Project Name. PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB6976 DRC-Multimodal Transp Additional Financing. AFRICA Sector.

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1 Project Name PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB6976 DRC-Multimodal Transp Additional Financing Region AFRICA Sector Railways (80%); Ports, waterways and shipping (5%); Aviation (5%); Public administration- Industry and trade (5%); Public administration-transportation (5%) Project ID P Borrower(s) Congo, Democratic Republic of Implementing Agency Ministry of Transport Building ONATRA, Blvd. du 30 Juin Kinshasa-Gombe Congo, Democratic Republic of Tel.: (243-81) Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared February 15, 2012 Date of Appraisal February 29, 2012 Authorization Date of Board Approval May 31, Country and Sector Background Despite its rich endowment in natural resources and the dynamism and entrepreneurship of its population, the Democratic Republic of Congo (DRC) is still today one of the poorest countries in the world. Although significant progress has been made over the past decade, DRC s political, economic and social challenges, the result to a large extent of past conflicts and inadequate economic management, remain daunting. The development of the transport sector in DRC is a major element of the government s policy towards economic growth and poverty reduction. Even though the rehabilitation of dilapidated key infrastructure and facilities is under way with the support of several donor funded projects, the transport network is still suffering from major connectivity gaps and bottlenecks. In addition, the sector continues to experience serious governance and management issues. Its performance is currently inadequate and limits DRC s ability to achieve rapid economic growth. It requires further investments and reforms. 2. Objectives The development objectives of the proposed Additional Financing (AF) are the same sa those of the Multimodal Transport Project s (MTP), namely: (i) to improve transport connectivity in DRC so as to support national economic integration, (ii) to restore SNCC s (Société Nationale des Chemins de Fer du Congo, National Railway Company of DRC) financial and operational viability, and (iii) to implement a sector wide governance plan and strengthen transport stateowned enterprises (SOE) operational performances.

2 3. Rationale for Bank Involvement Under Component 1 of the original project, the MTP has experienced lower co-financing support than initially committed by the Government of the Democratic Republic of Congo (GDRC) based on its national budget as well as on a Chinese line of credit which was expected to be passed on to SNCC for the provision of equipment and works, and by the World Bank Private Sector Development and Competitiveness Project (PSDCP) for funding staff reduction. Indeed, the Government has been able to provide only a much reduced contribution to the project out of its national budget, and it is now unlikely that the Chinese line of credit will come to fruition. The proposed AF would make up for part of this funding gap and help SNCC increase its transport capacity to the financial break-even level. The proposed modest scaling up of Component 2 activities has become a priority as a result of several recent plane crashes and river boat accidents with high death tolls. It will help increase the efficiency of operators regulation in air and river transport and thus the safety of passengers and freight. It will also help provide an adequate river transport infrastructure in neglected parts of the river network. 4. Description Based on the GDRC request and the team s evaluation, it is proposed that the AF will be allocated as follows: a) Component 1 - SNCC recovery plan: The AF contribution to Component 1 is US$160 million and supports the following activities: US$95 million to finance about one third of the investments which were to be funded by the government through the Chinese line of credit. The remainder of the needed investments (US$105 million) would be funded by the Chinese line of credit once it is effective or by private mining companies. US$25 million to replace:( i) the US$14 million shortfall of the PSDCP to the SNCC social plan; and (ii) US$11 million originally to be provided by GDRC and /or SNCC to pay the pension rights of the cohorts of employees eligible for retirement from 2010 to US$40 million in support of SNCC s operations to partially replace the US$44 million that GDRC committed to under the existing grant agreement but cannot provide due to deteriorating fiscal and budgetary situation. b) Component 2 - Operational performance strengthening and improved governance of the sector: The AF contribution to Component 2 is US$15 million and supports the following activities:

3 River transportation: U$5 million would complement a planned Euro 60 million investments by the European Union (EU) and would expand the rehabilitation of river navigational aids on the upper stretches of the Congo River (in complement of the SNCC rail network) and two neglected tributaries (the Lua and Mongala rivers) with relatively high surrounding population, increasing the capacity of river transportation which has recently gained importance, particularly within the growth poles development strategy of the GDRC. Directorate of Maritime Waterways (Direction Maritime des Voies Navigables, (DVMN)): US$5 million for capacity building at the Directorate of Maritime Waterways (Direction Maritime des Voies Navigables, (DVMN)) to oversee and license the river transportation operators via: (i) the recruitment of new inspectors; and (ii) the temporary support to DVMN operational costs until an independent and sustainable financing scheme is in place; and Agency for Civil Aviation (Agence de l Aviation Civile (AAC)): US$5 million to implement (i) an action plan for DRC s civil aviation, including external services for the twinning of the AAC with a foreign civil aviation, (ii) a five-year technical capacity strengthening plan for AAC, and (iii) a recertification of DRC passenger airlines crews and aircrafts. This amount would complement other funds provided by the EU for the renewal of the AAC. c) Component 3 International trade procedures simplification: No supplemental AF funds are provided to Component 3 activities. d) Component 4 - Project management: The AF contribution to Component 4 is US$5 million and supports the following activities: US$5 million would be allocated to the project management entity Cellule d Execution du Projet de Transport Multimodal (CEPTM) to fully fund its revised operating costs until the new closing date. 5. Financing Source: ($m.) BORROWER/RECIPIENT 0 IDA Grant 180 Total Implementation The implementation arrangements for the proposed AF will remain the same as for the original project. The Ministry of Transport (MoT) will ensure the project oversight with support as and when needed from the Project Steering Committee (PSC) which is comprised of the different ministries and agencies concerned by cross-cutting issues with the ongoing SOE reform in DRC.

4 Responsibility for detailed implementation activities will be with CEPTM which includes two independent units one being located in Lubumbashi (UPL) for Component 1 and the other in Kinshasa (UPK) for the management of Components 2 and 3. The implementation of the proposed AF is expected to be completed by June 30, 2017 within 18 months of the original closing date for the MTP of December 31, Sustainability In the case of Component 1 (SNCC recovery plan) which accounts for about 90% of the Additional Financing, the Bank, in cooperation with GDRC, has devised a comprehensive investment plan designed to ensure that the impact of the project would go beyond simply stabilizing SNCC operations. In order to ensure the viability of the investment, the Bank has agreed to complement this plan with financial assistance to SNCC towards the payment of its employees retirement obligations and to finance some of its operating expenses. This assistance will allow SNCC to adjust its structural costs slowly downward while waiting for the impact of the track and rolling stock investments to raise SNCC traffic and revenues beyond its fixed costs after At the same time, a major institutional strengthening is taking place, which is key to ensure the long term sustainability of the SNCC. 8. Lessons Learned from Past Operations in the Country/Sector Past similar operations in the country and/or the sector have shown that reform of SOEs is a long term process that requires strong commitment and sustained effort on both the Government and the Bank sides. Experience has also shown that institutional and operational weaknesses need to be addressed through a comprehensive program of measures, which includes investments to develop capacity and efficiency, financial recovery, staff reduction and renewal, institutional strengthening, and, whenever possible, involvement of private operators and investors. The key lesson learned in terms of PPPs, and transport PPPs in particular, is that private operators and investors cannot be expected to finance all the investment needs. It is thus critical to identify and secure prior to establishing PPPs the sources of such financing. In addition to legal settings that protect private investors, governments also need to offer attractive conditions to private operators. In some transport subsectors (ports and airports), the danger of turning public monopolies into private ones can be avoided through contractual capping and/or decrease of maximum users tariffs over the lifetime of the PPPs. Finally, public and private expectations ahead and during PPPs implementation are key to ensuring PPPs success and need to be managed very carefully. These key lessons have been used in the design of the original MTP and the proposed AF which seeks to ensure that: (i) There is a comprehensive program of change measures GDRC s share of investment is fully financed, (ii) SOEs legacy costs are duly dealt with,

5 (iii) policies related to intermodal competition and soft issues such as international trade regulations are addressed, and (iv) realistic expectations are assigned to each PPP. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment (OP/BP 4.01) [X] [ ] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] [ ] Pest Management (OP 4.09) [ ] [X] [ ] Physical Cultural Resources (OP/BP 4.11) [X] [ ] [ ] Involuntary Resettlement (OP/BP 4.12) [X] [ ] [ ] Indigenous Peoples (OP/BP 4.10) [X] [ ] [ ] Forests (OP/BP 4.36) [ ] [X] [ ] Safety of Dams (OP/BP 4.37) [ ] [X] [ ] Projects in Disputed Areas (OP/BP 7.60) * [ ] [X] [ ] Projects on International Waterways (OP/BP 7.50) [ ] [X] [ ] 10. List of Factual Technical Documents - PAD for the parent project - Implementation Status and Results Report from past supervision missions. 11. Contact point Contact: Jean-Charles Crochet Title: Senior Transport Economist Tel: (202) Jcrochet@worldbank.org 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) pic@worldbank.org Web: * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas