FILE COPY RESTRICTED Report No. PTR-49a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A HIGHWAY PROJECT RWANDA May 26, 1970 Transportation Projects Department Currency Equivalents: Currency Units Rwandese Francs (RF) FRI` 1 = USXO.o*01 FRI1 100 = USol.00 FRW1 1,000,000 = US%lO,OOO Fiscal Year January 1 to Deceniber 31 Weights and ivieaseres: i4etric iietric: BritishAtS Eui.valent: 1 kilometer (km) - 0.62 miles (mi) 1 meter (m) 3.28 feet (ft) 1 square kilometer (km2) 0.386 square miles (sq mi) 1 hectare (ha) 2.47 acres (ac) 1liter (1) 0.22 gallons (Imperial) 0.26 gallons (US) 1 metric ton (m ton) 2,204 ponnds (lbs) 1.bbreviations and Acronyme : DRB - Department of Roads and Bridges FED - European Development Fund ŒP - Gross Dmtiest1C Prodact PMEA - Permpnent Mission in Eastern Africa r4Ep _- United Nat-ions Develo-iment Programme RWANDA APPRAISAL OF A HIGHWAY PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ............................. i 1. INTRODUCTION ........................................ 1 2. BACKGROUND .......................................... 2 A. Economic Setting ...... .......................... 2 B. The Transport System ............................ 3 General ...................... 3 Highways . . 4 Transport Policy ..... ............. 4 3. THE HIGHWAY SECTOR .................................. 6 A. Road Traffic Characteristics .................... 6 B. Highway Administration .......................... 6 C. Engineering and Construction .................... 6 D. Maintenance Services ............................ 7 E. Highway Financing ............................... 8 4. THE PROJECT ......................................... 8 A. Description ..................................... 8 B. Construction of the Kigali-Gatuna Road .... ...... 8 C. Purchase of Road Maintenance Equipment .... ...... 10 D. Cost Estimates and Financing .................... il E. Execution ....................................... 12 Construction of the Kigali-Gatuna Road .... 12 Purchase of Road Maintenance Equipment .... 12 F. Financing and Disbursement ...................... 12 5. ECONOMIC EVALUATION ................................. 13 6. RECOMMENDATIONS ..................................... 15 (Continued) This report was prepared by Messrs. H. Brandreth (economist) and G. Chaix (engineer), and was edited by Miss J. Murphy. Table of Contents (Continued) TABLES 1. Importa and Exports 2. Highway User Charges 3. Department of Roade and Bridges Expenditures 4. Vehicle Fleet and Fuel Consumption 5. Design Standards 6. Mechauiued Maintenance Unit 7. Basic Data on Vehicle Cost Savings and Growth of Traffic 8. Flow of Net-of-Tax Costa and Benefits from Construction of the Kigali-Gatuna Road MAPS 1. RWANDA: International Transport Connections 2. RWANDA: Main Road Network RWANDA APPRAISAL OF A HIGHWAY PROJECT SUMMARY AND CONCLUSIONS i. As is true of most land-locked countries, effective access to world markets is of primary importance to Rwanda. Located about 1,750 km from the nearest port, Rwanda spends as much as 35% of its meagre export earnings on transport costs for trade items. ii. Since independence, the main traffic routes for importe and ex- ports have been through Uganda-Kenya and Burundi-Tanzania to the Indian Ocean ports of Mombasa, Kenya, and Dar es Salaam, Tanzania, respectively. Of these routes, that to Mombasa is the more important; firat, because it involves only one transshipment of traffic (between road and rail) and second, because almost 50% of Rwanda's imports originate at points in Uganda and Kenya lying on this route. Kampala, the capital of Uganda and the main transshipment point on the route to Mombasa, has become a major marketing center for Rwanda. iii. The proposed project provides for the construction of a paved road from Kigali to Gatuna on the Uganda border, which, by connecting more directly with the Uganda highway system than the existing trade route via Kakitumba, will shorten the distance to Kampala and beyond by 73 km. [t will also provide much better riding characteristics for local and international road traffic. As a result, transport costs will be lowered substantially for import and export traffic; this factor, combined with the increased speed, convenience and safety of the new route will undoubtedly generate addītional traffic. The road construction project is estimated to have an internal rate of return of 13%, on the basis of traffic diverted from the existing link and normal growth. iv. The contract for construction of the road also providea for its maintenance for a full year after construction is complete. This is to ensure that the road is properly maintained, pending improvement of the Government's maintenance service through implementation of maintenance study recommendations (see para. vi). v. The project also includes the provision of a small amount of road maintenance equipment to improve the effectiveness of mechanized mainte- nance operations. Pending the reorganization of maintenance services, the equipment will be allocated to a mechanized maintenance unit now deployed on the existing road link from Kigali to Uganda via Kakitumba. This unit, partially equipped through German aid, is efficiently managed and operated by a four-man German technical assistance team. It comprises the only mechanized maintenance unit in Rwanda at present. vi. Large-scale assistance to Rwanda's road construction and main- tenance organization cannot be justified at present because of the poor state of the organization and facilities available. A maintenance study is needed to formulate a comprehensive program of rehabilitation and de- velopment, including the provision of adequate local funds to meet the - ii - needs of an efficient maintenance service. The improvement of maintenance facilities in Rwanda is vital to the proper upkeep of a major new paved road link of international significance as provided under this project. The UNDP is financing such a highway maintenance study, with the Bank as Executing Agency. The Government has agreed to implement a higilway main- tenance program, upon completion of the study and agreement with the As- sociation on its recommendations. vii. The total cost of the project is estimated at US$10.9 million equivalent. The proposed credit of USS9.3 million equivalent represents 85% of the total cost of the project and covers the estimated foreign exchange coats. The Government has confirmed that it will meet the local costs, estimated at US$1.6 million equivalent. Belgium is making avail- able US$600,000 equivalent to Rwanda as a contribution towards this local cost financing. viii. The project provides a suitable basis for an IDA credit of US$9.3 million equivalent. RWANDA APPRAISAL OF A HIGHWAY PROJECT 1. INTRODUCTION 1.01 The Government of Rwanda has asked the Association to help finance a project consisting of; (M) construction of a 79 km paved road between the capital, Kigali, and Gatuna on the Uganda border, including (a) preparation of bidding documents and supervision of construction by consultants, and (b) provision for one year's full maintenance of the project road by the con- struction contractor; and (ii) purchase of road maintenance equipment. The total cost of the project is estimated at US$10.9 million equivalent. The Credit of US$9.3 million equivalent (85%) will cover the estimated foreign exchange costs. 1.02 The road construction was first identified as a potential Bank Group project in April 1966 when a PMEA mission visited Rwanda. At that time the European Development Fund (FED) was proposing a feasibility and detailed engineering study of the Kigali-Gatuna road to be followed by limited improvements. The Bank Group, believing there was a prima facie case for total reconstruction of the road, proposed a common approach. As a result the necessary studies were financed by FED, utilizing the services of the Italian consultants, Electroconsult, on the understanding that the Association would proceed with an appraisal thereafter. Electroconsult completed its assignment in July 1969. 1.03 The project will provide a paved road, which will link Rwanda and the Uganda highway system, replacing an existing earth track and re- ducing by 73 km the road distance to Kampala, the market center and trans- shipment point in Uganda for Rwanda imports and exports. It will there- fore have a very favorable impact on transport costs related to Rwanda's foreign trade. The project will al8o provide some road maintenance equip- ment which will improve the effectiveness of mechanized road maintenance operations. 1.04 Although, before independence, Rwanda was the partial recipient of a 1957 Bank loan (165-BE) for a transport project in the Belgian Trust Territory of Ruanda-Urundi, the proceeds were devoted entirely to expand- ing the port of Bujumbura and to improvement of the Bujumbura-Muramvya road, all in what is now Burundi. The proposed project will therefore be the first Bank Group transport sector lending operation in Rwanda. However, two earlier appraisal reports have been prepared for transport projects. - 2 - 1.05 The first, initially prepared in the PMEA office in December 1967, consisted of a highway maintenance study, advisory services to the Department of Roads and Bridges (DRB), the purchase of an emergency supply of maintenance equipment and spare parts, and a serles of road feasibility and detailed engineering studies. At the request of the Government this report was drastically revised in October 1968 to delete the advisory services and all but one of the road studies. A credit for this latter proposed project was negotiated in November 1968 but the Government with- drew its credit request in favor of a UNDP-financed study covering highway maintenance and engineering of the Gisenyi-Ruhengeri road. The Plan of Operation for this study was approved by the Government in April 1970. The study is being carried out by the Italian consultants, Electro- consult, with the Bank as Executing Agency. 1.06 This report is based on the economic and engineering studite of Electroconsult and on the findings of an appraisal mission consisting of Messrs. Chaix (engineer) and Brandreth (economist) who visited Rwanda in December 1969. It was edited by Miss J. Murphy. 2. BACKGROUND A. Economic Setting 2.01 Rwanda, a land-locked country in east-central Africs about two- thirds the size of Switzerland (23,640 km2), shares many of that country's topographical features. With an average altitude of over 2,000 m, Rwanda enjoys a tropical highland climate. Most of the arable land lies in the mountainous western half of the country where rainfall is sufficient to permit several crops per year to be grown. Further east, where the ter- rain subsides into a rolling plateau, rainfall diminishes, the land is less fertile, and the prevalence of the tsetse fly inhibits animal husban- dry. As a result, the western mountain slopes are the most densely popu- lated and there is little arable land which remains untilled. 2.02 The country suffered great social and political turmoil between 1959 and 1965, marked by internal tribal conflict and incursions by political refugees sheltered in neighboring lands. This unrest intensified after 1962 when Belgium relinquished its trusteeship and Rwanda separated from Burundi to become independent. This instability combined with a lack of experience in government affairs led to a severe economic slump from which the country did not start to recover until 1964. Rwanda is currentlv a one-partv repub- lic with a relatively stable government and economic progress has been moderately good in the last few years. 2.03 The population of Rwanda, growing at over 3% annually, currently approximates 3.5 million, making it, with 148 inhabitants per km2, among the most densely populated countries in Africa. The economy is primitive, with subsistence agriculture the rule, and there are few population cen- ters of consequence. The GDP per capita in 1968 was estimated at US$50, - 3 - of which over half consisted of food crops grown for subuistence consump- tion. Commerce and industry are very limited and most manufactured gooda, from cloth to machinery, as well as some food items, must be imported. Ex- ports conslst almost exclusively of tin ore and coffee, supplemented by pyrethrum and, more recently, by a growing volume of tea. 2.04 In 1968, imports, amounting to 75,000 tons, were 35% higher than in 1966, representīng an annual growth of over 16%. Exports totalled about 17,000 tons in 1968 - up 29% from 1966 or 13.7% annually (Table 1). Prior to independence, 25%-50% of overseas trade moved via Atlantic ports in Congo (K) or Angola. In recent years all this trade has been diverted to the Indian Ocean ports of Mombasa in Kenya and, less importantly, Dar es Salaam in Tanzania. In 1967 and 1968, 92% of Rwanda's exporta and 85% of imports moved over the route to Mombasa. B. The Transport System (ī) General 2.05 Road movements dominate transport in Rwanda for both internal and external traffic. There are no railways, and while there is some water transport on Lake Kivu, it is not of national significance. Scheduled air transport in limited to international connections to all neighboring coun- tries and Europe through Kigali airport which i equipped to handle modern long-range jet aircraft. 2.06 The primary concern of the Government is with accesa to neighbor- ing and overseas markets. The more productive northern area of the country finds its natural outlet through Uganda, by road as far as Kampala, the logical transshipment and local market point, and by rail from there to Mombasa (see Map 1). Southern areas, with production centered in Butare and Cyangugu, are closer to the Tanzanian outlet via Bujumbura in Burundi, the Lake Tanganyika waterway to Kigama, and by rail from there to Dar es Salaam. While this southern route is slightly shorter (1,750 km versus 1,800 km for the Mombasa route), there are two expensive and time-consuming transshipients en route (road to water at Bujumbura and water to rail at Kigoma) versus one transshipment (road to rail at Kampala) on the northern route. Additionally, in the three years 1966 to 1968 inclusive, about 50% of Rwanda's importe originated in Kampala or other intermediate stations in Uganda and Kenya, chiefly refined oil producte, cement and salt. A third route i under development, with German assistance, which will even- tually link southeastern Rwanda by road with Tabora, Tanzania, and thence, by rail, with Dar es Salaam. Thus, Rwanda ia endeavoring to maintain and expands its options for port access, in an attempt to avoid situations en- countered in the past in which, at one time or another, one or all of the routes through Congo (K), Burundi and Uganda have been cut for political reasons. -4- (ii) Highways 2.07 In spite of generally rugged terrain, Rwanda has a road system which in relation to the area of the country, is more than three times as extensive as that of its neighbors - Uganda or Kenya. Its 6,000 km of roada consist of about 2,000 km of national routes and 4,000 km of tertiary local roads. Almost the entire system consists of unengineered earth or gravel roads on which standards of alignment and roadway width vary unpredictably, and the classification relates chiefly to the allocation of responsibility for maintenance and repair. The Ministry of Public Works and Energy is reponsible for the national routes, while maintenance of the remaining roads is undertaken by the local districts or communes. In practice, main- tenance standards vary only slightly from one class of road to another. Shortages of funda, competent staff, and equipment have reduced maintenance operations, with few exceptions, to hand labor standards. The Association has been viewing the serious condition of maintenance services with concern for two years and recommended a maintenance study leading to an improvement program. The UNDP is financing this study. (iii) Transport Policy 2.08 Transport on the existing link between Kigali and Kampala is con- trolled by the Agence Maritime Internationale, a subsidiary company of a Belgian shipping line, which has been appointed by the Government to act as forwarding and receiving agent and to contract for the road services re- quired. Most of the transport is effected by Uganda road haulage firma with only a few small local operators participating. Transport rates are approved by the Government. 2.09 Several years ago, the Government created a public bus company (Societe des Transports Publics) to operate inter-city passenger services. In the past year, this organization has expanded considerably with Japanese technical assistance, not only to extend its service to more communities but also to introduce a bus service in Kigali proper. There are no other organized passenger services in Rwanda - in fact, there are very few taxis in Kigali and only one or two "bush" taxis in the countryside - in spite of the fact that there are no restrictions applied to such services. 2.10 There are no regulations applicable to trucking services and no restrictions to the importation of vehicles. A trade license is all that is required to enter the transport business and, although provisions exist for safety and economic regulations, none has been placed in force. Except for the fact that capital is extremely scarce, it may be said that within the local transport industry, conditions of virtually free competition ex- ist. 2.11 Road user taxes of all types are very low, particularly since April 1968 when the Governient cut many taxes in all fields. Import du- ties on transport vehicles and parts range from 5% to 10%. Duties on gasoline amount to RF 2 per liter (US é 2) which will be increased to RF 4 per liter in the current year. The diesel fuel duty in RF 2.5 per liter. There are no excise taxes on fuel and the price of diesel is slightly lover than in neighboring Uganda. As a result, the Uganda trucking firms handling Rwanda traffic arrange to purchase fuel in Rwanda rather than at their home bases. 2.12 On the single paved route in the country, a 10 km stretch between Kigali and the airport, a toll system has been introduced. The RF 50 (US$0.50) one way toll (for trucks) is calculated to be sufficient to meet maintenance and amortization costs. There is, in effect, a road toll on all international transport movements, since each time a truck or trailer enters Rwanda, a tax of RF 1,000 (US$10) is payable (Table 2). Since most of the important import-export traffic is handled by foreign vehicles, this tax ensures a revenue contribution by carriers which might otherwise escape taxation. It is likely, however, that most of this tax is ultimate- ly paid by Kigali consumers in the form of a higher transport element in the price of imported commodities. None of the foregoing revenues extracted from road users is earmarked in any way for road construction, improvements or maintenance. In 1967 and 1968, these revenues fell slightly short of expenditures on road maintenance. In 1969, the shortfall was quite con- siderable, as shown below: Estimated Highway User DRB Year Charges Expenditures 1/ (US$'000) (US$'000) 1966 n.a. 519.8 1967 514.2 572.1 1968 566.2 599.8 1969 593.4 736.4 1/ Road maintenance only, no construction undertaken. Details of revenues and expenses are outlined in Tables 2 and 3 respective- ly. 2.13 Since to be effective, any taxation policy of Rwanda mwut be cor- related with that of neighboring countries, any increase in road user charges should be carefully evaluated. As part of the UNDP-financed main- tenance study, the consultants will look into the entire question of high- way financing and will make specific recommendations as to the most effec- tive way of charging road users (para. 3.11). - 6 - 3. THE HIGHWAY SECTOR A. Road Traffic Characteristics 3.01 The vehicle fleet is small but has been growing extremely rapidly lin recent years (see Table 4). Between 1965 and 1968, the number of private cars increased 25% annually to reach a total of nearly 3,000 in 1968. Small trucks and vans increased at an even faster annual rate (28%) exceeding 900 in 1968, while the number of large trucks increased from 400 to over 600 in the period (over 13% per year). Figures for 1969 are not yet available but, assuming these growth rates have continued, the total number of vehicles currently exceeds 5,000. The vast majority of trucks carrying imports and export traffic, however, are registered in Uganda. Typically, each of these transport units consists of a 12-ton truck with a trailer capable of hauling 12-18 tons. 3.02 Traffic volumes are light throughout the country. Less than 100 km of road handle 100 vpd. The most heavily travelled routes include Kigali- Gitarama-Butare (136 km), Ruhengeri-Gisenyi (68 km), Kigali-Ruhengeri (116 km), the Cyangugu-Burundi frontier road (47 km), and the Kigali-Kakitumba road (208 km), currently carrying the Uganda traffic which will be diverted to the proposed project road. B. Highway Administration 3.03 The DRB, a department of the Ministry of Public Works and Energy, is responsible for the construction and maintenance of the national high- way system. The organizational structure of the DRB is not clearly defined but, in general, construction work is undertaken by one central office, while maintenance functions are divided between the main Kigali office, which retains control of mechanical equipment, allocating it according to need, and 10 prefectural offices which employ hand labor on daily main- tenance work. This structure is patterned on pre-independence procedures which, at that time, provided Rwanda with a well maintained road network on a modest budget. In recent years the growth in traffic, the lack of budgetary resources, and the shortage of trained staff have resulted in serious deterioration in technical and operational standards vith an in- evitably adverse effect on the road system. At the present time, both the construction and maintenance functions of the DRB are in the charge of for- eign experts, although the DRB itself is headed by a national. C. Engineering and Construction 3.04 No road construction of importance has been undertaken in recent years except for 10 km of paving near Kigali. Construction work by the DRB has been confined, of late, to a few minor structures. The DRB has also supervised the detailed engineering for the Kigali-Gatuna road fi- nanced by FED and for a bridge on the road to Tanzania, at Rusumo, financed by German aid. The major role in this work vas performed by foreign staff provided under German technical assistance. -7- D. Maintenance Services 3.05 The maintenance service is run by two Belgians, an engineer and a mechanic. The staff at their disposal has little or no technical training, and, at the prefectural level, the educational potential, even of senior staff, is frequently hampered by the lack of any language know- ledge beyond the local dialect. This is one reason why mechanical equip- ment i not allotted to the prefectures but is maintained under the super- vision of headquarters. Another reason is because modern equipment in good working order is in extremely short supply and, consequently, is not available for regular assignment. The exception to this situation is one maintenance unit recently equipped through aid provided by the Federal Re- public of Germany. The unit, supervised and maintained by four foreign technicians, operates efficiently, concentrating its efforts on the main roads, especially the Kigali-Kakitumba-Uganda road, which, although only an unengineered dirt road, is presently the best link vith Uganda. 3.06 The road maintenance equipment owned by the DRB was inventoried before the mission arrived in Rwanda. Of a total fleet of 114 units, only about 10% (7 agricultural tractors, 1 loader and 3 trucks), financed by German aid lesa than two years ago, is operational. About 70Z of the fleet is more than 5 years old and currently inoperable. These unit. are beyond economie repair and should be written off. The remaining 20X con- sists of units 3 to 5 years old and mont of it is out of service. 3.07 Efficient maintenance and repair of equipment is practically impossible under present circumatances. Aside from the lack of funds for staff and spare parts, the DRB has no maintenance workshops or servicing facilities and very few tools. It has no qualified local mechanics on its staff. 3.08 The Government has requested IDA financing for equipment and spare parts. But under present conditions, merely supplying new equipment and spare parts would not provide a solution to the problem of equipient short- ages because of the inability of the DRB to make effective use of such mate- rial. Pending corpletion of the maintenance study and subsequent reorgani- zation of road maintenance services, the project will provide a limited amount of equipment which could be efficiently and effectively utilized by the mechanized maintenance unit described in para. 3.05 (see para. 4.07). 3.09 The development of an adequate national road maintenance organi- zation would require not only capital investments but the provision of a substantial amount of technical assistance at the vorking level and a pro- graa for large-scale training of local staff. Since the DRB's road mainte- nance resources cannot adequately cope vith the existing national road sys- ten and certainly would not be able to maintain the projected Kigali-Gatuna road, it iS imperative that stepa be taken to improve the maintenance fa- cilities and to develop an effective maintenance program. The UNDP-financed highvay maintenance study, expected to be completed early in 1971, vill pre- pare such a program. Specifically, this study vill provide recoumendations to reorganize maintenance services and to determine technical assistance - 8- and maintenance equipment needs. During negotiations, the Government con- firmed that it vill, upon receipt of the study, and after consultations on its recommendation and agreement with the Association, implement a progra. to improve highway maintenance. Assuming adequate financing is available, such a program could probably start by mid-1972. E. RighwaY FinancinR 3.10 Over the past 4 years (1966-1969) total highway maintenance ex- penditures have averaged about RF 55 million per year (approximately US$550,000 equivalent) (see Table 3). Of this, about RF 25 million vas devoted to DRB salaries and RF 26 million to materials, spare parts and vehicle fuel. The remainder (about RF 4 million per year) vas allocated to the maintenance of tertiary roads to be done by the local communities. There has been no expenditure for road construction; only the improvement and paving of the 10 km airport road has been undertaken, financed in its entirety by German aid. 3.11 Maintenance funds are drawn from general budgetary allocations and are related to overall fiscal policy rather than road maintenance needs. Funds have been generally inadequate to meet basic requirements. The UNDP-financed maintenance study will investigate the financial re- quirements of the DRB, present and potential road user taxes, the changes that are needed to meet expenditure requirements and the desirability of and necessity for earmarking a portion of these revenues for road mainte- nance services. 4. THE PROJECT A. Description 4.01 The project consists of: (1) construction of a 79 km paved road between Kigali and Gatuna on the Uganda border, including (a) preparation of bidding documents and supervision of construction by consultants, and (b) provision for one year's full maintenance of the project road by the construction contractor; and (ii) purchase of road maintenance equipment. B. Construction of the KiRali-Gatuna Road 4.02 The Kigali-Gatuna road vill link Kigali, the capital and main commercial center, with the road/rail network in Uganda by which most of Rwandese importe and exports are shipped. At present, only a 107 km, sea- sonal dirt track existe between Kigali and Gatuna. Importe and exports be- tween Kigali and Uganda utilize another, low-standard, earth road that goes around the Muhazi lake to avoid mountainous areas north of Kigali, and reaches the Uganda border at Kakitumba in the northeast of Rwanda, 208 km from Kigali. This road has not been engineered and has design standards which vary from section to section, but are consistently low. The roadway width ranges from 4 to 6 m and earthworks are very limited. In some sec- tions in flat terrain, there is no laterite surfacing whatsoever. With insufficient drainage and scarcity of laterite surfacing, the road is barely passable for heavy trucks during the rainy season and does not permit satis- factory vehicle operation under the best of conditions. The present mainte- nance effort (para. 3.05) is helping the situation slightly, but any real improvement would require total reconstruction. 4.03 The proposed road will go straight north 79 km from Kigali to join the Uganda road system at Gatuna on the border. It vill connect with a gravel road to Kabale, the improvement of which is scheduled for completion in 1971 with financing from Credit 164-UG. From Kabale to Kampala the highway is paved. Compared to the existing link via Kakitumba, the proposed road vlll reduce the distance for transport between Kigali and Kampala, the capital of Uganda and the transshipment point for most of Rwanda's imports and exports, by 73 km. On the first 12 km, the new road will closely follow the alignment of the Kigali-Ruhengeri road, and re- construction of this section will also benefit the traffic on that route. Beyond this point the new road will replace a seasonal track which is not currently passable by heavy trucks because of weak bridges and steep grades. It will connect two valleys separated by a high ridge which vill be cross- ed by a 26 km long section on which substantial earthworks and numerous re- taining walls are required. Locally, the road vill serve the town of Byumba, located on a short spur, and its populated countryside as vell as an important tea plantation near Gatuna. 4.04 Electroconsult prepared detailed engineering for a two-lane gravel road including soil survey, earthwork, drainage, and bridges of lesa than 10 m length. For the most part, the design selected by the consultants can be adopted for a two-lane paved road (6 m carriageway and one meter shoulder width). In cut sections, however, the adoption of the consultants' design would have reduced the shoulder width to only 0.5 m. The Association and the Government agreed to widen the roadway in cut sections to keep a 1 m width shoulder, with the exception of a very mountainous 26 km stretch near Byumba, where widening of the proposed roadway would lead to prohibitively expensive additional earthwork. (See Table 5 for design standards.) These modifications increase the earthwork construction costs by about 5% over the consultants' estimate. They are justified since they will simplify pavement construction and provide better operating conditions. Engineering required by these modifications in design will be undertaken under the project. 4.05 Detalled engineering of three small bridges on the project road ranging in length from 14 to 30 m has not been undertaken. Similarly, pave- ment design has yet to be done. This work, combined vith the changes in roadway vidth mentioned in para 4.04, vill take approximately four montha - 10 - and will have to be completed before bidding documents can be prepared. While it vould have been desirable to have this work finished for consider- ation during negotiations of the proposed credit, it was not essential. The appraisal estimate for road construction includes the cost of changing the design standards and adding the bridges and paving work. 4.06 Because of the inadequacy of the current maintenance service in Rwanda, it is advisable to provide for separate maintenance of the project road for one full year after its completion. This vill ensure that the road is properly maintained until, as a result of the maintenance improve- ment program implemented on the basis of the maintenance study recommenda- tions (see para. 3.09), the DRB is in a position to provide its own adequate service. The construction contract for the project road provides for full maintenance of the road for one year after its completion, in addition to the normal contractor's obligation to repair faulty construction; financial provision has been made for this in the credit. C. Purchase of Road Maintenance Equipment 4.07 The project als includes the purchase of aome equipment and a vehicle to increase the efficiency of mechanized maintenance operations. Pending reorganization of maintenance services, the equipment would be allocated to the mechanized maintenance unit working on the most heavily used roads, mainly the Kigali-Kakitumba road. The equipment (1 bulldozer, 1 grader and 1 dump truck) will speed up maintenance activities while the light transport vehlcle will improve liaison with Kigali, the major source of supply. (Table 6 gives additional details on this unit.) The mainte- nance study will make recommendations for absorbing this equipment within the framework of an overall maintenance facility at a later date. - il - D. Cost Estimates and FinancinR 4.08 The estimated cost of the project ls sumrarized as follows: RF (million) US$ (million) % Foreijn Local Foreixn Total Local Forei$n Total Exchange (a) Construction and one year's maintenance of Kigali-Gatuna Road 115 655 770 1.15 6.55 7.70 85 (b) Preparation of bidding docu- ments and super- vision il 59 70 0.11 0.59 0.70 84 (c) Maintenance equipment 1 13 14 0.01 0.13 0.14 93 (d) Contingencies 3 196 231 0.35 1.96 2.31 85 TOTAL PROJECT COST 162 923 1,085 1.62 9.23 10.85 Say, 160 930 1,090 1.60 9.30 10.90 85 _ulm _ _ _ _ 4.09 The construction cost estimates are based on quantities derived from the detailed engineering estimates for a gravel road and on unit prices prepared by the consultants and reviewed by IDA. They include assesements of coste related to the roadway width changes mentioned in para. 4.04, as well as estimates, based on the consultants' preliminary studies, of the cost of the three small bridges not yet deeigned. They also provide for road paving costs based on recent Government studies, reviewed by IDA. An allowance of 15% has been included for work which has been engineered, and of 20% for work which has not yet been engineered (paving, bridges and design revision) to cover possible increases in physical quantities. A price escalation allowance of about 10% has been provided to cover the two-year construction period. 4.10 The estimates for consulting services include the preparation of bidding documents, including the completion of detailed engineering for bridges, paving and revisions in design standards, and the supervision of construction. They vere confirmed during credit negotiations, when a con- tract between the consultants and the Government vas aleo negotiated. A 10% contingency allowance is included to cover possible price variations. 4.11 The cost of the limited quantity of highway maintenance equipment to be included in the project is based on estimated C.I.F. costs Kigali. - 12 - E. Execution (j) Construction of the Kigali-Gatuna Road 4.12 The DRB will be responsible for the execution of the project and is capable of doing so with the assistance of consultants. The con- sultants will prepare bidding documents, advise on the prequalification of contracting firms, and aid in the assessment of bide, as well as com- plete the engineering work described in paras. 4.04 and 4.05 and super- vise construction. The Government has retained Electroconsult to carry out this vork because of their intimate knowledge of the project. Signa- ture of the consultants' contract is a condition for effectiveness of the credit. 4.13 Bidding documents will be submitted to IDA for review prior to issuance. During negotiations, the Government confirmed that construction work will be awarded on the basis of international competitive bidding in accordance with Bank/IDA guidelines. The Government also confirmed that adequate right-of-way will be available to permit construction to begin on schedule. The construction contract ij expected to be awarded early in 1971; works vill require about two years. (ii) Purchase of Road Maintenance Equipment 4.14 The maintenance equipment will be procured on the basis of cou- petitive bidding in accordance with Bank/IDA guidelines. This vas confirmed by the Government during negotiations. The consultants vill assist the DRB in the preparation of bidding documents within four monthe of the consultants' contract effectiveness date. They vill be submitted to IDA for review to ensure that they conforu vith its procedures. The equipment procurement con- tracte will be awarded on the basis of the lowest evaluated bide. The equip- ment will be delivered during late 1970 or early 1971. 4.15 The maintenance equipment will be specifically allocated to the mechanized maintenace unit described in para. 3.05 pending its redeployment under a suitable maintenance program (para. 4.07). During negotiations, the Government confirmed this disposition of equipment and its inten- tion to ensure the efficient use of this equipment by supplying adequate fuel, staff, servicing and maintenance. F. Financing and Disbursement 4.16 The Association will finance the foreign costs of the project. During negotiations, the Governuent confirmed that it vill meet the local coste, estimated at US$1.6 million equivalent. Belgium is aking available US$600,000 equivalent to Rvanda as a contribution towards this local cost financing. - 13 - 4.17 Credit disbursements will be made on the following basis: (i) 85% of expenditures on road construction which represents the estimated foreigu exchange com- ponent thereof; (ii) actual foreign exchange expenditures on the consultants' contract; and (iii) 100% of the C.I.F. price (Kigali) of maintenance equipment. 4.18 Any surplus remaining in the credit account upon completion of the project would be cancelled. Assuming credit effectivenesa in late 1970, IDA diļbursements will be as follows: IDA Fiscal Year 1970/71 1971/72 1972/73 1973/74 Total Forecast IDA disbursements (US$ million) 1.6 4.0 3.3 0.4 9.3 5. ECONOMIC EVALUATION 5.01 The development of the economy of Rwanda beyond the present sub- sistence level depende on the expansion of trade: essential importe ultimately paid for by increased exports. Transport costs are a critical element in this expansion because the distance of Rwanda from the Indian Ocean places it at a basic disadvantage with regard to the price of importa and the competitive position of its basic exports, coffee and tin, in the world market. In 1967, for example, transport costs of importe and exporte equalled 23% of export earnings. In 1968, this figure rose to 26% and, in the first nine months of 1969, to 35%. Any reduction in transport costs offers immediate and tangible benefits to the economy. 5.02 Construction of the project road clearly offers such benefits. The present route to Kampala, via Kakitumba, is made up of 235 km of un- engineered earth and gravel road and 349 km of paved road for a total dis- tance of 584 km. The new route via Gatuna will only be 511 km, of which 488 km vill be paved. Not only will the proposed Kigali-Gatuna road offer vastly improved riding conditions, but it will shorten the distance to the railhead at Kampala by 73 km. 5.03 In 1968, about 8,700 trucks (with and without trailers) passed over the existing Uganda route via Kakitumba, together with 2,900 cars and light vans. International traffic over this route is expected to grow at the rate of 8% annually until 1973, the year wheu the proposed road vill be opened to traffic. Foreign trade growth has averaged 16.5% per year in the past and is forecast by the Ministry of Commerce for an 8X - 10Z growth - 14 - over the next five years. The vehicle fleet in RIwanda has increased 24% annually for the past four years and la likely to continue to increase rapidly. The 8% growth estimate is therefore considered to be conservative. 5.04 This growth rate would yield about 12,780 trucks and 4,260 cars and light vehicles by 1973 or about 47 vpd, all of which will be diverted to the proposed road. When combined with local traffic now using the ex- isting track, total traffic over the new Kigali-Gatuna route will amount to about 60-65 vpd. On the first 12 km north of Kigali, the road will also service the Kigali-Ruhengeri traffic, which, by 1973, will average about 115-120 vpd, yieldīng an overall total for this section of 175-185 vpd. 5.05 Vehicle operating cost savings in 1973 will total about US$980,000. The basis for these savings may be found in Table 7, in which vehicle op- erating expense levels for different road surfaces are outlined. 5.06 Construction of the project road will result in a shift in road maintenance costs arising not only for the new mileage to be created but also by the diversion of traffic flows. Maintenance costs on the 208-km Kigali-Kakitumba road, for example, will fall drastically since traffic will be reduced to local requirements. The new Kigali-Gatuna road, how- ever, will have maintenance expenses considerably higher than the existing earth track. 5.07 Taking into consideration both vehicle operating costs and net maintenance expenditures, the internal rate of return for a paved road over 20 years i slightly over 13%, which is sufficient to justify its construction. These calculations are based on a modest increase in traffic of 5% annually to 1978 and 3% thereafter. No allowance has been made for generated traffic (see Table 8). 5.08 While it is unusual to find paving justifiable at relative low traffic levels, the high proportion of heavy vehicles (up to 30-ton loada), combined with the mountainous terrain, steep grades and heavy rainfall in the area of the project road, tend to favor a paved surface. While paved road construction and maintenance costs are higher than those for a gravel or laterite surface, they are not sufficiently s0 in this case to offset vehicle operating costs savings accruing to the pavement. As a result, the paved road rate of return is virtually identical with that of a gravel road. While paving the road will add US$1.6 million equivalent to construc- tion cost, this addition vill yield an internal rate of return of almost 12Z, which ls sufficient to justify its expenditure. There is little doubt that the calculations leading to this conclusion include only minimum bene- fits since no provision has been made for generated traffic which would be very much higher on a paved road than on a gravel surface. 5.09 Not all sections of the road offer the same rate of return from paving. The sections into which the road can logically be divided yield economic returns ranging from 8%-23%, as follows: - 15 - Road Sections (Km) Z Economic Return (Kigali) PK O - 12 23Z PK 12 - 34 9X PK 34 - 60 10.5% PK 60 - 79 (Gatuna) 8Z Total 12% The firet and third sections, representing nearly half the total length of the road, offer acceptable rates of return, while the second and fourth sections are marginal in this respect. However, it would be im- practical to pave only part of the road now, since paving would be essen- tial by 1976 and another paving project, requiring the mobilization of con- tracting forces a second time, would involve higher costs. Also, gravel roads deteriorate rapidly unless adequately maintained. The establishaent of a maintenance unit designed to maintain the gravel portions of this road for only about four years would be a costly undertaking. Accordingly, in view of the satisfactory return on the project, a paved road is proposed. 5.10 Improvement of maintenance services on the main national road links would offer very substantial benefits and a maintenance improvement program should, from an economic standpoint, be given the highest priority among future highway projects. The UNDP-financed maintenance study will defīne such a program. While complete renewal of the highway maintenance fleet must await the outcome of this study, the maintenance equipment pro- vided under the present project will be efficiently and effectively utilized by the mechanized maintenance unit, and will favorably affect the maintenance standard on the most important roads pending implementation of a highway maintenance program. 6. RECOMMENDATIONS 6.01 During credit negotiations, the Governtnent agreed to the follow- ing major matters: (a) upon receipt of the highway maintenance study, and after consultations on its recommendations and agreement with the Association, a program to improve highway maintenance will be implemented (para 3.09); (b) the design standards for the project road will be changed as proposed by the Association (para 4.04); and (c) the equipment to be purchased under the project will be specifically allocated to a mechanized maintenance unit under the supervision of qualified - 16 - experts and will be adequately staffed, supplied and serviced (para 4.15). 6.02 Signature of the consultants' contract is a condition for effec- tiveness of the credit. 6.03 The project is a suitable basis for an IRA credit of US$9.3 million. May 26, 1970 TABLE 1 RWANDA APPRAISAL 0 A HIGHWAY PROJECT ImPorts and Eports (tons) Imports 1966 1967 1968 Annual Rate of Qrcowth Petroleum Products 10,213 12,175 14,264 Cement 9,867 13,193 13,565 Sait 5,505 6,241 9,022 Sugar 1,864 3,097 4,340 Flour 2,916 2,030 1,378 Sheet Motal 986 1,181 2,241 Other 24,249 23,583 30,190 TOTAL: 55,600 61,500 75,000 16.1% l/ ExpOrts- Coffee 8,700 10,100 12,000 Mineral 2,133 2,988 2,580 Pyrethrum 417 458 291 Tea 324 321 635 Cotton 313 350 257 Other 1,117 1,350 1,037 TOTAL: 13,004 15,567 16,800 13.7% 1/ Excluding live animnais Source: Rwanda, Ministry of Commerce March 20, 1970 TABLE 2 RWANDA APPRAISAL 0P A HIQHWAY PROJECT Highway User Charges (in US$) Vehicle Registration Import duties Toli Charges on fuel 1/ Total 1966 n.a 59,879 294,sOo n.a. 1967 154,780 69,461 290,000 514,241 1968 155,355 70,859 340,000 566,214 1969 161ī,8302/ 72,543 359,2OG:/ 593e373 1/ estimated on the basis of fuel coamaution 2/ estimated on the basis of 6 monthe Sources Customst Service February 17, 197b TABLE3 IdANDA APPRAISAL OF A HIGHWAY PROJECT Department of Roads and Bridges Expenditures (in US$) Urban and Year Salaries Maintenance Commal Roada Total 1966 232,387 249,300 38,071 519,758 1967 250,519 282,166 39,396 572,081 1968 289,175 272,973 37, 658 599,8o6 1969 325,e20 3i5,850 95,0OO 736,370 Source: DRB February 17, 1970 TAELE 4 APPRAISAL OF A HIOHWAY PROJECT Vehicle Fleet 1965 1966 1967 1968 Annual Rate of Growth Carm 1,J467 1,942 2,353 2,880 25% Vans 434 567 712 908 28% Trucks 416 492 537 606 13% Tractors 38 48 43 48 8% Total 2,355 3,049 3,645 4,442 24% Fuel Con8umption (1,000 liters) X 9 1967 1968 Annual Rate of Growth Gas 6,417 6,563 6,628 7,886 7% Diesel 6,413 6,o43 5,863 6,918 3% Total 12,830 12,606 12,491 14,804 5% Sourcet DRB Harch 20, 1970 TA=E 5 APPRAISA.L OF A HIGHWAY PROJECT Design Standards (two-lane paved highway) In rolling terrain In mountainous terrain for 53 km tor 26 km Design speed 60 kmVh 45 ki/h Maximum grade Normal 6% 7% Exceptional 7.5% 8% Minimum curve Radius Normal 150 m 75 m Exceptional 75 m 70 m Width of Carriageway 6 m 6 m Width of Shoulder 1 m 0.50 m 7 1/ Concrete lateral ditches should be constructed on each aide Source: Consultants' report February 17, 1970 TABLE 6 RWANDA APPRAISAL OF A HIGHWAY PROJECT Mechanized Maintenance Unit (i) List of Equiinent and Vehicles New Equipment Items Existing Equipment to be orcered Total Bulldozer - 1 Grader - 1 Dunp Trucks 2 1 3 Tractors and Trailers 7 _ 7 Loader 1 1 Compactors 2 2 Tanker 1 1 Mobile Workshop 1 1 Cars 2 1 3 (ii) List of Personnel Supplied by Foreign Aid : Foreman 1 Assistant Poreman 1 Mechanics 2 Supplied by DRB Assistant Foreman 2 Operators ) as Unskilled Labor )neceasary Source: DRB February 17, 1970 TABLE 7 RWANTDA APPRAISAL OF A HIGHWAY PROJECT Basic Data on Vehicle Cost Savings and Growth of Traffic 1. Estimated Vehicle Operating Costs (net of taxes) (US cents per veh./km) Kigali-Kakitumba Proposed Kigali-3atuna Road Costs Road Coats Gravel Paved Standard Standard Car or light vehicle 7.0 5.6 4-4 12-ton Truck 32.2 25.3 16.5 12-ton Truck + Trailer 58.5 44.6 29.0 2. Estimated 1968 Annual Traffic (number of vehicles) Kigali-Ruhengeri cut-off (11 km) Kigali-Kakitumba Kigali-yWmba north of Kigali Cars or light vehicles 2,900 1,825 ll,000 6-8 ton Trucks 1,700 18,250 12-ton Trucks h,300 _ - 12-ton Trucks + Trailers 4,400 3. TraPfic Growth Factors 1968-1973 - 8% 1973-1978 5% 1978-1992 3% Source: Mission estimates Pebruary 17, 1970 TABLE 8 RWANDA APPRAISAL OF A HIGIVJAY PROJECT Flow of Net-of-Tax Costa and Benetita from Construction of the Kigali-Gatuna Road 1971-1992 (US$1oo0) Net Benefits A¢cruing Savinga in Vehicla Capital Cost froen Maintenance Costa Operatig Csts 3r-a-vel Pid Gravel Paved Gravel Paved Tear Surface Surface Surface Surface Surface Surface 1971 3,380 4,2OO 1972 3,390 4l,200 1973 - 1 il 811 979 1974 - 1 il 852 1,o08 1975 -1 895 1,134 1976 - 1 1 940 1,191 1977 + 5 118 987 1,250 1978 - 1 il 1,036 1,312 1979 - 1 - 373 1,067 1,352 1980 -1 11 1,098 1,393 1981 - 1 11 1,132 1,435 198? + 5 118 1,167 1,478 1983 - 1 il 1,201 1,521 1984 - 1 il 1,237 1,567 1985 - 1 il 1,274 1,614 1986 - 1 - 373 1,313 1,663 1987 +5 il 1,352 1,713 1988 - 1 U 1,392 1,764 1989 - 1 il 1,434 1,816 1990 - 1 il 1,477 1,872 1991 - 1 i 1,522 1,928 1992 + 5 il 1,568 1,986 Internal Rate of Return: Gravel Road 13.3% Paved Road 13.2% Source: Mission estimates March 20, 1970 Lake vAIber/ ij UGANDA E d rt( ARC Ko,2se K E NYA AREA COVEREDH 511 Km. 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