Algeria-Transport Technical Assistance

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name Region Sector Project ID Borrower(s) Implementing Agency Environment Category Report No. PID9779 Algeria-Transport Technical Assistance Middle East and North Africa Region Ports & Waterways; Urban Transport; Other Transportation DZPE72458 GOVERNMENT OF ALGERIA Date PID Prepared March 7, 2001 Projected Appraisal Date November 20, 2001 Projected Board Date April 26, 2001 Address MINISTRY OF TRANSPORT 119 rue Didouche Mourad, Alger, Republique Algerienne Democratique et Populaire Contact Person: Mr. Ali Akrouf, Conseiller du Ministre Tel: Fax: C 1. Country and Sector Background Sector issuesthe transport sector operates under burdensome managerial, operational and financial structures developed under the former political system. The transition to a market-oriented economy driven by private investment, which is at the heart of the Government of Algeria (GoA) new strategy, calls for drastic changes in the way transport is organized and resources are allocated. A description of key issues is provided below. Sector policy definition. Strategies for most transport sub-sectors have yet to be formulated along founding principles of GoA's new policy. While private sector involvement is emphasized, there is no legal or regulatory framework in place to provide assurance to, or guarantee the rights of, private investors. For instance, trucking and urban transport experienced an explosion of services provided by the private sector; however, improper regulations caused market failures, which hurt both the user and the provider. While ports and airports are being opened to the private sector, a lack of clear regulations might limit the quality of investors. In railways, even though past sector policies have been self-serving, they failed to maintain the role of rail services in the economy (its overall market share is below 10%-). Limited private sector participation. In ports, the Entreprises Publiques Economiques (EPEs) run practically all services (private activities are limited to shiphandlers, freightforwarders, and cargo handling on the land transport interface in Algiers), and the same is true of the country's airports, managed by Etablissements de Gestion des Services Aeroportuaires (EGSAs). While the Societe Nationale des Transports Ferroviaires (SNTF) did unbundle part of its special rail services, they remain wholly owned subsidiaries or joint ventures with railway users in the public sector. In air transport, Air Algerie (AA) is in competition with local private airlines on domestic

2 routes, but is the exclusive carrier on main international routes. Limited competition in the market. This is the direct consequence of too many public monopolies still in place. However, there are a few cases where public enterprises lost their monopolies including in urban and air transport. But, even in such cases, the competition is subdued. For instance, private firms are barred from entering the most lucrative markets (AA faces competition only on the domestic market where 60% of its total flying hours only yields 15% of its total revenue), or require subsidization (Etusa for urban transport within Algiers). Weak financial status. For social reasons, tariffs for many transport services are inadequate to cover costs. This contributes to poor performance, which is the prevalent culture in most public enterprises, and triggers a spiral of inefficiency and recurring financial problems, with GoA bailing out foundering companies. Etusa, SNTF, and the national shipping lines, have been primary recipients of GoA rescue packages. Infrastructure investments are also subject to periodic squeezes since their sources of financing comes primarily from the GoA budget, which has been hard hit by the enduring economic crisis. This partially explains why the quality and coverage of transport infrastructure is limited. Misconstrued investment priorities Poor central planning has often led to suboptimal allocation of budget resources. Ill-timed decisions and poor coordination of complementary investments have perpetuated poor performance and missed economic opportunity. Past railway investments are a good example of misallocated resources. Over the last ten years, close to US$5 billion of public funds were channeled to the railways; however, rail market shares continued to decline. There is also insufficient coordination between the Ministry of Transport (MoT) and the Ministry of Public Works (MPW), with the latter generally in charge of infrastructure development planning and endowed with the corresponding budget. Limited capacity to implement investments. Weaknesses in the local consulting and contracting industry are partially due to the stifling presence of dominant public firms, and these public entities often have difficulties responding to the needs of projects as they evolve. A burdensome budgetary process affects disbursement of public funds. Two large projects exemplifies this issue: (a) construction of a 12 km metro line which began in 1990 is only halfway completed; (b) construction of the terminal building at Algiers airport was halted a few years ago, and now requires some US$100 million to be completed. Widespread overstaffing. This is an endemic problem for most public transport enterprises. In some cases, shrinking business has exacerbated the issue. For instance, AA has a fleet of 30 aircraft but employs some 8,300 staff. The ailing shipping industry still employs about 8,000 staff and, even after the loss of 4,000 jobs over the last four years, some 12,500 employees still work for the railway company, a number which grossly exceeds needs. The Government strategythe GoA's strategy for the sector is to modernize and expand transport infrastructure and raise private foreign and local capital to support this. For commercial services, the objective is to privatize remaining public enterprises and encourage competition in the market. For public goods or services, private sector participation will be sought under concession contracts. The new strategy is based on a clear understanding of the issues described above and on the realization that, with a need to reduce the budget deficit and to mitigate the social impacts of moving to a market-based policy, there will be fewer budget resources available for infrastructure investments, given the priority assigned to social goals. What the GoA feels should be clarified is the way to handle the increasing demands from prospective -2 -

3 investors and select those that are good for the country in a long term perspective. International expertise will be sought to guide and implement the transport strategy. GoA has resolved to:create an institutional framework conducive to PPI. In acknowledgment of flaws that even recent laws have carried over (for instance: Law of June 27, 1998 for ports and shipping; or Law of June 27, 1998 for civil aviation), amendments have been passed in December 2000 by the National Assembly so as to bring the Algerian legislation more in line with international standards.widen the scope of competitive transport markets: the land transport law is also being revised to, among other things, limit monopolies. In air transport, signing of the Yamoussoukro Agreement creating an open sky all across Africa in November 1999 shows a willingness to liberalize markets beyond trucking and intercity bus transport. Competition is expected to lead to better and more cost-effective services across the transport sector.divest commercial public enterprises. Tap local dynamism by decentralizing government responsibilities to the new port organization and by the proposed reorganization of urban transport management in Algiers. Develop regulatory capabilities that fit the circumstances of each sub-sector so that private activities do not work against the common good. International standards will be emulated.streamline investment planning: while the GoA doesn't necessarily seek to reduce its contribution to transport, it wants to ensure that wherever public funds are channeled, they are put to efficient use. In that regard, rehabilitating the railways is of the highest priority.mitigate negative social impacts of reform by seeking to minimize staff redundancies through retraining, redeployment of the labor force, controlling tariffs in markets where segments of the population are socially vulnerable (urban transport for instance), and, as a last resort, funding severance plans.the Government has embarked on a privatization program of the more than 400 State-owned EPEs. A new privatization law, amending the 1995 privatization laws, is under preparation and the Government is expected to adopt a new privatization program encompassing 120 medium and large EPEs at the same time. This program is being prepared by the Ministbre de la Participation et de la Coordination des Reformes (MPCR), which will also be in charge of its implementation with the help of the new privatization agency. The Bank Privatization Assistance Learning and Innovation Loan (LIL) approved in July 2000 is supporting this policy which covers transport public enterprises. By paving the way to private operations and investments on public land, the proposed TA project is an indispensable complement to the LIL. Overall, the GoA transport strategy is adequately focused and designed, and largely in agreement with the Bank recommendations. Views may marginally differ on the speed with which the transition should proceed (unbundling of port EPEs for instance) or on transport as a public service, but the right goals are set and the GoA has engaged in dialogue with the Bank which will, with time, broaden the consensus on how to reach these goals. 2. Objectives The Transport Strategy Note, which the Bank forwarded to the Government of Algeria (GoA) in January 1999, outlined the need to modernize and expand transport services and systems, and to improve the integration of transport modes. The Project development objectives are therefore to: set up a policy and institutional framework that will facilitate private participation in infrastructure (PPI);demonstrate the viability of mainstreaming transport concessions through successful launching of two - 3-

4 subway and port Build-Operate-Transfer (BOT) schemes; strengthen GoA's capacity to manage and regulate the transport sector; andrehabilitate the railways so that they contribute to better and more cost efficient transport of people and freight nationwide. 3. Rationale for Bank's Involvement Through the Transport Strategy Note, the Infrastructure Concession seminar and the dialogue that led to preparation of the Transport TA project, a consensus has emerged between the Ministry of Transport and the Bank on the content of the sector reform. The Algerian Government wants to pursue private-public partnerships for development of its transport infrastructure. Its lack of experience in PPI schemes has led the GoA to seek assistance from the Bank. The Bank can best support the implementation of PPI schemes by facilitating concession deals that are truly beneficial to the country. The transparent procedures that will be applied under the proposed project will likely have a positive demonstration effect, which will support growth in public-private partnerships. 4. Description There are five components under the proposed project plus one dealing with the project financial management system. Component 1 Ports The port component is designed to (i) implement an institutional framework for better public planning, land management and regulation, while opening the delivery of services to private sector participation under competitive conditions; and (ii) support concessioning of international transshipment activities at Djendjen. Component 2 Airports The airport component will: (i) adapt the national airport policy framework to create conditions of financial sustainability and allow for new airport concessions beyond the Algiers terminal building concession; and (ii) develop local capacity to regulate PPI schemes. Component 3 Air transport The air transport component is designed to (i) upgrade the current regulatory framework; (ii) advise and train staff accordingly; and (iii) update the national strategy to liberalize international air transport and assist Direction de l'aviation Civile (DAC) in the upcoming renegotiation of a bilateral agreement with foreign nations. Component 4 Railways Based on the Bank diagnosis of intrinsic weaknesses in the current system, the railway component will: (i) restructure SNTF to be more competitive and financially sustainable; (ii) build staff skills, particularly in areas of finance and marketing; and (iii) prepare a core investment program in support of the rehabilitation strategy. Component 5 Urban transport The urban transport component will: (i) set up an autonomous management and regulatory authority in the Greater Algiers and create conditions for harmonious development and adequate funding of public transport, including the future subway system; and (ii) support concessioning of this subway system. Component 6 Project financial management This component will ensure that the project's Financial Management System (FMS) complies with the Bank's requirements for administration, reporting, and transaction recording. A -4 -

5 quarterly Project Management Report (PMR) will be submitted based on reliable and timely recorded information. A consultant will be hired to set up the FMS and develop appropriate software (its cost will be financed by the Bank loan). 5. Financing Total ( US$m) Total Project Cost (Proposed Bank Loan US$7.7 million) 6. Implementation The project will be implemented by an adequately staffed Project Management Unit (PMU) located within MoT. The PMU will be headed by a staff at director's level who will coordinate project activities and provide advice and guidance to representatives of the various transport sub-sector directorates, and SNTF on project related matters. The director will be assisted by a financial manager and an administrative officer who will be in charge of the financial management and procurement activities of the project respectively. PMU staff will be accountable for establishing an adequate FMS, including interaction with MoT's budget department and the Banque Algerienne de Developpement (BAD), and for monitoring and reporting. The establishment of the PMU and appointment of its staff is a Condition of Board Presentation.The MoT is familiar with Bank procedures on project implementation, as it was the executing agency for the Third Ports Project, which closed on June 30, 1998, and the Algerian component of a regional GEF project. Risks of management failures by the unit are therefore minimal.in order to steer project implementation toward meeting its goals and to monitor the work done by the PMU, a Management and Monitoring Committee will be set up by effectiveness and headed by the Secretary General of the Ministry of Transport. It will include representatives from other ministries involved in the project, as well as participation from the Algiers Wilaya.In order to provide needed authority and impetus to the establishment of an Urban Transport Management Authority for the Greater Algiers area, a task force comprised of senior staff from the Wilaya, the MoT and the Ministry of Finance will be established and empowered to pilot studies, draw conclusions, and present recommendations for decision by the Council of Ministers. The establishment of the Task Force and nomination of its members are Conditions of Project Effectiveness.All contracts will be approved by the PMU. However, its various correspondents in specialized directorates within the Ministry of Transport, including port, civil aviation and urban transport directorates, and at SNTF, will, under the guidance of the PMU manager, have delegated responsibility to prepare tenders, and negotiate and execute contracts.specific coordination arrangements will also be needed with the Ministbre de la Participation et de la Coordination des Reformes (MPCR) regarding the privatization of transport enterprises (e.g., AA, port EPEs). MPCR is the executing agency for the Privatization Technical Assistance Project (PTAP) and has its own project unit which is familiar with Bank procedures. Implementation arrangements, including those related to procurement, financial management and disbursement, will be included in the Project Implementation Plan to be submitted in draft as Condition of Negotiations and in its final form as a Condition of Effectiveness.Project Financial Management System (FMS). Assessment of the MoT financial management capacity, including its current organizational structure, staffing, accounting and budgeting practices, - 5 -

6 and internal controls, was undertaken during preparation. The evaluation, which was conducted by a Financial Management Specialist, concluded that MoT's financial, budgeting, and accounting functions are appropriately performed and adequately staffed. The FMS is based on public accounting procedures and principles, and uses an accounting system maintained on a cash basis, as defined by the Algerian Public Accounting Law. All transactions in terms of commitments and flow of funds are recorded manually.in order to ease project implementation and monitor project activity, a FMS will be developed for the PMU and set up with the assistance of the same consultant who is preparing the FMS for the PTAP. It will be implemented according to the agreed time-bound action plan. The FMS will be based on the principles and procedures defined by the national public accounting law and adapted to Bank's requirements for efficient and transparent financial management arrangements. It will include a Chart of Accounts, the preparation of a Financial Management Procedures Manual (FMPM) describing the FMS to be established at the PMU and internal control mechanisms, and the implementation of a data processing system, which will include project activities, and training of staff. The FMS will provide the tools for documenting the flow of funds and operation of the project including preparation of Project Management Reports (PMRs). Sample documents have been provided and MoT's Management Information System (MIS) will assist the PMU to set up these tables. In the meantime, PMU will enter into an agreement with the consultant who is preparing the FMS/FMPM for the PTAP to adapt the FMS to this operation. The FMS and related FMPM will be adopted by loan effectiveness. The final PMRs format will be implemented no later than December 31, 2001.Auditing Arrangements. The project financial statements maintained by the PMU, the special account activities maintained by BAD, and SOE-based disbursement prepared by the PMU will be audited by an independent auditor under terms of reference acceptable to the Bank and according to international standards of auditing. The auditor will review and give an opinion on the financial statements, and prepare and submit separate opinions on the accuracy and appropriateness of the project accounts, the activity of the special account, and the use of statements of expenditures. The annual audit reports and the reports on project and special account will be submitted to the Bank within six months after the end of each fiscal year.disbursements. Disbursements from the Bank loan will be made using traditional procedures based on complete documentation, including Statements of Expenditure (SOEs) and direct payments to consultants. However, it was agreed that the FMS will be implemented to ensure that the project is appropriately managed and to produce the required monitoring arrangements and reporting (quarterly and annual PMRs). To facilitate disbursement, a Special Account will be opened at the Central Bank of Algeria (BA) and managed by BAD. The initial deposit into the SA will be US$500,000. Disbursements out of the SA will be based on SOEs prepared by the PMU and processed by BAD.Procurement. Consulting services will be procured in accordance with Bank Guidelines for Selection and Employment of Consultants (published in January 1997, revised in September 1997 and January 1999). Some 80 W of loan proceeds will be allocated to major studies costing US$200,000 or more and for which expression of interest will first be sought, followed by shortlisting. Some 10t of loan proceeds will be allocated to training, seminars and short-term consulting services, which will consist primarily of small contracts (less than US$20,000) that could be awarded to consultants selected on a sole source basis. Study trips will be financed under the loan up to a cumulative - 6 -

7 amount of US$50,000. For all studies and consulting services costing US$100,000 or more per contract, the Bank prior review will be mandated. Mid-Term Review. A mid-term review will be held no later than January 31, Its purpose is to assess the success and failures of implementation with a focus on the institutional development in urban transport, the railway rehabilitation and air transport liberalization, and to reach agreement with the Borrower on measures to meet the project's development objectives. In order to prepare the mid term review, a report on project implementation will be submitted to the Bank by the Borrower on October 31, 2002 at latest. 7. Sustainability The proposed TA project will build capacities in urban transport management (in Algiers), in regulation (ports, airports, urban transport, air transport) and in railway management and operations (commercial, financial and technical functions). The TA package is designed to ensure knowledge transfers. The performance of consultants is as critical as the designation of local counterparts. Sound procurement of expert services and efficient monitoring of TA missions by the Project Unit and by the Bank will enhance the chances of successful capacity building. 8. Lessons learned from past operations in the country/sector A high level of Government commitment to project objectives and establishment of an effective coordination mechanism when more than one agency is involved are essential for successful project implementation. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues It is not anticipated that the project will have any direct environmental impacts. However, in two instances where the project will prepare tendering (for the subway and the Djendjen port concessions), a clear link will exist between project-related activities and investments to follow. These projects will have environmental consequences which will need to be addressed accordingly. Some related tasks will be funded by the project. Environmental aspects will be taken into consideration when comparing policy and investment options: Terms of reference for detailed environmental assessments will be prepared and funded by the project for inclusion in the package of more detailed feasibility studies which will be carried out before decisions are made to program any investment. Master plan studies will be carried out for port development nationwide and urban transport in Algiers, including self standing environmental studies and audits for proposed investments. Therefore, the environmental content of this project is not negligible and a simplified Environmental Management Plan will be part of the Project Implementation Plan in order to facilitate monitoring of environmental activities under the project. 11. Contact Point: Task Manager Michel A. Loir The World Bank 1818 H Street, NW Washington D.C

8 Telephone: Fax: For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending March 9,