Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15486 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT (Loan A: 2584-CK and Loan B: 018-CM) March 1, 1996 Infrastructure Division Central Africa and Indian Ocean Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit CFA Franc (CFAF) At appraisal US$1 = 490 1985 US$1 = 454 1986 US$1 = 342 1987 US$1 = 297 1988 US$1 = 309 1989 US$1 = 336 1990 US$1 = 285 1991 US$1 = 275 1992 US$1 = 289 1993 US$1 = 280 1994 US$1 = 540 WEIGHTS AND MEASURES Metric System FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS AfDB = African Development Bank CIDA = Canadian International Development Agency CAA = Caisse Autonome d' Amortissement (Debt Management Agency) DGTC = Direction Generale des Grands Travaux du Cameroun (General Directorate for Large Scale Works) ERR = Economic Rate of Return EU = European Union GDP = Gross Domestic Product ICR = Implementation Completion Report LABOGENIE = Laboratoire de Genie Civil (National Road Laboratory) MATGENIE = Parc National de Materiel de Genie Civil (National Equipment Pool) MINEQ = Ministere de I' Equipement ( Ministry of Equipment) MINT = Ministere des Transports (Ministry of Transport) MINTP = Ministry of Public Works (Minist6re des Travaux Publics) SAR = Staff Appraisal Report FOR OFFICIAL USE ONLY REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table of Contents Preface ..............i Evaluation summary ............. ui PART I. PROJECT IMPLEMENTATION ASSESSMENT ......................... 1..... Background .......................................1I A Statement/Evaluation of Objectives ...................................I B Achievement of Objectives ........................................4 C Major Factors Affecting the Project ...................................6 D Sustainability ........................................7 E Bank Performance .......................................8 F Borrower Performance .......................................9 G Assessment of Outcome ....................................... 10 H Future Operations ............. .......................... 11 I Key Lessons Learned .................. ..................... 12 PART II. STATISTICAL ANNEXES .................... 14 Table 1: Summary of Assessments ...................................... 14 Table 2: Related Bank Loans/Credits ...................................... 16 Table 3: Project Timetable ....................................... 17 Table 4: Loan Disbursements: Cumulative Estimated & Actual ..... 18 Table 5: Key Indicators for Project Implementation & Operation.. 19 Table 6: Studies Included in Project ....................... ............ 20 Table 7A: Project Costs ................................... 21 Table 7B: Project Financing ................................... 22 Table 8: Status of Legal Covenants ................................... 23 Table 9: Compliance with Operational Manual Statements ............ 26 Table 10: Bank Resources: Staff Inputs ................................... 27 Table 11: Bank Resources: Missions .................... ............... 28 Appendixes: A. Borrower contribution to the ICR ................................... 31 B. Map ................................... 32 Tlis document has a restricted distribution and may be used by recipients only in the performance of their |officW duties. Its contents may not otherwise be disclosed wiihout World Bank authorization. ) IMPLEMENTATION COMPLETION REPORT REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT (Loan A: 2584-CM and Loan B: 018-CM) Preface This is the Implementation Completion Report (ICR) for the Sixth Highway Project in Cameroon, for which Loan 2584-CM in the amount of US$125 million equivalent was approved on June 18, 1985, and made effective on April 8, 1986, and Loan B018-CM in the amount equivalent of US$20 million equivalent was approved on January 14, 1987, and made effective on January 16, 1987. Loan 2584-CM was closed on October 31, 1993, 28 months after the original Closing Date. Final disbursement took place on May 5, 1994, at which time a balance of US$ 587,946.68 was canceled. Funds from Loan B018-CM were deposited in an account at the Central Bank of Cameroon after effectiveness, and managed by Caisse Autonome d'Amortissement (CAA), the Cameroonian debt management agency, to provide counterpart funds to Loan 2584- CM. Cofinancing for the Project was provided by the African Development Bank (AfDB), the European Union (EU) and the Canadian International Development Agency (CIDA). The ICR was prepared by Jean Noel Guiflossou, Infrastructure Division, Central Africa and Indian Ocean Department of the Africa Region, and reviewed by Ms. Maryvonne Plessis-Fraissard, Division Chief, AF3IN, and Mr. P. Hari Prasad, Operations Adviser, AF3DR. This ICR is based on materials in the Project file. The Borrower contributed to the preparation of the ICR by carrying out its own evaluation of the Project execution. ii IMPLEMENTATION COMPLETION REPORT REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT (Loan A: 2584-CM and Loan B: 018-CM) Evaluation Summary Introduction 1. The project being evaluated is the fourteenth Bank-financed project in the transport sector in Cameroon. The preceding Bank loans in this sector totaled about US$349 rnillion, including US$218.5 million for five highway projects. Project Objectives 2. At Appraisal As stated in the Staff Appraisal Report (SAR, Report No. 5371- CM, May 1985), the objectives of the Project were: (a) to increase road transport capacity while reducing transport costs and protecting existing investment in the paved road network; (b) to consolidate and build upon institutional developments regarding transport planning, road safety, highway planning, maintenance planning and execution; and training begun under previous highway projects; (c) to strengthen the management system of the national equipment pool (MATGENIE), increase its productivity and improve its control of resource utilization; and (d) to strengthen operational and research capacity of the national road laboratory's (LABOGENEE). The Project originated in a Transport Strategy Paper (Report No. 4975-CM, February 29, 1984). 3. Revised Objectives. Soon after effectiveness, the Government began facing severe budget constraints. In a November 1987 joint Bank-Government meeting, project objectives were re-oriented in line with the recommendations of a Transport Plan prepared under the Fifth Highway Project, with: (a) restructuring of public enterprises (MATGENIE and LABOGENIE); (b) cost recovery improvement; (c) priority for road maintenance, to preserve existing road investments; and (d) priority for financing uncompleted ongoing road projects. The revised objectives were only recorded in an aide-memoire, but not in the 1988 amendment to the Loan Agreement, which only listed roads to be built under the Project.. 4. Evaluation of Objectives. The objectives, as stated in the SAR, appeared realistic amid the optimism prevailing at appraisal on the macro-economic prospects. However, the economic and financial crisis revealed that the optimism was not justified. The revised objectives took that conclusion into account. The project as appraised appeared neither too complex nor too risky and could have been reasonably well implemented despite the economic crisis. However, three risks out of four identified in the SAR occurred: (a) high iif construction costs; (b) negative traffic growth; and (c) MATGENEE's failure to improve its performance. In addition, the SAR mentioned the weakness of sector institutions but did not consider such weakness as a risk for the Project. The risk of bankruptcy for LABOGENIE was not identified but occurred. The Borrower was not committed to restructuring public enterprises, giving priority to road maintenance, or improving sector management. Implementation Experience and Results 5. Achievement of Objectives. The Project failed to achieve most of its objectives: (a) Sector policies: The achievement is negligible. Cost recovery improved, but additional resources thus created were not allocated to road maintenance. At the end of the Project, a new strategy for road maintenance was defined but has still to be implemented. (b) Financial objectives: The achievement is negligible. The Government provided only 30 percent of counterpart funds estimated in the SAR. Financial targets for MATGENIE and LABOGENIE were not met. The Government provided only 40 percent of the budget for road maintenance targeted in the SAR during the 1987-1992 period. (c) Institutional development: The achievement is negligible. MATGENIE and LABOGENIE were not restructured and were bankrupt at the end of the Project. The management capacity in the sector did not improve. (d) Physical objectives: The achievement is partial. 217 km of roads were built, against a target of 156 km at appraisal and 265 km in the 1988 amendment to the Project description. Out of a 600 km program identified in the SAR, 166 km of roads were strengthened. 6. Because the project as appraised was a straightforward investment project with some institutional development activities, its design was appropriate to achieve its objectives. However, after the objectives were revised, the project developed in such manner during execution that it failed to achieve these objectives. Although criteria were defined to monitor the achievement of SAR objectives, no criteria were defined to monitor the revised objectives. 7. Assessment of Sustainability. The project is unsustainable because the roads built or strengthened under the Project have not been maintained, and the institutional development component of the Project was not implemented or improvements based on provision of long-term assistance disappeared when the technical assistants left. 8. Costs and Delays. Changes in exchange rates from CFAF 490 for one US dollar at project appraisal to CFAF 275 for one US dollar in 1991 reduced significantly the iv amount in CFAF of resources available under the Project while the cost of works, goods and services remained constant. Shortage of counterpart funds, poor detailed engineering studies, slow procurement procedures related to centralized authorization at top levels, political interference and political strife were the major reasons for implementation delays. The project start-up was delayed by two years. The Closing Date was extended twice. The Loan Account was closed 28 months behind schedule. 9. Key factors which affected achievement of the major objectives were the economic crisis and the Government's inability to face it; lack of Government commitment to institutional reform; political and bureaucratic interference with project execution; conflict of responsibilities among institutions; lack of leadership at the helm of the Civil Works and Transport institutions; poor human resource management; and the high turnover of Bank Task Managers or supervision team members. 10. Bank and Borrower Performance. The Bank performance is rated deficient. The Bank assessment on the capacity of the Administration to manage, finance and execute road maintenance was too optimistic. However, this optimism reflected the general optimism vis-a-vis Cameroon economic management and performance shared at that time among all donors as well as among private banks and investors. Therefore, the wrong judgment cannot be attributed only to the team which prepared the project.The quality of preliminary studies was poor. Task managers spent considerable time on implementation issues without addressing the causes of the issues. Although the Bank realized that the approach used under the Project was inadequate, it did not restructure the Project to reflect changes in the macroeconomic situation and in the sector institutions, and revised objectives. However, on the basis of the sector analysis carried out in 1988 and 1993 (Transport Sector Memorandum, Report No. 11430, 06/061/93), the Bank decided to put its lending program in the transport sector on hold until the Government showed enough commitment to implementation of a sector-wide reform. 11. The Borrower's performance is rated deficient. It was not committed to the revised project objectives. Insufficient funds were allocated to road maintenance. The weak institutional framework resulted in conflicts among institutions. Project management was poor. The Borrower complied with legal covenants with considerable delays. Poor human resource management resulted in weak motivation and loss of benefits gained from foreign experts and training provided under the Project. 12. Assessment of Outcome. The outcome is rated highly unsatisfactory. Future Operations and Key Lessons Learned 13. Future Operations. IDA would assist the Government to implement an overall sector reform program through both adjustment and investment operations. State divestiture from transport operations is on-going in the urban transport, air, maritime and rail subsectors, and would be supported by the proposed Enterprise Reform and Divestiture Credit (FY98). Revision of the regulatory framework for maritime transport is v included in the proposed Structural Adjustment Credit (FY96). Implementation of the subsequent phases of the transport sector reform program (revision of the regulatory framework for air and urban transport, restructuring of MINT and MINTP, divestiture from MATGENIE, downsizing of the port authority) would be supported by the proposed Transport Sector Project (TSP, FY96). 14. Key Lessons Learned. (a) Project Context: Bank assistance strategy and operations should be based on a sector-wide analysis to determine priorities and reforms which would prevent some sub-sectors from undermining efforts elsewhere, especially in a deteriorating or weak economy, when resources are scarce. The commitment of the Government, consistency of investment programs with the macro-economic situation, and donors' coordination, are key factors towards the achievement of sector reform. (b) Road Maintenance Organization: When the sector lacks strong leadership and commitment to efficiency and accountability, the role of the institution in charge of road maintenance needs to be concentrated on planning, programming, budgeting and supervising road maintenance works. Work execution should be contracted-out to achieve better efficiency and adequacy between the program of works and available resources. Financing of inputs as done under the Project should definitely be discarded. (c) Project Design and Supervision: To continue in a direction which has become inappropriate is likely to result in poor implementation and performance and lack of achievement of the Project objectives. In such a case, the Project ought to be adjusted or restructured where necessary. Investing time on implementation issues without addressing their root causes is useless. (d) Technical Assistance, Capacity Building and Human Resource Development: Technical assistance should not substitute for local staff, and should be provided in an environment which is committed to building on the expertise thus provided. This requires a strong leadership capable of developing and implementing a human resource development strategy. Capacity building has to be considered on a long-term basis and monitored and evaluated against objective achievement targets. Training is most useful when immediately applicable in the day-to-day work environment. I PART I. PROJECT REVIEW FROM BANK PERSPECTIVE BACKGROUND 1. The project being evaluated is the fourteenth Bank-financed project in the transport sector in Cameroon. The preceding Bank loans in this sector totaled about US$349 million, including US$218.5 million for five highway projects. In comparison, Bank financing for this project alone reached US$165 million. 2. While the Project was prepared in 1984-1985 with an ambitious vision, at the peak of a long (20-year) period of economic prosperity that was characterized by a 7 percent growth in average, its implementation occurred amid an exceptionally severe and prolonged economic crisis whose end is not yet in sight. Several structural problems developed during this period of growth. The traditional growth sectors, agriculture in particular, were neglected and their productivity declined. The multitude of public enterprises created during this period were inefficient and eventually became bankrupt while draining huge resources from the State budget. The banking sector practiced imprudent lending by becoming overly dependent on oil revenues and large government deposits. The investment in public infrastructure was not selected to respond to economic priorities or social needs and was not followed by proper maintenance. The long-term debt increased from less than 20 percent of the Gross Domestic Product (GDP) in 1976, to about 50 percent in 1992. In addition, Cameroon suffered from two major shocks. First, as a result of a sharp decline in export prices of petroleum in 1986, followed by declines in cocoa and coffee export prices, the external terms of trade fell by more than 55 percent from 1985 to 1989. Second, the real effective exchange rate started to appreciate following the US dollar and Nigerian Naira depreciation in 1985-1986, and continued to appreciate as Cameroon's inflation rate consistently remained above the inflation rates of its main trading partners. 3. The Project overlapped with two Bank-financed highway projects in Cameroon. The Fourth Highway Project (Loan 1723-CM, US$40 million, closed on 06/30/87), focused on the maintenance of unpaved roads, with a pilot operation of road maintenance by contract, management improvement through provision of technical assistance, and equipment renewal. The Fifth Highway Project (Loan 2180-CM, US$70 million, closed on 06/30/89) included expansion of the paved road network and a study of its strengthening; a new building for the national road laboratory (LABOGENIE); and technical assistance to the Ministry of Transport and LABOGENIE. A. STATEMENT/EVALUATION OF OBJECTIVES A.1 Objectives 4. At AppraisaL As stated in the Staff Appraisal Report (SAR, Report No. 5371- CM, May 1985), the objectives of the Project were: (a) to increase road transport capacity while reducing transport costs and protecting existing investment in the paved road 2 network; (b) to consolidate and build upon institutional developments, regarding transport planning, road safety, highway planning; maintenance planning and execution; and training begun under previous highway projects; (c) to strengthen the management system of the national equipment pool (MATGENIE), increase its productivity and improve its control of resource utilization; and (d) to strengthen the national road laboratory's (LABOGENIE) operational and research capacity. The Project originated in a Transport Strategy Paper (Report No. 4975-CM, February 29, 1984). 5. Project components included: (a) a Road Development Program comprising: (i) a 600 km four-year road strengthening program; (ii) construction of the Mbalmayo- Ebolowa road (107 km) and Kumba-Bakundo-Mfaitok II (50 km) road sections; and (iii) studies; (b) an institutional development program comprising long-term and short-term technical assistance and training provided to the four executing agencies: (i) the Ministry of Equipment (MINEQ); (ii) the national equipment pool (MATGENIE); (iii) the national road laboratory (LABOGENIE); and (iv) the Ministry of Transport (MINT); and (c) facilities and equipment. 6. Revised Objectives. Soon after effectiveness, the Government began facing severe budget constraints. In a November 1987 joint Bank-Government meeting, project objectives were re-oriented in line with the recommendations of the Transport Plan prepared under the Fifth Highway Project: (a) restructuring of public enterprises (MATGENIE and LABOGENIE); (b) cost recovery improvement; (c) priority to road maintenance, to preserve existing road investments; and (d) priority for financing uncompleted ongoing road projects. However, the 1988 amendment to the Loan Agreement did not translate these new objectives but only listed roads to be built under the Project. The revised objectives were only recorded in an aide-memoire. A.2 Evaluation of Objectives and Risks 7. The objectives, as stated in the SAR, appeared realistic amid the optimism prevailing at appraisal on the macro-economic prospects. However, the economical and financial crisis revealed that the optimism was not justified. The revised objectives took that conclusion into account. 8. The project at appraisal appeared neither too complex nor too risky, and could have been reasonably well implemented despite the economic crisis. However, three risks out of four identified in the SAR, occurred: (a) Project Costs: The expectation that strong competition among contractors would keep construction costs at reasonable levels was not met. Construction costs remained high because the financial crisis resulted in the departure of several foreign contractors from Cameroon and reduction in competition, and arrears from the Government to contractors lead those contractors to cover the risk of additional arrears by increasing the share of 3 the contract paid by external donors by the equivalent of the share to be paid by the Government. (b) Traffic Growth: There again, the expectation that economic growth would continue strongly and result in rapid traffic growth was not met because of the economic crisis. (c) A 17GENIE's Failure to Improve its Performance: Although the causes for MATGENIE's weak performance were clearly identified in the SAR, the measures consisting in provision of substantial technical assistance and monitoring of MATGENIE's and consultants' performance were unable to prevent this risk to occur. (d) Insufficient External Financing: Fortunately, external financing was sufficient. Should there have been insufficient funds, the Government would have been unable to finance the gap as expected in the SAR. 9. Two risks were not identified: (a) Weak Performance of Sector Institutions: Although the lack of experienced intermediate level managers was identified in the SAR as a main weakness, it was not considered as a risk for the Project. The organizational set up was qualified as adequate. Technical assistance and training provided under the Project were expected to overcome this weakness, but did not meet this expectation. (b) LABOGEN7E's Bankruptcy: The financial forecasts were based on the optimistic assumptions that the civil works market would continue to grow and LABOGENIE would continue to benefit from its monopoly in the sector. The economic crisis resulted in a collapse of the market as well as in accumulation of State arrears to the enterprise. Under Bank's pressure, LABOGENIE had to decrease its tariffs because they did not reflect actual costs, and the market was eventually open to the competition at the end of the Project. 10. The project, as reflected in the revised objectives, was too demanding for the Borrower which was not committed to restructuring LABOGENIE and MATGENIE, giving priority to road maintenance, and improving sector management. The reason for this lack of commitment was that the Borrower had not realized that its economy was collapsing and did not feel any need to implement the actions necessary to achieve these objectives, under the impression that large State resources would continue to be available and compensate for poor management and weak performance. 4 B. ACHIEVEMENT OF OBJECTIVES B.1. Degree of Achievement of Objectives 11. Macroeconomic Policies. Not applicable. 12. Sector Policies. The achievement is negligible. Although cost recovery improved by increasing taxes on petroleum products and creating an axle load tax, the impact on the sector was minimum, resources being not allocated to road maintenance. No other sector policy issues were addressed under the Project although they were identified in a Transport Sector Strategy Note prepared by the Bank in 1988. 13. Financial Objectives. The achievement is negligible. As a result of the economic crisis, the Government failed to meet SAR targets for road maintenance budget allocation. Only 40 percent of the targeted budget was provided during the 1987-1992 period. For this reason, actual revenues for MATGENIE and LABOGENIE were far below SAR targets. The Government provided only 30 percent of proposed counterpart funds to the Project. 14. Institutional Development The achievement was negligible. (a) MATGENIE and LABOGENIE were not restructured. At the end of the Project, both companies were overstaffed and bankrupt. Only LABOGENIE reduced its number of staff, although insufficiently. MATGENIE did it only at the end of 1994 after a new general manager was appointed. Their management information system remained deficient. However, LABOGENIE's management was more committed to restructuring and the achievement in this particular case is assessed as partial. (b) The Government did not, in practice, give priority to road maintenance. Extemal resources provided under the Project for road maintenance were much higher than expected, but were insufficient to compensate for the drastic decrease of resources allocated to road maintenance in the Government's budget. Other externally-financed projects which began during the same period included almost only new road construction and nothing for road maintenance. (c) The management capacity in transport planning and road safety, highway planning, road maintenance capacity and execution was not strengthened because of too much reliance on long-term technical assistance without ensuring a sustainable transfer of know-how. Poor human resource management in the sectoral ministries did not provide the incentives or the adequate framework to ensure such sustainability. 5 15. Physical Objectives. The achievement is partial. (a) 217 km of new roads were built under the Project against 156 km targeted in the SAR and 265 km in the 1988 amendment to project description. 166 km were strengthened or rehabilitated out of a 600 km program identified in the SAR. (b) Although the Project funds were used to complete previously uncompleted projects, either Bank or Government-financed, two project-financed civil works contracts were uncompleted because of lack of funds, and the Project financed two sections in the middle of a road, with Government- financed works remaining uncompleted on the section giving access to the Project-financed sections for the same reason. 16. Because the project as appraised was a straightforward investment project with some institutional development activities, its design was appropriate to achieve its objectives. However, after the objectives were revised, the project developed in such manner during execution that it failed to achieve these objectives: (a) It relied on force account to execute road maintenance, although the Fourth Highway Project had included a pilot operation to develop the use of small and medium contractors. Force account was inefficient. Its management was weak and unaccountable. (b) It relied on long-term technical assistance as a substitute for local staff. This was unsustainable and all improvements disappeared when the technical assistance ended. 17. Criteria were sufficiently quantified in the SAR to monitor the achievement of objectives. However, when new objectives were established soon after project effectiveness, they were not translated into an amendment to the Project and no criteria were established to monitor their achievement. B.2. Economic Evaluation 18. At AppraisaL The SAR provided an economic evaluation for the construction of two roads: Mbalmayo-Ebolowa Road (the Bank eventually financed only 6% of the construction cost), and Kumba-Bakundo-Mfaitok (lot 3). The rate of return ranged between 13% and 16% for the former, and between 12% and 15% for the latter. The rate of return of Kumba-Bakundo-Mfaitok Qot 1) was calculated together with lot 2 which was to be financed by the Government. The rates of return of new projects included in the 1988 amendment to project description were estimated at 20.8 percent for Yaounde- Mfou, and 20.7 percent for Obala-Sa'a-Monatele. 6 19. A preliminary economic evaluation of the road strengthening program had been carried out during project preparation. Rates of return ranged between 15 and 40 percent. The Government and the Bank agreed during negotiations that the results of the economic justification underway at the time of negotiations would be reviewed jointly, and that the economic rate of return of sections to be retained under the Project would not be less than 12%. 20. After Project Completion. The economic evaluation could not be undertaken in the absence of reliable and updated data on road conditions, traffic, and road user costs. Actual maintenance costs are unknown, as a cost accounting system is still absent despite costly efforts to create one under the Project. 21. Actual rates of return are expected to be much lower than estimated in the SAR. Because of the economic crisis, traffic volume decreased, contrary to an estimated 10 percent annual traffic growth rate assumed in the SAR. Actual construction costs exceeded significantly bid amounts mainly because of poor supervision and poor contract management. Furthermore, post-project road user and maintenance costs are likely to be far higher than anticipated, because of lack of maintenance. In the case of the Kumba- Bakundo-Mfaitok road, the Government-financed contract for the construction of the first 50 km was not completed because of lack of funds, so that road users do not have full access and therefore do not benefit from the Bank-financed works on the following two sections of the road. C. MAJOR FACTORS AFFECTING THE PROJECT C.1 Factors Not Generally Subject to Government Control 22. The major factor that dominated project outcome was the severe economic crisis. It was essentially triggered, in 1986, by the fall of raw materials and oil product prices on the world market, combined with a simultaneous drop of the US dollar rate of exchange versus the CFA Franc. Intemal political strife also affected the Project. 23. From the Bank side's, the Project suffered from the high tumover of task managers, as well as the inexperience of task managers or members of supervision teams during the last three years of project execution. One task manager was severely ill during three years while continuing to supervise the Project, and died in 1991. C.2 Factors Generally Subject to Government Control 24. The Government did not acknowledge the economic crisis and did not take the actions necessary to mitigate the adverse impact on sectors. Lack of Government commitment to institutional reform and understanding of the implications of neglecting road maintenance caused a shortfall in performance and delays throughout Project implementation. The economic crisis also resulted in shortages of counterpart funding and chronic inability to pay civil servants' salaries on time. 7 25. Considerable Central Government control over road organization and strong political interference in technical decision-making, procurement and staff appointments also hampered the functioning of the road system and made it highly unproductive. 26. The transfer of responsibility for large road works from the Ministry of Public Works to a new procurement agency (DGTC), reporting initially directly to the Presidency, then to the Prime Minister, and ambiguities in the responsibility for road management, caused delays and conflicts between the institutions, while not improving sector and contract management. C.3 Factors Subject to Implementing Agency Control 27. The major factor negatively affecting the Project was the absence of leadership that was competent, responsible, accountable and committed to reform at the helm of the Civil Works and Transport institutions in their three functions: planning, design and execution, and monitoring and evaluation. 28. Other factors too played a role: (i) lack of incentives and reluctance to take sanctions; (ii) poor management skills; (iii) lack of rigor in bookkeeping, associated with poor financial management skills; (iv) poor adherence to Bank guidelines; and (v) inadequate design and cost estimate of works at the preparation stage. C.4 Cost Changes 29. Changes in exchange rates had a major impact on the Project. The exchange rate fell from CFAF 490 for one US dollar at project appraisal to CFAF 275 for one US dollar in 1991. The average rate during project execution was 291. This reduced significantly the amount in CFAF of resources available under the Project while the cost of works, goods and services remained constant. C.5 Implementation Delays 30. Shortage of counterpart funds, poor detailed engineering studies, slow procurement procedures related to centralized authorization at top levels, political interference and political strife were the major reasons for implementation delays. The project start-up was delayed by about two years and accordingly, disbursements were behind schedule. Following two extension of the Closing Date, Loan 2584-CM was closed on October 31, 1993, against an initial Closing Date of June 30, 1991, in the SAR. D. SUSTAINABILITY 31. The project is unsustainable because its objectives were not achieved: 8 (a) The physical component of the Project is unsustainable because the roads built or strengthened under the Project have not been maintained resulting in steady deterioration. (b) The institutional development of the Project was either not implemented (restructuring of MATGENIE and LABOGENIE) or unsustainable because of poor commitment of sector institutions to good management and reliance on long-term technical assistance with no strengthening of local capacity. E. BANK PERFORMANCE 32. Overall Bank performance is rated deficient: (a) The Bank assessment on the capacity of the Administration to manage, finance and execute road maintenance was too optimistic. However, this optimism reflected the general optimism vis-a-vis Cameroon economic management and performance shared at that time among all donors as well as among private banks and investors. Therefore, the wrong judgment cannot be attributed only to the team which prepared the project. (b) Preliminary studies used for project appraisal were of poor quality and were not updated before execution of works, resulting in delays and cost overruns. (c) Although the Bank realized one year after effectiveness that the project objectives had to be revised to take into account the deteriorating economic situation, the amendment to the project did not reflect those changes. (d) During supervision, the Bank focused on procurement, let aside monitoring of technical assistance, was unsuccessful to obtain from the Borrower a satisfactory project management which resulted in unreliable information regarding the Project's financial execution. The first project audit was produced only in 1992, six years after effectiveness, without any corrective actions being taken by the Bank other than letters sent to request the audits. The Project was not amended to reflect changes in institutions, which had resulted in conflict between institutions and confusion in project management. The high number of task managers, the lack of experience of team members or task managers during the last three years of project execution, and the serious illness of a task manager during three years were responsible for lack of consistency in Bank project management, delays in the decision-making process, lack of decisions on project restructuring. Overall, the Bank failed to apply remedies against poor project management. Missions did not visit the field enough. 9 (e) The Bank realized in 1988 after having prepared a Transport Sector Strategy Note that a new strategy was necessary for the transport sector, but did not apply this conclusion to the Project by discussing with the Government its restructuring. Although a Feeder Roads Project had been under preparation since 1987 and a Transport Sector Public Enterprise Restructuring Project since 1989, the Bank decided in 1991 to put its lending program in the transport sector on hold until the Government showed enough commitment to implementation of a sector-wide reform. F. BORROWER PERFORMANCE 33. The Borrower's performance is rated deficient: (a) The Government did not recognize in time that its macro-economic situation was quickly deteriorating, and lacked commitment to implement a new strategy in the public works sector to give priority to road maintenance and restructuring of the equipment pool or the road laboratory. The Borrower was mostly interested in the physical components of the Project, especially the construction of new roads. (b) Project management was poor. Sector institutions lacked coordination. The Project lacked strong leadership dedicated to its objectives and their achievement. (c) When the macro-economic situation deteriorated soon after effectiveness, the Borrower did not make counterpart funds available, resulting in delays in the Project's launch. The Borrower did not allocate adequate funds to road maintenance, resulting in a bankrupt equipment pool and road laboratory, and in a road network in poor condition requiring costly rehabilitation. (d) The Borrower complied with the Project's legal covenants with considerable delays. Poor management and lack of compliance with procurement procedures also resulted in delays, unsatisfactory execution of works, and claims. Two civil works contracts were not completed because of unpaid claims. (e) The Borrower did not seek to improve sector policies. (f) The use of technical assistance was unsatisfactory. Strengthening of the highway department, an objective of one large contract, was unsustainable as local counterparts to foreign technical experts lacked incentives and almost all department staff moved to other services after the departure of technical experts. Another large technical assistance contract had no result lo other than a pilot operation for computerization of vehicle certification implemented with what funds remained at the end of the contract. G. ASSESSMENT OF OUTCOME 34. The assessment of the Project's outcome is rated highly unsatisfactory as the Project failed to achieve most of its objectives, and has not, and is not expected to yield worthwhile development results. The assessment with regard to the initial project objectives is as follows: (a) Road capacity did not increase as expected because roads have deteriorated since their construction due to a lack of maintenance, some works have not been completed, and, in a specific case, works were executed on a central section without working on the sections on either end, making the investment less economic. (b) Reduction in transport costs and protection of existing investments on the paved road network were not achieved because of the lack of maintenance. (c) Institutional development regarding transport planning, road safety, highway planning, maintenance planning and execution was not consolidated. This objective was expected to be achieved through a large program of technical assistance. In the transport sector, technical assistance had no impact because of its poor performance, the complacency of the administration and the lack of supervision of the contract when an incompetent new mission chief of the technical assistance team was appointed. In the public works sector, the impact of the technical assistance was unsustainable and became null when the contract was completed and the technical assistants left. (d) The management system of MATGENIE was not strengthened. The improvements disappeared when the technical assistance provided under the Project ended. MATGENIE initially refused, and eventually accepted but only at the end of the Project, assistance to overhaul its accounting system. Productivity did not increase due to poor management of the equipment and the lack of resources because of accumulated arrears from the Government. 35. The assessment with regard to the revised objectives is as follows: (a) Restructuring of MATGENIE and LABOGENIE: Restructuring studies were carried out for both companies, but were discarded because of the inadequacy of their recommendations with regard to the bankruptcy of both companies, and the lack of strategy for road maintenance to make the companies financially viable. 11 (b) Cost Recovery Improvement: Some recommendations of the studies carried out during the Project were implemented but additional resources thus created were not allocated to road maintenance. Road tolls were created in 1993. Axle loads of trucks started to be controlled in 1995. (c) Preservation of Road Investment Capital: Once the Project ended, all efforts stopped and past efforts became vain. H. FUTURE OPERATIONS 36. The Government, with the support of donors involved in the transport sector, has developed an overall transport sector reform program to adjust the sector institutions and address the financial issues in the sector. The program seeks to enable the sector to resume its contribution to development rather than being a constraint to the country's economic growth. It is aimed at improving mobilization and allocation of resources, maintenance of transport infrastructure and the overall efficiency of the sector. These objectives would be achieved through State divestiture from transport operations, increased competition, more focused institutions to improve their effectiveness, and an improved regulatory framework. The program would be implemented in three phases over a three-year period. The first phase of the program would privatize or liquidate five major transport Public Enterprises (PEs) with most impact on the Treasury, i.e., the national airline, railways, shipping line, urban bus company and container transport and freight forwarder company. The Ministry of Transport (MINT) 's role would be revised to focus on planning, regulation and policy. The regulatory framework for air, maritime and urban transport would be revised to develop competition and entry of private operators in the subsectors. The subsequent phases would downsize the port authority and implement an efficiency-driven organization for dredging execution, reorganize road maintenance, and improvement in customs procedures for local and international transit. The role of the Ministry of Public Works (MINTP) would be revised to shift from carrying out road maintenance by force account to management of road maintenance by contract. The State would divest from MATGENIE in parallel with the progressive contracting-out of road maintenance. Investment in the sector, with an initial focus on maintenance and rehabilitation, would resume once implementation of the reforms has begun. 37. IDA would assist the Government through both adjustment and investment operations: (a) State divestiture from transport operations is on-going and will be completed under the proposed Enterprise Reform and Divestiture Credit (FY98). Revision of the regulatory framework for maritime transport is included in the proposed Structural Adjustment Credits (FY96). The Infrastructure Division will assist other divisions in the Department who will manage these two adjustment operations. 12 (b) Implementation of the subsequent phases of the transport sector reform progran, as well as revision of the regulatory framework for urban and air transport, and restructuring of the Ministry of Transport included in the first phase will be supported by the proposed Transport Sector Project (TSP, FY96). The TSP will also finance a portion of the Public Investment Program in the sector. (c) The Transport Sector Technical Assistance Project (Cr. 2703-CM, approved on April 11, 1995), cofinanced by IDA, the European Union (EU), the French Ministry of Cooperation, and the German Ministry for Cooperation will provide the necessary expertise in institutional development to assist in the implementation of the transport reform program. 38. The institutional setup was defined during the preparation of the sector reform to ensure effective implementation of the reform. An Interministerial Committee was created which prepared the new strategy for the sector. In addition, the reform program was discussed with all stakeholders, public and private, in the sector. Several meetings and seminars were organized to discuss the new strategy for road maintenance, the regulatory framework in the maritime sector, the liquidation of the urban bus company and the privatization of the other priority PEs in the sector. Several donor meetings have been held in Cameroon. Sensitization has been strengthened by the intervention of the Minister of Transport in the media and discussions with the employees of the PEs to be privatized/liquidated. The institutional framework for privatization is being strengthened as part of the proposed Structural Adjustment Credit (FY96). 39. MINT and MINTP would be responsible, in their relative subsectors, for the preparation of subsequent phases of the reform program--including investments--in close collaboration with other interested Government agencies. The existing Transport Interministerial Coordination Unit, which has diligently assisted the Government in the preparation of the reform program, will continue to assist MINT and MINTP. Almost all technical assistance to be provided under the proposed IDA operations is of a short-term nature and is designed to strengthen national capacity to manage the transport sector. Technical assistance will not, therefore, be a long-term substitute for local staff. 40. Clear indicators and detailed timetables were agreed by the Government during the negotiations of the Transport Sector Technical Assistance Project. They will be used to closely monitor the implementation of transport reform. I. KEY LESSONS LEARNED 41. Key lessons learned are related to: (a) Project Context: Bank assistance strategy and operations should be based on a sector-wide analysis to determine priorities and reforms which would prevent some sub-sectors from undermining efforts in others, especially in a 13 deteriorating or weak economy, when resources are scarce. The commitment of the Government, consistency of investment programs with the macro-economic situation, and donors' coordination, are key factors towards the achievement of sector reform. (b) Road Maintenance Organization: When the sector lacks strong leadership and commitment to efficiency and accountability, the role of the institution in charge of road maintenance needs to be concentrated on planning, programming, budgeting and supervising road maintenance works. Work execution should be contracted-out to achieve better efficiency and adequacy between the program of works and available resources. Financing of road maintenance inputs (gasoil, spare parts) as done under the Project should definitely be discarded. (c) Project Design and Implementdtion: To continue in a direction which has become inappropriate is likely to result in poor implementation and performance and lack of achievement of the Project objectives. In such a case, the Project ought to be adjusted or restructured where necessary. (d) Technical Assistance, Capacity Building and Human Resource Development: Technical assistance should be provided in an environment which is committed to building on the expertise thus provided. This requires a strong leadership capable of developing and implementing a human resource development strategy. Capacity building has to be considered on a long-term basis. Training is most useful when immediately applicable in the day-to-day work environment. 14 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 1: Summary of Assessments A. Achievement of Obiectives Substantial Partial Neglifible Not Applicable Macro Policies x Sector Policies x Financial Objectives x Institutional Development x Physical Objectives x Poverty Reduction x Gender Issues X Other Social Objectives x Environmental Objectives x Public Sector Management x Private Sector Development x Other (specify) x B. Proiect Sustainability Likely Unlikely Uncertain x 15 C. Bank Performance Highly Satisfactory Deficient Highly Satisfactory Unsatisfactory Identification x Preparation Assistance x Appraisal x Supervision x D. Borrower Rerformance Highly Satisfactorv Deficient Satisfactory Preparation x Implementation x Covenant Compliance x E. Assessment of outcome Highly Satisfactory Deficient Highly Satisfactory Unsatisfactory x 16 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose Year of Status Approval Preceding Operations 1. Feeder Roads Project Establish an efficient institutional framework for planning, 1977 Disbursed developing and maintaining feeder roads. 2. Fourth Highway Improve the Government's capacity to maintain roads; to 1979 Disbursed Project promote small- and medium-scale contractors; to control vehicle load and improve road maintenance planning. 3. Fifth Highway Construction of the Douala-Yaounde road; technical 1982 Disbursed Project assistance to the Ministry of Public Works and Transport; strengthening of the National Road Laboratory; preinvestment studies. Following Operations Transport Sector Launch the transport sector reform program, which would 1995 Approved Technical Assistance result in the creation of a new private civil aviation Project company, private operation of rail services, liquidation of the urban bus company, sale of public shares in the national shipping line, restructuring of the Ministry of Transport and reform of the regulatory framework for air, urban and maritime transport. Continue preparation of the subsequent phases of the reform program, which would result in: (a) restructuring of the Ministry of Public Works, execution by contract of most of the road maintenance work program, and implementation of a sustainable financing mechanism for road maintenance; (b) restructuring and down-sizing of the port authority, and implementation of an efficiency-driven organization for dredging; and (c) an improved customs institutional framework, overhaul of the customs computerized information system, and implementation of a new international transit system. 17 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 3: Project Timetable Steps in project cycle Date Planned Date actual Identification Preparation November 14, 1983 Appraisal June 19841 May 28, 1984 Negotiations February 1985 1 April 22, 1985 Board presentation June 1985 2 June 18, 1985 Signing November 19, 1985 Effectiveness October 31, 19852 April 8, 1986 Project completion June 30, 19902 October 31, 1993 Loan closing June 30, 1991 2 May 5, 1994 ' in final project brief (April 24, 1984) 2 in SAR 18 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ million) FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 Appraisal 6.0 29.0 65.00 99.00 120.00 125.00 125.00 125.00 125.00 estimate Actual 0.0 1.7 15.03 33.81 57.38 95.86 112.96 122.42 124.41 Actual as 0 6 23 34 48 77 90 98 100 % of estimate The data above does not include US$20 million disbursed in January 1987 from the Loan Account B018-CM. 19 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 5: Key Indicators for Project Implementation and Operation Key Indicators in SAR Estimated Actual Road Maintenance Budget' 1985 21,774 27,095 1986 23,063 26,795 1987 24,421 14,843 1988 25,843 8,399 1989 26,968 9,645 1990 28,103 12,658 1991 29,253 11,298 1992 30,428 9,900 Road Construction (km) 116 2 217 265 3 'The road maintenance budget is given in million CFAF. The estimated budget is in constant 1984 prices. The actual budget is in current prices. 2At appraisal. 3 1988 amendment. MATGENIE Key Indicators in SAR Estimated Actual Working Ratio 1986 35% 1987 and thereafter 30% 84% Return on Fixed Assets 10% <0 Equipment Availability 1986 70% 1987 and thereafter 80% 64% LABOGENIE Key Indicators in SAR Estimated Actual Accounts Receivables/Gross Operating Revenue 1988 and thereafter 67% 384% Ratio of Profitability on Sales 15% <0 20 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 6: Studies Included in Project Study Purpose as Defined at Status Impact of Study Appraisal/ Redefined Road Kumba-Mamfe Update of tender Completed Negligible. Funds were not available to (lot 2) documents execute the works. Study is now outdated. Road Ebolowa-Kribi Feasibility and detailed Completed Partial. Funds were not available to engineering design execute the works, the study will need to be updated. Road Febadi- Feasibility and detailed Completed Partial. Funds were not available to Ngaoundere engineering design execute the works, the study will need to be updated. Road Obala-Nanga Feasibility and detailed Completed Partial. Funds were not available to Eboko-Bouam engineering design execute the works, the study will need to be updated. Road taxation and Improve cost recovery Completed' Provided the basis for an increase in cost recovery from road users taxation of petroleum products and creation of a tax on axle load. Data base on Monitoring of transport Completed Provided data to discuss a new strategy for transport sector performance for 1991 ' the transport sector, but was not maintained after 1991. Feeder roads Update of the study Completed' Provided the basis for the definition of a development plan financed under the Fifth rehabilitation and maintenance program Highway Project using small and medium-scale enterprises (SMEs) and labor-based methods. Road component of Preparation of a road Completed' Provided the basis for the definition of a the Transport Sector maintenance program new strategy for road maintenance executed Project by contract instead of force account. Small- and medium- Identification of SMEs Completed' Established the potential of using SMEs for scale enterprises in Cameroon road maintenance. MATGENIE Restructuring study Completed' Negligible. The study did not take into account the impact of the economic crisis on the availability of funds for road maintenance, and the shift toward road maintenance execution by contract. LABOGENIE Restructuring study Completed' Partial. Labogenie's management team used the study to implement some restructuring actions. The study did not take into account the opening of the market to the competition. LABOGENIE Data base Uncompleted' ' Studies carried out as part of technical assistance contracts. 21 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 7A: Project Costs Appraisal Estimate (US$ '000) Actual (USS '000) Institution Item Local Foreign Total Total Costs Costs Ministry of Civil Works 64,825.0 125,675.0 190,500.0 225,359.4 Public Works Equipment 30.6 275.4 306.0 55,733.5 Consultant 2,990.0 14,950.4 17,940.4 24,230.4 Services Fellowships 0.0 120.0 120.0 536.5 MATGENIE Civil Works 360.0 440.0 800.0 9.4 Equipment 513.0 4,617.0 5,130.0 3,170.5 Consultant 734.2 2,937.0 3,671.2 8,891.9 Services Fellowships 0.0 210.0 210.0 161.7 LABOGENIE Civil Works 180.0 220.0 400.0 1,622.4 Equipment 70.0 630.0 700.0 1,395.7 Consultant 273.6 1,094.4 1,368.0 1,945.9 Services Fellowships 0.0 150.0 150.0 43.0 Ministry of Civil Works 135.0 165.0 300.0 0.0 Transport Equipment 110.0 990.0 1,100.0 171.4 Consultant 762.1 3,048.5 3,810.6 5,570.0 Services Fellowships 0.0 120.0 120.0 131.6 Sub-total 70,983.6 152,652.6 223,636.2 329,055.2 Contingencies 24,026.0 47,327.2 71,353.1 0.0 Total 95,009.6 199,979.8 294,989.3 329,055.2 Distribution of actual costs between foreign and local costs is unavailable. 22 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 7B: Project Financing (US$ million) Source Appraisal Estimate Actual Local Costs Foreign Costs Total Total IBRD 0.0 125.0 125.0 144.4 Private Banks and other cofinanciers - Private Banks 100.0 - AfDB 48.9 -EU 6.9 -CIDA 0.2 Sub-total 75.0 75.0 156.0 Government 95.0 0.0 95.0 28.7 Total 95.0 200.0 295.0 329.1 23 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 8: Status of Legal Covenants Agreement Section Covenant Status Original Revised Description Comments Type Fulfillment Fulfillment of Covenant Date Date Loan 3.01 4 NC General Borrower to cause Arrears from the MATGENIE to Government have been perform in accordance accumulating and total with the Project about CFAF 13.5 M Agreement, to take all Loan. action, including provision of funds, facilities, services and other resources to enable MATGENIE to perform such obligations. 3.04 12 C Not later Government to furnish Completed. than three such annual program months to the Bank for review before and approval. inviting Rehabilitation works tenders for included in such works under program to have an road economic rate of return strengthenin not less than 12%. g programn 3.05 9 C Before Review by the Bank of Completed. undertaking terms of reference, and studies concurrence under Parts A(c) and B(cXiii) of the Project. 3.06 13 C 12/31/86 or Selection for training Training activities were such other of MINEQ staff with stopped at the end of the date that the qualifications and Project because of a lack Bank may proposed training of adequacy between the agree programs satisfactory training program and the to the Bank. training requirements, as well as between the training program and the qualification of staff proposed to be trained 3.07 9 C 03/31/86 or Review by the Bank of Completed. such other list and cost of date that the equipment to be Bank may purchased under Part agree B of the Project. 24 Agreement Section Covenant Status Original Revised Description Comments Type Fulfillment Fulfillment of Covenant Date Date 4.01 (a) 9 CP Continuous Borrower to maintain Maintenance was poor at separate records and the start of the project accounts adequate to because of lack of reflect in accordance coordination between the with sound accounting executing agencies; practices the deteriorated when MINTP operations, resources was split between two and expenditures in ministries and DGTC was respect of the Project created, and improved at the end of the project when it was centralized in a single unit. 4.01 1 CD Not later Audit of the Project The furst audit was than sixth Accounts carried out in 1992. All months after audits were unqualified. the end of each fiscal year 4.02 (a) 9 CP Continuous LABOGENIE to Records and accounts maintain separate were not maintained in records and accounts accordance with sound adequate to reflect in accounting practices (see accordance with sound clause on audits below) accounting practices the operations, and financial condition of LABOGENIE. 4.02 (b) 1 CD Not later Audit of LABOGENIE All audits were qualified. than sixth months after the end of each fiscal year 4.03 (a) 2 C Every fiscal LABOGENIE to Completed. year include fixed assets in use other than those presently included at their current value in its balance sheets. 4.03 (b) 2 NC Ratio of profitability LABOGENIE became on sales exceeding or unprofitable due to FY86 equal to: accumulating Government FY87 and 10%; arrears after 15% _ 4.04 (a) 12 C 03131/86 or MINEQ to Exchange of views were such other exchange views not followed by actions. date that the with the Bank on Restructuring of MINEQ Bank may institutional is part of the new project agree measures under preparation. with a view to strengthen transport planning and coordination. 25 Agreement Secton Covenant Status Original Revied Description Comments Type Fulfillment Fulfillment of Covenant Date Date 4.04 (b) 12 CD November MINEQ to exchange Recommendations aimed 30 of each views with the Bank at improving force account year on: failed because of the (a) technical budget collapse, high assistance provided turnover of Ministiy staff and to be provided, and lack of comnitment and actions taken or from the Ministry. proposed to be taken on the basis of conwltants' recomunendations; (b) its investment program in the transport sector 4.04 (b) 12 CD Beginning MINEQ to exchange The survey became March 31, views with the Bank obsolete due to the 1986 or on the economic crisis. such other recommendations date as the included in the banlc may nationlal transport agree survey carried out underth&e Fifth IHighway Project; 4.05 9 CP Not later Borrower to Borrower sent its annual than April exchange views with budget for road 30 of each the Bank on its draft maintenance. year, until annual road Implementation reports two years maintenance were no more prepared and after project program. furnished when the completion Bortower to furnish technical assistance left. to the Bank a report on the implementation of its road maintenance program for the preding fiscal Project 4.01 1 CD Not later Audit of All audits were qualified. than sixth MATGENIE months after the end of each fial vear Schedule 2 NC Continuous MATGENE will Never complied with due follow a financial to Governments arrears. policy enabling it to finance an equipment and acquisition program 26 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 9: Compliance with Operational Manual Statements Statement Number and Title Description and Comment on Lack of Compliance OD1 1.00: Procurement Loan B018-CM financed rental of equipment by MATGENIE, the national equipment pool, which should not have been eligible because of lack of managerial autonomy. Contracts were awarded without competition. OD1O.60: Accounting, financial No corrective action was taken to make the Borrower reporting, and auditing comply with the Loan Agreement regarding the timely OD13. 10: Borrower compliance with provision of project audits, and improve financial audit covenants accounting and control systems as recommended in the audits during the first six years of project execution. OD 13.05: Project supervision Legal documents were not amended to reflect changes in priorities (road maintenance versus road construction), circumstances surrounding the project (the economic crisis), and organizational and managerial arrangements (split of MINEQ into two ministries and creation of DGTC). OD4.01: Environmental assessment The environmental impact of the project was not assessed. 27 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT DIPLEMENTATION COMPLETION REPORT Table 10: Bank Resources: Staff Inputs Stage of Project Cyde Planned Actual Prepuation to Appraisal N.A. 64.9 Negotiations through N.A. 13.2 Board Approval Supervision N.A. 143.1 Completion NA. 2.4 Total N.A. 223.6 Ibc staff inputs arm expressed in staff-weeks. Number in USS are not available. N.A.: Not Available in SAR 28 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT IMPLEMENTATION COMPLETION REPORT Table 11: Bank Resources: Missions Performance Rating Stage of project Month No. of Days Specialized Implemen Develop- Types of Problems cycle /year persons in the staff skills -tation ment field represented status objectives Through appraisal 12/83 3 21 HE, TE, FA 03/84 3 14 HE, TE, - - ES 06/84 5 21 HE, FA, - - TE, ES, TS Appraisal through 12/84 1 9 HE Board approval 03/85 2 15 HE, TE - - Supervision 10/85 3 12 HE, TE, N.A. N.A. Loan signature pending FA 03/86 3 16 HE, TE, 1 1 Delays in the institutional FA development program 06/86 2 6 HE, FA N.A. N.A. 10/86 3 14 HE, TE, I I Project start-up delayed by FA one year. Institutional development program remains to be defined for MINT and LABOGENIE. 03/87 1 5 HE 1 1 Project start-up delayed by one year and expected to be delayed by one addition year due to delays in completion of engineering studies and slow procurement. More delays expected for the institutional development program (MINT and LABOGENIE) 11/87 4 18 HE, TE, 3 3 Only 3% of funds FA, TS disbursed and 10% committed due to slow procurement. Government reluctant to hire consultants agreed during negotiations. 29 Performance Rating Stage of project Month No. of Days Specialized Implemen Develop- Types of Problems cycle /year persons in the staff skills -tation ment field represented status objectives 07/88 3 21 HBE, TE, 2 2 Government arrears on PS contracts financed by the project; and insufficient funds for road maintenance 03/89 1 15 TE 2 2 Delay in the road maintenance component. Deterioration of the financial situation of MATGENIE and LABOGENIE 06/89 2 10 TE, FA N.A. N.A. N.A. 12/89 3 14 TE, HE, 2 2 Slow procurement ES procedures; inadequate management in the Road Directorate; aggravating financial situation of LABOGENIE and MATGENIE due to financial constraints of the State. 03/90 2 14 TE, FA, N.A. N.A. Ambiguities in the role of HE sector institutions due to creation of DGTC 02/91 1 13 TE 2 2 Serious financial problems for MATGENIE and LABOGENIE 06/91 3 7 TE, PO, N.A. N.A. N.A. HE 10/91 2 5 TE, PO 3 2 Lack of coordination between implementing agencies; lack of compliance with Loan covenants regarding audits; lack of compliance with Bank procurement guidelines. 02/92 1 5 TE 2 2 Serious financial problems for MATGENIE and LABOGENIE; lack of compliance with Bank procurement guidelines; lack of funds to complete civil works contracts; draft project audit qualified; LABOGENIE and MATGENIE audits still unavailable. 30 Performance Rating Stage of project Month No. of Days Specialized Implemen Develop- Types of Problems cycle /year persons in the staff skills -tation ment field represented status objectives 06/92 1 7 CS N.A. N.A. N.A. 12/92 1 5 TE 2 2 Final audit reports not yet available 03/93 2 2 FY91 and FY92 final audit reports for MATGENIE and LABOGENEE not yet available Completion 06/94- 1 42 TE - - 11/94 Almost all supervision missions were carried out in parallel with the supervision or the preparation of other Bank projects. The project was not supervised in the field in 1993 because 12 categories had been closed in June 1992, and project activities consisted in completion of two civil works contracts, and contracts with project auditors. HE: Highway Engineer TE: Transport Economist PS: Procurement Specialist ES: Civil Works Equipment Specialist FA: Financial Analyst TS: Training Specialist PO: Project Officer CS: Computer Specialist 31 REPUBLIC OF CAMEROON SIXTH HIGHWAY PROJECT (Loans A: 2584-CM and B: 018-CM BORROWER CONTRIBUTION TO THE ICR INTRODUCTION Cameroon prepared the Sixth Highway Project in 1984-85 at the peak of a long (20-year) period of economic prosperity characterized by 7-percent average growth and the construction of major basic infrastructures works, particularly in the transportation sector (roads, airports, etc.). Its implementation, on the other hand, was to take place in the midst of a prolonged and exceptionally severe economic cfisis. The Sixth Highway Project followed: - the Fourth Highway Project, which focused on institutional development and road maintenance personnel training and improvement of the road network by means of a major unpaved roads maintenance and rehabilitation program; - the Fifth Highway Project, which comprised construction of the Yaounde-Douala highway, of which the World Bank helped finance the works of the Edea-Yaounde section, construction of the new headquarters building of the National Road Laboratory (LABOGENIE), study of the transportation plan, study of strengthening of the 2,400 km of paved roads, and technical assistance to the Ministry of Equipment (MINEQ). The objectives of the Sixth Highway Project as defined at appraisal in 1985 were: - to boost road transport capacity while reducing transport costs and protecting existing investment; - to achieve institutional strengthening by consolidating or pursuing the activities undertaken in the areas of road safety, road and transportation planning and road maintenance; - to strengthen the management system of the National Equipment Pool (MATGENIE); - to upgrade LABOGENIE'S operational and research capacities. These objectives were to be pursued through the following operations: (1) Roads - a program of strengthening of 600 km of priority-ranked asphalted roads; 32 - construction of the Mbalmayo-Ebolowa road (107 km) and the Kumba-Mfaitok section (50 Iam), representing lot 3 of the Kumba-Mamfe highway; - feasibility studies of other roads. (2) Institutional Strengthening MINEQ: - upgrading of the Ministry's planning and monitoring capacities; - improvement of its management information, budget preparation and cost accounting systems; - a technical training and study fellowships program. MATGENIE: - upgrading of operations management capacity, including technical personnel training; - granting of training fellowships; - construction of training and workshop facilities. Ministry of Transport (MINT): - upgrading of transportation planning and coordination capacity; - setting up of a road safety and vehicle approval system; - personnel training and fellowships; - computerization of vehicle certification, etc. (3) Strengthening of LABOGENIE'S Operational and Research Capacities - technical personnel training, granting of fellowships; - construction works, supplies, training and research. The cost of this project was estimated at appraisal completion at US$295 million, i.e. more than 85 percent of the aggregate volume of the Bank's previous transportation-sector lending to Cameroon. Financing of this project was provided by the following donors: 33 § the World Bank, through: - Loan A ( 2584-CM), for US$125 million, signed on June 18, 1985 and supplemented, owing to the financial difficulties encountered, by - Loan B (018-CM), for CFAF 35,980,622,400, signed on January 16, 1987. § ADB, which contributed CFAF 15.1 billion for the Mbalmayo-Ebolowa road works. § The Government, which granted a CFAF 10 billion commitment under the Public Investment Budget. L EVALUATION OF OBJECTIVES Revised Objectives In November 1987, i.e. after the loan had entered into effect, Cameroon and the Bank, responding to the adverse effects of the economic crisis on the public finances, jointly reoriented the project objectives to take account of the recommendations of the Transport Plan study carried out under the Fifth Highway Project, as follows: - restructuring of MATGENIE and LABOGENIE; - improvement of cost recovery; - giving priority to road maintenance in order to preserve existing investment; - assignment of priority to uncompleted projects. While these revisions did not entail any changes in the loan agreement, they did require amendment of project contents to: - place limits on construction works; - reduce the 600-km rehabilitation program to 150 km, comprising 100 km of strengthening works and 50 km of curative maintenance of the Mora-Waza section; - take account of certain operations carried out under the Fourth and Fifth highway projects. Sector Policies The results are practically negligible. Cost recovery improved, but owing to the decrease in governmental resources the resulting incremental resources were not applied to road maintenance. 34 Institutionally, the creation of the DGTC in 1988 and the transfer to it of the functions of the New Works Subdirectorate led the latter to pursue a program until then followed by another agency, with a completely different approach (different project management approaches: force account/contracting). Financial Objectives Management of the project was weakened by financial problems of various kinds: § The fall in the US dollar/CFA franc exchange rate. The parity of the US dollar, CFAF 490 at project appraisal, had fallen to CFAF 275 by 1991. This situation substantially reduced the available local currency resources whereas works, goods and services costs remained at least constant. § The Government failed to honor its financial commitments promptly, as a consequence of the reduction in the Public Investment Budget, combined with the adverse effects of the economic crisis. This explains the moderate rate of disbursement of counterpart funds. § To enable it to honor part of its commitments, the Borrower had to resort to EDF support in the amount of CFAF 2 billion. § The untimely stoppages caused by the repeated suspension of disbursements by the Bank disrupted the normal progress of the works and generated incremental costs. Institutional Strengthening Achievement was negligible. MATGENIE and LABOGENIE were not restructured, and at the end of the project are still bankrupt. The sector's management capacity has not been strengthened. Technical Objectives § New and rehabilitation works. In quantitative terms, the overall outcome is positive: of the 255 km provided for in the 1988 amendment, 85% was implemented. As regards strengthening works, 166 km of road was paved, against the scheduled 150 km, an execution rate of 1 11 percent. In terms of quality, deficiencies are noted, connected with failure to update the basic studies, particularly concerning rehabilitation operations, as in the case of the Bekoko-Tiko-Limbe and Mora-Waza highways. 35 § Road maintenance. Here, the outcome is generally negative, evidence that real priority was not given to road maintenance, in terms either of public finances disbursement priorities or of internal management of the technical agencies. Concerning road maintenance operations, we note: - lack of continuity with the Fourth Highway Project: none of the recommendations contained in its Completion Report were implemented; - poor inputs management (fuel and bitumen) and low equipment utilization productivity; - inadequate budget allocations in light of the works program; - delays in awarding contracts; - the operating difficulties experienced by MATGENEE. E. EVALUATION OF THE GOVERNMENT'S PERFORMANCE - The financial resources allocated to road maintenance continued to fall short of its needs even though road maintenance is listed among the Government's priorities. Moreover, following the reduction in the public agencies' operating resources the productivity of the road maintenance subsector fell sharply. - The weaknesses of the institutional framework led to conflicts between different executing agencies, highlighting the need to set up a single road authority. - Human resource management was not conducted with an eye to preserving the gains obtained with the know-how transfer generated by the technical assistance, training activities and other technical benefits generated by the project. - There were long delays in awarding contracts. m. EVALUATION OF THE BANK'S PERFORMANCE - The project was not put together in a spirit inspired by the lessons of the previous projects, which were implemented in a calm economic environment. - The bidding studies were not updated to take account of the parameters of the new economic environment, changes in factor costs and technical developments. The Bank ought to have committed itself to monitoring not only the works but also the quality of the studies, as some donors do. - The repeated disbursement suspensions during execution of the works inevitably inflated the project cost. The Bank needs to review its procedures with the object of minimizing these cost changes. 36 - As a consequence of the large turnover of project chiefs at the Bank: - there were frequent monitoring holdups which affected the duration of the operations; - the Bank expressed only few opinions on the studies and works during execution, opinions that were even sometimes contradictory. - Technical assistance was completely nonexistent during execution of new construction works or rehabilitation works supervised by a local agency. It was confined to road maintenance works. - Audits were rare; moreover, the first did not take place until 6 years after the effective date of the loan. In light of the above, the Bank's performance appears to have been unsatisfactory. IV. KEY LESSONS LEARNED 4.1 Project Framework Sector financing strategy ought to take account of: - a global macroeconomic framework that determines the economy's absorption capacity and setting up of the counterpart funds to finance the local portion; - the institutional and management framework of the project, including the development of project planning, programming and supervision capacities; - the need for proper coordination of executing agencies and the donors. In this connection, the operations programming system ought to be decided on after appraisal of the activities, as a flexible system, and reviewed annually to take account of short-term changes in the macroeconomic situation and a system of regular audit should be installed. 4.2 Studies and Works - The poor quality of the studies had a major financial impact on the execution of the works. It had the effect generally of increasing the original quantities and prolonging the completion deadlines, the subjects of numerous financial amendments to the basic contracts. These amendments resulted in cost increases, the magnitude of which ranged from 15 to 26 percent. - Adequate account needs to be taken henceforth of experience acquired in works execution in a tropical environment in selecting foreign enterprises that are to carry out the works. 37 4.3 Road Maintenance The current organization of road maintenance is out of step with the need for efficient use of the resources to be mobilized and the low productivity of the public agencies in comparison with an increasingly efficient private sector. Priority should be given in this organization to creating a system of competition by integrating private operators into road maintenance. Under this set-up, the institution currently responsible for road maintenance would confine itself to planning, programming, budgeting and supervision tasks. Separating the two groups of tasks would make it possible to enhance efficiency of capital in road maintenance. 4.4 Technical Assistance For the capitalizing effects of the projects to penetrate the entire sector, they need to be internalized to the maximum possible degree. The technical assistance missions ought therefore to aim at permanence of the system beyond the contract period. V. RECOMMENDATIONS § Undisbursed balance of US$587,946.68. Considering first that the Bank's performance in the putting together and conduct of this project was mutually rated as unsatisfactory and second that the large turnover of Bank project chiefs created constant hold-ups, the Bank's responsibility would appear to be obvious, notwithstanding the poor [or] mediocre performance of the Government, to justify failure to disburse the entire loan allocated to this project. It would hence be wise, for the purpose of sharing responsibility in this situation, to regard this residue as applied to amortization of the pertinent loan or allocated to completion of the other uncompleted projects. § Monitoring of studies: The need is clearer than in the past to update the studies before putting together the tender documentation. § It would be advisable to draw up and communicate to the executing agencies the terms of reference between the technical assistant and the borrower and the donor and draw up a contract, preferably of short duration and providing for closely specified assistance, clearly defining the evaluation criteria for each expert, particularly with respect to know-how and knowledge transfer, that can be called into question prior to its expiration when any serious deficiency becomes apparent. § In the case of new construction and rehabilitation works, special attention should be paid to the prior studies; this could be reflected in an increase in the services to be performed (geotechnical tests, structural calculations, technical variants, and so on) in order to achieve better control of works deadlines. 38 § In order to avoid execution holdups and slowdowns, the institutional and nmanagem fiamework of the project should be agreed on prior to its entry into effect; idllarly, to settle the problem of availability of counterpart finds, agreement should be reached on a panent mechanism for financing the local portion through user cost recovery. § Finally, to avoid slippages, a regular reporting and auditing procedure should be set up, together with a system of regular consltation and discussion meetings. 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'- K , TRANSPORT INFRASTRUCTURE SELECTED TOWNS GR'- S PROVINCE CAPITALS be GAR U PAVED ROADS ) | ' UNPAVED ROADS j |' RAILROADS _4 Guib[ib_ RIVERS JPl PROVINCE BOUNDARIES Tch1 I,rA _ INTERNATIONAL I - I _ r BOUNDARIES j 4 T gnere M;ourguel , )NGAOUNDERE rJ 9 aD~~~~6Nk-be, B.,o Mlra ~ eloW NIGERIA WM Wumt Assons C~~~~~~~~~~~~~o.I6 IAs' Nbengnc \AM@EIDA ' - A Mfe * Lbk b CENTRAL Ngo., Dschong AFRICAN | Ngt;, , .REPUBLIC K, Mundeba EoNkongsor3o I bERTOUA k JX , , r f '- R UA. \ Batouri _ enoddo\ BU r'a a g.t N d l > K AUNDE t- A - Mbar,g Akonol,nga .ok\d,un \ \ --\\0IKO \/ -- ( < aiE b, < ( \ fKr ~~~~b, EBOLOWA1 ) sg ema '- / EQUATORIAL GUINEA ATLANTIC \ OCEAN \ >_5-'- M N oso RIO t1 -JNI GAON CONGO 5- JUNE 1995 I IMAGING Report No: 15486 Type: ICR