Public Disclosure Authorized. Public Disclosure Authorized. Public Disclosure Authorized. Public Disclosure Authorized. Report No.

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1 Public Disclosure Authorized Project Name Region Sector Project ID Borrower Report No. PIC4620 Senegal-Urban Transport Reform and... Capacity Building Project Africa Urban Transport SNPA44383 Republic of Senegal Public Disclosure Authorized Implementing Agency Date initial PID prepared May 1, 1996 Date revised PID prepared January 13, 1997 Ministry of Equipment and Land Transport CETUD, Dakar, Senegal Contact: Mr. M. Ndiaye, Director of Land Transport Tel: Fax: Projected Appraisal date January 20, 1997 Public Disclosure Authorized Public Disclosure Authorized Projected Board date June 10, 1997 Country Background 1. Senegal is a Sahelian country with limited natural resources and a population of 8.3 million in Social indicators, such as life expectancy, primary school enrolent rate and infant mortality are at the lower end of the range recorded in sub-saharan Africa. Per capita GDP, which was estimated at US$ 610 in 1994, places Senegal at the level of middle-income countries. 2. Senegal's economic performance during its first 30 years of independence ( ) has been disappointing. Population grew at 3 percent per annum, while GDP grew at only 2.5 percent. Senegal's agricultural base has been steadily deteriorating because of poor weather conditions and resource management. Industrial production grew at 4.5 percent per annum between 1960 and 1985, and at 4.1 percent between 1986 and Export performance during this period compared unfavorably with most other West African countries and averaged only 2.4 percent growth per annum. 3. In an attempt to reverse this economic deterioration, the Government adopted a series of adjustment measures, including cuts in public sector wages and the devaluation of the CFA Franc by 50 percent in January 1994, and started to implement a medium-term strategy for the development of the private sector. As a result, real GDP is estimated to have grown by 4.8 percent in 1995, led in part by exports of fish, groundnut products and phosphate, and expansion of tourism. In the nontradables sector, however, a number of parastatals suffered, including the Senegalese Railways, Air Senegal and Societe des Transports en commun du Cap Vert (SOTRAC), the bus company. The increased cost of

2 imported fuel and a decrease in the number of passengers carried led to a decrease in net revenues, that impacted both the public and private sector operators. Urban Transport Sector Background 4. The urban population in Senegal has steadily increased from 30 percent of the total population in 1970 to an estimated 42 percent in 1994, and is projected to increase to 45 percent by the year Overall, the national urban population is currently growing at an average rate of 3.7 percent. Most of the urban population is concentrated in these regions in the west of the country: Dakar, Thijs and Kaolack. The population of the metropolitan area of Dakar (nearly two million inhabitants in 1994) where a substantial proportion of Senegal's economic activities is concentrated (86 percent of its industries and 92 percent of the financial services) 1994) has a yearly growth rate of 5 percent. 5. The metropolitan area of Dakar consists of three major poles stretched along 30 kilometers of the Cap Vert peninsula. These poles include the city of Dakar itself, where 63 percent of the jobs are located, and two 'bedroom' communities of Pikine-Guediawaye and Rufisque. As a result, there is a massive daily traffic of commuters. About two million daily trips occur in Dakar, half of them involving motorized transport vehicles. 6. The urban transport sector accounts for seven percent of Senegal's GDP and generates about 32,000 jobs in Dakar with an estimated 30,000 jobs provided through the privately owned vehicles and taxi services. Public transport also plays a major role in the urban economy by facilitating access to places of employment and the market. In Dakar, 74 percent of the home-work trips are motorized due to the long distance to be covered. Within the motorized transport mode, 70 percent are made using public transport services, which is one of the highest percentages in sub-saharan Africa. These public transport services are provided by the private sector (the Cars Rapides--small owner/operators--consisting of a fleet of about 2, seater buses), a parastatal bus company (SOTRAC, with a fleet of 200 buses), the Senegalese Railways, Petit Train Bleu (the PTB), and taxis (registered and unregistered). SOTRAC, created in 1971, is a 65-percent state-owned company, with foreign partners owing the remainder 35 percent. SOTRAC's market's share (61 percent) is made up largely of civil servants and students riding on reduced fare or riding free. Management performance is weak, and the company is a burden on the public budget (US$20 million over a threeyear period). Successive performance contracts 'contrats-plans' between the State and SOTRAC, aimed at improving SOTRAC's efficiency, have not met their objectives. Urban Transport Reforms 7. The urban transport sector which has played a significant role in the urban, economic and social development of Senegal, is now facing a major crisis, particular in Dakar under the combined effects of: (a) diffused responsibilities (planning and regulation in the urban transport sector ministries with poor technical expertise); (b) weak -2 -

3 financial and managerial capacities; (c) an ineffective regulatory framework; (d) rapid urban population growth; (e) lack of intermodal coordination; and (f) traffic congestion. As a result, commuter rides take longer and are more hazardous. In addition, due to the lack of pedestrians facilities, weak law enforcement and insufficient road safety measures, the number of traffic accidents involving pedestrians has increased significantly during the last decade. 8. To find sustainable solutions, the Government of Senegal (GOS) has made a major effort to design reforms in the urban transport sector with broad participation of various stakeholders. This effort was undertaken under the leadership of an ad-hoc Committee (the 'Comite de Suivi des Transports Urbains') set up under the auspices of the Ministry of Equipment and Land Transport in May 1993 and with support from the World Bank through the sub-saharan Africa Transport Policy Program (SSATP). A draft Urban Transport Policy was issued by the Comite de Suivi in July 1995 and debated during a national policy seminar in September 1995 at which most stakeholders and donors participated. Based on the recommendations of this seminar and further sector dialogue in September 1996, the GOS issued a Letter of Urban Transport Sector Policy, defining its strategy for the sector. This strategy is based on a comprehensive approach covering the institutional, regulatory, financial, managerial and social aspects of the urban transport crisis The government (GOS) has requested the Bank's assistance to implement these reforms. Project Objectives 9. The main objective of the operation is to provide more affordable, reliable and safer public transport services in the metropolitan area of Dakar. This objective will be pursued through: (i) the strengthening of the institutional and regulatory framework and the development of a coordination mechanism between the public and the private actors (operators, national and local agencies); (ii) the privatization the public transport company, the SOTRAC; (iii) stakeholders' involvement in the decision-making and regulation process; (iv) the development of road safety action plans and traffic management measures in the metropolitan area of Dakar; and (v) pilot investments targeted on the promotion of public transport services. Project Description 10. The project will consist of consultant's services and short-term technical assistance for implementing the policy and institutional reform defined by the Government of Senegal in the Urban Transport Policy Letter dated September, The main component of the proposed operation (US$3.1 million) is the strengthening of the capacity building including training, awareness campaign and advisory services for: (i) central and local government agencies for policy development; (ii) assistance to the privatization of SOTRAC, including the assistance to the development of a leasing scheme for the urban transport operators and the revision of the regulatory framework for urban transport services; and (iii) sector coordination and participation through the establishment and management of a coordinating body, the Conseil Executif des Transports Urbains de Dakar (CETUD), as well as the establishment and functioning of a sustainable financing mechanism for -3 -

4 the sector through the Fonds de Developpement des Transports Urbains (FDTU). 11. Complementary to the capacity building package, a physical component (US$2.0 million) will be carried out through pilot investments in favor of the public transport services, such as rehabilitation of bus stops/shelters, bus lane arrangements, fitting of encroachments, ntermodal slots, and traffic management measures. Project Financing 12. The project cost is estimated at US$7.5 million. IDA would finance US$5.1 million. The contribution from the Government of Senegal would be US$2.4 million, through its financial participation to the FDTU for the next three years. Following upon the Letter of Urban Transport Sector Policy issued in September 1996, the Caisse Frangaise de Developpement (CFD) has expressed its intention to finance the purchase of second-hand buses for the sector (future privatized SOTRAC and the Cars Rapides) as well as investments in urban infrastructures. The European Union (EU) is considering its intervention in the financing of urban infrastructures. Both intentions are expected to be confirmed at appraisal. Project Implementation 13. The project would be implemented in 36 months. The Ministry of Equipment and Land Transport (MELT) would be the supervisory Ministry. The CETUD, under the technical tutelage of the MELT and the financial tutelage of the Ministry of Economy, Finance and Plan (MEFP) would act as the Implementing Agency. The civil works component would be carried out by AGETIP under an agreement with the CETUD. The project will be implemented according to a Project Implementation Manual to be agreed at negotiations. Project sustainability 14. The project contains policy and institutional components which are designed to ensure sustainability of the sector development and investments. Project sustainability would be ensured through (a) the implementation of the institutional reform by the CETUD which gathers the main actors of the sector and will be an effective tool for regulated and coordinated urban transport services and (b) the establishment and working of the FDTU which will provide a sustainable financing mechanism for the development of the urban mobility through sector contribution. Lessons learned from past operations in the country/sector 15. IDA has been involved in the transport and urban sectors in Senegal since 1966 with 19 completed projects in the area of roads, railways, ports, civil aviation and infrastructure. These completed projects and the ongoing transport structural/adjustment project (Cr SE) has made important contributions to the operational and financial performance of the railways and port subsectors. The ongoing third urban project, Municipal and Housing Development Project (Cr SE) -4 -

5 has partially addressed Dakar's transport infrastructure needs through the construction of a new intermodal station ('Ilot Peterson') and a traffic management action plan, both in Dakar City that is complemented by AGETIP's activities in roads projects in Dakar, which has been carried out mainly by the private sector. Previous experience with transport projects as well as urban projects in Senegal hold the following useful lessons: (i) essential to success of any sector development is the need to strengthen institutional and regulatory expertise; (ii) stakeholders' participation is essential to ensure ownership of the project; (iii) sustainable provision of domestic funding is essential to ensure long-term investment in the urban transport sector; and (iv) there is a need for increased private sector participation. These lessons have been incorporated in the project design through sustained dialogue between IDA, GOS, officials of the local authorities, urban transport operators and donors involved in the sector. Environmental aspects 16. The project has a "C" environmental rating. Overall, it would have a beneficial impact on the environment. Traffic management investments and measures would help relieve congestion, resulting in lower emissions of pollutants per vehicle. The emphasis placed on public transport is expected to maintain an efficient and sustained model of urban development in the metropolitan area of Dakar. Program Objective Category 17. Private Sector Development. The project will promote sustained participation of the private sector in the provision of urban transport services, leading to increased efficiency and urban productivity. Capacity Building. The project will remedy the institutional fragmentation in the urban transport sector. Poverty alleviation. This objective will be pursued through (a) the extended provision of public transport services affecting mainly the urban poor, (b) the involvement of the informal sector (Cars Rapides) in the project because of the entrepreneurial and income generating possibilities that it offers to the poor, and (c) the execution of the pilot operation in civil works, using labor-based methods, which will promote the development of local small and medium size contractors. Project Benefits 18. The proposed credit would have a major leverage impact in pushing the reform agenda for the critical urban transport sector, with benefits far outweighing the relatively small amount of financing sought. Through such leveraging, the project will also increase the efficiency, reliability and safety of urban public transport services in Dakar. It will improve the access of the urban poor to public transport services, reduce passenger transport costs and improve the performance and competitiveness of the urban economy. Specifically, benefits expected from the project are: (a) better sector management through strengthening capacity of local staff, the coordination among ministries, municipal agencies and the transport industry within the CETUD; (b) substantial reduction of the fiscal burden of the sector --without the privatization - 5 -

6 of SOTRAC, the level of state intervention in the enterprise, based on the latest contrat-plan, is estimated to be at US$20 million for the next three years; (c) reduction in urban transport costs, travel time, traffic congestion and accidents through traffic management measures resulting in an overall increase in the performance of the urban economy; (d) extended access to the urban transport services for the poor, improving their access to job and market opportunities; and (e) sustainable financing for the development of the urban transport services through the FDTU and contributions of the main actors in the sector. Projects Risks 19. The risks are: (a) delays in the privatization process of SOTRAC because of political or trade union's pressure. However, the donorsupported approach, developed within the SSATP, will permit investments in the urban transport sector only after successful reform implementation; this should convince the GOS to take actions to implement the reform according to the agreed timetable and mitigate the risk of postponement in the privatization. The law authorizing the State to privatize SOTRAC is due to be passed in January 1997 prior to credit negotiations; (b) lack of private sector contribution to the FDTU. The project will help reinforce the consensus achieved among the actors on the advantage of such a contribution, without increasing the level of taxes. The participation in the decision-making of the CETUD should convince the transport industry of the effectiveness of the FDTU and their contribution; (c) delays in the establishment of the CETUD. This risk is relatively minor as there is already a consensus to set up a coordinating body in the sector. This consensus has been built all along during project preparation, within the SSATP dialogue framework. The law establishing the CETUD is due to be passed in January 1997 prior to credit negotiations and CETUD is expected to be functioning by then. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C Telephone No.: (202) Fax No.: (202) Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by The Public Information Center week ending January 17,