in March Procurement of Pangani was substantially completed by the end of the credit period. Component B: Enhancing road management capacity specifically for TANROADS and MOCT Zanzibar 10. This component had eight subcomponents. Except for the construction of a new TANROADS headquarters building and Organization and Management (O&M) study of the TANROADS structure, the other subcomponent were completed within the credit period. The outputs of each subcomponent are listed below: 11. Subcomponent 1: Design and construction of a new TANROADS headquarters building. The design of the TANROADS Headquarters building at Plot No 9/1, Mabibo was completed in January However, the employer decided to change the original 29

40 location of the proposed building on grounds of, among others, being too far away from the parent Ministry and Development Partners. The subsequent time spent for acquiring the new plot and re-design to fit the new plot delayed the project such that it could not be implemented within the credit timeframe. 12. Subcomponent 2: Setting up of a Wide Area Network to improve communication between TANROADS headquarters, its regional offices and MOCT Zanzibar. This subcomponent involved installation of Local Area Networks in 38 centers and then connected to wide area network (WAN). The WAN and local access network (LAN) contract was signed in 2006 and substantially completed in April The installation of WAN was effected on 36 stations while the remaining two stations (Tunduma and Nyakahura) were not connected to WAN due to the absence of network from the WAN services provider, the Tanzania Telecommunications Company Limited (TTCL). After the network being set up, a Consulting firm will be engaged to carry out a technical audit and propose enhancement of the system as the system is not working as efficiently as expected. 13. Subcomponent 3: Carrying out of a study for the enhancement of the organization and management of TANROADS. The study was not carried out as TANROADS felt it was not needed following restructuring of the TANROADS Organization in August Subcomponent 4: Carrying out of studies to identify road investment priorities, such as traffic counts and an update of the ten-year investment plan. This study was completed by TANROADS. The results formed an invaluable input in the preparation of TSIP. 15. Subcomponent 5: Preparation of a local government roads inventory and condition survey. This study was successfully completed within the Credit period. The output includes: (a) inventory of the District roads in mainland Tanzania; (b) classification of the District Roads and Community roads; (c) production of maps; (d) identification of location of resources e.g. water, gravel, sand, etc.; and, (e) location of social centers, e.g. schools, hospitals, etc. 16. Subcomponent 6: Carrying out other transport related studies, including a Dares-Salaam Bus Rapid Transit (BRT) and traffic management study. The contract for the study which comprised Conceptual Design and Detailed Design of Phase 1 was successfully completed. The physical work is implemented under CTCP-2. In addition, an Environmental and Social Impact Assessment (ESIA) Study for Jangwani Depot was completed under this subcomponent. 17. Subcomponent 7: Provision of technical advisory services and training for improved management and operational capacity of TANROADS and MOCT Zanzibar. A total of 135 TANROADS staff attended the training, out of whom 47 staff attended professional training outside the country and 88 staff attended tailor-made professional 30

41 seminars organized in the country. Six staff from MOCT Zanzibar attended training outside the country. 18. Subcomponent 8: Provision of technical advisory services, training and financing to the Project; Coordination Unit (PCU) and MOCT Coordination of Donor Aided Project (CODAP). Human Resources Specialist and a Transport Economist were engaged as technical assistants to TANROADS for one year each. Two Technical Assistants were engaged for two years contract to provide management assistance to the CODAP in the MOCT, Zanzibar. 19. The following activities were added during project implementation period and the outputs are listed below: 20. Emergency repair and maintenance of Zanzibar international airport. This activity became necessary and was added due to the deterioration of the runway. The contract was signed on June 2, 2008 and was completed on August 18, Works involved repair of the trenches, sealing of cracks and pothole patching. The rehabilitation of Zanzibar runway is currently financed under CTCP Zanzibar Transport Master Plan and Transport Policy Study. The study produced two documents, namely; Zanzibar Transport Master Plan and the Transport Policy Paper. The studies are important for the preparation of future Transport Development Program. 22. Zanzibar International Airport Master Plan Study. This included carrying out feasibility study and the design of a new passenger terminal at the Zanzibar airport. The study and design were successfully completed within the credit closure. 23. Baseline Survey for Zanzibar International Airport. The main purpose of the study was to determine how users currently rate the facilities and services offered at the Zanzibar Airport and to establish the framework to be used to monitor satisfaction during and after the proposed rehabilitation and extension of Airport runway. The survey was successfully executed and the final report was submitted in September Design of Seven Airports. Feasibility study and detailed engineering design and tender documentation for seven commercial airports were carried out. These airports are Arusha, Bukoba, Tabora, Mafia, Shinyanga, Sumbawanga and Kigoma. Mafia Airport is earmarked for MCC financing while Bukoba, Tabora and Kigoma Airports are earmarked for IDA financing under the forthcoming Transport Sector Support Project (TSSP). 25. Road Fund Leakage Study. The purpose of this study is identifying sources of leakage of revenues intended for the RF and proposing mitigation measures. However, during execution of the assignment the consultant faced some hurdles and could not proceed due to inability to access relevant data. Subsequently, the Road Fund Board appointed a task force to finalize the study. The final report was successfully completed. 31

42 Component C: Improved Performance of Tanzanian Railways. 26. Subcomponent 1: Provision of urgently needed rails, sleepers and other material for TRC, for the replacement of the track between Itigi and Tabora. The goods from the first two suppliers were delivered in November 2006 and the third supplier in May A total length of rail relayed was 47 km as planned including Kitinku and Makutopora (16 km), Itigi Kitaraka (15 km) and Tura Karangasi (16 km). 27. Subcomponent 2: Provision of other rails, sleepers and materials for TRC for the replacement of the balance of the tracks of TRC between Itigi and Tabora. The provision of the goods was supplied under two contracts. The first contract was with Chinese. The supplier had claimed that earthquake which took place in China destroyed his factory and could no longer produce the required materials. The dispute was subsequently resolved amicably and goods were supplied as planned. The second one procurement process was delayed because of counteroffer by the awarded supplier. Also due to the Letter of Credit issue, the supply of goods was delayed,steel prices raised up and only 50 percent of the required goods were able to be delivered before closure of credit. As a result, the total length of railway being relayed was reduced from 197 km to 127 km. 28. Subcomponent 3: Preparation of an Environmental Assessment, a Social Assessment and EMPs and RAP for TRC. The study was successfully completed within the credit closure. 29. Subcomponent 4: Financing of clean-up costs based on the Environmental Assessment and EMP, and of resettlement costs based on the Social Assessment and RAP. Following non-response to the tendering for Contractors to carry out the environmental clean-up works, it was decided to use TRC/RAHCO in-house capacity to carry out the assignment. The entity conducted the cleaning up works at Dar es Salaam, Morogoro and Tabora only. TRL were subsequently contracted under IDA financing, to clean up the remaining workshop facilities at Mwanza and Kigoma and the assignment was completed by the closure of the Credit. 30. Subcomponent 5: Provision of technical advisory services and training for: (a) the handing over of TRC assets and operation of the Railway Operator; (b) the winding up of TRC; and (c) the building up of the management and operational capacity of Reli Assets Holding Company (RAHCO). The outputs of this subcomponent were: (a) a Change Manager was engaged whose responsibility was to coordinate the process of the change from the current management to the concessionaire. However, due to delays in the takeover of the TRC operation by the Concessionaire, the services were suspended in November 2006 until the time for handing over of the TRC to the Concessionaire. The Contract of the Change Manager was concluded in December 2008 after submission of his Final report; (b) a Consultant was engaged between July 2005 and December 2005 as Assistant Director General Operation to assist in the restructuring process; (c) the 32

43 signing of the Concession Agreement between M/s RITES of India and M/s Reli Assets Holding Company (RAHCO) of Tanzania took place on September 3, The effective date of the concession was October 1, Subcomponent 6: Provision of technical advisory services for the future private sector participation in TAZARA, including: (a) the restructuring of TAZARA; (b) the establishment of the regulatory and legal framework governing the operations of TAZARA; and (c) preparation of EA, SA, EMP and RAP. This component was not commenced because of the management complications as it is owned by three partners (Tanzania, Zambia and China). 33

44 Annex 3. Economic and Financial Analysis Economic Analysis of Singida-Shelui Road 1. Upgrading of the Singida - Shelui road to bitumen standard covered three packages namely; Singida - Iguguno, Iguguno - Sekenke and Sekenke - Shelui. Works for the three packages were successfully completed around end The Highway Development and Management model version 4 (HDM4) was used to evaluate the economic internal rate of return (EIRR) of rehabilitating Singida-Shelui Road. The Data needed for analysis of the economic impact were collected from the Tanzania National Roads Agency (TANROADS) through several reports. Baseline data were mainly sourced from: Black and Veatch Africa; Consultancy Services to finalize review of detailed engineering design report and tender documents for Singida - Shelui road, Final report. The after project data were mainly sourced from final reports for the three upgrading project packages for Singida - Shelui road prepared by works supervision consultants. 3. The main factors affecting the EIRR are: traffic level, Construction Cost, unit maintenance cost, road roughness, vehicle operating costs (VOC) and travel time. The values of these factors are listed in the Table 1 below. Table 1: Main Factors for EIRR At appraisal stage ICR stage Traffic (AADT) Construction Cost (USDm) road roughness Index Travel time (minutes) The current unit maintenance cost and VOC are not listed because there are multiple values related with these two factors depending on the difference maintenance and different vehicle types 4. The sharp increase of traffic could be attributed to the much better road condition post project. In addition, the non-performing railway sector also contributed to the traffic increase on road sector. 5. The main outcomes of economic analysis of Singida-Shelui road at ICR stage are listed in the Table 2 below. 34

45 Table 2: Summary of Economic Evaluation of the Singida - Shelui Road Economic Parameter Unit Output Value Investment Cost (US$ m.) 45.6 Recurrent Cost (US$ m.) 3.8 Net Economic Benefits (NPV) (US$ m.) 47.5 NPV/Cost (%) 1.1 Savings in MT VOC (US$m.) 83.7 Savings in MT Travel Time Costs (US$ m.) 2.8 Reduction in Accident Costs (US$ m.) 0.00 Internal Rate of Return (IRR) (%) 19.7 Economic Analysis of Three Roads in Zanzibar 6. Upgrading of the Zanzibar 3-Roads to bitumen standard covered three, namely; Mkwajuni - Nungwi (19km), Matemwe - Pongwe (21km) and Paje - Pingwe (17km).Works for the three packages were successfully completed around December The evaluation analysis was performed using HDM4 version 2.06 on a by project approach, at a discount rate of 12 percent for a design life of 20 years. Data needed for analysis of the economic impact were obtained from Ministry of Communication and Transport Zanzibar (MOCT) and TANROADS. Baseline data were mainly sourced from: Feasibility Study Report prepared by Data System Engineering & Research Corporation Ltd. (UK) in association with TECNIC Consulting Engineers 8. The main factors affecting the EIRR are: traffic level, Unit Construction Cost, unit maintenance cost, road roughness, VOC and travel time. The values of these factors are listed in the Table 3 below. Table 3: Main Factors for EIRR At appraisal stage ICR stage Traffic (AADT) ,625 Unit Construction Cost (USD1,000) Road Roughness Index Travel time (minutes) Varies from several hours to one day Around one hour The unit maintenance cost and VOC are not listed because there are multiple values related with these two factors depending on the difference maintenance and different vehicle types 9. Traffic figures reveal a sharp and abrupt increase of traffic well beyond levels predicted during appraisal stage. The higher traffic contributes to the higher EIRR at ICR stage. 10. The following is a summary of results of the economic evaluation of the Zanzibar 3-Roads, with all costs discounted to year

46 Table 4: Summary of Economic Evaluation of Three Roads in Zanzibar Economic Parameter Unit Output Value Investment Cost (US$ m) 33.8 Recurrent Cost (US$ m) (1.86) Net Economic Benefits (NPV) (US$ m) 13.9 NPV/Cost (%) 0.4 Savings in MT VOC (US$ m) 38.6 Savings in MT Travel Time Costs (US$ m) 6.0 Internal Rate of Return (IRR) (%)

47 37

48 Economic Analysis of Railway Component Table 5: ERR "with" Project - as Estimated at Appraisal C1 and C2 are costs to economy B1 and B2 are benefits to the economy 38

49 Explanations Column 1: The analysis was estimated for twenty years from 2005, the expected starting year of the Project until the end of 2024 Column 2: indicates investments by the government (through IDA) in the first two years and by the concessionaire in the enxt 6 years. The investments pertain only to replacement of assets (rails, sleepers,wagons, signaling equipment etc) and do not include money spent on backlog maintenance which is assumed to have been ploughed back from increased revenues Column 3: Freight traffic projections in terms of net ton kilometers (NTKM) Column 4: expected gross revenue at the average rate of US cents 4.5 per NTKM. This is not used for computing ERR Column 5: The fixed operating cost assuming: (a) 10% reduction in the first two years and then remaining constant Column 6: Variable cost assuming: (a) 10% reduction in the first two years and (b) proportional to NTKM Column 7: Total benefit due to cost reduction for different years Column 8: Repatriation of funds by the concessionaire as dividend on equity assumed as 1/3rd of total investment, US$60 million, and a return of 25 percent increasing gradually Column 9: Road avoidance benefit assuming that the additional traffic caused as a result of the Project (reference to traffic in 2005) would have moved by road at an additional cost of US cents 3 per NTKM Column 10: Net economic benefits being the sum of columns 2, 7,8, and 9 Assumptions for the "Without" scenario: (a) there will be no investment; (b) traffic will decline by five percent every year; (c) there will be no improvement in fixed and variable costs; and (d) there will be no repatriation of funds 39

50 C1 and C2 are costs to economy B1 and B2 are benefits to the economy Table 6: ERR "with" Project - as Revised at the Time of ICR 40