FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

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1 ETH/PTTR/2001/01 AFRICAN DEVELOPMENT FUND LANGUAGE : ENGLISH ORIGINAL : ENGLISH FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA BUTAJIRA-HOSSAINA-SODO ROAD UPGRADING PROJECT APPRAISAL REPORT NB: This document contains errata or corrigenda (see Annexes) COUNTRY DEPARTMENT OCDE EAST REGION MAY 2001

2 ii TABLE OF CONTENTS Pages PROJECT INFORMATION SHEET, CURRENCY AND MEASURES, LIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS, BASIC PROJECT DATA, PROJECT LOGICAL FRAMEWORK, EXECUTIVE SUMMARY iv-viii 1. ORIGIN AND HISTORY OF THE PROJECT 1 2. THE TRANSPORT SECTOR Sector Overview Transport System Transport Policy, Planning and Coordination 4 3. THE ROAD SUB-SECTOR Road Network, Vehicle Fleet and Traffic The Road Transport Industry Road Administration and Training Road Planning and Financing Road Engineering and Construction Road Maintenance THE PROJECT Concept and Rationale Project Area and Project Beneficiaries Strategic Context Project Objective Project Description Traffic Demand and Road User Prices Environmental Impact Social Impact Project Costs Sources of Finance and Expenditure Schedule 26

3 iii 5. PROJECT IMPLEMENTATION Executing Agency Institutional Arrangements Supervision and Implementation Schedule Procurement Arrangements Disbursement Arrangements Monitoring and Evaluation Financial Reporting and Auditing Aid Co-ordination PROJECT SUSTAINABILITY AND RISKS Recurrent Costs Project Sustainability Critical Risks and Mitigation Measures PROJECT BENEFITS Financial Analysis Economic Analysis Social Impact Analysis Sensitivity Analysis CONCLUSIONS AND RECOMMENDATIONS Conclusions Recommendations and Conditions of Loan Approval 38 This Appraisal Report was prepared by Messrs. M.O. AJIJO (Principal Transport Economist, Ext. 5353), M. DIENE (Principal Transport Engineer, Ext. 5954), A. OUMAROU (Senior Transport Engineer, Ext. 5286) and Ms. G. GEISLER (Senior Gender Specialist, Ext. 4940) following their mission to Ethiopia in May Any inquiries relating to this report may be referred to either the authors or to Mr. G. MBESHERUBUSA, Division Manager, OCDE.4, Ext

4 i AFRICAN DEVELOPMENT FUND 01 B.P ABIDJAN Tel: Fax: (225) Telex: 23717, 22202, PROJECT INFORMATION SHEET The information given hereunder is intended to provide some guidance to prospective suppliers, contractors and consultants and to all persons interested in the procurement of goods and services for project approved by the Board of Directors of the Bank Group. More detailed information and guidance should be obtained from the Executing Agency of the Borrower. 1. COUNTRY : Ethiopia 2. PROJECT TITLE : Butajira-Hossaina-Sodo Road Upgrading Project 3. LOCATION : Alemgena and Sodo Districts of Southern Nations Nationalities and Peoples Region. 4. BORROWER : Federal Democratic Republic of Ethiopia 5. EXECUTING AGENCY : Ethiopian Roads Authority (ERA) P.O. Box 1770 Addis Ababa Ethiopia Tel: (251) Fax: (251) E. Mail: era1@telecom.net.et 6. DESCRIPTION : The project consists of: (a) (b) Civil works for upgrading of the km long Butajira Hossaina-Sodo gravel road to bitumen standard. Consultancy services for the supervision of above civil works. 7. TOTAL COST : UA million i) Foreign Exchange : UA million ii) Local Cost : UA 6.83 million (c) Consultancy Services for Project Audit.

5 ii 8. BANK GROUP LOAN ADF : UA million 9. OTHER SOURCE OF FINANCE GOE : UA 4.59 million 10. DATE OF APPROVAL : October ESTIMATED STARTING DATE OF PROJECT AND DURATION : July months 12. PROCUREMENT OF GOODS AND WORKS : International Competitive Bidding (ICB) with prequalification of contractors for construction works, limited to member countries of ADB and ADF State participants in accordance with the Bank's "Rules of Procedure for Procurement of Goods and Works". 13. CONSULTANCY SERVICES REQUIRED AND STAGE OF SELECTION : Consultancy services will be required for the supervision of construction works and for project audit services. Procurement will be in accordance with the Bank's "Rules of Procedure for Use of Consultants". The selection will be through limited competition on the basis of shortlist of consulting firms using the selection criteria of Price is a Factor for supervision of works and Comparability of technical proposal and lowest price considerations for audit services respectively. 1 SDR = UA 1 1 UA = US$ (May, 2001) 1 UA = ETB

6 iii CURRENCY AND MEASURES Currency Equivalents (May, 2001 Exchange Rates) Currency Unit = Ethiopian Birr (ETB) 1 UA = ETB UA = US$ US$ = ETB Weights and Measures 1 metric tonne (t) = 2,205 lbs. 1 kilogram (kg) = lbs. 1 metre (m) = ft 1 foot (ft) = m 1 kilometre (km) = mile 1 square kilometre (km 2 ) = square mile 1 hectare (ha) = 0.01 km 2 = acres FISCAL YEAR July 7- July 6 LIST OF TABLES Table 3.1 : Table 3.2 : Table 3.3 : Table 3.4 : Table 4.1 : Table 4.2 : Table 4.3 : Table 4.4 : Table 4.5 : Table 4.6 : Table 4.7 : Table 5.1 : Table 5.2 : Table 5.3 : Table 7.1 : RSDP-I Mid Term Review and Revised Implementation Road Construction and Maintenance Expenditure Road Fund Regular Budget Allocation Maintenance Needs and Financing Sources Base Year (2003): Traffic Road Intervention Unit Cost Summary of Project Cost Estimates by Components Summary of Project Cost by Category of Expenditure Sources of Finance Expenditure Schedule by Components Expenditure Schedule by Source of Finance Summary of Project Implementation Schedule Summary of Procurement Arrangements Provisional Mission Program Switch Values for Investment Costs LIST OF ANNEXES ANNEX Titles No of Pages 1. Road Location Map 1 2. Ethiopian Roads Authority Organisation Chart 1 3. Project Implementation Schedule 1 4. Provisional List of Goods and Services 1 5. Summary Financial and Economic Analysis 4 6. Environmental and Social Management Plan Summary 2 7. Summary of Bank Group Operations as of 31 May List of Annexes in the Project Implementation Document 1

7 iv LIST OF ABBREVIATIONS AADT = Average Annual Daily Traffic ADB = African Development Bank ADF = African Development Fund BADEA = Arab Bank for Economic Development for Africa CAA = Civil Aviation Authority CBR = California Bearing Ratio DBST = Double Bituminous Surface Treatment DfID = Department for International Development (U.K.) EAL = Ethiopian Airlines EDF = European Development Fund EU = European Union ESL = Ethiopian Shipping Lines EFTC = Ethiopian Freight Transport Corporation ERA = Ethiopian Roads Authority EIRR = Economic Internal Rate of Return ERTTP = Ethiopian Rural Travel and Transport Programme ESAL = Equivalent Standard Axle Load FE = Foreign Exchange GPN = General Procurement Notice GOE = Government of Ethiopia GTZ = Deutsche Gereuschraft fur Technische Zusammenarbeit HDM = Highway Design and Maintenance Standard Model IMT = Intermediate Means of Transport ICB = International Competitive Bidding IDA = International Development Association (World Bank) IRI = International Roughness Index JICA = Japanese International Cooperation Agency kph = Kilometres Per Hour KfW = Kreditanstalt fur Wiederanfbaw MEDAC = Ministry of Economic Development and Cooperation MOF = Ministry of Finance MOTAC = Ministry of Transport and Communications MOW & UD = Ministry of Works & Urban Development NDF = Nordic Development Fund PID = Project Implementation Document PER = Public Expenditure Review PTC = Passenger Transport Corporation RFP = Request for Proposals RE = Regional Engineer REO = Regional Engineer's Office RIU = Road Inspectorate Unit RSDP = Road Sector Development Program SIP = Sector Investment Program SPN = Specific Procurement Notice TA = Technical Assistance TCDE = Transport Construction and Design Enterprise TRRL = Transport Road Research Laboratory UNDP = United Nations Development Programme VOC = Vehicle Operating Costs vpd = Vehicles Per Day

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9 vi ETHIOPIA BUTAJIRA-HOSSAINA-SODO ROAD UPGRADING PROJECT PROJECT MATRIX REVISION DATE: MAY 2001 DESIGN TEAM: M.O. AJIJO/M. DIENE/A. OUMAROU Narrative Summary (NS) Verifiable Indicators (VI) Means of Verification Assumptions 1. Goal: 1.1 To improve the efficiency and 1.1 Annual road capacity of the transport system to Construction and support economic and social Pavement evaluadevelopment programmes. 2. Project Objective: 2.1. To reduce transport cost between Butajira and Sodo and to promote market integration between rural and urban areas. 1.1 Inventory of the classified road network in satisfactory condition increase from 57% in 2000 to about 90% by year Raise the level of road density from 21 km/ 1000 km2 in 2001 to 38 km/1000 km2 by the year Average vehicle operating costs reduced by 43% in the year 2006 when the roads is opened to traffic compared to the base case. 2.2 Average travel time between Butajira and Sodo reduced by up to 50% compared with base case tion statistics from ERA 1.2 Road Network statistics Vehicle operating cost data 2.2 ERA traffic and travel time survey data on project road (Goal to supergoal) Reduced transport cost will lead to economic growth and improvement of critical poverty indicators. (Project objective to Goal) 2.1 Fuel levy fund is adequate for road maintenance 2.2 Government commitment to axle load control and other policies and measures contained in the RSDP. 3. Outputs 3.1 A two lane bituminous road with 7.0 m wide carriageway and 1.5 m wide shoulder on either side from Butajira to Sodo (189 km) km of gravel road upgraded to all weather bitumen standard by IRI reduced from 15m/ km in 2003 on existing road to about 2.2 m/k on actual project road by Project Completion Report (PCR). 3.2 Audit Reports 3.3 Project Performance Evaluation Report(PPER) (Outputs to Project Objective) 3.1 ERA will maintain the road in accordance with the maintenance action plan. 4. Activities For Civil Works : 4.1 Prequalification of contractors, Issue and receipt of tenders Evaluation, negotiation and award of contract 4.2 Execution of civil works. For Consultancy Services: 4.3 Approval of TOR for supervision and auditing services. 4.4 Issue & receipt of RFP 4.5 Evaluation and approval 4.6 Award of consultancy service contracts 4.7 Commencement of services. Inputs/Resources Inputs million UA 4.1 Civil works Consultancy i) Supervision 1.99 ii) Audit Contingencies: - Physical Price 5.43 Total Resources: ADF GOE 4.59 Total QPRs 4.2 SRs 4.3 PCR 4.4 Audit Reports (Activity to Output) 4.1 All procurement actions are on schedule. 4.2 Payments for invoices are not delayed. 4.3 GOE budgets and timely release of counterpart funds. 4.4 Effective supervision by the Bank and consulting firms. 4.5 ERA s effective monitoring.

10 vii EXECUTIVE SUMMARY Project Background The Government of Ethiopia put together with the support and wide consultation with its development partners and other stakeholders in 1997 a ten year Road Sector Development Programme to be implemented in two phases with the objective of improving the road transport operating efficiency which is critical to the success of its Agricultural Development Led Industrialisation Strategy. The first phase of the programme, RSDP I originally estimated to cost US$ 2.8 billion over the period focused mainly on i) the restoration/upgrading of the classified main road network, ii) institutional support to strengthen Federal and Regional roads management capacity including support to domestic construction industry, environmental protection, a road safety component and iii) road maintenance support programme which focuses on use of private sector. The RSDP lists several road links and sector policy support options which provided the basis for donor intervention. Donors currently co-financing the programme include the IDA, ADF, EU, NDF, OPEC, BADEA and a number of bilateral donors viz. the Governments of Germany, Italy, Japan, and the United Kingdom. The Government, participating donors and other stakeholders had a mid-term review of the RSDP I in February 2001 and have agreed on actions and schedules for preparing, discussing and follow on of the RSDP II for the period Among the list of several link roads put forward by the GOE for financing by the Bank Group in the RSDP is the upgrading from gravel to bitumen standard of the Alemgena Butajira Hossaina Sodo Road Corridor (309.1 km). For ease of implementation, the project was conceived in lots of Alemgena Butajira (120.1 km), Butajira Hossaina (95 km) and Hossaina Sodo (94 km). The Bank appraised the Alemgena Butajira section in February 1998 and the ADF approved a loan of UA million for the section in June The physical execution of the link commenced in November The ADF/TAF Grant for the Seven Roads Study was used to update the economic feasibility and social impact studies of the other two sections which are the subject of this appraisal document. Purpose of the Loan The ADF loan will be used to finance the entire foreign exchange cost of UA million and 32.83% of the local cost, which amounts to UA 2.24 million. The total ADF financing amounts to UA million, representing 90.0% of the total project cost, net of taxes. Sector Goal and Project Objective(s) The sectoral objective of the project is to improve the efficiency and the capacity of the transport system to support economic and social development of Ethiopia. The objective of the project is to reduce transport cost between Butajira and Sodo and to promote market integration between rural and urban areas of Ethiopia. Brief Description of Project Outputs: The output of the project will be a two-lane 189-km bitumen surfaced road with 7.0m wide carriageway and 1.5m shoulder on either side between the two towns of Butajira and Sodo. The project comprises the following components:

11 viii Project Cost i) Construction works for the upgrading of gravel surfaced road to a two-lane bitumen standard with 7.0m wide carriageway and 1.5m wide shoulders on each side for a total length of 189 km between Butajira and Sodo. ii) Consultancy Services for: - Supervision of construction works of (i) above. - Project audit services. The estimated cost of the project is UA million (net of taxes) of which UA million (85.0%) will be in foreign currency and UA 6.83 million (15.0%) will be in local currency. The estimated cost is based on March 2001 prices with 10% physical contingency and a price escalation per annum of 3% and 9% on foreign and local costs respectively. Source of Finance ADF and GOE will jointly finance the project. The proposed financing from ADF will cover the entire foreign exchange cost of UA million and 32.83% of local cost, which amounts to UA 2.24 million. The total proposed financing from the ADF amounts to UA million which is equivalent to 90.0% of total cost of the project. The GOE will finance 67.17% of the local costs amounting to UA 4.59 million. Project Implementation The Ethiopian Roads Authority (ERA) will be responsible for the execution of the project. The project construction will be implemented over a period of thirty-two (32) months starting from July 2003 and will be completed by February 2006 followed by the 12 months warranty period. Conclusions and Recommendations The upgrading to bitumen standard of the Butajira Hossaina-Sodo section of the Alemgena-Sodo trunk road is in line with the Government's stated policy on road infrastructure development. The project through the removal of transportation bottlenecks will contribute to the sector goal of improving the efficiency and capacity of the transport system to support the social and economic programmes of the Government.. The proposed road will improve transport services between the capital Addis Ababa and Sodo, and promote market integration between rural and urban areas. The project is consistent with the Bank Group's strategy for Ethiopia in the transport sector for the period and is well conceived, technically feasible, economically justified and environmentally sustainable. The project generates an economic internal rate of return (EIRR) of 18.46% based entirely on quantifiable economic benefits for road user benefits. The road will give rise to other economic and social benefits, and will have a significant impact on poverty reduction in the project area. It is recommended that a loan not exceeding UA million from ADF resources be extended to the Government of Ethiopia for the purpose of implementing the project described in this report subject to the conditions specified in the loan Agreement.

12 1 1. ORIGIN AND HISTORY OF THE PROJECT 1.1 The Government of Ethiopia put together with the support and wide consultation with its development partners and other stakeholders in 1997, a ten year Road Sector Development Programme (RSDP) with the objective of improving the efficiency and capacity of the road transport system to support its Agricultural Development Led Industrialisation Strategy and social economic development in general. Initially the programme emphasis is on extensive rehabilitation and upgrading of existing main roads and later substantially expanding the rural roads network. The programme is under implementation in two phases; RSDP - I is estimated originally to cost US$ 2.8 billion over the period and focused mainly on restoration/upgrading of the classified main road network. A mid-term review of RSDP-I was undertaken in February 2001 to assess implementation experience and draw lessons for putting the programme on track. The RSDP provides the key to transport development in Ethiopia, and lists several roads and sector policy support options, which provided the basis for donor intervention in the programme. Donors currently co-financing the implementation of the programme or indicated commitment include the IDA, EU, ADF, NDF, OPEC, BADEA and a number of bilateral donors viz.: the Governments of Germany, Italy, Japan, Ireland and the United Kingdom. More details on the RSDP and its implementation performance are in Chapter Among the list of several link roads put forward by the Government for financing by the Bank Group in the RSDP is the upgrading from gravel to bitumen surfaced standard of the Alemgena- Butajira-Hossaina-Sodo Corridor (309.1 km). The area through which the road passes is characterised by extensive small-scale agricultural activity. However the poor condition of the road infrastructure on the corridor, leads to low operating speeds and difficult operating conditions during wet season. The development of road infrastructure in this corridor is important for market integration between the rural and urban sectors. 1.3 For ease of implementation, the project is subdivided into sub-sections viz.: Alemgena- Butajira (120.1km), Butajira Hossaina (95 km) and Hossaina-Sodo (94 km). The ADF appraised the Alemgena - Butajira link in February 1998 and approved a loan of UA million for the link in June The contractor was issued letter of commencement in November 2000 for completion in 30 months and physical implementation is currently rated at 6%. The other two remaining links were admitted into the 2001 Indicative Lending Programme following a Bank identification mission to Ethiopia in June The feasibility studies of the Alemgena-Butajira-Hossaina-Sodo corridor was commissioned in June 1996 under a Consulting Services for Five Roads Feasibility Study financed through a Japanese Grant administered by the IDA for review and revision as necessary of Ethiopian Roads Authority's (ERA) preliminary feasibility on five road corridors that have been admitted into the RSDP after a selection on the basis of an initial assessment of needs as part of a base line Road Sector Study financed by the European Union. The final report of the feasibility study was delivered in July 1997 while the detailed engineering design was completed in December Given the age of the studies, the ADF approved an update of the feasibility studies under Package "A" of the ADF/TAF Grant for the Seven Roads Study in December This appraisal report is based on the updated project documents, discussions held with the Government and other agencies and on additional information collected by the Bank mission that visited Ethiopia in May 2001.

13 2. THE TRANSPORT SECTOR Sector Overview Ethiopia's land area of 1.10 million km 2 is one of the largest countries in Africa. Economic activities are widely dispersed around the country and long haul traffic movements are characteristic of Ethiopia's transport system. With agriculture accounting for 45.0% of the country s GDP and 85.0% of its employment, Ethiopian needs a sustainable road network and transport services that could play a vital role in agriculture for internal distribution and marketing of food as well as export of cash crops. It is in this context that the successful implementation of the RSDP is critical for the its Agriculture Development Led Industrialisation Strategy aimed at boosting the productivity of the agricultural sector The transport system consists of about 60,000 km of roads of which about 3,824 km are paved; one railway line (780 km) connecting Addis Ababa with Djibouti; two international airports (Addis Ababa and Dire Dawa), twelve local airports and 38 air strips, river and lake transport of relatively little significance and marine shipping. Roads are the country's dominant mode of transport. More than 95 percent of motorised tonnes-km and passenger-km are carried by road. Road Transport 2.2 Transport System Ethiopia has a relatively limited classified network of about 29,571 km of which about 13 percent is paved; in addition there are some 30,000 km of unclassified roads. The classified network is one of the least developed in Africa with a density of only 27 km per 1000 km 2 and 0.47 km per 1000 population as at 2001 despite 0.7 per cent annual increase in the network since Inadequate maintenance over a long period had led to a severely deteriorated road network. In 1996, it was estimated that 82 percent of the classified roads were in a fair/poor condition and penalised agricultural activity through its effect on vehicle operating costs, delayed evacuation and damage to crops. The ten-year Road Sector Development Programme (RSDP) is to address both the past neglect and the present capacity constraint in the road sector. Through the implementation of RSDP, the Government plans both to expand the network by 80 percent and to improve the condition of the existing network by an extensive programme of rehabilitation and upgrading. Further details of the road subsector and the RSDP are given in Chapter 3. Rail Transport Rail transport operations are undertaken by the Chemin de Fer Djibouti-Ethiopia (CDE) jointly owned by the governments of the two countries under the provision of a 1981 treaty. It is a 781 km single track rail connecting Addis Ababa to the port of Djibouti, built about 100 years back with aging track and rolling stock making it difficult to maintain its original operational efficiency and safety standards. Historically, Addis-Djibouti railway was the main import and export corridor in the country but lost its monopoly in the 1950's when the Port of Assab was built and a road was constructed from Addis Ababa to the new port.

14 During its peak, CDE moved 90 percent of Ethiopia's international traffic. However, since 1986, there has been a general decline. The freight tonnage conveyed fell from a high of 336,000 tons in 1986 to a low of 160,000 tons in The number of passengers transported fell from 1,000,000 in 1986 to 760,000 in 1999, a drop of 31 percent. The reasons for this decline were the poor condition of the track, limited locomotives availability and weak management As part of its external transport strategy to develop alternatives transit routes to the neighbouring countries, efforts to improve the performance of the CDE have been underway, with the help of several donors. In this context, the EU has funded a study which concluded that an investment programme of about US$ 205 million (US$ 140 million for infrastructure and US$ 65 million for equipment) is required to meet CDE's needs until Emergency measures estimated at 31.7 million ECU with part financing to the tune of 55 million French francs from France is currently being implemented and involves renewal of track, rehabilitation and procurement of locomotives/rolling stock, training and technical assistance support. These measures when completed would restore the annual lifting capacity of the rail to 350,000 tonnes per year. In addition, medium and long term measures with an estimated cost of million ECU have been put in place with expected financing from the EU of which 35 million ECU has already been secured. There is also the intention of the two Governments to implement CDE concession plan, which would involve the granting of a license to a private company to operate the railway services. Government is also finalising a preliminary study of a Railway development master plan with short, medium and long-term vision to have alternative export corridors through Djibouti, Kenya and Sudan. Air Transport Ethiopia is served by two international airports (Addis Ababa and Dire Dawa), twelve local airports, which are administered directly by the Ethiopian Civil Aviation Authority (CAA) and 38 air strips which are seasonally used outside of the CAA s administration. In order to keep pace with the evolving technologies and growing traffic at Addis Ababa International Airport, Government has embarked on improvement and upgrading of existing infrastructure facilities with its related systems to transform Addis Ababa airport with a new runway, five taxiways, a new international terminal, and upgraded communication and safety facilities as per ICAO standards to be completed by The total estimated cost of the project was US$ 160 million and for ease of implementation for external financing consideration has been divided into three packages. The Bank Group and the EIB are co-financing with Government on parallel basis the air side works, with financing of US$ 26 million for the new runway, taxiways and associated works provided by the ADF in one package, while the EIB provided financing for augmentation of navaids, communications, airfield lighting systems and other utilities with a credit of US$ 21 million in another package. The construction of new international passenger terminal with cofinancing to the tune of US$ 47.0 million from KFEAD, BADEA and OPEC, while NDF is financing the special systems including luggage handling with a credit of US$ 7.0 million that constitute the third package. Government using its own resource and in support of development of tourism has invested about Birr million in construction of runways, terminal buildings and upgrading of facilities in five of the twelve domestic airports of Arba Minch, Axum, Gondar, Lalibela and Mekele Air transport services are provided by EAL which operates on domestic and international routes. At present the EAL services 49 destinations in its international operations, which still remains under the domain of the state. However about ten other international airlines operate regional and international flights into and out of Addis Ababa. Ethiopian Airlines (EAL) is wholly owned by the government and is still the dominant provider of domestic scheduled services to 32 domestic airports and airstrips. Private participation is allowed under general aviation and as per proclamation No 37/1996, the area of investment reserved for domestic investors is in the areas of air transport services using aircraft with seat capacity of 20 passengers, or with cargo capacity of up to 2700 kgs. At present five private national operators have been licensed out of which two have started operation. The demand for EAL's services is high with average passenger load factor of about 59 percent on all routes and 63 percent in the domestic market, resulting in a high turnover particularly at Addis Ababa airport.

15 4 Maritime Transport At the moment Ethiopia is mainly served by one port which provides the gateway for it s foreign trade viz. Djibouti in the Republic of Djibouti. Ethiopia s transit traffic in 1999 amounted to 2.8 million tonnes. Of this, only 200,000 tonnes were exports. Imports consisted of 1.0 million tonnes of petroleum products and 1.6 million tonnes dry cargo, half of which consisted of grains and fertilizers The Ethiopian Shipping Lines (ESL), a Government parastatal owns 12 ships with total lifting capacity of 112,834 Gross Registered Tonnes (GRT) out of which 10 are operational. Two of its vessels are less than 10 years old, two between 10 and 15 years and another 5 between 15 and 20 years while the remaining one is 30 years old. The ESL operates in five routes viz.; North & Western Europe, Mediterranean & Adriatic, Far East, East Africa and Middle East and plays an important role in the development of the country s external sector. The total tonnage lifted by the ESL was 228,285 tonnes in 1998/99. Government as matter of policy has in 1997 liberalized freight forwarding and shipping agency which hitherto were the domain of the state and are now open to the private sector with 36 companies including the state owned Maritime and Transit Services Enterprise (MTSE) involved. 2.3 Transport Policy, Planning and Coordination The Government of Ethiopia's current economic policy statement calls for a greater role for the private sector and a departure from centralised administrative regulation to market determined decisions. The policy as enunciated in November 1991 has important elements with respect to policy direction in the transport sector. The economic policy recognises the need for limiting the role of the state to regulations and their enforcement and introducing reforms including streamlining the role of public enterprises; and encouraging private participation in the sector. A lot of institutional support and policy studies are being financed in the sector by donors for which action plans are being recommended for implementation by the Government for the deregulation and privatisation of the sector The Ministry of Economic Development and Cooperation (MEDAC) is responsible for giving directives and reviewing investment plans, which are submitted for approval to the Cabinet and the Council of Representatives from the sector Ministries. The Ministry of Finance undertakes the review of recurrent budget, which is also approved by the Cabinet and the Council of Representatives The overall coordination in the transport sector is exercised by Ministry of Transport and Communications (MOTAC) to which all agencies in the transport sector, except those in road infrastructure report. Roads planning and construction for the trunk and main link roads is undertaken by the Ethiopian Roads Authority (ERA) whereas MOTAC is responsible for planning of all other transport modes as well as regulation of the road transport industry. The Ministry of Works and Urban Development oversees development of urban transport and the construction industry while Regional Road Organisations (RRO) are responsible for rural roads Finally, the Ministry of Economic Development and Cooperation (MEDAC) plays an important role in helping to coordinate transport strategies, providing guidelines for sectoral development plans, and setting overall levels of investment for each of the sub-sector plans. Effective coordination exists between the planning offices of MOTAC, ERA and the MEDAC.

16 5 3. THE ROAD SUB-SECTOR Road Network 3.1 Road Network, Vehicle Fleet and Traffic The total classified road network is about 29,571 km of which 8,180 km are designated trunk roads which function as the primary road system, 7,911 of major link roads connecting the trunk roads with economic centers, and 13,480 km of regional roads which provide the inter-village tertiary road network. This classification is more related to design standard than function; a study to establish a comprehensive functional classification system has been finalized which enabled the Ethiopia roads to be classified in five classes. The final classification of the roads in these five classes is underway. The overall condition of the network indicated as of 1999/2000 that about 70% of the paved network are rated poor while for the gravel roads 78% are in poor condition. This current condition indicates an apparent poor level of service, which would be arrested to a greater extent as the rehabilitation of roads under current contracts, is expedited The main network extends radially from Addis Ababa with few interconnecting links; large areas still lack an all-weather link to the capital or to other economic centers. However, the network has expanded considerably since 1996/97 as indicated by road density data, which increased from 21.7 km per 1000 km2 in 1996/97 to 27 km/1000 km2 in 1999/00, and from per 1000 population to per 1000 population over the same period. The regional roads in both categories of collector and feeder roads increased from 9,192 km in 1996/97 to 13,480 km in 1999/00, an increase of over 46.6% which has contributed to accessibility while the expansion of the federal highway network was from 15,769 km to 16,091 km (2.04%) over the same period. The overall expansion of % has been recorded for the overall national network, which has been attributed mainly to improvement in rural access roads. Road Vehicle Fleet and Traffic An estimated fleet of some 100,000 vehicles provides transport services in Ethiopia. The current rate of motorization is very low by international standards with only vehicle per capita (620 people per vehicle). Despite an increase in the fleet of 150 percent since 1991; this is less than half the rate in the region. Moreover, the geographical distribution of vehicle ownership is highly concentrated with over 70 percent of vehicles registered in Addis Ababa As a consequence of the past regulations, some 13 percent of the Government owned trucks are between 16 and 20 years old while for truck in private possession where the age is known, 48 percent are older than 16 years and 28 percent are over 20 years. Less than one percent of Government buses are over 16 years whilst 53 percent of private buses are over 16 years and 39 percent over 20 years. This ageing fleet has resulted in low availability and high spare parts requirements and therefore high operating costs Despite the small vehicle fleet, traffic flows on the main network are high. In 1996, 6 percent of the main network had an average daily traffic greater than 800 and 70 percent greater than 200. Total non-urban traffic grew by about 10 percent per year since The most striking feature in traffic flow trends is the continuing increase in total vehicle kilometres travelled; particularly the result indicated increases in kilometers travelled for heavy vehicles than for small vehicles. The adjusted aggregated index of traffic flow on the main road network increased from 100 in 1996 to in 1998 and reached a level of in This high rate of traffic growth is supported by data on fuel consumption and sales. Since 1993, the nation wide increase in fuel sales has been at nearly 15 percent per year.

17 6 3.2 The Road Transport Industry The road transport industry accounts for 95% of passenger/freight movement in the country, import distribution of petroleum products, fertilizer, relief food and collection/ export of coffee from the rural areas. In the Derg period all commercial road transport was under state control. The Government of Ethiopia in 1992 introduced a change, from regulation to deregulation with the Transport Regulation Proclamation and the road transport market is today almost completely deregulated. The Proclamation allowed the establishment of non-government transport undertakings as associations, companies and private operators out of the aegis of Government Corporations and is free to operate. The State owned the very large truck and bus companies; the private sector acted as subcontractors to the Ethiopian Freight Transport Corporation (EFTC) and the Passenger Transport Corporation (PTC) which are currently being commercialized Deregulation of the road freight sector including the abolition of the official Ketana freight allocation system, the restructuring of EFTC into four separate trucking enterprise and a workshop enterprise, and the removal of tariff control and route assignment has resulted in a competitive market for the movement of goods. Freight transport is available throughout the country but its price varies with market conditions, backloading opportunities, and road conditions. In order to match the transport supply, the private sector has received assistance from the government through credits and loans. However the number of new private operators entering the market has been very limited, showing no confidence in the profit opportunities in the sector In the passenger transport sector, deregulation started prior to the change of regime with liberalization of mini-buses, stimulating a large expansion in the fleet. The process has continued and most official controls over the sector have been removed with the exception of fare control for the large buses and urban public transport. The supply of passenger transport has been growing at an annual rate of about 6 percent and appears adequate except at peak periods and in remote areas The road transport market, though had made in reality impressive progress from the regulated state market of the Derg regime, but it is today in fact characterized by a situation of imperfect competition due to the excessive presence of Government activity (own account fleets, parastatal companies, city bus public company, national protection) to the non transparency of the new regulation to operators, to poor organisation and preparation of transport companies (limited backhaul, low containerization factor). In particular, in the freight transport, the presence of three large conglomerates of operators owned by the public sector which in different ways exert some oligopolistic influence on the market, do not stimulate the entrance of individual private operators. In the public passenger transport, the system of public obligation services should be restructured in the capital city and introduced in difficult rural areas to guarantee basic needs for transport to all citizens The road transport regulation still has to respond to the demands of the new economic policy through effective privatisation of parastatal enterprises; opening of the transport market to foreign operators and investors, the complete deregulation of the entire market, with restructuring of urban public transport, the widespread information disclosure policy of the new rules and regulation to all operators and the adoption of a clear framework of regulatory and enforcement institutions. Government is currently trying to review these issues under a Study on Road Transport Regulations with EDF financial support Other issues of concern are i) the control of vehicle loading which is not effective and axle load limits are exceeded and ii) road safety in Ethiopia which is extremely poor with accident fatalities of 155/10,000 motor vehicles compared to 60/10,000 motor vehicles in Kenya and 17/10,000 motor vehicles in South Africa ranking among the highest in Africa. EDF financed study was completed in November 2000 in the case of the axle load controls and Government accepted the recommendation and an implementation action plan was formulated by March 2001 to be submitted to stakeholders consultative group. The substantial completion of implementation of the action plan is to be achieved by 2003 by

18 7 ERA for the sustainability of the investment under the RSDP. The EDF financed study on the issue of Road Safety is still on going and Government adoption of the recommendations and the agreement of an action plan is expected by end Submission of the annual progress reports on the implementation of the action plans for control of vehicle loading and that of Road Safety have been made a condition of the loan. Road Administration 3.3 Road Administration and Training As a part of the institutional reforms agreed during the donors conference of 1996, the restructuring of Ethiopian Roads Authority (ERA) was addressed by Proclamation in This set the framework for transforming ERA from a supplier of road infrastructure to a manager and purchaser of services and works for the road network maintenance and development. The main objectives of this reform was to encourage cost effective construction and maintenance management, and implementation through; (i) contracting-out all construction and progressively increasing amounts of maintenance work contracted out; (ii) progressive commercialization of force account units; (iii) creation of a commercial equipment pool (using ERA equipment); (iv) clear delegation of authority and responsibility; and (v) development of the private sector participation in all aspects of the operations (e.g. training, equipment ownership, materials testing, etc.) ERA is a legally autonomous agency responsible for overall planning, construction, maintenance and management of the country's trunk and major link roads. A Board of Directors appointed by the Government now leads ERA. The Board is composed of six members of whom the Government nominates one member as its Chairman. At present the Minister of Economic Development and Co-operation (MEDAC) is the Chairman. The other five members are: Minister for Works and Urban Development (MOW & UB), Minister of Transport and Communications (MOTAC), General Manager, ERA and two representatives (equal to the rank of ministers) from the Prime Minister's Office. The Board meets regularly once a month to review the progress of the authority and guides ERA in its strategic management of the road network to ensure that it meets the priority needs of the economy and the social demands of a large and widely dispersed rural population and also approves the award of all contracts. The responsibilities for the construction and maintenance of rural/regional roads have been decentralised and are administered by the Regional Government's Rural Roads Organization (RRO) The new ERA structure, headed by a General Manager has three departments, each headed by Deputy General Manager as follows: (a) Regulatory and Engineering Services Department, which is to discharge its responsibilities through three divisions viz. Planning & Programming, Contracts Administration, and Design, Research and Network Management; (b) Operations Department, which has responsibility for force account maintenance, emergency road construction and maintenance and associated logistic support; and (c) Human Resources and Financial Management Department. The technical divisions for the implementation of projects under contract are under the Regulatory and Engineering Services Department. Each division headed by a Manager has specialised branches, with a branch head, responsible for activities under his jurisdiction and is assisted by qualified and experienced professionals in relevant fields. Each engineer is assigned with projects and is responsible for overall supervision and day-to-day monitoring of the projects. The ERA's current organisational structure is given in Annex All departments and divisions of ERA are staffed by qualified and experienced Ethiopian professionals. ERA has about 14,258 employees of whom 5% are professionals and the remaining are non-professionals. Of the total, 4% are women and only about 16% of them are professionals, the remaining is in administrative support cadres. Government is, however, making efforts to recruit more women in the professional categories.

19 8 Training ERA has its own in-house and on-the-job training programmes for all levels of its personnel. The existing training centre at Alemgena (established in 1956) is capable of training personnel engaged in building and maintaining of trunk and major link roads. It has also facility to train in other major fields such as equipment operation, trade and crafts, engineering, financial management etc. Another training institute was established in 1981 to train in modern labour-based techniques suitable to the country's needs. ERA through these training centres, also arranges advanced training courses in foreign institutions with assistance from World Bank, JICA and Federal Republic of Germany (FRG) In order to strengthen the institutional capacity of both ERA and Regional States Rural Roads Organization (RRO), training of more personnel in areas of highway design and engineering, transport planning, contract administration and equipment management, is underway. More than 80 professionals have so far received overseas training with financial assistance from the Government and the World Bank. In addition, financial assistance has been received from the European Union (EU) and GTZ and commitments have been made to cover expenditures related to short term training, project related study tours, and policy oriented seminars in the areas of road infrastructure and road transport. Technical Assistance In order to meet the objectives of the Road Sector Development Programme and the need for smooth and speedy execution of the programme, technical assistance in different fields has been in place to compliment the in-house activities of ERA. Currently, there are seven Technical Assistants working for the ERA. Four of them (contract specialist, transport economist, rural roads coordinator and RSDP adviser) have been assigned by E.U.; the other three, who are working in the newly established Road Inspectorate Unit for strengthening capacity for technical monitoring and supervision of works, have been financed by the World Bank. A bridge specialist technical assistant assigned by the Government of Japan is working under Bridges Branch of ERA. The effective utilisation of the technical assistance programme is critical to the sustainability of the projects under the RSDP and as such monitoring through progress reporting to the Fund of the institutional support component of the RSDP has been made a condition of the loan. 3.4 Road Planning and Financing Road planning and programming is undertaken by ERA's Planning and Programming Division (PPD) which is well organised and staffed with economists, engineers, statisticians, budget analysts and traffic experts. Budget preparation for roads is also the responsibility of the PPD. When the programmes are finalised, the proposals and budgets are reviewed by the Board of ERA and submitted to the Ministry of Economic Development and Co-operation (MEDAC) for review and submission to the Government for its approval. It is through this process that the RSDP has been formulated. Road Sector Development Programme (RSDP) The RSDP, a comprehensive ten year target programme, was prepared by the Government through effective participation with stakeholders and donor community and commissioned in September 1997 for implementation in two phases. The objective of RSDP is to restore Ethiopia's road network, which has become an obstacle to the sustainability of the Economic Development Programme, and to develop institutional capacities of the road agencies to properly manage the network. The physical targets in the first phase of the programme RSDP I ( ) are: i) increasing the road density from 21 km/1000 sq. km in 1996 to 27 km/1000 sq. km in 2002 and ii) to have the proportion of the network in good condition increased from 18% in 1996/97 to 60% by 2002 and to install regular maintenance on the maintainable road network.

20 The first phase of the programme with an original programme size amounting to US$ 2.8 billion was presented to the donors for financial support in The programme was supported by ten multilateral/bilateral donors and commitment/pledges by all financiers including the Government amounted to US$ 1.29 billion by the mid term review of February 2001 (see Annex 5). Donors participating in the programme include the IDA, ADF, EU, OPEC, BADEA, NDF, and a number of bilateral donors, viz. the Governments of Germany, Italy, Japan, Ireland and United Kingdom. The main components of the programme consists of: (a) rehabilitation and upgrading of about 6300 km of trunk roads, (b) upgrading and construction of about 2300 km major link roads, (c) rehabilitation/construction of 1900 km regional roads, (iv) periodic maintenance of about 2400 km, and (v) institutional support to strengthen federal and regional road management agencies The investment component of the programme focuses mainly on the rehabilitation/upgrading of the five road corridors as under: i) Southern import-export corridor between Addis-Modjo-Awash-Mille (522 km); ii) iii) iv) Northern Corridor between Addis-Dessie-Woldiya-Adigat-Zalambessa (922 km); North-Western corridor between Addis-Debre Markos-Gondar (750 km); East and South Eastern corridor between Awash-Kulubi-Dir Dawa-Harar (315 km); and v) North-South rift valley corridor between Alemgena-Hossaina-Sodo (309.1 km). The intervention of the World Bank, European Commission and the Government of Japan is on the first four corridors, whereas the Bank Group's financing is in the fifth corridor. RSDP programme financing sources as at May 2001 and the indicative commitment of each donor are given in Annex 5. The Government of Ethiopia (including the Road Fund Administration) is the major financier of RSDP I accounting for 60% while 40% of the funding is from donor agencies In order to ensure the sustainability of the RSDP programme, during the donors meeting of January 1996, four major issues were raised by the donors viz. (i) ERA institutional reform; (ii) Establishment of Road Fund; (iii) Preparation of maintenance action plan and; (iv) preparation of letter of sector policy. Government has taken actions and complied to the satisfaction of the donors requirements; in particular the Road Sector Policy was overhauled by the Government prior to the launching of the RSDP and resulted in Government issuing a letter of sector policy, which was endorsed by the donor community. The letter of sector policy and strategy formed the foundation of many policy and institutional reforms that gave the donor community the confidence to invest in RSDP I In February 2001, a mid-term review of RSDP I was undertaken where the Government and participating donors including the Bank Group took stock of progress to date, assimilate lessons learned and redirected efforts to a more efficient implementation of the program. The overall accomplishment in terms of physical work as at February 2002 (maintenance, rehabilitation and upgrading) are as indicated in the table below while the projected accomplishments at the end of RSDP I are based on progress expected from on-going projects. :