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Public Disclosure Authorized InfoShop

Report No: AB92 Initial Project Information Document (PID)

Project Name -Second Project to Support ROADSIP Region Regional Office Sector Roads and highways (70%); Sub-national government administration (10%); Central government administration (10%); General transportation sector (10%)

Project ID P071985 Supplemental Project

Public Disclosure Authorized Borrower(s) REPUBLIC OF ZAMBIA Implementing Agency NATIONAL ROADS BOARD ON BEHALF OF GOVERNMENT Address Government of Zambia Address: P. 0. Box 50695, Fairley Road, Zambia Contact Person: Mr. Gananadha, Executive Secretary

Tel: 2601/253088 Fax: 2601/253154 Email: [email protected]

Ministry of Communications and Transport Address: Contact Person: Dr.Kwendakwema, Acting Permanent Secretary

Tel: 2601/251444 Fax: 2601/253260 Email:

Public Disclosure Authorized Ministry of Works and Supply Address: Contact Person: Lt. Col. Nkunika, Permanent Secretary Tel: 2601/253447 Fax: 2601/253404 Email: Environment Category B Date PID Prepared April 22, 2003 Auth Appr/Negs Date September 30, 2003 Bank Approval Date March 9, 2004

1. Country and Sector Background

Sector overview. The transport sector in Zambia forms the backbone of the country's economy, as it is central to the promotion of local, regional and international trade. The

Public Disclosure Authorized transport network in Zambia is comprised of five distinct modes of transportation, i.e, rail, road, civil aviation, inland water transport and pipeline. An overview of the Zambia's major modes of transport reveals that rail and road account for the movement of three quarters of total import and exports. Approximately 2.2 million tons of imports and 2 PID exports are transported by roads as compared to only 400,000 tons by rail. Road transport has been identified as a major factor within the Government's overall policy framework to enhance economic development and growth. Road transport covers the most extensive area in Zambia since the railway network covers only a small portion of the country. In the past poor performance of the state owned enterprises held back transport. More recently, the freight industry performed fairly well with the increased participation of the private sector. Also reforms in the rail sector including concessioning of main freight and passenger service should enhance performance.

Road network. Zambia has a gazetted road network just under 37,000 kilometers (6,475 km bituminous, 8,480 km gravel and 21,970 km earth). In addition, there are estimated 30,000 km non-gazetted community roads comprising tracks, trails, and footpaths. A large part of the main road network was constructed between 1965 and 1975. It was designed to support projected internal development rather than to take advantage of the strategic location of Zambia in the sub-region. The geography of Zambia is such that access to many parts of the country and neighboring countries involved crossing of rivers. In areas where bridges have not been constructed, pontoons and ferries are used. Most pontoons in Zambia are more that 40 years old and their carrying capacity ranges from 12 to 1 00 tons. An additional challenge posed by Zambia's geography is securing cost effective access to the rural population, which is quite scattered and in large part is isolated from markets and services.

Road policy and management: The Ministry of Communication and Transport (MCT) is responsible for overall policy formulation and monitoring of the transport sector. In addition, MCT presently oversees the operation of a number of transport related corporate bodies and institutions which include the National Roads Board (NRB) and the National Road Safety Council (NRSC). The Road Fund (RF) was established in 1993 and has been administered since October 1994 by NRB. The Ministry of Works and Supply (MoWS) is responsible for the trunk, main and district roads. The local authorities with the technical support of the Ministry of Local Government and Housing (MoLH) are responsible for feeder roads and urban roads. The Zambia Wildlife Authority (ZAWA) under the Ministry of Tourism is responsible for the tourist roads (about 7,200 km) in national parks, game management areas, and cultural heritage sites of the national interest. Most of the tourist roads are in very poor condition due to a lack of maintenance since they were constructed. There is a substantial un-gazetted road network which is vital to the communities it serves. Some progress has been made to provide a maintenance funding allocation from the Road Fund where community participation has been secured. Ownership and responsibility for such roads remains to be clarified however.

In the Transport Policy of May 2002, the cabinet has approved a new institutional framework for road sector management. This involves inter alia the establishment of three new bodies - the National Road Fund Agency (under the Ministry of Finance and National Planning - MoFNP), the Road Development Agency (under MoWS) and the Road Transport and Safety Agency (under MCT). The supporting legislation was passed by Parliament in December 2002. The govemment is in the process of preparing a transitional plan to implement the new framework, assure the smooth transfer of functions 3 PID and provide adequate funding such that the agencies can be operational from fiscal year 2004. The project will support the transitional arrangements as well as provide assistance in the initial implementation of the reformed structures.

Achievement in the roads network and sector management since 1992.

Since 1992, assistance from the Bank and other donors in the roads sector have supported major achievements in institutional reforms and in improving road network condition. The Bank has made a contribution to these efforts, through its support to the Road Management Initiative (RMI), the Rural Travel and Transport Program (RTTP), through the IDA- financed Technical Engineering and Technical Assistance Project (TETAP), and the IDA financed Project to Support to ROADSIP Phase 1. Supporting institutional and policy reforms in the road management and financing, was initiated through RMI, and particularly a workshop held in February 1993, which developed a broad consensus for creation of RF and NRB under the overall policy guidance from MCT. Further institutional support has been rendered to bring rural and community roads in the mainstream of the road management; RTTP is playing an active role in promoting mobility and enhancing its impact on poverty reduction in the rural areas. Through TETAP, an IDA credit effective in 1993 and closed in 1998, the Bank tendered support to a number of preparatory activities required for launching of a comprehensive investment program in the road sector including strengthening management and financing of roads; supporting feeder and urban road management in MoLGH, establishing a highway management system (HMS) in the Roads Department (RD); and carrying out studies aimed at developing local construction industry and promoting improvements in plant and equipment management.

IDA support to ROADSIP Phase I, becoming effective in 1998 and due to complete in early 2004, supported policy reforms, institutional strengthening, and capacity building through: (a) technical assistance (TA) in the management support services to NRB; (b) continued TA support to strengthen management of feeder roads and urban roads in MoLGH; (c) developing RD institutional capacity in environmental analysis and monitoring, contract management, financial management, equipment management, and HMS; (d) strengthening the NRSC, developing a road safety action plan and improving axle load management; (e) streamlining management of the RF and diversifying road user charges; (f) starting a pilot IMT program to improve rural transport mobility; (g) providing TA support in establishing the National Construction Council (NCC); and (h) providing TA support for implementing a community transport infrastructure program under the Social Recovery Project (later ZAMSIF). Other institutional and policy reforms as agreed in the letter of sector policy were initiated, but implementation was delayed by the fact that a comprehensive Transport Policy was only approved by Cabinet in April 2002. These reforms include: restructuring of road agencies, adjustment of fuel levy to match maintenance needs, channeling all road users charges through RF, and immediate transfer of fuel levy collected by MoFNP to RF. Implementation of the Transport Policy is now moving forward rapidly. Enabling legislation for the establishment of the new road agencies has been passed. The next step is to prepare a financial strategy and to 4 PID implement measures to address the maintenance funding shortfall (see below).

Under ROADSIP Phase 1, over 1,400 km of trunk, main, district, urban and feeder roads have been rehabilitated, 6,400 km of roads have received periodic maintenance, 1,500 km of community roads have received accessibility improvement. Its positive impact has been registered with, for example, the percentage of paved roads in good condition having risen from 21% in 1995 to 46% by the end of 2001. Performance is generally in line with agreed targets with the exception of feeder roads. 300 routine maintenance contractors have been trained and substantial progress has been made towards meeting the 14,000 jobs creation target by 2002. In the year 2001, RD started using performance based contract procedures for carrying out routine maintenance on pilot basis. This now covers about 6,000 km of the network after successful piloting of the initiative. However in aggregate maintenance still lags behind largely as funding objectives have not been completely met - only around 30-40% of all needs are being met on a regular basis. Some interventions made on feeder roads accessibility improvement works do not seem to be appropriate due to lack of technical and monitoring capacity and it is important to consider different approach in Phase II. To this end a comprehensive technical audit exercise has commenced in 2002 with its recommendations to be adopted under ROADSIP Phase II..

What remains to be done

Although the management of the road sector has certainly improved thanks in part to the IDA support to ROADSIP I, the institutional and policy reform process is yet to be completed. In line with the provisions of the recently approved Transport Policy, the following actions are now to be taken:

(a) Mobilization of Road Sector Resources: In order to coordinate all funding to the road sector, the Government will establish a National Road Fund Agency (NRFA). All resources intended for the road sector from the road users, Government, cooperating partners or private sector would be channeled to the Road Fund which would henceforth be managed by NRFA. NRFA will be responsible for collection, disbursement, management, and accounting of these resources. NRB willl be replaced with the proposed NRFA at the conclusion of the institutional transition period. This is intended to secure effective coordination of road and roads transport sector program and investment in the roads sector. The NRFA will operate commercially. Arrangements will be made to ensure maintenance is prioritized and road users charges and levies are dedicated to this end. A financial strategy exercise is to be undertaken in the first half of 2003 to: identify the firnancial resources needed to fund the requirements of ROADSIP Phase II; determine financial targets and performance indicators, with particular refernece to securing the maintenance of the core network.

(b) Strengthening Road Infrastructure management: The Government will bring the management of all public roads under a Road Development Agency (RDA). Ownership of roads is unchanged under the new legislation, that is local authorities and MoWS will continue to have a say in planning priorities. Detailed organizational arrangements have 5 PID

yet to be worked out. It is expected that there will be two departments under the Chief Executive Officer, one responsible for Trunk, Main, and District roads and another for Urban and Feeder roads. RDA will undertake planning, programming, implementation, monitoring and overall supervision of all road works in the country undertaken through Contract Account.

(c) Enhancing Road Transport and Safety: The Department of Road Transport and National Roads Safety Council will be merged to constitute a Road Transport and Safety Agency (RTSA) under MCT. The Agency will be responsible for implementation of policy on road transport and traffic management, road safety and enforcement of laws regulating road transport, traffic safety, and axle load control in the country. In addition the Agency will be responsible for planning, programming, implementation, monitoring and evaluation of road transport regulations and safety programs approved by the Committee of the Ministers on RMI.

(d) The three agencies (RDA, NRFA, and RTSA) will each have a Board of Directors, comprising private and public sector membership. The Committee of the Ministers on RMI will also evaluate the effectiveness of the reform and carry out monitoring and evaluation activities. The Committee of the Ministers on RMI comprises Ministers of MCT (Chairman), MoFNP, MoWS, MoLGH, Energy and Water Development, Agriculture and Cooperatives, Tourism, Environment and Natural Resources, and Legal Affairs. The treasury will not be required to fund administrative costs of these agencies as these shall be self financing through allocation made from the NRFA provided road user charges are channeled directly to the Road Fund. The total administrative cost of all agencies will be an agreed percentage of the total program approved by the Committee of the Ministers.

In addition: (a) Private sector participation in road construction will be enhanced by facilitating access to equipment and credit, and putting in place fiscal measures to support local firms. NCC is developing an action plan to strengthen the implementation capacity of the local road construction industry; (b) Action to enhance road safety measures will be accelerated in view of the important costs imposed by road accidents and the consequent fatalities, injuries and property damage; (c) Maintenance strategies will be more effective with axle load control measures in place - with the recent agreement to put in place a comprehensive axle load program, more attention is to be given to the technical, financial, and the legal issues underlying overloading; and (d) The rapid spread of HIV/AIDS in Southern African countries means that roads program in this region must now include measures to prevent HIV/AIDS among workers and people living nearby and using roads - a comprehensive sector strategy and action plan is under preparation for launch in July 2003 in support of ROADSIP Phase II.

2. Objectives

10 Year Program Obiective. The Government of Zambia (GOZ) has a ten year (1 997-2007) Road Sector Investment Program (ROADSIP) with an original estimated 6 PID budget of US$860 million. The overall goals and the program objectives are to:

(a) bring a core road network of 33,500 km into a maintainable condition; (b) bring the condition of the road network to at least 50% good and 10% poor for all types of road; (c) strengthen the technical and managerial capacity of road authorities; (d) create employment opportunities in the road sector and alleviate poverty through the creation of 30,000 new jobs in road maintenance; (e) improve road safety and reduce road accidents by at least 20%; (f) improve environmental management in the road sector through the establishment of procedures and guidelines; (g) provide an enabling environment for improved rural transport services and increase the truck and bus fleet by at least 29% in rural areas; and (h) develop a framework for the management of community roads and promotion of community participation in road management.

IDA has been financing part of the requirements for the first five year time slice (ROADSIP Phase I, 1997-2003) through a project with a US$70 mn equivalent credit. This became effective in March 1998 and is expected to be completed in early 2004, a delay of about one year. Phase I is nearing completion and is likely to expedn slightly over half of the total estiamted budget. Phase I has been largely successful in achieving its physical objectives, though the performance on maintenance objectives has lagged. Achievement of institutional objectives was delayed, but is now on track. The Government has acknowledged that the road sub-sector plays an important role in contributing to economic development, and has attached high priority for launching the second 5 year time slice of ROADSIP, Phase li (2003-2007). Consequently increased expenditure and acceleration of the achievement of program objectives is foreseen in the next phase.

5 Year Time Slice Objective. For ROADSIP Phase 11 (2003-2007), the overarching goal is to stimulate economic growth, and contribute to poverty reduction through appropriate investments in road infrastructure, adequate institutional and policy reforms, and enhanced road sector management, all in line with the provisions of the Transport policy approved in April 2002. Achievement of these objectives will be assisted by a second IDA project to support ROADSIP. The specific objectives of Phase II are: (a) preservation of the public road network in support of sustainable economic growth and diversification strategy, (b) building and maintaining institutional capacity for the efficient, equitable and financially sustainable management of the public road infrastructure; (c) selective improvement of district level road infrastructure and improved transport services (non-motorized means, public passenger transport) with a view of increased access to markets and services for the urban and rural poor, and (d) extension of local community participation in the management of selective road infrastructure as well as in prioritization of investments.

3. Rationale for Bank's Involvement

Since the Bank's involvement in roads sector in 1991, its contributions have been regarded as positive catalysts in the road sector, both through the direct support of physical work programs 7 PlD and by its assistance in implementing institutional and policy reforms, including the support tendered through the Bank managed Road Management Initiative (RMI). The Bank has developed extensive knowledge of the transport sector in Zambia and has helped financed two operations in the road sector. Continued Bank support to the sector will: (i) play a critical role in realizing and sustaining the benefit of ROADSIP Phase I as some of the institutional reforms and capacity building programs are now on track and will be continued and completed under ROADSIP Phase II; (ii) catalyze a large amount of external investment resources by other donors; (iii) assist Government in the restructuring of road agencies to introduce a coordinated approach to strengthen the management and financing of the road sub-sector; and (iv) provide advice to the Government on creating an appropriate environment to attract the private sector to engage more fully in the sector on a long-term basis.

Through RMI, of which Zambia is a founder member, the policy reform process has been informed by the experiences of a large number of Sub Saharan Africa (SSA) countries. In particular, Zambia has benefited and continues to benefit from these experiences in terms of: structure and operation of the RF; tools for maintenance management and works prioritization; management of the policy reforms process to improve road management including establishment of road agencies. The RMI is also helping to provide advocacy tools and a support network to help reforming countries like Zambia present their case better to stakeholders and decision makers.

Bank involvement will also be critical in coordinating donor assistance and ensuring a coherent approach to the sector. The Bank has actively participated in the Donor Forum for the sector since its inception in April 2000. The Bank will also help Zambia incorporate newer concerns in its transport sector activities, particularly gender and HIV/AIDS issues, and provide support to the implementation of appropriate sector strategies. The project will support the PRSP and CAS recommendations relating to the roads sector.

4. Description The ROADSIP Phase II has the following components with an estimated total cost of US$600 mn. The specific elements to be funded by the IDA project are not yet finalized:

1. Component 1, Civil Works (US$ 480 million): The civil works component will focus on the priority needs for road maintenance and rehabilitation for the period of 2003-07 within the core road network of about 40,000 km. The program is inclusive of ongoing works, and will include inter-territorial trunk, territorial main, district roads, primary feeder roads, urban roads, and tourist roads in all provinces of the country.

The civil works program is based on an optimum balance of: (a) carrying out routine and periodic maintenance on all good and fair roads in order to avoid a further increase in the maintenance backlog; (b) rehabilitation of poor roads based on priority ranking on the basis of economic rate of return for most main and urban roads, and on multi-criteria selection for feeder roads and for some low volume main roads, and the roads after rehabilitation would be placed under a regular annual routine maintenance and pluri-annual periodic maintenance program; (c) upgrading of some selected non-engineered roads based on the above agreed selection criteria; and (d) increasing the tonnage capacity of selected pontoons or their replacement with bridges to provide 8 PID all weather accessibility to the strategic locations on the core road network. The strategy does not provide for any new road construction, but rather places emphasis on gradually reducing the proportion of road network that is poor by the end of project period. The main sub-components are as follows, with estimated costs given in the parentheses.

a. Trunk, Main District Roads (US$ 140 million): This sub-component will focus on the road network of trunk (3,090 km), main (3,690 km) and district (13,710 km). The present condition mix of the T, M, and D roads, based on HMS data is 59% good, 22% fair, and 19% poor. The project is aimed at improving the condition mix of TMD roads to 70 good, 20% fair by 2007. The project will support the necessary rehabilitation and periodic maintenance in support of this objective. The annual routine maintenance would cover only good and fair roads, the volume of which will increase over the course of the program. Comprising the first year program of works: the -Kasumbalesa road which covers some 44.5 km connecting Chingola with Kasumbalesa; Chirundu to road (T2) [135 km] and border in Livingstone road (T1) [101 km], Ndola--Mwambashi road (M4) [89 km], Mufulira and Mikambo at border with DRC (M5) [15 km]; and Kafulafuta to (M6) [43 km]. The total length of these roads is 427 km.

b. Feeder Roads (US$ 110 million): This sub component will focus on only primary feeder roads of length 15,953 km, which is part of the core road network. The condition mix of the primary road network is 15 % good, 35% fair and 50% poor. The project is aimed at improving the condition mix of the primary feeder roads by 2007 to 50% good to an acceptable engineering standard so that it could be covered under a regular maintenance program. The remaining 50% of the primary roads will receive accessibility improvements works. The annual routine maintenance would cover only good and fair roads, the volume of which will increase over the course of the program.

c. Tourist Roads (US$ 55 million): The tourist road network is estimated at 7,200 km of tourist roads within 19 national parks (NP) and 34 game management areas (GMA). There are 3,900 km of tourist roads that provides access to and with in the 8 prioritized NP and GMAs. About 40% of this has been identified for rehabilitation under the program. The annual routine maintenance would cover only good and fair roads, the volume of which will increase over the course of the program.

d Urban Roads(US$ 125 million): The urban road network is estimated at 5,500 km, of which about 2,000 km are in poor condition. The project would focus on rehabilitating poor roads in 7 provincial towns and 15 proposed urban centers, but selecting not more than 40 km in each urban center. In addition, the program will support periodic maintenance. The annual routine maintenance would cover only good and fair roads, the volume of which will increase over the course of the program.

e. Pontoons and bridges (US$ 50 million): To enhance connectivity of the strategic locations on the core road network, which are currently hindered due to crossing of the major rivers, program will include replacement of pontoons with higher tonnage or new 9 PID

bridges of adequate capacity provided the investments in pontoon and bridges are economically viable.

2. Component 2: Engineering and other Technical Services (US$ 50 million): Technical assistance for carrying out feasibility studies, engineering design and supervision of rehabilitation and periodic maintenance works for the component 1.

3. Component 3: Institutional Development and Capacity Building ( US$ 55 million): Technical assistance and training in the areas of policy support, implementation support, and institutional development. The strong focus of this project is to provide support to the Government in implementation of the Transport Policy and the new institutional framework including the creation of three new agencies in the road sector. The main elements of the component include:

(a) Policy support: This will include technical assistance and training in regard to: legislative reform and drafting, financial strategy and instruments, poverty assessment (baseline monitoring), road safety, axle load control.

(b) Implementation Support: This will include technical assistance and training in regard to: institutional management, contract management including out-sourcing, institutional planning and implementation,

(c) InstitutionalDevelopment: This will include: environmental and social assessment, audit and financial management services

Component 4: Accessibility and Mobility Improvement ( US$15 million): This component is aimed at providing continued support for improved access for the poor to market opportunities and social services. This starts from the ongoing and successfully established intermediate means of transport (IMT) pilot program and the community accessibility program which will be extended through: (i) developing integrated programs in selected districts; (ii) continuing to meet part of the demand for construction and maintenance of transport infrastructure in rural areas through cost sharing arrangements with beneficiary communities; and (iii) reviewing the legal framework and ensuring other measures are taken to make local communities eligible as a road owner.

5. Financing Total (US$m) BORROWER $80.00 IBRD IDA $30.00 Total Project Cost $600.00 6. Implementation Implementation period: 5 Years (October 2003 to December 2008).

Implementing Agencies: The project will be implemented by various ministries and agencies 10 PID including MCT, MoWS, MoLGH and the newly established agencies. NRB is expected to play a critical part in the transitional period prior to the full establishment of the new institutional structure, essentially a continuation of the role they have played under ROADSIP Phase I. This role will continue at least unitl mid-2004 during whihc year the agencies are expected to become operatinoal and during which Bank support to ROADSIP Phase I will conclude.

Project Coordination and Oversight: MCT will be responsible for policy guidance, and overall program oversight, and will ensure coordination and cooperation among the ministries, government agencies and the corporate bodies. Currently and until further notice, NRB will be responsible for coordinating implementation of the project, financial management, and assembling all technical and financial reports. NRB will approve the annual road program on the basis of the submissions made by the various road authorities. The secretariat of the Board is headed by an Executive Secretary, and organized in technical and financial services, each serving the Board as a whole and also the corresponding committee. Future implementation arrangements will be reviewed at appraisal and agreed no later than effectiveness in line with the provisions of the new road sector institutional structure and the progress which has been made at that time towards completing the transformation.

Implementation Arrangements: A detailed project implementation plan (PIP) will be prepared. The draft PIP will be presented to the Bank as a condition of negotiations. The PIP will be finalized and formally adopted no later than credit effectiveness. This will take as a starting point that the PIP that has been utilized under ROADSIP Phase I.

Parallel Financing Arrangement: As with ROADSIP I, many development partners are interested in supporting ROADSIP II. Commitments from development partners which will be made largely through parallel financing rather than co-financing arrangements, are expected to meet the project financing gap. The financing plan will however be reviewed and agreed not later then appraisal. Opportunities to harmonize assistance strategies and provide more funding to local/national procurement through the Road Fund are being looked into. During implementation, the Donor Forum based in Lusaka will meet quarterly with the Government to discuss implementation status and outstanding issues.

Procurement Arrangements: Works, consultants' services, and equipment to be financed under the IDA credit will be procured according to World Bank procurement guidelines. Procurement under other parallel financing will follow the relevant donor procedures.

Accounting, Financial Reporting and Auditing Arrangements: In the transition period, NRB will continue to be responsible for ensuring that financial management and reporting procedures are carried out in a manner acceptable to the government, Committee of Ministers, the World Bank, and other donors. The principal goal of the Financial Management System (FMS) is to support management in their deployment of limited resources with the objective of ensuring economy, efficiency and effectiveness in the delivery of project outputs. Specifically, the FMS must be capable of producing timely, understandable, relevant, and reliable financial information that will enable management to plan, implement, monitor, and appraise the project's overall progress report towards the achievement of its objectives. Establishment of the agreed 11 PID financial management and accounting system for the project will be a condition of credit effectiveness and will specify the different roels that the new agencies will play.

New special accounts for the IDA Credit will be opened and maintained in a commercial bank acceptable to IDA, managed by the relevant agencies. Independent auditors acceptable to IDA will audit the use of all IDA funds available under the credit, including the IDA special account and the statement of expenditures. Financial audit reports will be submitted to IDA no later than six months after the end of the fiscal year. The format and frequency of periodic reporting will be defined in PIP.

Monitoring and Evaluation Arrangements: Continuous monitoring, periodic reviews, and mid-term evaluation will be based on predetermined indicators which will measure inputs, process, outputs and outcomes. Performance and monitoring indicators are to be defined. Additional baseline surveys and monitoring arrangements will be developed, particularly to assess poverty impact of the program. The Mid-Term Review will be conducted by December 2005.

7. Sustainability

Clarified institutional roles, improved organizational structures, and adequate funding for the road maintenance are the key factors for sustainability of the ROADSIP. The project is expected to enhance sustainability by addressing these factors in a coherent and effective manner. The project will support the government in the implementation of the Transport Policy April 2002, which provides the basis for sustainable financing for road maintenance and to strengthen management of the road sector by setting up three autonomous road agencies, (RDA, RTSA, NRFA). RDA will ensure the sustainability of coordinated planning, programming, improved implementation and enhanced efficiency by bringing the responsibility of the whole core road network under one management. RTSA will ensure the sustainability of traffic management, road safety and enforcement of road regulations. NRFA will ensure the sustainability of road maintenance funding by enforcing greater regularity and predictability of financial flows to the sector based on a pre-determined financial strategy. The financial strategy, which is expected to be ready prior to the credit negotiations, will provide guidance on: (a) generation of additional Road Fund revenues; (b) modalities for fixing road user charges, adjustment of fuel levy, and transfer to the Road Fund; (c) setting of road priorities and criteria for the funds allocations; and (d) transparency in use of Road Fund by carrying out financial and technical audits.

It is critical for the sustainability of ROADSIP Phase II that the three new agencies be fully operational and managed by their respective Boards by mid 2004. In addition, the Government has prepared the first draft of the letter of sector policy (LOSP), which has been reviewed by the Donor Forum in Zambia, and comments made. The government is currently finalizing this document as a memorandum of understanding (MOU), which will be addressed to all donors and will clearly provide the benchmarks for the performance of the road sector. The benefits of the program will be sustained through effective, transparent, and accountable road management and stable, and sufficient funding for road maintenance.

An HIV/AIDS strategy for the transport sector will be an essential element of the program to 12 PID mitigate loss or disability of key sector personnel to HIV related infections. For the sustainability of the implementation capacity in the private sector, the project will also continue to support the development of the local construction industry and will strengthen the capacity of the NCC.

8. Lessons learned from past operations in the country/sector

The following lessons from the on-going project are incorporated in the design of the proposed project to support ROADSIP Phase II:

* Design and implementation of institutional reforms for the overall sustainability of the road sector is a lengthy process and demands a sustained dialogue among all stake holders including public institutions, donors, private sector and civil societies. More time needs to be allocated for this process to be completed.

* For the Road Fund to achieve its objective of sustainable road financing for road maintenance, it is essential to have a sound financial strategy clearly specifying the resources for the generation of road fund revenues and a priority for allocation of its funding. Slippage in this area in the first five years have highlighted the need for a comprehensive and realistic approach to bridging the financing gap.

* To enhance the impact of improving mobility and accessibility on poverty reduction in the rural areas, it is important to ensure active local community participation at all project stages including priority setting, site selection, planning, design, implementation, quality control, and measuring impact of the completed projects. Some of the experience on a pilot basis during the first five years have been successful. This should now then be extended and the lessons generalized.

* Capacity and financing constraints will always limit what can realistically be achieved in terms of addressing the maintenance and rehabilitation backlog. More attention has thus to be given to seeking an cost effective and appropriate solution to unpaved accesses; revisiting standards that should be applied to different levels of the road network.

9. Environment Aspects (including any public consultation) Issues : Environmental management in the road sector has been well established under ROADSIP I through the creation of an environmental management unit (EMU) in the Roads Department. The unit has already established: policies and procedures for environmental impact assessment; environmental contract clauses; staff training program in environmental management. An environmental monitoring system is in place. Work has been carried out on a resettlement policy framework and it has been agreed that this should be cleared and disclosed prior to project appraisal. Environmental management capacity will be carried forward into the RDA as an integral element of its palnning and implmentation capabilities. Capacity for improving sector performance in the development of appropriate sector environmental policies will be strengthened in MCT. 13 PID

10. List of factual technical documents:

11. Contact Point:

Task Manager Stephen J. Brushett The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: Fax:

12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:/H www.worldbank.org/infoshop

Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.

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