Document of The World Bank Public Disclosure Authorized Report No. 19023- SE

PROJECT APPRAISALDOCUMENT

Public Disclosure Authorized ONA

PROPOSED CREDIT

IN THE AMOUNT OF SDR 64.3 MILLION (US$90MILLION) EQUIVALENT

TO THE

REPUBLIC OF FOR A

SECOND TRANSPORT SECTOR PROJECT Public Disclosure Authorized March 10, 1999

Transport 2 Country Department 14 Region Public Disclosure Authorized CURRENCY EQUIVALENTS

(Average Exchange Rate Effective as of February 22, 1999)

Currency Unit CFA Franc CFAF 1= US$0.0017 US$ 1 CFA Franc 550

FISCAL YEAR

January 1 - December 31

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

ASECNA Agency for Air Security in Africa and Madagascar (4gence pour la SecuriteAerienne en Afrique et Madagascar) CAS Country Assistance Strategy CELCO Project Coordination Unit (Cellule de Coordination du PST II) CEREEQ Center for Road Research and Quality Control DAC Civil Aviation Department (Direction de lAviation Civile) DTP Department of Public Works (Direction des Travaux Publics) DTT Land Transport Department (Direction des Transports Terrestres) GIS Geographical Information System GOS Government of Senegal LSPl/2 Policy Letter for the Transport Sector I or 2 LSS Leopold Sedar Senghor Airport ( Airport) MEFP Ministry of Economy, Finance and Plan (Ministere de I 'Economie, des Finances et du Plan) MPTM Ministry of Fisheries and Maritime Transport (Ministere de la Peche et des Transports Maritimes METT Ministry of Equipment and Land Transport (Ministere de I 'Equipement et desTransports Terrestres) MTTA Ministry of Tourism and Air Transport (Mnistere du Tourisme et des Transports Ariens) PAST Transport Sector Adjustment Program (Programme d Ajustement Sectoriel des Transport) PEM Project Execution Manual PST2 Second Transport Sector Project (Deuxieme Projet Sectoriel des Transports) SETI International Rail Operating Company (Societe d'Exploitation de Trafic International) SONAPAD National Company (Societe Nationale du PortAutonome de Dakar) SNCS National Railroad Company (Societe Nationale des Chemins de Fer du Senegal) RMRP Three-Year Rolling Road Maintenance and Rehabilitation Program RFARB Road Fund Advisory and Review Board WPB Annual Work Program and Budget

Vice President: Jean Louis Sarbib Country Director: Mahmood Ayub Sector Manager: Maryvonne Plessis-Fraissard Task Team Leaders: Emmanuel Mbi & Jaffar Bentchikou REPUBLIC OF SENEGAL SECOND TRANSPORTSECTOR PROJECT (PST 2)

CONTENTS

ProjectAppraisal Document 1

A. ProjectDevelopment Objective 2 1. Projectdevelopment objective and key performanceindicators (see Annex 1) 2 B. StrategicContext 2 1. Sector-relatedCountry Assistance Strategy (CAS) goals supportedby the project (see Annex 1) 2 2. GovernmentStrategies and Main sectorissues 3 3. GovernmentStrategy 3 4. Main SectorIssues, Issues to be addressedby the project and strategicchoices 4 C. Project Description Summary 9 1. Project components 11 2. Key policy and institutionalreforms supported by the project 14 3. Benefitsand target population 14 4. Institutionaland implementationarrangements: 15 D. Project Rationale 17 1. Project alternativesconsidered and reasonsfor rejection 17 2. Majorrelated projectsfinanced by the Bank and/orother developmentagencies (completed,ongoing and planned) 18 3. Lessonslearned and reflectedin the project design 18 4. Indicationsof borrowercommitment and ownership 20 5. Value added of Bank supportin this project 21 E. Summary Project Analysis 21 1. Economic(supported by Annex 4) 21 2. Financial(see Annex 5) 23 3. Technical 24 4. Institutional 25 5. Social and Poverty Impact (see Annex 4F) 25 6. Environmentalassessment (see Annex 2C) 26 7. Participatoryapproach 26 F. Sustainability and Risks 27 1. Sustainability 27 2. Critical Risks 28 3. PossibleControversial Aspects 29 G. Main Loan Conditions 29 1. EffectivenessConditions 29 2. Other 29

H. Readiness for Implementation 31

I. Compliance with Bank Policies 32 ANNEXES Annex 1 Project Design Summary Annex 2A Project Description Annex 2A bis Descriptionof Project Financedby IDA Annex2B AnnualWork Program and BudgetPlanning and ReviewProcess Annex 2C EnvironmentalEvaluation/Action Plan Annex 3A EstimatedProject Costs Annex 3B Project FinancingPlan Annex 4 Cost-BenefitProgram Analysis Annex 4A CostBenefit Analysis Summary- RoadMaintenance, Rehabilitation & Construction Annex 4B CostBenefit Analysis Summary - RailwaysComponent Annex 4C CostBenefit Analysis Summary - Subcomponent Annex 4D CostBenefit Analysis Summary - Civil Aviation(Airports/Safety Subcomponent) Annex 4E Economic/Impact/RiskAssessment Summary - LandTransport Annex 4F Social and PovertyImpact Summary Annex SA FinancialSummary for RevenueEarning Project Entities:Port Autonomede Dakar Annex 5B FinancialSummary for RevenueEarning Project Entities:AANS (Airports Mgmt.) Annex SB Privatizationof Airportmanagement: Timetable of Actions Annex 5C Financial Summaryfor RevenueEarning Project Entities:Air Senegal Annex 5C bis Privatizationof Air Senegal:Timetable of Actions Annex 5D FinancialSummary for RevenueEarning ProjectEntities: CEREEQ Annex SE FinancialSummary for RevenueEarning Project Entities:SNCS Annex 6 Procurementand Disbursement Arrangements Annex 6: TableA Project Costs by ProcurementArrangements Annex 6: Table B Thresholdsfor ProcurementMethods and Prior Review Annex 6: TableC Allocationof Loan Proceeds Annex 7 Project ProcessingBudget and Schedule Annex 8 Documentsin the Project File* Annex 9 Statementof Loans and Credits Annex 10 Senegalat a Glance Annex 11 SenegalTransport Sector at a Glance(Highlights) APPENDIX Appendix1 Letter of SectorPolicy

MAP REPUBLICOF SENEGAL SECOND TRANSPORTSECTOR PROJECT (PST II)

Project Appraisal Document

Africa Region- CountryDepartment 14

Date: March 10,1999 Cluster LeademWTaskManagers: EmmanuelMbi & Jaffar Bentchikou CountryDirector MabmoodAyub Sector Manager MaryvonnePlessis-Fraissard Project lD:SN-PE-2366 Sector. Transport Program Objective Category:ESSDIPSD Lending instrument SIL Program of Targeted Intervention: [xi Yes rI No

Project Financing Data [] Loan [xl Credit [1 Guarantee f I Other [Specfy] For LoanslCredits/Others

Amount (US$m/SDRm):US$90 million/SDR 64.3 million Proposedterms: [x I Multicurrency fi Single currency:specify Grace period (years): 10 [] Standard Variable [x] Fixed [] LIBOR-based Years to maturity: 40 Commitmentfee: Standard IDA Service charge: 0.75%

Financing plan (USSm): Source Local Foreign Total Goverunent 133.2 - 133.2 Cofinanciers 54.5 278.5 333.0 1BRD N/A N/A N/A IDA 8.5 81.5 90.0 Other: -(Public Enterprises-SNCS,PAD, ASECNA) 24.8 - 24.8 Total 221.0 360.0 581.0

Borrower: Govemmentof Snegal (GOS) Guarantor NA Responsibleagency(ies): Overight: Ministryof Finance (MEFP) in collaborationwith Ministries of Equipmentand Land Transport(MET), Tourinsmand Air Transport(MrTA), Fisheries and Maritine Transport (MPIT), PM's Office . Day-o-dy Coonlinafion:Program Coordination Unit (CELCO).Execuffon of Components/Activities.Department of Land Transport (DTM; Departmentof Public Works (DTP)Road Works Authority(AAGTR-4o be created),Vocational Training Center of MEUT (CFP-METI); Road Research and Quality ControlLaboratory (CEREEQ);Port of Dakar (PAD); Dept of MerchantMarine (DMM); Civil Aviation (DACXMeteorological Dept (DMA);AANS (ASECNA- S&ndgal),SONATRA (Air Senegal); CELCO(rural trans.& environ. components);,MEFP &METT(Road Fund rest.); State PortfolioManagement Unit-CGCPE-MEFP(privatizations); Prime Mnister's Office with CELCO support (process of creation of Road Agency)

Estinated disbursements(Bank FYIMSSM): 2000 2001 2002 2003 2004 2005 Annual 10.00 15.00 20.00 20.00 13.00 12.00 Cumulative 10.00 25.00 45.00 65.00 78.00 90.00

For Guarantees: [] Partial credit [] Partial risk Proposedcoverage: N/A Project sponsor Nature of underlying fnancing: Terms of financing: Principal amount (USS) Final maturity Amortizationprofile Financing availablewithout guarantee?: [1 Yes [ No If yes, estimated cost or maturity: Estimated financingcost or maturity with guarantee: Project implementaton period: 5.5 years. Expected effectivenessdate: July 1, 1999.Expected closing date: June 30,2005

1 A. Project DevelopmentObjective

1. Project development objective and key performance indicators (see Annex 1)

1.1 The DevelopmentObjective of the SecondTransport Sector Project (PST2)in Senegalis to obtain a sustainable improvementin the supply and performance of transport infrastructure (includingservices), in order to create an environmentfor improved economicgrowth through exanded access and reducedtransport costs. This objectivewill be pursuedby supportingfurther institutionalreforms and policy enhancementsin the sector and by removing major physical constraints, allowing for the consolidation and further development of those achievements realizedunder the TransportSector Adjustment/InvestmentProgram (PAST--IDA Cr. 2266-SE). The proposedproject has the followingspecific objectives:

* stabilizeand improvethe conditionof the priorityroad network,reducing the long-run economiccosts for road maintenanceand rehabilitationin order to enhanceregional competitivenessand attain sectoralfinancial sustainability; * increasethe numberof districtcapitals with accessto all-weatherroads; * strengtheninstitutional capacity, financialviability and operationalefficiency of the agenciesof the sector; * encouragemore direct private sector involvementin investmentand managementof the sector;and * reducetransport cost for the poor.

1.2 Key performanceindicators are: (i) reductionin freight rates and vehicle operatingcosts; (ii) reduction in goods delivery time; (iii) improvementin the overall conditionof the roads networkas reflected by the IRI (internationalroughness index); (iv) increase in the number of district capitals with access to all-weather roads; (v) mainstreamingof better planning and programmingtools for road maintenanceand rehabilitationworks (e.g. three-yearrolling plan); (vi) creationof a Road Works ManagementAgency; (vii) operationof a Road Fund Mechanism under a new structure and procedures;(viii) further improvementsin financialperformance and efficiency gains (e.g. reductionin work force, declining ratio of wage bill to revenues) and managementcapacity of parastatals; (ix) improved competitivenessvis-A vis other ports and airportsof the region; (x) adoptionof a new MaritimeCode in line with intemationalstandards; (xi) increased traffic to the secondary ports of Ziguinchorand Kaolack, as well as reduced transport cost and travel time savings from the Dakar regionto ;and (xii) successful privatizationof the operationof internationalrail services on the Dakar-Bamakocorridor, Air Senegal,and airport management.

B. Strategic Context 1. Country AssistanceStrategy (CAS)

CAS document number: 17269- SE Date of latest CAS discussion: 1/29/98

Goal Supported by the Project (see Annex 1)

1.1 The proposedproject is consistentwith the CountryAssistance Strategy (CAS) discussed by the Board on January 29, 1998. The overarchingobjective of the CAS is to reduce the incidence of poverty and to create gainful employmentopportunities based on a two-pronged

2 approach:(i) support for policies and programsaimed at more rapid and sustainedgrowth; and (ii) ensuring social sustainabilityof programs.Within the investmentportfolio the majorityof operationsfocus on alleviatingkey infrastructurebottlenecks, especially in the transport,energy and water sectorsas well as in the rural areas. The projectwill supportthe CAS in two ways. It will increase Senegal's competitivenessin foreign trade and promote linkages in domestic markets - crucial factors for rapid and sustained growth. It will also improve the degree and decreasethe cost of access by the poor to social services,markets and economicopportunities, thereby contributingto social sustainability.

2. Government Strategies and Main Sector Issues

2.1 The transport sector plays a strategicrole in the . It accounts for approximately10% of GDP and generatesa significantshare of the total budgetary revenuesof the State. As a center of French colonial administrationin the 1950's and following independencein 1960, Senegal,and in particular its capital Dakar, acquired a relativelygood infiastructurebase. However, economiccrisis and decline duringthe 1970's and early 1980's, and weak institutionalcapacity, led to a deteriorationin the infrastructure network and its operations and left it with the inability to expand services to a larger segment of the population.

2.2 Presently the transport infrastructure network consists of the following: 14,500 km in the classified road network (4,200 km paved, 10,300 km unpaved), of which about 5,500 km are rural earth roads. The rail network consists of 1,058 km of track. (906 km main track, 152 km branch lines). The Port of Dakar is the country's main international seaport with the capability of handling container as well as other cargoes. There are also three secondary and several tertiary ports and harbors. In addition, Senegal has one main international airport (Leopold Sedar Senghor, Dakar), 16 regional airports (the large 3 of which also handle international traffic related to neighboring countries, tourism and agricultural exports) and one wholly-owned national airline. It participates as a shareholder in the multinational carrier Air Afrique, which Senegal has designated as its flag carrier in international matters. Annex 11 provides highlights on the transport sector.

2.3 Since 1992 the Government has deployed, within the framework of the PAST and supported by twelve donors/international financial institutions, major efforts to remedy sectoral imbalances. Policy, institutional and physical shortcomings were or are being addressed. Much has been achieved under the PAST, notably in policy and institutional reform, in particular since the devaluation of the CFA Franc in January 1994. One of the key underlying factors for these achievements has been the Government's commitment to reform and development of the sector. The Government's approach as outlined in its Ninth Economic and Social Development Plan, Medium Term Strategy Paper for the Transport Sector (MTSTS--June 1997), and Letter of Sector Policy (LSP2-January 1998) aims to consolidate and build on earlier achievements, while continuing to address shortcomings and emerging issues. This, it is expected, will contribute to rapid and sustained economic development in a socially sensitive manner. This approach will require the GOS to deal with several critical issues, the key ones of which are identified below.

3. Government Strategy 3.1 In the late 1980s the GOS initiated a wide range of new approaches to develop and improve the infrastructure network and services. Private participation was considered for service contracting, road maintenance and the concessioning of infrastructure management. In 1991 the Government adopted a Policy Letter for the Transport Sector (LSP1). The overriding objectives included the improvement of the state and efficiency of transport infrastructure and services,

3 reducingoperating costs and makingthe sector more competitive.The LSP1 also called for the restructuringof sector parastatals(railways, port and air transport)to enhancetheir performance, provide them with full autonomy and effectivelytransform them into commercially viable companies.The Public Works Department's(DTP) role was transformed to focus on planning, programming,contract management, supervision of works and the establishmentof regulations. To assistthe GOS in translatingits sectorpolicies into operationalreality, the PAST was prepared with the support of the Bank and severaldonors (EEC,ADB, CIDA, BOAD, etc.).

3.2 Underthe PAST projectmost of the government'ssector policy objectiveswere addressed, with varying degrees of success. Specific issues and achievementsare detailed in the Board Document"Senegal: Transport Sector Adjustment/Investment Credit - Releaseof the Secondand Third Tranches (Waiverof Conditions)"dated June 11, 1996 (summarypresented in matrix on pages 5-9). In the NinthEconomic and SocialDevelopment Plan, the GOS reiteratedthat efficient management,maintenance, and developmentof the infrastructuresectors, including the transport sector, are critical to Senegal's future economic development,poverty alleviation objectives, domesticcompetitiveness, and regionalintegration. In line with this a joint Government-Bank MTSTS was issued in June 1997. The MTSTS,molded by the lessons from the PAST project (see SectionD.3) and with the activeparticipation of a wide spectrumof sector stakeholders,has recommendeda strategy and agenda for further reform and improvementsin the sector. The proposedproject (PST2), supportedby a new Letter of SectorPolicy (LSP2),will pursue reforms and consolidatepast and ongoingefforts.

3.3 The principlesunderlying the Government'spolicies and proposedreforms and regulatory interventionsin the sector uider the LSP2 include: (i) adapting transport infrastructureto the needs of economicgrowth and of regionalintegration; (ii) furtherstrengthening sector institutions and the Administrationto improve capacity to perform the essential functions of planning, coordination,regulation, and supervision;(iii) extensivestakeholder involvement in the decision- making process regarding the managementand developmentof the sector; (iv) adoption of regulatoryand fiscal frameworksdesigned to induce competitionand promote private sector participationin the developmentand managementof the sector; (v) continuedpromotion of local private contractors to develop technical and management capacity to efficiently carry out increasedshares of maintenanceworks for road, rail and port infrastructure;(vi) continued emphasis on maintenanceand rehabilitation,while pursuing selective infrastructureexpansion (encompassingall transportmodes); (vii) developmentof rural transportincluding the definition of a coherentpolicy, preparation of an appropriatestrategy and definitionof an action plan for the provision and maintenanceof rural roads (includinga pilot priority program of rural roads rehabilitation); and (viii) ensuring environmental and social sustainability in the sector. Consistentwith the above,a detailedlist of objectivesand plans of action back up LSP2 with the proposedPST2 supportingefforts to furtherthe principlesoutlined, as well as the objectivesand implementationof the plans of action.GOS commitmentto the principlesof LSP2 is one of the key elementsfor attainmentof the PST2's developmentobjective. (see SectionD.4).

4. Main Sector Issues, Issues to be Addressed by the Project and Strategic Choices

4.1 The project is designed to support a five and a half year time slice of the GOS' sector maintenance and investment program (SMIP) including institutional and policy development support. A number of important sector issues have been identified during the supervision of the on-going PAST project with more than 21 studies conducted by both national and international consultants on key transport areas during the PST2 preparation. These studies have also identified a number of key issues that need to be addressed.

4 4.2 Donors and other multilateral and bilateral institutions will finance about 51% of the project, with the Government (including public enterprises) financing about 27% of total project costs; the private sector 7%; and the Bank covering the remainder, about 15%. Annex 3B outlines the financing plan for the project. The following matrix summarizes the main sector issues identified both through PAST supervision and PST2 preparation. In addition it presents the main PAST project accomplishments in these areas, and outlines proposed project solutions, both in terms of institutional and policy reforms as well as physical improvements.

A. Institutionaland PolicyIssues PAST Project ProposedProject Solutions Accomplishments Sector Planning, Management, Sector Planning, Sector Planning, Management, Supervision & Policy Development Management, Supervision, & Policy Development - Sector-widethere is weak institutional Supervision& Policy Capacityin policy-makingand regulation capacity in management, policy and Development in civil aviation, maritime transport, and decision-making, planning, preparation * Efforts were made to the railways will be developed. Users and and implementation of regulations, establish reliable stakeholders will participate in policy programming, as well as contracting management systems and dialogue to ensure transparency and and the supervision of works. In databases in the rail, accountability. Planning, and cost- addition, specifically in roads, there are maritime and road effectiveness measures will consider weak financial controls and inadequate subsectors. However, safety, accessibility, and land-use issues. records, insufficient technology capacity issues with Sound database and modeling systems transfer under past projects, a poor respect to middle and will be implemented and capacity in road database, modeling and analysis lower level technicians programming and quality control of capability, a lack of road maintenance were not adequately works improved. A 3-year rolling road planning and programming, and targeted. As a result large maintenance and rehabilitation program inadequate budget preparation. long-term expatriate TA (RMRP) was has been prepared with did not leave lasting training for two key technical staff of improvements. METT, both in Senegal and at a Canadian * All periodic, routine engineering school. Support will be road maintenance works provided for yearly update the RMRP. and rehabilitation are now An autonomous entity will replace DTP to carried out by private manage the road sector with TA and contractors. training provided. A manual of * Economic criteria for procedures will be prepared to include a selection of works to be catalogue of works, pricing and carried out has been recruitment principles and procedures, introduced. and guidelines for the preparation of * Full autonomy granted annual work programs and budgets to sector enterprises to (WPB). Coordination will be emphasized operate on commercial and strengthened and a rural transport principles; cessation of all policy developed. Skills of middle and operation subsidies; and lower level technicians will be upgraded. Establishment of Both the Center for Professional Training compensation principles of the Ministry of Equipment (CFP- for public service METT), and the Center for Road obligation. Business Research and Quality Control (CEREEQ) Plans and corporate will be restructured to give greater strategy principles have commercial relevance and autonomy. been introduced in the management of enterprises.

5 Land Transport Administration Land Transport Land Transport Administration - DTT to Inadequate institutional and financial Administration introduce road safety campaigns including resources have been provided by the Issues concerning DTT development of information systems. Administration to effectively carry out were addressed but not as Equipment and materials to be provided the basic functions of the Land vigorously as envisioned. to strengthen, integrate and standardize all Transport Department (DTT). In However, action plans land transport administration systems and addition road safety has been have been developed for databases. An internet server will be inadequately addressed. implementation. established. DTT's regional offices in , Kaolack, St. Louis and Diourbel, and vehicle testing centers to be rehabilitated & upgraded. Road Maintenance & Financing Road Maintenance & Road Maintenance & Financing. - A 3- Funds allocated by the GOS for road Financing - Adequate year rolling annual maintenance program maintenance have not always been funds were allocated and will be introduced with budgetary targets disbursed, or when disbursed not disbursed for road based on need, as will short-medium term always used for intended purposes. In maintenance from 1994 reform of the Road Fund, establishment addition there has been seriously onwards. The backlog of of basis for long-term reform, and inadequate management of the Road maintenance has been restructuring of Fund management to Fund with poor fund transparency, significantly reduced by ensure transparency by instituting clear poor documentation of transactions strict adherence to a ratio financial management and accounting and inadequate application of financial of funds use: 75% for procedures and a system of regular audits. management and accounting principles maintenance and 25% for An Advisory and Review Board and procedures. Overall road new works. However, (RFARB) will be established with maintenance has suffered due to functioning of the Road representation from road subsector inadequate programming and frequent Fund remains inadequate, stakeholders, supported by a technical staffing changes. The Road Fund with the absence of secretariat. Progress will be reviewed and continues to finance activities proper programming, reforms implemented as necessary after a unrelated to road maintenance. There is financial planning and 2-3 year period. The GOS to continue to continued poor management due to a controls. replenish the Fund from its consolidated lack of training and insufficient investment budget (BCI) at a minimum technology transfer under previous level of CFAF 15 billion/year (confirmed projects. Finally, provisions of legal in the LSP2) and will ensure timely texts are out of line with reality. availability of resources. Private Sector Involvement in Further Private Sector Further Private Sector Involvement - Management, Development and Involvement - Overall Project to support efforts to increase Financing of Transport Sector - There extensive involvement of private participation in the management, is continued financial and technical private sector in transport development and financing of the sector, weakness in the local small and maintenance, specifically, the privatization of the medium public works companies; a construction and the operation of international services on the continued over-dependence on public provision of key services, Dakar-Bamako corridor; promotion of the and donor funds for transport sector in particular, road technical, financial and management financing with limited private sector maintenance; the railroad development of the local SMEs for road participation in the financing of is being prepared for maintenance work; assistance to better transport infrastructure. The Franc privatization of prepare for the privatization of Air CFA devaluation of 1994 greatly international transport Senegal and management of the airports; inflated the indebtedness of sector services; private mobilization of private participation in enterprises, with hard currency operators are heavily the Dakar-Ziguinchor maritime route, and denominated loans making their involved in port assess potential for increased private financial structures inadequate. operations; feasibility participation in road construction and study for private airport maintenance financing. It will also assist management with the GOS to restructure the balance sheets detailed inventory of of transport sector companies to clean up

6 assets of entity, the devaluation induced debt overhang. reconstitution and audit of accounts, completed. Environnental Sustainability Environmental Environmental and Social Sustainability There is inadequate attention paid to Sustainability - - The project will assist in strengthening environmental impacts in the transport * Environmental the capacity for environmental and social sector; no systematic approach to the awareness introduced in impacts evaluation. It will finance development of suitable mitigation transport. environmental assessments for individual measures or the creation of * A detailed sector-wide sub-projects and support implementation environmental awareness and staff environmental impact of the Environmental Action Plan (Annex training. assessment developed 2C). Relevant staff will be trained. and an action plan to mitigate negative effects prepared. Efficiency and Competitiveness of the Efficiency and Efficiency and Competitiveness of the Railway - There remains a number of Competitiveness of the Railway - The project will assist SNCS to uneconomic routes which continue to Railway - Institutional implement a new corporate strategy operate without government reforms, with a change of (Annex 8) designed in light of the compensation. There is poor physical legal status increased rail operation of international services on the infrastructure, chronic overstaffing autonomy. Service has Dakar-Bamako corridor. It will help with inadequate attention to funding of improved with increased finance the severance packages of about employment separation packages wagon availability. New 550 redundant staff resulting from the where needed. management tools and above privatization, a refocus of SNCS computerization strategy and business operations, as well introduced. A staff as the 314 redundancies resulting from the reduction plan was 1996 closure of the Tivaouane-St. Louis negotiated with 814 staff, and Guingeneo-Kaolack passenger 500 of whom departed. services. Lack of funds blocked full implementation. Civil Aviation Management- There is CivilAviation Civil Aviation Management - The project weak institutional capacity in overall Management Some will support more systematic and a better management, airport operations, internal management prepared privatization program for Air reporting and accounting procedures. improvement measures Senegal as well as airport management. Also, there have been a number of implemented for Air Restructuring of DAC and DMA and the failed privatization attempts for Air Senegal. Improvements development of regulatory capacity and Senegal. attained in financial tools to adapt to demands of globalization results. will be introduced. Ports, Maritime and River Transport Ports, Maritime and Ports, Maritime and River Transport - - Limited competitiveness of ports due River Transport - Long- The project will support improvements in to weak maritime transport policy and term masterplan institutional and policy development. decision-making capabilities, developed which Pricing policies and other incentives for inadequate management capacity and underpins future needs. private operators to be introduced to regulations, marketing problems, and increase the use of river transport and overstaffing. Specific secondary port coastal shipping. Revision of maritime problems include: accessibility issues legislation in line with intemational in St. Louis; Kaolack's under norms. utilization; and need for a strategic and marketing plan. Rural Transport - There is absenceof Rural Roads - Due to Rural Transport - The projectwill a coherent policy for the sub-sector pressing needs and GOS support the definition of a national policy

7 with no institutional,financial and resourceconstraints, rural and strategyfor ruraltransport including technicalframework for rural roads. In roads were excludedfrom assigningoverall ministerial additionthere is inadequatereliable the project. responsibilityfor rural roads. It will informationon essentialrural transport assess reformrequirements for infrastructurewith the networkbeing decentralizationand begin discussionsto too rudimentaryfor improved determineresource mobilization needs at agriculturalproduction, marketing and the central and locallevels. Decentralized accessto services. decision-makingis supportedwith a full- time programcoordinator (within CELCO). B. PhysicalConstraints and Issues Relatedto the State of Infrastructure Roads - Roadnetwork performance Roads -The most urgent Roads - About 60% of projectfunds will (costs imposedon users)is bridgerepairs have been be committedto cover roads works, unsatisfactory,specifically as concerns carriedout underthe includingroad maintenance,rehabilitation earth roads whichare poorly project.In additionroad and other expansion.Maintenance and maintained.Targeted investments in linksto , rehabilitationto be withinthe framework rehabilitationand maintenanceare Gambiaand of the rolling3-year RMRP, updated urgentlyneeded. Several critical Bissauhave been annuallyand reviewedby IDA and donors bridgesare in need of significantrepair upgraded.Technical as part of PST's WorkProgram and or replacement.Finally, the inter- audits wereregularly Budget(WPB -- see SectionG) annual regionallinks and axes to and carriedout in conjunction review.Project to affect morethan 9,000 Guinearemain poor. with financialaudits. kms of the road network,at least 10 bridges,and a numberof specificroad sections.Works will be selectedin accordancewith agreed economic, technicaland/or other specifiedcriteria as stipulatedin the LSP2.Technical audits to be separatedfrom financial audits and done more frequently. Railways - The Dakar/Bamako Railways - Track Railway - Rehabilitationof major corridor,in particularthe rehabilitationexpected economicrail infrastructureto a -Kidiralink (175 km) is under the projectdid not maintainablelevel of service,at an a major infrastructurebottleneck which occur due to the acceptablecost is a criticalobjective. has adverselyaffected operations. Rail withdrawalof supportby Track rehabilitationof the Tambacounda- workshopsremain in poor condition the Italianfinanciers. and Thies-Tivaouanelines will and need to be modernized.There is IDA funds were receivepriority. For safetyand also a significantamount of existing reallocatedto financethe operationalefficiency reasons and to meet rollingstock whichis in poor condition rehabilitationof nearly 65 projecteddemands for phosphate and needsto be replaced.Line km of Tamba-Kidira transport,a third track will be constructed profitabilityis adverselyaffected by track. The rail telecom betweenThiaroye and Hann near Dakar, overstaffingand the telecom system systemhas been and the Kidiratrain stationupgraded to needsto be upgradedand made upgraded,and equipment facilitatetransit operationsbetween Mali compatiblewith the Malian system. providedto computerize and Senegal.Telecommunication operations(including equipmentwill be purchased.Additional financialmanagement). rollingstock will be financedby the Modernlocomotives privateoperator of the international wereacquired. serviceson the Dakar-Bamakocorridor. Airports and Civil Aviation Airports and Civil Airports and CivilAviation - First Trafficmanagement including aid to Aviation Main runway priority will be given to the supplyof navigationand safetyequipment is constructed;air terminal equipment,and rehabilitationand inadequate;maintenance facilities improvementsunderway; expansionof infrastructurefor air

8 rundownand transit facilities modemcommunications navigationand safety,followed by dilapidated;handling equipment systempurchased as well facilitiesupgrading, modernization, and obsoleteand in short supply;cargo as groundsafety handlingequipment designed to facilitate aircraftparking in poor condition; equipmentfor businessand transfornationof LSS safety equipmentfor secondary Tamnbacoundaairport. Airportinto a regionalhub. airportsin short supplyor non-existent; But, investmentsdid not and runwaysin need of rehabilitation addresskey constraints or lengthening. sufficiently. Ports,Maritime and River Transport Ports, Maritimeand Ports, Maritimeand River Transport- The ratio of storagespace/quay in the River Transport- Many Rehabilitationand expansionworks will port of Dakaris insufficientand needs infrastructurebottlenecks be undertakenin Dakarto improvethe to be significantlyincreased. The removed(e.g. increased capacityof the containerterminal and physicallayout issuesassociated with storage/quayspace, public facilities,as well as the Ports of the port of Dakarneed to be addressed. modernhandling Kaolackand Ziguinchor.Appropriate equipment).Entire levels of equipment(navigation aids, physicalbottlenecks and signaling,etc.) will be provided,and evolvingbusiness needs improvementsto infrastructurerelated to couldnot howeverbe the developmentof domesticpassenger addressed. and freight lines, in partnershipwith the ______privatesector, explored. Rural Roads Rural Roads - Rural Roads - For improvedaccessibility There is urgent investmentrequired to Due to pressingneeds of isolatedareas with agricultural improveaccessibility of certainareas. and GOS resource potential,a prioritypilot program of rural constraints,rural roads road rehabilitationwill be undertaken. were excludedfrom the This will be precededby a definedand project. implementablerural roadpolicy with clear responsibilityfor financingand maintenancefor the differentlevels of the ______feeder road network,defined

C. Project Description Summary

1. A detailed list of the preparatorystudies undertaken for the PST2 to further strengthenthe qualityof project designas well as contributeto the definitionof appropriatestrategic choices is found in the Project File (Annex 8). As noted in Section2 (b), morethan 21 studieswere conductedto identifythose institutionaland policy issues upon which the proposed project would need to focus to ensure that physical improvementsare sustainableand GOS objectivesfor the transportsector met. For illustrationpurposes, the followingbriefly summarizessome of the main conclusionsreached by one of the studies - on the Dakar-Ziguinchormaritime-river route - which was instrumental in designingpart of the port/maritimecomponent.

(i) road transport betweenDakar and the Casamanceis a poor alternativebecause of the bad state of the roads which result in hightransport costs, the poor state of the vehicles,harassment from customsand police officials,the lack of safety and security, and the physical territorial incontinuitycaused by 's geographicalsituation; (ii) the demandfor low-costtransport of both passengersand goodsbetween Dakar and the Casamanceby ship far outstripsexisting supply, however, basic on-land infrastructureto support the operationsof ships is grossly inadequate;the draft in key portions of the routes used by boats is shallowand a major restrictive factor; and the only boat used for low-fare transport needs basic repair and maintenancethat has been consistentlyneglected;

9 (iii) the fares set by the Government,regardless of their social justification, are leading to increased operational losses while still not making it possibleto meet demand either in terms of quantityor quality; and

(iv) overall, no incentivesare being providedto allow the private sector to assist in making up for the supply-demandimbalance.

1.1 As shown elsewhere,the projectwill addressmost of the problems/issuesidentified above through support for institutionaldevelopment, policy definitionand design/refinementof regulatoryframeworks to promote private sector involvement and the financing of essential physical investments in works (limited dredging) and infrastructure.

1.2 On a broader front, the projecthas been divided into 11 componentswhich cover all of the main transport sectorsin Senegal.The first 5 concernmainly institutional and policy strengthening,with the remaining6 consisting of a combinationof technicalassistance and physical works. Each of the componentsis further divided into sub- componentswith a specificdevelopment focus. The followingtable presentsthe projectcomponents in a summary formwith Annex 2 providinga more detaileddescription and cost breakdown.

10 1. Project components

Comnonent Cateeorv Costs wth Of Bank % of Catgaories ContineencV Total financina Bank AnneS6 ______t1SSn) __ £US!n) inancig__ 1. Indtutional Strengthening & Polcy Development 1.1 Modernize and update data bases on the state of road transport inst-building infiastructure introducingGIS-T technology.[see 2.2 & 6.1] 1.2 OrganizationalAdjustment / fine-tuning of Public Works Department institutional/ (DTP) and creation of Road Works ManagementAgency [see 6.21 capacity building 1.3 Preparation& update of the three year Rolling Maintenanceand policy, inst.- RehabilitationPlan ibr (RMRP) of roads [see 6.3] building 1.4 Promote research, monitor/enforcestandards & improve quality control inst-building in road works [CEREEQ,see 6.61 1.5 Train key personnel in relevant Administrations[see 6.41 capacity building 1.6 Office,didactic & other equipment [see 6.51 physical, inst- building 1.7 Improvetechnivcal competenceof middle & lower level technicians for capacitybuilding public works [see 6.71 1.8 Itnplementnew railway strategy [see 7.21 policy, inst- building 1.9 ReorganizeCivil Aviation Administration[see 8.3] policy, inst.- building 1.10 Improvepolicy-uaking, regulatory & management capacityin maritime policy, inst.- transport sector [see 9.1 & 9.21 building 1.11 Developrural transportpolicy & action plan [see 10.1] policy, inst.- building 2. Land TransportAdmntistration Modernization & Planning 4.91 0.85 432 87.98 2.1. Reform & modemization oftesting systemsfor driver's licenses inst-building 0.11 0.11 100.00 3.C2 2.2. Full computerizationof the Land Transport Administration(DTT) inst-building 0.25 0.25 100.00 3.C2 2.3. Road safety campaigns,studies training inst -building 1.75 1.75 100.00 3.C26 2.4. Physicalimprovements of DTT: archives, facilitiesrenovation! physical, inst.- 1.90 1.51 80.00 L.C2 construction building 2.5. Goods:technical docs, fumriture,equipment physical 0.90 0.70 80.00 2.C1 3. Tranpaent & SustainablePublic Finaning in Road Subsector 1.90 033 1.90 100.00 3.1. Adjustment/streamliningof Road Fund management,including policy, inst- 1.60 1.60 100.00 3.C3 implementation(establishment & functioning of advisoryand review building board, etc..) 3.2. Office equipment,materials, vehicles for Board/Secretariat physical 0.30 0.30 100.00 2.C2 4. Promote Further Private Sector Involvement in Sector 230 0.40 1.70 73.91 4.1. Supportto effectprivatization arrangements for Dakar/Bamakorailway policy, inst 0.40 0.20 50.00 3.C4 axis operationsand mobilize private participationin rail development 4.2. Supportthe privatizationprocess of Air Sen6gal inc. stafftraining policy, cap. build. 0.70 0.70 100.00 3.C4 4.3. Supportthe privatizationof Airports Management policy, -inst. 0.80 0.40 50.00 3.C4 4.4. Support mobilizationof private participationin ports development, policy, -inst. 0.20 0.20 100.00 3.C4 maritime transport and Dakar-Ziguinchorroute 4.5. Mobilizationof private participationin road financing policy, inst.- 0.20 0.20 100.00 3.C4 building S. Socdaland EnvironmentalSustainability 5.02 0.86 0.67 1335 5.1. EnvironmentalOfficer - CELCO inst. -building 0.15 0.02 13.33 3.C5 5.2. Strengtheninstitutional capacity for evaluationof Environmentaland policy, inst.- 3.72 - - Social Impact (ESI), studies, audits/ training of key personnel,public building education,advisory services standards,specifications 5.3. Worksto support ESI mitigation measures under PST2 physical 0.30 0.30 100.00 I.C3 5.4. Equipmentto support ESI mitigation measures physical 0.85 0.35 41.00 2.C2

11 Coannonent lElgz.eLrIndicative % of n % ofragu1m Bank costs (US$m) Totd flnani llnndub Ann{ex (USSn) 6. Road Maneance, Rehabillitatlo*, Consetom 330.57 56.90 384 11.62 6.1. Expand & Update daabases on state of road infiasdntte, intrduce policy, ins.- 1.00 1.00 100.00 3.C6 GlS-T technology, and appropriateanalytical models [ref. 1.1] building 6.2. Organizationaladjustment and fine tuning of DTP includingtraining institVcap.building 4.14 1.50 36.23 3.C6 and TA & Road Agency Creation [ref. 1.21 6.3. Preparationand updae oftl2ree year RMRP [ref. 1.3] policy, 0.70 0.70 100.00 3.C6 instbuilding 6.4. Train key personnel other than for DTP [ref 1.51 cVacity building 3.09 1.00 32.36 3.C6 6.5. Equipment(office, didactic, vehicles, supplie, etc..) [ ref.1.61 physical, inst.build. 16.77 1.50 8.94 2.C4 6.6. RestructuringCEREEQ & strengthen its normativerole [re£f1.4J physical, inst.build. 1.20 0.80 66.67 3.C6 6.7. Reform and restructureCFP [ref. 1.71 capacit building 0.80 0.80 100.00 3.C6 6.8. Routineroad nmintenanceworiks physical 87.70 - - 6.9. Periodicpaved road maintenanceand rehab. works physical 110.53 9.1 10.70 1.C4 6.10. Easthroadrebabilitation works physical 54.55 15.0 17.65 1.C4 6.11. Road inprovements and investments(including bridges) physical 45.09 5.0 11.08 I.C4 6.12. Studies, engineeringand supervision inst-buiding 5.0 2.0 40.00 3.C6 7. R 76.96 13.25 19.76 25.68 7.1. Supportprivatization arrangements of Dakar/Bamakoaxis op. and policy n/a mobilizationof private participationfor railway development[see 4.1] 7.2. Implementationof SNCSrestructuring, new strategy,mgmt & staff institutional/capacit 1.00 0.50 100.00 3.B training [ref. 1.8] y building 7.3. Office,didactic and computerequipment physical, inst.- 0.50 0.50 100.00 2.B2 building 7.4. SNCSpersonnel redundancies other 6.40 4.20 65.60 4.A 7.5a. Worb for incrcasingthe transportcapacity for the phosphateindustry physical 2.77 2.65 95.67 I.B 7.5b. Goodsfor inreasing the trapot capacityfor the pophate industry physicat 7.03 6.74 95.87 2.B2 7.6 Goods& Woks for thetrack reewallrehabilitationon Tambscounds- physical 36.73 4.23 11.52 2.B2 Kidira,Thits-Tanbacounda and improvementof the Kidirastation 7.7 Rehabilitationof workshops physical 1.04 0.00 0.00 - 7.8 Radio,conL and weighing equipment and signalingsystems physical 6.36 0.71 11.16 2.B2 7.9. Acquisitionof heavymachines, equipment and rolling stock 14.90 0.00 0.00 - 7.10 Studies, engineeringand supervision of works physical 0.23 0.23 100.00 3.B 8. Airports & Civil Aviation 71.93 12.38 10.19 14.17 8.1. Privatizationof Air Sen6gal [see 4.21 inst-building n/a 8.2. Privafizationof Airports Management[see 4.3] inst-building n/a 8.3. Reorganizationof the Civil Aviation Administrationincl. regulatory policy, inst.- 1.00 0.50 50.00 3.C7 amngements, training and TA [ref 1.9]. building 8.4. Reorganization/Strengtheningmeteorological department(DMN) inst -building 0.26 0.26 100.00 3.C7 8.5. Expansionand modanization oftenninal at L S. Senghor (LSS) physical 18.91 0.00 0.00 Airport S.6. Officerehabilitation of DAC and DMN physical 0.19 0.17 89.47 1.C5 8.7. Equipment/ materialsfor DAC and DMN physical 1.33 0.60 45.11 2.C5 8.8. Aid to navigation and safety equipment for all airports physical 2.22 1.11 50.00 2.C5 8.9. Handling equipmentfor LSS airport physical 2.00 0.00 0.00 8.10. Rehabilitationworks at LSS Airport (main runway 18/36,parking area physical 10.27 0.00 0.00 for cargo planes, etc.) 8.11. Reinforceparkdng areas at LSS Airport for jumbojets physical 2.12 0.00 0.00 8.12. Lengthenrunway 0312at LSS airport physical 1.80 1.62 90.00 I.C5 8.13. Constructionof new Ziguinchor airport physical 22.97 0.00 0.00 8.14. Lengthen runway of StLouis airpoirtdeviationof road physical 5.86 2.93 50.00 1.C5 8.15 Redundanciesat AANS & Air Senegal policy 3.00 3.00 100.00 4.B

12 Comwonent ~Catefor Indicative % of Bank %-Of Categories costs (USS Total Financing Bank Annex6 C (US$m) financing 9. Ports & Martme Transport 72.57 12.49 6.00 8.27 9.1. Establisha system of periodic hydrographic survey of Kaolack Port policy 0.10 0.08 80.00 3.C1 [ref. 1.10] 9.2. Strengthensub-sectoral institutions (DMM, MPTM, etc..) including policy 0.80 0.80 100.00 3.CI training, studies, TA [ref. 1.101 9.3. Office, didactic, logisticalequipment & materials for sub-sectoralinst. physical, insLbuild 0.30 0.30 100.00 2.C7 9.4. Equipmentfor secondary ports Kaolack & Ziguinchor (signaling and physical 0.50 0.00 0.00 navigationaids, etc.) 9.5. Expnsion and rehab. wotks for Kaolack & Ziguinchor ports physical 2.50 0.50 20.00 l.CI 9.6. Expansionand rehabilitationworks for Pod of Dakar (container physical 63.37 3.82 6.02 L.A terminal, petroleum wharfs, public facilities, etc.) 9.7. Equipmentfor Port of Dakar physical 4.50 0.00 0.00 9.8. Training,studies & advisory services for PAD inst-building 0.50 0.50 100.00 3.A

9.9. Support privateparticipation in Dakar-Ziguinchormaritime route [4.4] policy n/a -

10 Rural Tranport 10.93 1.87 3.26 29.83 10.1. Support design of Rural Transport Srategy including preparationof policy, inst- 0.70 0.70 100.00 3.CS nat'l rultransport project includingtraining [ref. 1.11] building 10.2. EstablishRural TransportCoordination Unit includingoffice equipment inst-building. 0.10 0.10 100.00 2.C6 physical 10.3 Office and didactic equipmentand logistical physical 0.13 0.13 100.00 2.C6 10.4. Priority Rehabilitationworks physical 10.00 2.33 23.30 L.C6 11. ProJect CoordInation 3.91 0.67 3.80 11.1. Operating costs projectmgmt, 2.23 2.12 95.06 5.A policy 11.2. Audits AdvisoryservicesJ Studies/ Training project mgmt, 1.68 1.68 100.00 3.C9 capacity building ITrOTALz 581.00 100.00 90.00 15.49

13 1. Projectcomponents

2. Key policyand institutionalreforms supported by the project

2.1 As discussed above, the project will support several policy and institutionalreforms to address current issues and will include policy and regulatory reform measures, technical assistanceand training. Key reforms are outlined above, some of which are: (i) the reform of Road Fund; (ii) introductionof a three-year rolling RMRP system as a key planning and programming tool; (iii) the restructuring of the road management system through the establishmentof an autonomousroad works entity; (iv) the privatizationof the operation of internationalrail service on the Dakar-Bamakocorridor; (v) the privatizationof Air Sen6gal;(vi) the privatizationof airport management; (vii) the restructuringof the debt of sector companies; and (viii) the developmentof a rural transportpolicy. In addition,program coordination will be improvedwith the adoption of CELCO's revisedterms of referenceand reportingarrangements as well as the preparationof a ProceduresManual.

3. Benefitsand target population

3.1 The programmedinvestments are expectedto yield substantialbenefits by improvingthe productivityand competitivenessof the Senegaleseeconomy and improvingaccess to markets and servicefor the poor. All 10 regionswill benefit.The roads componentis itself focusedon the regionalroad network and hence will directlybenefit the poorer segmentsof the rural populations they serve, both in terms of improvedrural as well as intra-ruralmobility, increasing access to centers of employment,education and social services.The target populationis around 2 million spreadthrough the variousregions. In addition,the rail component,which crosses 6 regionswill reinforcethe benefits to the rural poor (See 5. Social and PovertyImpact). Otherglobal benefits whichwill be realizedthrough the variousinvestments include:

* The projectsupports restructuring and streamliningmeasures for the Road MaintenanceFund to induce greater accountabilityand sustainabilityin public financingof the road subsector. Specific stakeholder organizationswill be represented on the Road Fund Advisory and ReviewBoard and will have a criticalinput into decisionsrelated to fund use. The Road Fund will be refocusedto expend most of its resourceson the maintenanceof roads, resulting in better overall maintenanceof roads outside of the main urban areas. Improvedand more efficient road rehabilitationand maintenancewill result in improved conditionsfor a larger proportion of the road network. Due to improved all-weather market access, agricultural productsand other essentialgoods will be more traded and accessto all productsfor the rural poor will be improved.

* Reducedtransport costs, fresher produce and more on time deliverieswill make Senegal's productsand servicesmore competitivein local, regionaland internationalmarkets.

* The project will have a substantial impact on local private sector development and employment.The project will help to strengthenthe managementcapacity of local firms while local consultants will be able to offer their services for studies, auditing, and other activities.In additionto using local contractorsand consultants,an estimatedtotal of 13,000 skilled and unskilled locals will be directly employed,per annum, during the construction periodfor road works and maintenance,track replacementand rehabilitation,as well as port and airport constructionand maintenance.

14 * Quality of rail transport services will be improved through private operation of international services, and transport costs will also be reduced as a result of efficiency enhancement investments. Improved quality of freight rail service will result in an increased use of the facilities at the Port of Dakar (which is in direct competition with Abidjan) for Malian imports and exports.

* Institutional strengthening and reform measures under the project will result in a more efficient sector administration.

* A marked improvement in road safety on the national network will have a quantifiable benefit in terms of the costs of avoided accidents, Presently there are an estimated 2200 road fatalities annually. Project features include a focus on accident safety and prevention, through improved road design, elimination of black spots and increased driver training. Although the benefits will be translated to the whole population it is the poor who, as pedestrians and users of unsafe private mass transport means in both urban and rural areas, suffer disproportionately from road accidents, will benefit most.

* Development of national maritime transport activities will help reduce transport costs within the country and increase trade making it possible to bring agricultural produce to populated centers where demand is high. This will be reflected in increased GNP growth.

* Investments in the civil aviation sector will improve security and safety of airport operations, extend the economic life of many existing assets, reduce plane taxiing time and therefore costs, increase airport passenger and cargo handling capacity while improving overall conditions, promote tourism and reduce the export cost and increase the export volume of perishable high value agricultural and fisheries products, through a reduction of current high losses.

4. Institutional and implementation arrangements

4.1 Implementation Period: July 1999-December 2004

4.2 Implementing Agencies

4.3 The project will be coordinated by the Ministry of the Economy, Finance and Planning (MEFP) through a Project Coordination Unit (CELCO) similar in part to the arrangement under the on-going Transport Sector Adjustment Project (CELCO-PAST which is under the METT). The repositioning of CELCO-PAST to MEFP has taken place and its key personnel has been recruited. MEFP will work in collaboration with MTTA, MPTM, METT and the PM's Office. Each government agency (DTT, DTP, DMM, MTTA/DAC/DMA, AANS (ASECNA-Senegal), SONATRA-Air Senegal, SNCS, SONAPAD, CELCO (rural transport and environment components), and State Portfolio Management Unit-CGCPE-MEFP (privatizations) participating in the project will be responsible for the implementation of each of their own component activities. Implementation will be based on an Annual Work Program and Budget (WPB) prepared by each agency with the assistance of CELCO. A draft project execution manual (PEM) has been prepared to provide the necessary guidelines for all implementing agencies. The PEM incorporates the financial and accounting systems procedures manual prepared for the PAST project, amended as needed and carried over into the PST2. CELCO will act as the coordinating body and secretariat for the WPB process. The Road Fund Advisory Board (RFAB) already established will review the functions of the Road Fund, advise the Ministers of Finance and Land Transport, and ensure that the Road Fund is run along well defined technical, accounting and financial management lines. It will include a separate Secretariat with well remunerated technical

15 staff having specificrelevant expertise in financialand accountingmanagement, road works and procurement.The Road Fund Boardhas representationfrom both the privateand public sectors.

Project Coordination

4.4 As stated above, MEFP will, in collaboration with METT, MITA, and MPTM, provide oversight and guidance for the program. Day-to-day coordination and follow-up of the entire projectwill be the responsibilityof CELCOwhich was set up underthe PAST program.Revised terms of reference have been preparedfor CELCO so that it may better respondto a changed context, and agreement has been reached on its new positioning within MEFP. Administrative texts have been prepared (and are in the approval process) to put the new measures into effect before negotiations. The recruitment of key staff will begin as soon as possible after the new measures are adopted. Concerning the Road Fund, the Advisory and Review Board comRpletewith a Secretariat including accountinn and management staff reporting to the MEFP and METT will be set up before negotiation. It key functions will be to monitor, review and advise on the managementand executionof the Road Fund. The Road Fund will have clear operatingand disbursement procedures. IDA will provide support for Board set-up and for its operations during the early years. The Unit for the Management and Control of the State Portfolio at MEFP (CGCPE-MEFP) will be closely consulted and would take the lead in privatization matters. Project implementation will take place in accordance with the provisions of the PEM.

Accounting, financial reporting and auditing arrangements

4.5 CELCO will be responsible for overall project administrative and financial management and reporting, including arrangements for audits, in accordance with systems and procedures acceptable to IDA. Accounting and financial management systems and procedures including detailed and clear reporting procedures have been prepared and put in place under the on-going PAST. A computerized accounting and financial management system is in place and has been tested and found satisfactory although some adjustments are needed and currently being undertaken. Financial planning and management will be done on the basis of the WPB process. A new Special Account for the proposed IDA credit will be opened and maintained in a commercial Bank acceptable to IDA, managed by CELCO. Independent auditors acceptable to IDA will audit the use of all IDA funds available under the credit, including the IDA special account and the statements of expenditures. Audit reports will be submitted to IDA no later than six months after the end of the fiscal year. The format and the frequency of periodic reporting will be defined in the PEM. An Implementation Completion Report (ICR) will be prepared within six months after Credit closing. All financial and accounting activities will take into consideration the Year 2000 computer concerns, which are being coordinated internally by the Bank. (see Annex 6).

Monitoring and evaluation arrangements

4.6 Continuous monitoring, annual reviews and a mid-term evaluation will be based on predetermined indicators which will measure inputs, process, outputs and outcomes. Performance and monitoring indicators are defined in Annex 1. The overall project monitoring and evaluation system will be guided by the Project Design Summary (Annex 1) and the PEM (see Annex 6).

Mid-Term Review

4.7 An in-depth, rnid-termreview will be carried out at the end of the second full year of project implementation (not later than January 31, 2002). The review would be organized by CELCO in collaboration with all stakeholders. The purpose would be to review project progress

16 in meeting its objectives,overall performanceagainst establishedand agreed key performance indicators,and would include a mid-termevaluation of economic,financial and social impacts (includinginvestment and financingplans, quantifiedand non-quantifiedbenefits), as well as environmentalimpacts and mitigationactions. The reviewwould provide the opportunityfor IDA to assess the Government'scontinued commitmentto the project's objectives,reform of the transport sector, and level of private sector participation. The review will also allow for modification,if necessary, of project features to improve effectiveness.During negotiations, agreementon the timingand objectivesof the Mid-TermReview was obtained.

D. Project Rationale

1. Project alternatives considered and reasons for rejection

1.1 Four project alternatives were considered. The first alternative contemplated was a project which included a comprehensive rural transport component. Due to the absence of even a rudimentary government strategy in this sector it was agreed that a more sensible approach would be to first define a strategy and policy for rural transport (and test some alternatives through pilot ruralroad works) after which a stand alone project would be processed. Preparation of the stand alone project would be undertaken under the preferred altemative. This altemative was therefore rejected.

1.2 The second altenative included an urban transport component in the project. This was rejected because of the need for focus and because the subsector is presently covered by a stand alone Urban Transport and Technical Assistance project where a self-standing Urban Transport Project would be a logical follow-up. Such a project has now been included in the Senegal lending program.

1.3 The third altemative was to design and process two separate operations because of the great scope, spread and breadth of the proposed undertakings, splitting the proposed PST2 program as follows: (i) a project covering road maintenance, rehabilitation and upgrading, land transport modemization and the creation of a rural transport strategy to be called Transport 2 (PT2 - IDA Credit $43 million); and (ii) an operation covering ports/maritime transport, railways, civil aviation, promotion of private sector initiatives and environmental mitigation to be named Transport 3 (PT3 - IDA Credit $42 million). Both operations would have been prepared as SSIPs (subsector investment programs). Co-financing would have been at the same level, as co-financier interest is very sub-sectorspecific. Benefiting from the coherenceand synergiesthat have been established under the PAST, the alternative of two separate but closely sequenced operations could have been a logical "second generation" arrangement for ensuring focused and effective monitoring and attention to implementation of improvements in the sector. In addition, the two project approach would have provided more explicit supervision resources.

1.4 This alternative was actively considered. EIowever, in view of the acknowledged advantages of a sector-wide approach, at least during preparation, which includes the design of consistent approaches to cross-sectoral issues, it was agreed that the final decision regarding the above option, if still considered appropriate, would be made following appraisal.

1.5 The option finally adopted, the fourth alternative, is a variance of the third one. Factors in favor of this option included: (i) implementation and monitoring of complex and inter-related project reforms as well as inter-modal issues are often best addressed under a single umbrella; (ii) phasing of projects, or splitting components into numerous parts can be difficult to implement when there are a number of stakeholders participating in various components. Also, monitoring of

17 stakeholders' progress and covering shortfalls in the event of financing pull-outs becomes particularlydifficult; (iii) successesunder the PAST programindicate that the country is capable of implementinga complex,multi-faceted project. In addition, a single large credit provides greaterleverage in policy implementation.In support of this alternativeit was understoodthat: (i) Bank supervisionwould be funded sustainably at a level of about $150,000 - $160,000per annum,which is roughly50% higherthan the standardtotal allocationfor supervisionof a single project;(ii) other donors would be asked for more direct involvementin the supervisionof their specific componentsthus reducing the Bank's burden; and (iii) as was the case with project preparation, supervisionwould be delegated over time to the Senegalesethrough increased "projectization"of costs.

2. Major related projects financed by the Bank (completed, ongoing and planned)

Sectorissue Project Supervision(F.590) Ratings Implementation Development Progress(IP) Objective ______~(DO ) TransportSector UrbanTransport and TA Project: HS HS ongoing TransportSector Adjustment & S S InvestmentProgram (PAST): ongoing Urban Transport: planned Urban/Municipa AGETIP: completed S HS I/Water AGETIP: ongoing S S MunicipalHousing and UrbanDevt: S S completed Urban Devt and Decentralization Project: not yet effective S HS Water Sector: ongoing Energy Energy SectorAdjustment: planned _ Private Sector Private Sector CapacityBuilding S S Project: ongoing Rural NationalRural InfrastructureProject: Development planned

IP/DORatings: HS (HighlySatisfactory), S (Satisfactory),U (Unsatisfactory), HU (HighlyUnsatisfactory)

3. Lessons learned and reflected in the project design

3.1 Prior to the PAST, the Bank had financedeleven transport operationsin Senegalincluding five road, three port and three railwayprojects, in additionto financingrural roads components under agriculturalprojects. These projectshad all attempted,with disappointingresults in many cases,to introducereforms in the transport subsectors.

3.2 The more recent of these completed projects (Third Railway Project, Credit 1518-SE, Third Port Project,Credit 1459-SEand the PAST, Credit2266-SE) have providedan opportunity for the Bank to establish an open and frank dialogue with the government on the major shortcomingsof the transport sector. Agreementwas reached on the need to define and adopt

18 policy and institutional reform measures. A detailed reform action plan by subsector (road, railway, port and civil aviation) was prepared. Implementationof specific reforms was a condition of the adjustment component of the PAST allowing for the monitoring and implementation of the remaining policy reform measures through tranche disbursement conditionalities.

3.3 Otherdonors have been active in the transport sector,and more specificallyin the PAST. However, during implementation,coordination was sometimes inadequate with some donors taking unilateral action based on their own interests, without consideringthe impact of their actions on the overall program implementation.This sometimesled to a disruptionof balanced implementationbetween the subsectorsand the differenttransport modes. The most pertinent lessons learned from past projects are outlined below with action plans presented on how the proposedproject will deal withthe issuesidentified.

Information base 3.4 Transport infrastructure databases, including those available in the road subsector are neither regularly maintained nor updated. Decisions on planning and programming of maintenance works and budget allocations are therefore often made without reliable information.

3.5 Proposed Project Action - Priority will be given to computerizing, modernizing and updating of databases on the state of roads and road transport infrastructure to ensure the timely availability of information needed to make a realistic estimate of the maintenance, rehabilitation and new investment needs. As part of preparation of this project, a number of specific studies were undertaken with a view to updating the information base (see Annex 8). In addition, it is proposed to introduce a GIS-Transport component as well as improved survey, collection and analysiscapability.

Human Resource Development

3.6 Measures aimed at human resource development under the PAST project have improved the implementation capacities of the various agencies, but planning and programming remain weak, particularly in the road sub-sector.

3.7 Proposed Project Action - The human resource aspects of the project have been carefully assessed and include: (i) an evaluation of training needs; (ii) introduction of adequate training plans; and (iii) proper targeting of technical assistance to include information transfer targets and the designof a follow-upmechanism. The organizationaland institutionaldiagnostic assessment of the DTP carried out as part of project preparation work includes this assessment and reconmmendations.

Implementation Procedures

3.8 Past projects in the transport sector have been implemented without a procedural fiamework. This has had a negative impact on implementation and has hamnperedeffective coordination among implementation agencies.

3.9 Proposed Project Action - A draft project execution/procedures manual (including reporting format and requirements, and coordination mechanisms) has been prepared and was circulated at Negotiations. A manual of financial and accounting procedures has also been

19 completedand will be integratedinto the overallprocedures manual. The finalizationof the PEM is a conditionof Credit effectiveness.

Resourceallocation criteria

3.10 The allocationof resourcesbetween new investmentsand maintenance,and rehabilitation of existinginfrastructure, especially in the road sub-sector,has not alwaysbeen based on clearly defined criteria. Factors that need to be taken into account include the additional costs to the economy in vehicle repairs and maintenanceresulting from neglected maintenance,the higher costs of postponed maintenance, future maintenance recurrent cost requirements of new investments undertaken in the sector, and criteria for providing access to high potential agricultureregions.

3.11 Proposed Project Action - The project will support an investment split of 75% maintenanceand 25% new works program. In addition,a 3-year rolling maintenanceprogram will ensurethat maintenanceremains a priority.

Weak absorptivecapacity of some agencies

3.12 The absorptivecapacity of certain agenciesremains weak. This has been compoundedby the proceduralvoid mentionedabove, and the inefficiencyof the technicalassistance provided. Planningand programmingperformance have been inadequateand executionbelow par in many cases.

3.13 ProposedProject Action - Project designincludes provisions for implementationbased on an AnnualWork Programand Budget (WPB), a strengthenedcoordination mechanism, and well targeted technical assistance, training and other institutional building measures. A capacity buildingprogram has also been includedfor the public works companieswhich deal with road maintenancebut have displayedtechnical and managerialshortcomings.

Financialmobilization capacity of publicsector companies

3.14 The debt burden of public sector companieswas dramaticallyincreased following the 1994 devaluationof the CFA Franc, leadingto an unhealthyfinancial structure.Although in practice much of the debt on-lent by the GOS is not being serviced by the transport entities, non- provisionof relief has meant a high level of indebtednesson the balance sheets and high debt service requirements.This has in turn reducedthe ability of these companies,despite increased profitability,to mobilizenew fundingfrom private sources.

3.15 Proposed Project Action - An in-depth review of the companies' debt burden is being undertakenwith a viewto reaching agreementon a restructuringframework and actionplans. 4. Indicationsof borrowercommitment and ownership

4.1 The Borrowerhas shownits commitmentand project ownershipthrough the following:(i) it has preparedits own retrospectiveevaluation of the on-goingproject to identifykey constraints, singleout major weaknesses,and draw lessonsfor the future; (ii) it has produceda sector strategy paper with the assistanceof national consultants;(iii) it has prepared a draft LSP2; (iv) it has participatedactively in effortsto assessthe existingRoad Fund mechanismand restructureit; (v) it has participatedactively in the redefinitionof the terms of reference of CELCO; (vi) it has

20 proposed, on its own initiative, the creation of a Road Works Management Agency; and (vii) it is playing a leading role in defining the privatization strategies.

5. Value added of Bank support in this project

5.1 The Bank has been a leading supporter of the transport sector in Senegal since the 1970s. It's value added may be summed up as follows: (i) the Bank has played a key leadership and coordinating role with other donors to ensure policy reform; (ii) it has provided critical advice and created a favorable climate for capacity building by encouraging the Government to assume an increasing role in all aspects of project activities; (iii) it has provided valuable advice on combining country specifics with best practice, as is contemplated in the restructuring of the Road Fund and the creation of the Road Works Agency; and (iv) staff have specialized skills and the possibility to draw on world-wide experience to advise the GOS on all elements related to the transport sector including "frontier" areas such as private management of airports in the region. Continued Bank involvement in the sector ensures more effective coordination between transport sector reform and the overall economic management program.

E. Summary Project Analysis

The project analysis was based on: experience and information accumulated through the PAST project; lessons learned in other related Bank projects in the country; cross-information from similar Bank projects globally; consultant studies prepared under the PPF to determine feasibility of each proposed component, and design and develop implementation strategies; GOS input; advise and information from the Bank's Resident Mission; Bank missions and internal advisory support. (Detailed information concerning project background and preparation are available in the project file, see Annex 8).

1. Economic Analysis (supported by Annex 4)

Net Present Value Economic Rate of (US$ million) Return ______(%) Program Evaluation 580.0 35 * Road Component 517.2 52 * Rail Component 25.9 18 * Port Component 11.6 16 * Aviation Component 25.7 19

1.1 A detailed quantified economic analysis has been carried out for each of the project's main sectoral sub-components. In addition, an economic analysis for the whole program was completed as well as a limited distributional analysis which includes the program's employment and fiscal impact. This program evaluation takes into account all of the quantifiable costs and benefits identified by the separate analyses. The program viability, at a base economic internal rate of return (EIRR) of 35% remains robust under the sensitivity analyses. The break-even analysis for the program demonstrates that costs would have to increase by almost 50%, in parallel with a benefit decrease of 50%, for the project EIRR to equate the 12% discount rate. In terms of the distributional analysis, as noted in Section C-3, it is estimated that about 13,000 unskilled locals will be directly employed through the project works annually during the construction phase. In addition the project will have a positive fiscal impact as a more efficient transport system is likely to increase usage and thereby generate more fiscal revenues both through increased usage as well as increased employment. It is currently estimated that the road

21 sector alone will generate more than CFAF 60 billion (over US$ 100 million) in tax revenues per year. Annex 4 details the program evaluation, with Annexes 4A-4F presenting the detailed analyses. A summary of the individual economic analyses conducted is presented below:

(a) Road Component - The HDM-III model was used for the road analysis, as defined by the DTP and based on a network-wide survey of road characteristics and traffic. Financial costs were adjusted for economic factors and a discount rate of 12% was employed. Economic rates of return (EIRR) for each proposed road link range from 17-100+% for unpaved roads, 19-100+% for paved roads, and 12-24% for the proposed new roads. Sensitivity analyses for each sub- component indicate a strong robustness, depending on the different maintenance strategies adopted. Details of the evaluation are found in Annex 4A. In addition a roads program analysis was conducted. A base case EIRR of 52% has been calculated. The sensitivity analyses for the program indicate that the EIRR remains robust. This program economic analysis is also further detailed in Annex 4A. As specified in the LSP2, the economic criteria for financing under the road component is a minimum 12% EIRR. Subprojects below this rate could only be financed following discussions with IDA providing evidence of significant unquantifiable benefits which could not be factored into the IRR calculations (such as furthering regional integration objectives, impact on poverty, regional balance and women, etc.). The standards for construction used must also be the least cost solution.

(b) Rail Component - The economic returns for the railway component are also solid at between 17-28% for each of the main rail investments considered. The base case EIRR for the rail program as a whole is 18%. A break-even analysis of the rail program indicates that costs would have to increase by 23% and benefits decrease by 23% for the EIRR to drop to 12%. Because of the special tax exempt status of the investments, the economic costs are similar to the financial ones. Details of the analysis are provided in Annex 4B, including the main assumptions. The main quantifiable benefits identified consist of: (i) savings in operation and maintenance of rolling stock; (ii) savings in staff costs; (iii) savings in reduced derailments; (iv) incremental increase in rail revenue due to increased freight movements; and (v) traffic diversion benefits. In addition, due to the discrepancy between project life and actual asset life of the investments made under the program, a salvage value for these investments has also been included in the analysis.

(c) Port Component - The port component, which consists of an evaluation of both public and private sector investments for the Port of Dakar, indicates a base case economic internal rate of return of 16%. To ensure that the proposed investments reflect needs resulting from increased traffic volumes these investments have been phased. The first phase consists of public financing and the second private financing. Because the full extent of benefits resulting from private sector participation have not been identified, the EIRR calculated is considered to be conservative. A break-even analysis indicates that costs would have to increase by 11% and benefits decrease by 11% for the EIRR to drop to 12%. Further benefits, risks, impact and qualitative assessments for the ports/maritime as well as transport modernization components are found in Annex 4C. As in the case of the railways, the tax exempt status of the port means that the financial and economic costs are similar. The main quantifiable benefits identified consist of: (i) voc savings due to improved road access; (ii) savings in container ship waiting time due to improved ship positioning; (iii) savings in cargo handling costs; and (iv) GNP value-added resulting from increased exports. As with the railways, due to the discrepancy between project life and actual asset life of the program investments, a salvage value for these investments has also been calculated and included in the analysis.

(d) Aviation Component - The aviation component, which consists mainly of investments in the International Airport at Dakar (L.S.Senghor), indicates a base case EIRR of 19%. A break- even analysis indicates that costs would have to increase by 25% and benefits decrease by 25%

22 for the EIRR to drop to 12%. Details of the analysis are provided in Annex 4D, including the main assumptions. The main quantifiable benefits identified consist of: (i) incremental increase in passenger revenues; (ii) increase in tourist spending; (iii) savings in terminal and runway maintenance; (iv) savings in staff costs; and (v) cargo handling cost savings. As with both the rail and ports components, due to the discrepancy between project life and actual asset life of the program investments, a salvage value for these investments has been included in the analysis.

2. Financial (refer to Annex 5)

2.1 Financial analyses were conducted for each of the project parastatals (revenue-earning agencies) separately. The results of the pertinent analyses are summarized below and further detailed in Annex 5.

(a) SNCS (National Railroad Company) - The financial statements of the National Railroad Company (SNCS) have shown a steady improvement under the PAST. Sales have increased about 10% p.a. from 1993 to 1997 while Earnings Before Depreciation, Interest and Taxes (EBMI)have gone from a negative 13% to 13% of sales revenues. Net results have gone from a net loss representing 5% of sales in 1993 to a net profit representing 5% of sales in 1997. The liquidity position has not on the whole improved with the current ratio remaining stable at about I during the period. However, the financial structure has worsened as a result of the 1994 CFA Franc devaluation. SNCS is in arrears in its debt repayment so that the numbers in the balance sheets do not represent the real situation. The debt-equity ratio is unsatisfactory being at more than 65% during most of the period.

The rail component shows an internal financial rate of return of 20% and a NPV of CFAF 21 billion at 12%. The main benefits are derived from savings in operating costs and some increases in revenue from more quantities of goods transported at the national level than would have been the case without the project investments. A sensitivity analysis was carried out to determine the impact of adverse developments on the key parameters including: investment costs, savings and additional revenues on the overall project performance. The results show that the investments would still have satisfactory results under the assumptions made: costs would have to increase by 170% for the NPV to come to 0 and the IRR to drop to 8%.

(b) Port of Dakar - As with the railroad company, the financial statements indicate that there has been a steady improvement under the PAST program. Sales have increased 25% p.a. from 1993 to 1997 while EBIT have gone from 27 tO 34% of sales revenues. Net income increased from 4 to 9% of sales and the current ratio improved from 1.1 to 2.1. The financial projections show that, based on the assumptions used, the proposed investments under the project would yield satisfactory results: (i) EBIT would increase from 34% in 1997 to more than 40% in 1999 and beyond after a brief dip to 32% in 1998; (ii) net income would stabilize at around 6%; and (iii) the overall liquidity situation would be acceptable. The additional debt incurred under the project would decrease the debt service coverage ratios from the high levels of 1995 and 1996. However, they would still be adequate at more than 3. Meanwhile, the debt-equity ratio would reach its highest level of 57% when all the project-related loans are drawn down in 2002. The port component shows an internal financial rate of return of 9%. The main benefits are derived from savings in operating costs and an increase in revenues from more quantities of goods handled than would have been the case without the project investments. A sensitivity analysis was carried out to determine the impact of adverse developments on the key parameters including: investment costs, savings and additional revenues on the overall project performance. Results indicate that the investments would still have satisfactory results under a 25% increase in

23 investment costs, a 25% decrease in the projected savings and projected additional revenues.

(c) AANS: Airport Management - The financial statements of AANS indicate significant swings over the past few years, from a break-even situation in 1993 and 1994 to a huge loss in 1995 and then again a large net profit in 1996. Although internal statements showed a near-break- even in 1997, a Bank-financed accounting and financial study has shown a huge loss (CFA Francs 1.6 billion) in 1997. EBlTs have reflected the swings in reported earnings, going from 28% to 9% and then a record 30% of sales in 1990, 1996 and 1997 respectively. Nonetheless, the financial projections show that, based on the assumptions used, the proposed investments under the project along with the proposed reform measures would yield satisfactory results for the new airport management setup: (i) the level of profitability, even under the very conservative assumptions made regarding the level of fees, would be adequate; (ii) the overall liquidity situation would be good with the current ratio consistently above or near 2 except for the first year of principal repayment; (iii) the debt-equity ratio would be highest (73%) when all the loan funds have been disbursed. It should be pointed out, however, that equity, quasi-equity or internal cash flow financing has been put at 20% because of the uncertainties still surrounding the terms and conditions under which privatization of airport management will take place. The level of equity financing and/or financing from internal cash flow has the potential of being significantly increased.

The civil aviation component shows a internal financial rate of return of 9%. The main benefits are derived from savings in operating costs (most specifically personnel costs) and an increase in revenues from more passenger and freight traffic than would have been the case without the project investments and/or the implementation of the reform program. A sensitivity analysis was carried out to determine the impact of adverse developments on the key parameters including: investment costs, savings and additional revenues, on the overall project performance. The results indicate that the investments would still have satisfactory results under the assumptions made: a 25% increase in investment costs, a 25% decrease in the projected savings and a 25% decrease in the projected additional revenues.

(d) CEREEQ (Experimental Center for Research and Study of Equipment) - Financial results have steadily improved since 1993. However, this is tempered somewhat by the fact that the agency continued to receive investment subsidies that reached 28% of sales in 1996. The financial projections indicate that as a result of the project investments for CEREEQ, and efficiency improvement measures, EBIT would improve from an average of about 20% over the last five years to more than 30% of sales. At the same time, the liquidity situation would improve. Finally, even after the investments are financed through a combination 75% from a loan and 25% from internationally generated cash flow, the financial structure of CEREEQ would show a debt- equity ratio of 42%, at its highest level, and a debt service coverage ratio of at least close to 3.

The IRR for the CEREEQ component is 31 %. The sensitivity analysis shows that investments will still retain satisfactory results with an operational cost increase of 25%.

3. Technical

3.1 The three-year rolling RMRP has been prepared in detail using available road planning tools, specifically the HDM-III model. All road works, including new construction, rehabilitation, periodic and routine maintenance are contracted to the private sector and although the technical capability of small local firms involved in road works has improved in recent years, it needs to be further strengthened. Knowledge transfer from larger to small and medium-sized companies

24 will continue to be encouraged. In addition to the training program designed for these companies, a system for monitoring capacity and quality assurance will be developed (see below). The technical capabilities of the ports and railway companies on the other hand are high with most works subcontracted to private sector firms.

4. Institutional

Project Coordination

4.1 The Ministry of Economy, Finance and Planning (MEFP) will be responsible for the overall coordination of project activities carried out by the various implementing agencies. Day to day coordination will be carried out by a Project Coordinating Unit (CELCO). (see section C-4, Institutional and Implementation Arrangements).

Project Management

4.2 Each component will be implemented by the agency responsible for the sub-sector concemed, a system that has generally been satisfactory in the past, with one exception, the Public Works Department (DTP). As a result the planning, programming, and implementation of sector activities, 'especially in the road sub-sector, will be an area of continued focus. A recent review of the operations and management of DTP, undertaken as part of project preparation recommended significant organizational change. However, in light of the improbability of the cumulative effects of such adjustments leading to acceptable levels of efficiency and effectiveness over the long-term, the Government has opted, with the support and encouragement of all the donors, to create an autonomous Road Works Agency (AAGTR) with clear procedures, accountability and performance benchmarks, and operating resource levels commensurate with staffing requirements. During the transition period (between DTP and AAGTR) the following are being instituted in line with the organizational improvements recommended: (i) preparation of a 3-year rolling road maintenance program using HDM III; (ii) preparation of a detailed first year road maintenance program as part of the 3-year rolling program; (iii) staff training in the use of BDM III; and (iv) reform of the Road Fund to ensure more efficiency and transparency. This will be facilitated through the creation of a Road Fund Advisory Board whose main tasks will be to: (i) set appropriate procedures for planning, programming, implementation and control of maintenance works; (ii) report to the Ministers on how effectively these procedures are followed; (iii) provide technical advice to the Ministers on the Annual Road Maintenance Programs to be approved; and (iv) provide meaningful input to the MEFP on how effectively the conditions of disbursements of funds are met. The AAGTR study will include an evaluation to determine the fate of the Road Fund Board in relation to the agency. The TORs for this study have been prepared and a timetable for implementation agreed upon.

4.3 Monitoring of project activities in a systematic fashion will be reinforced. As noted in Section C4, Institutional and Implementation Arrangements, CELCO will be located in MEFP, with its work supported and guided by a procedures and execution manual. Technical audits will be carried out on an annual basis. This will be reinforced by annual reviews of all project aspects. In addition a Mid-Term Review will be carried out not later than January 31, 2002 (noted in Section C-4 (f)).

5. Social and Poverty Impact (SeeAnnex 4F)

5.1 Senegal, a country of almost 8.5 million, has a high incidence of poverty, illiteracy and unemployment.Thirty-three percent of the populationis consideredto be below the povertyline

25 with 45% estimated poor in relative terms. The proportion is higher in the rural areas (66%) than in the urban areas (14%). These socio-economic income groups have two key determinants of poverty in common: (i) low level of capital endowment (including human capital), and (ii) limited or no access to social services and economic opportunities, including schools. As a result illiteracy is high, about 67%, and affects women more than men. A poverty assessment conducted by the World Bank in 1995 listed transport cost as one of the factors constraining the supply and demand of education to the poor. The following regions are considered the poorest: (i) , (ii) Fatick, (iii) Kaolack, (iv) Ziguinchor, and (v) Diourbel.

5.2 In terms of employment, approximately 45% of the population participates in the labor force, with an estimated 75% under-employed. The overall unemployment rate is estimated at 30%, and even with urban unemployment increasing, in Senegal it remains essentially a rural phenomenon. In terms ofjob distribution it is estimated that the majority of jobs (more than 80%) are located in the Dakar area. The project will positively impact the living standard of both urban and rural dwellers. During the construction period alone it is estimated that a total of about 13,000 unskilled workers will be employed per annum on the various project works, with three of the five above-listed poorest regions (Fatick, Kaolack, and Diourbel) accounting for over 30% of this employment. In addition it is estimated that those employed will support a total of almost 30,000, including spouse, children and other relatives. This does not take into account any indirect employment that may arise as a result of the project or project works. The roads in particular will increase access and mobility for the rural poor in all regions, and reduce both travel time and transport costs associated with daily activities (see 7 (a) below), further increasing employment opportunities for low-income households through improved access to employment centers. The project's rural roads component is also expected to have a direct impact on the low-income population in the project's targeted areas through reduced transaction costs, increased agricultural production, increased access to markets and improved access to social services, including education and health centers.

6. Environmental assessment

6.1 The project falls under Category B. A thorough sector-wide environmental assessment has been conducted to determine the likely impacts of the project and to develop concrete action plans to mitigate negative project effects on the environment. Furthermore, a number of actions are programnmed into the project through specific environmental and social sustainable components, to ensure environmental sustainability both for the project itself and for the transport sector in general. At the institutional level the project will reinforce environmental capabilities within the various implementing agencies through training and technical assistance. Within the project coordination unit (CELCO) an environmental position has been created to specifically focus on environmental issues and to coordinate environmental assessments for the project components as necessary. Legislative and regulatory issues as they relate to the project will also be addressed. In terms of specific project environmental impacts, mitigation measures covering deforestation, construction refuse, and various environmental nuisances related to construction, as well as water and habitats have been identified and are included in Annex 2C. Total enviromnental costs being financed by the project are estimated at US$ 4.6 million. An environmental Action Plan for each transport sub-sector has been prepared (Annex 2C).

7. Participatory approach

7.1 A national workshop was organized in March 1997 to initiate the retrospective evaluation of the PAST, explore medium-term strategies and examine prospects regarding the PST 2. The

26 Medium-Term Transport Strategy was prepared with major input from all stakeholders. A Senegalese mission to Washington in October 1997 reviewed specific components of the proposed project and presented a first draft LSP2. A draft of the Project Concept Document (PCD) was discussed at a national workshop with all stakeholders (including donors) in March 1998 in Dakar. A similar workshop was held on October 24 (during appraisal), where the draft PAD, the Government's draft Consolidated Project Document (CPD), and the overall direction and pace of implementation of both the government's transport strategy and project direction, were discussed.

7.2 The preparation of the rural transport strategy will make extensive use of national, regional and local workshops and will pay particular attention to the inclusion of marginalized groups. The process of project preparation has been very interactive. Pre-appraisal and appraisal were conducted concurrently and in close coordination by IDA and four of the co-financiers of the project (AFD, BOAD, EU, and the Nordic Fund).

7.3 Primary beneficiaries and other affected groups: Given the overall poverty reduction objective of the Government and the CAS, and the aim to reach this objective effectively and efficiently, the assessment of beneficiaries in PST2 is based on its impact on policy-relevant socio-economic groups (the poor). As conceived, the project's impact on the poor is mainly in increased access to markets and services, reduced travel times and transport costs, improved safety and employment through network expansion, infrastructure rehabilitation, and increased tourism. This is particularly true with respect to the roads component which should particularly benefit unskilled workers. In terms of the rural transport component, both men and women are expected to be equal beneficiaries. For men, their access to employment and income-generating activities is expected to be significant. With respect to women, the benefit will be more subtle. Women play an important role in the household to the extent that their social obligations include tasks such as fetching water and firewood. As a result they tend to carry a greater share of the transport burden, where it is estimated that women contribute over 60% of their time and effort on travel and the transport of basic needs. An improved rural network is expected to significantly reduce the time spent on these tasks (recent UNEF study has suggested that time reductions could be decreased by more than half and transport costs reduced by as much as 50% in monetary terms).

7.4 Other key stakeholders: Almost 40% of project costs are to be financed by donors and multilateral institutions other than the World Bank. In total there are 10 potential co-financiers for PST2. These include: the Economic Union (EU), BID, AFD and FAC (of France), Nordic Fund, West-African Development Bank (BOAD), African Development Bank (ADB), Saudi Fund, Kuwaiti Fund, ASECNA (Article 2), and others. Discussions are well under way concerning the interest and level of commitment of each co-financier. Confirmation of donor co-financing interest covering specific portions of the project cost was obtained at a donors' meeting held on February 1-2. 1999. with the assistance of the Bank.

F. Sustainability and Risks

1. Sustainability

1.1 Sustainability is enhanced by demonstrated Government commitment to the sector. This is evidenced by its allocation of about 20% of its overall investment budget to the road sector in the past several years and by the reforms already undertaken for the parastatals (railways, port,

27 airline) under the PAST. The need and justification for adequate investments in infrastructure is well understood.

1.2 To further strengthen transport sustainability, the following actions have been taken or are needed: (i) transparency, and a predictable supply and timely disbursement of funds for road maintenance. Reform of the Road Fund is underway and will be operationalized through this Credit (see Section G); (ii) effective capacity building; (iii) introduction of an efficient system for road maintenance planning, programming and supervision and introduction of the three-year rolling RMRP; and (iv) enhancement of regulatory capacity in the administration.

2. Critical Risks

(reflectingassumptions in the fourthcolumn of Annex 1): Risk Risk Risk MinimizationMeasure Rating Annex 1, cell "fromOutputs to Objective" Project outputs to development objective _ . Governmentof Senegal(GOS) does not N The Letter of SectorPolicy (LSP2) has adhere to the principles of the Letter of been prepared by GOS after extensive Sector Policy consultations with executing agencies, stakeholders & donors. Also, donors have indicated clearly that their financing is predicated on adherence to the Reform Program. GOS does not fully compensate for public N Due diligence clause and credit service obligations on sector operators covenants GOS does not continue appropriate budget M GOS commitment in LSP2 allocationfor DTT GOS does not make agreed level of and M GOS commitment in LSP2. Credit timely resource allocation to the Road Fund covenants. GOS own preferred option to provide funds, in the short-medium terms through the budget process. Adequate external and local funding sources N Sector approach to project. Many donors are not identified already committed. Flexibility in available IDA financing. Customs procedures and regulations are not N Actions supported under Private Sector simplified & Competitiveness Project (PSCP) GOS is not ready to plan investments in the N Commitment in LSP2. 3-year RMRP sector according to transparent and explicit agreed with IDA. Availability of criteria Execution Manual priorto effectiveness. GOS does not restructure the Road Fund in N Agreed already with relevant manner acceptable to IDA and Donors acts/decrees to effect the reform/restructuring in approval process. GOS actively participated in designing restructuring proposals. Signature of acts/decrees and personnel recruitment under reform scheme are conditions of negotiations. Weak planning, programming and M A 3-year RMRP already prepared using supervision capacity of DTP. Transitory HDM-III. Key staff have received measures regarding organizational special training and targeted TA has

28 adjustinent and fine-tuning of DTP not been provided. Creation of an implemented autonomousRoad Works Agency by effectiveness. Functions for evaluation of environmental N Commitment in LSP2. Detailed sector and social impact unassigned or weak environmental assessment already relevant ministry completed under PAST; mitigation measures proposed and action plan prepared. Assistance foreseen under

.______PST2 (see Action Plan in Annex 2B). GOS does not adopt acceptable guidelines for N Draft framework and guidelines environmental and social appraisal of prepared and submitted by GOS. appropriate transport infrastructure projects Delay in creation of SETI S Joint notification by GOS and Government of Mali of the choice of the strategic shareholder in SETI is a condition for disbursement of the rail component. Failure to privatize Air Senegal N Commitment of Senegal GOS Overall Risk Rating M

Risk Rating -H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

3. Possible Controversial Aspects: none

G. Main Loan Conditions

1. Effectiveness Conditions:

3 Open a project account and deposit therein the amount of the Initial Deposit * Establish a financial accounting and management system acceptable to IDA and selection of auditors acceptable to IDA; * Provide report with a detailed Action Plan regarding creation of Road Works Agency; * Project Execution Manual, including procedures for accounting and financial management, finalized and acceptable to IDA.

2. Other

2.1 Negotiation conditions shown below were met on time:

* Letter of Sector Policy (LSP2) adopted; * Government of Senegal will have prepared a draft of the Project Execution Manual including procedures for accounting and financial management; * Official act on the reform of the road fund mechanism signed, Road Fund reform effective, Road Fund Review and Advisory Board (RFRAB) appointed, essential Secretariat personnel recruited and in place, first meeting of the Advisory Board held, financing provided; program of actions for first year blue-printed;

29 * The repositioning of CELCO to the Ministry of Economic, Finance and Planning has been effected and key personnel recruited; * The revised timetable for the creation of SETI is on course and a coherent remedial plan of action presented to address any slippage or delays; * Framework has been designed for onlending of funds to SNCS and PAD. The framework will include the restructuring of existing debt to clean the balance sheets of the companies taking into account recent debt forgiveness enjoyed by GOS and to bring their debt service ratios to acceptable levels; * Confirmation that an accounting and financial management system acceptable to IDA is in place at CELCO; * Confirmation of donor co-financing interest covering significant portion of project cost; * Environmental action plan has been prepare; * Preparation of draft report on the establishment of the Road Works Agency; * Preparation of strategy and the implementation plan for airport management privatization and restructuring of civil aviation and meteorology departments; * Confirmation of availability of counterpart funds for CELCO, DTT, DAC, DMN and DMM for FY 1999; * Confirmation that a minimum of CFAF 15 billion has been allocated to the Road Fund for FY 1999; and • Start of process to recruit auditing firm on a multi-year contract basis.

2.2. The following agreements were reached at Negotiations

* The Government would submit to the Association, by August 1st of each year (see Annex 2B), for review and comments its draft annual Work Program and Budget (WPB) for the project including: (i) objectives; (ii) actions, programs; (iii) an estimate of the financial resources required and the financing sources; (iv) a Procurement Plan based on the WPB; and (v) a monitoring program; * quarterly reports to be furnished to the Association no later than 30 days after the end of each of the following quarters: March 31, June 30, and September 30, and an annual report which would include the December 31 period, to be furnished within two months of year-end; * the Government and the Association shall, not later than August 1, 1999 and, thereafter, not later than August 1 of each subsequent year, undertake a joint review of the Project or, and, not later than March 31, 2002, conduct a mid-term review, during which they shall exchange views generally on all matters relating to the progress achieved in the implementation of the objectives of the Project. Following each such review, the Government shall undertake to take corrective actions deemed necessary to remedy any shortcomings noted in the implementation of the project, or to implement any other measures as may have been agreed upon in furtherance of the objectives of the Project (pg. 17);

30 * not later thanone month prior to each such review,the GOS shall furnish to IDA, for its comments, a report in such detail as the Association shall reasonably request,to undertakethe above-mentionedyearly and mid-term review; * as a general rule, consultingand advisoryservices would be selected on the basis of short-listing,and on Sample Bank Bidding Documents,Letters of Invitation for selection of consultants, and Sample Consultants' contracts, modified as appropriate.; * the Governmentwill prepare and furnish to the Associationan Implementation CompletionReport within six monthsafter the closing date; * the Government shall, at the beginning of its financial year make available annually at least CFA F 15 billion to the Road Fund and provide appropriate local financing for the Project CoordinationUnit (CELCO), Land Transport Administration(DTT) and other projectactivities identified in the WPB; * the establishmentand operationsof the SpecialAccount and other disbursement procedures; * key monitoringand performanceindicators for each componentof the project; * the carrying out of a mid-termreview not later than January 31, 2002; and - the Government shall cause SNCS and PAD to implement project activities in line with the provisionsof their respectiveproject agreements * Disbursementof works and equipmentfor the rehabilitationof the Tambacounda/ Kidira section (Category2(a) (ii)), cannot be made unless: (i) the Borrower has adopted an action plan, satisfactoryto the Association,for the organizationaland financialrestructuring of SNCS;(ii) the Borrowerhas issued and publishedin the Journal O0ficiel,a Decree containingthe amendmentsto the SNCS Cahiersdes Charges required to allow the operationof internationalrail services by SETI; and (iii) SNCS has entered into an operatingagreement with SETI, in form and substance satisfactory to the Association, for the international rail transport services on the Dakar-Bamakocorridor.

H. Readiness for Implementation

1. The engineeringdesign documents for the first year's activitiesare complete and ready for the start of project implementationas are the procurementdocuments. Advance procurementfor civil works and goods will be made in accordancewith Bank procurementguidelines. With the current processing schedule, retroactive financing for certain project components may be necessary given the present rate of project preparation.However, it is well understoodthat all IDA guidelines will be observed prior to the release of any such funds. During project implementation,CELCO will benefit from the assistance of a procurement specialist for the handling/coordinationand supervisionof works as well as quality control on the procurement actions of other units of the project.

1.1 The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality. Details are found in the Project ExecutionManual and the Project File (see Annex 8). The Plan and the procurementdocuments for the first year's activitiesare complete and ready for the start of project implementation.

31 I. Compliance with Bank Policies

This project complieswith all applicableBank policies.

EmmanuelMbi Task Team Leader

-

Taskea Leader

Ma PlisXis-Fraissard

MahmoodA. Ayub CountryDirector

32 Annex 1: Second Transport Sector Program (PST2)

Project Design Summary

Sectr-rblta CAS Goal: Goal to Mbrion To CONlEnE So RPID AND SUSADW GROWTHBY - increa5ein GDP RVaflOCOu ETMVENuSEtFORLEIINTRADEAND - Increasein sectord contbtion to GDPgrowth > National statistics * Favorablemacroeconomics VPOVINKAGESIN DOMESlCAND REGIONAL - growh In cgo& > i tinlConditin TOaMARKETS E TOp^L ssrnBlLn BY- lnc,zsein contpet statistics * Concomitat progre in IMPROVWIGTHE DEBRNE AND DSCREASNG T1HE COST OF > Ministy of oeier fiffi soton ACCESSBY TB PtOO TOSOCIAL SERVICES AND MARKET commace and e8mu ts. ORECONOMC OPPORIUNMES IN RURAL & URBANAREAS cudom date tabamuic) > Devcolmcso ntof basic IhUMAnreacurco to sustain surv"s ~~~rapidgrowth

Project Developoent Objectliv Objectiveto Goal TOOBTAJNASUSTAJNABLEIMPROVEMENT INTH SUPPLY - redto in internaland exdtrnfreight rates by ANDPERFORMANCE OFTHE TRANSPORT WFRASMUCTURE modeand > fre wadfrom o tEvovingcomptr iptisec (INCLUDIGSERVICES) TO HELP IMPROVEVSUSTAIN - reductionof averagedeliveryt tefor sekcted f-arding agent ofthe tt seca ECONOMICGROWtJIAND IMPROVE ACCESS. goods * Effectiveimplementation of - reductionin averagepassengerfares > Independent fee exchang agreemnts - increasedpercentageofinfrastmucture in good perfonnane auditing with neighboring counries condition and oirrgoa - increasednomber ofdisrct capitals ith accessto > Annul statisticsof andtea rriSon al all weatherroadsfor bothpassengers andfreight the land Tranport the contextof ECOWAS - increasein percentage of roadinfrastructure in Di (Tcto(O h good condton as reflectedby theINJ (international > Annualstatistico s Effctive impofm taion of roughnes index) th i an Maofm - financIaautonony ofparartatals tframransort fswokofteUEMOA - successfidcomapkti- fprvatmtition Directorates a Continuityof

> Quadely Opeating tsained/tapeionco saff in Repats of thejobs Railway(SNCS) Dakar Pot (PAD) ad Aiport Mangement (AANS)companies > Road Condition Surveys > Traffic Surveys

'Cf. Senegal:the Challenge ofRegional Integration,Development Prospect Group, November 1997 1 THE REGULATORY,PLANNING AND - the Data Bases on transport infrastructure (roads in particular) are > Project * The Government of PRWRANSPOrGCAPACrrY OF THIE te em desupdated eve i t y pe in Senegal adfhues to ADMINISTRAMlONIS - the three-yearro)lingRoad Maintenance and Rehabilitation Plan Reports the principles of the STRENGTHEND (RURP) is -pdated evryyear > Project Quarterly Letter of Sector - increasein the nwmberof personnel in theAdmxinistration receivmg Reports Policy (LSP2) training

THE MODERNIZATIDNOF THELAND - the transportand vehicle titles computerization is generalized > Reports firom * The Government of TRANSPORTADMINISTRATlON IS - theMemento des Transports is updatedevery twoyears Implementing Senegal fully CONSOLIDATED - increase in revenuesfrom the land transport administration Agencies or Units compensates for {license,titles, etc..) public service obligations on sector companies

THE TRANSPARENCYAND - Road Fund management reformed by Septem ber 1999 > Quarterly * The Govemment of SUSTAINABILITYOF PUBLIC - options forfinancing road works from public sources other than GOS Independent Senegal continues SECTORFINANCING IS INCREASED direct budget reviewed by December 2001 Technical Audits appropriate budget allocation for the Land Transport Directorate (DTT)

THEINVOLVEMENTOPTHEPRIVATE- Air Senegal isprivatized byDecember 1999 > Independent * The Government of SECTOPIN THEMANAGEMENT, - the Privatization process of airports management operations is Financial Audits Senegal continues to DEVELOPMENTANDFINANCING OF initiated by January 2000 make agreed level of TRANSPORTINFRASTRUCTURE IS - SEll (Dakar/Bamako axis) is operational by December 1999 > Annual and timely allocation INCREASED - increase in cost recovery by mode performance to the Road Fund - increase in the amount of resourcesfor new investnents or reports of training rehabilitation provided by the private sector plans

AFRAMEWORXFORENVIRONMENTAL- the Guidesnafor ES] appraisal of InfrastructureProjects are issued > Specific Surveys * Adequate external AND SOCIALIMPACT (ESI) - increase in the nunber ofproject and works in the Infrastructure and local funding APPRAISALOF INFRASTRUCTURE sectors which underwent ESI assessment [to be revised] sources identified PROJECTSIS ESTABLISHED

THEROAD INFRASTRUCTUREIS - XY% of contract expenditures of RRP awarded via competitive > Haulage * Customs procedures IMPROVEDAND ITS MAINTENANCE process [to be discussed] companies records and regulations are IS MOREEFFICIENT - reduction in journey time weightedfor trafic on the primary roads simplified network > Railway - actual executed works broadly consistent with three-year AAdRP companies records

RAIL TRANSPORTIS MOREEFFICIENT - increase railways productivity - increase in average commercial speed/frequency ofservice > Data from airlines - reduction in derailments relative to movements - wage bill asproportion of revenues > Data from shipping - increase in cargo traffic on the line lines - rotation days ofwagon pool

CIMLAVIATION OPERATIONS ARE - decrease in average cargo hand7ing costs and dwell time in main SAFERAND MOREEFFICIENT airports - increase in aids to navigation availability and reliability

MARrTMETRANSPORT SERVICES ARE - PAD personnelloperating costs ratio is less than 277%and 25 % EXPANDEDAND MORE respectiveJyfor the years 1999 and 2000 COMPETrrIVE - decrease in average cargo/container handling costs and dwell time in main ports - increase infrequency offreight/passenger sailing from ma in ports - incear in tonnag of good.stramhipped - handledvolwne of argo

A STrATAOYFORRURALTRASORTIs- Strategyadopted by Judy 1999 ADoPT) - portfolioof projectsreadyfor imtnementation in twostages: emergency works and fud program_

2 liyi~~~~~~,-RI o" ~ ~ ~ ~ ~ ~

1. Intitutional Strengtening & Policy Development 1.1 Modernizeand update data bases on the state of road tranapost infrastructure [see 2.2 & 6.1] > Project The Government of 1.2 Organizational Adjustment IFine-Tuning of Public Works Depadment (DTP) [see 6.2] Supervision Senegal (GOS) ready 1.3 Prepuation & update three year Rolling Maintenance and Rehabilitation Plan for (RMRP) of the Reports to plan the primary roads [see 6.3] investments in the 1.4 Prmote research, monitor/enforce standards & improve quality control for road[CEREEQ, see 6.6] > Disbursements Sector according to 1.5 Train key pcr onnel in relevant Administrations [see 6.41 Reports explicittransparent criteria and 1.6 Office, didactic & other equipment [see 6.5] 1.7 Improve capacity of middle & lower level technicians for public works [see 6.7] 1.8 Implement new railway strategy [see 7.2] > Project GOS restructures the 1.9 Reorganize Civil Aviation Administration [see 8.3] Quarterly Road Fund in a 1.10 Improve policy-making, rgulatory & management capacity in maritime sector [see 9.1 & 9.2] Repots manner accptable to IDA and Donors 1.11 Develop rul transport policy &actionplan [see 10.1] > Repots from GOS takes and Implementing implements measurcs Agcencis of to streamline 2. Land Transport Administration Modernization & Planning 4.91 UAnits Organizationand 2.1. Reform & modernization of testing systems for driver's licenses 0.11 Improve capacity of 2.2. Full computerization of the Land Transport Administration (DTM 0.25 DTP 2.3. Road safety campaigns, studie training 1.75 2.4. Physical improvemnts of DTT: archives, facilities renovation/construction 1.90 2.5. Goods; technical docs., furiiture, equipment 0.90

3. Transparent & Sustainable Public Financing in Road Subsector 1.90 3.1. Adjuatment/ateamlining ofthe Road Fund management, including implenmentation(establishment 1.60 & finctioning of advisory and rcview board, etc..)

3.2. Office equipment, materials, vehicles for Board/Secretariat 0.30

4. Promote Further Private Sector Involvement in Sector 2.30 Functions for 4.1. Support to effect privatizationarrangements for Dakar/Eamako railway axis operations and 0.40 Evaluation of the mobiization private participation railway development environmental and social impact clearly 4.2. Support to the privatization process of Air S6n6gal inc. stafftraining 0.70 assigned and/or at the relevant ministry 4.3. Support to the privatization of Airports Management 0.80 4.4. Support to mobilize private participation ports deveopment maritime transport and Dakar- 0.20 GOS adopts Ziguinchor route acceptable guidelines for environmental 4.5. Mobilization of private participation in road financing 0.20 and Social appraisal of appropriate transport infirastructureprojects

5. Social and Environmental Sustainability 5.02 5.1. Environmental officer - CELCO 0.15 5.2. Strcngthen capacity for environmental inst, evaluation of the environmental and social impact 3.72 (ESI), studies, audits/training of key personnel, public education, advisory services standards, specifications 5.3. Works to support ESI nitigation measures under PST2 0.30 5.3. Equipment to suppott ESI mitigation measures 0.85

6. Read Maintenance, Rehabilitation, Construction 330.57 6.1. Expand & Update databases on state of road infrastucture inc. introducing GIS-T technology, and 1.00 appropriate analytical models [ref. 1.1] 6.2. Organizational adjustment and fine tuning ofthe Dept. of Public Works (T)TP) including training 4.14 and TA & Road Agency Creation [ref. 1.2] 6.3. Preparation and update ofthree years RRP [ref. 1.3] 0.70 6.4. Train key personnel other than for DTP [ref.1.5] 3.09 6.5. Equipment (office, didactic, vehices, supplies, etc..) [re£f.161 16.77 6.6. Restructuring CEREEQ & strengthen its normative role [ref 1.4] 1.20 6.7. Reform and restruture CFP [ref. 1.7] 0.80 6.8. Routine road maintenance waots 87.70 6.9. Periodic road maintenance andrehab. works 110.53 6.10. Eath road rhabilitation works 54.55 6.11. Road improverents and investments (including bridges) 45.09 6.1Z Studies, engineering and supervision 5.00 _

3 1~~~~~~~~~~

7. Railways 76.96 7.1. Support for privatization arrangements of the operation of international rail saevicca on thu n/a > Project DskarlBamako conridor nd mobilization of privatc participation, railway development [mee Supervision 4.11 Reports 7.2. Implementation of SNCS reatructuring new strategy, mgt &tstafftraiming [ref 1.81 1.00 7.3. Office, didactic and computer equipment 0.50 7.4. SNCS personnel redundanciea 6.40 > Disburmements 7.5. Goods & Worbs for inreuaing the transport capacity for the phosphate industry 9.80 Repoits 7.5 (a) Woris for increasing the trnspot capacity for the phosphate industry 2.77 7.5 (b) Goods for increasing the trasport capacity for the phosphate industy 7.03 7.6. Goods & Weeks for the track renewal/rehbilitation on Tambacounda-ICidira, This- 36.73 Tambacounda and improvemnct ofthe Kidira station 7.7 Rehabilitaton ofworkihops 1.04 > Project 7.8 Radio,cor. and weighingequipment and signalingsydems 6.36 Quatery 7.9 Acquisition of roling stock (to be f6nancd by operators) 14.90 Reports 7.10 Studies, engineering and supervisionof woais 0.23

8. Airports & Civil Aviation 71.93 > Reports from S1. Privatization of Air Senegal [se 42] n/a Implementing 8.2. Privatization of Airporb Marnagement [se 4.3] nla Agencies or 8.3. Reorg of the Civil Aviation Admin. incl. regulatory rangements. training and TA. [ref. 1.9]. 1.00 Units 8.4. Reorganization/Strengtheningmeteorological department (DMN) 0.26 S.5. Expanion andmodemization ofterminal at L. S. Senghor(LSS) Airport 18.91 8.6. Officerehabilitation of DAC and DMN 0.19 8.7. Equipment / materiab for DAC and DMN 1.33 B.S. Aid to naviption and safety equipment for all airports 2.22 S.9. Handling equipment for LSS airport 2.00 S 10. Rehabilitation woras at LSS Airport (main runway 18/36, parking area for cargo planes, etc.) 10.27 8.11. Reinforce. ofpafking reasatLSS Airport forjumbojets 2.12 8.12 Lengthening of runway 03/2 at LSS airport 1.80 8.13 Construction of new Ziguinchor aiport 22.97 8.14. Lengthening of runway of St.Louis airpot/deviation of road 5.86 8.15. Redundancies at AANS & Air Senegal 3.00

9. Ports & Maritime Transport 72.57 9.1. Establishlnent ofa system ofperiodic hydrographic survey ofKaolack Port [ref 1.10] 0.10 9.2. Institutional srengthening (DMMWM M etc..) including training, studies. TA [ef. 1.10] 0.80 9.3. Office, didactic, logistical equipment & material for sub-sectoral inst. 0.30 9.4. Equipment for econdary port Kaolack & Ziguinchor (signaling and navigation aids, etc.) 0.50 9.5. Expansionand rehab. worksfor Kaolack& Ziguinchorpoits 2.50 9.6. Expansionand rehb. wrka for PAD (containerteminal petro.wharfs, public facilities, etc.) 63.37 9.7. Equipment for Port ofDakar 4.50 9.8. Training studics& advisorysevices for PAD 0.50 9.9. Support to mobilize private participation in Dakar-Ziguinchor maritime route [see 4.41 n/a

1 Rural Transport 10.93 10.1. Support to design of Rural Trnsport Strategy including preparation of nat'l nual transport 0.70 projectincluding taining [ref. 1.11] 10 2. EstablishRurl Trnsport CoordinationUnit includingofficc equipment 0.10 10.3 Officeand didacticequipment and logistical 0.13 10.4. PriorityRehabilitation worbk 10.00

11 Project Coordination 3.91 11.1 Opeating Costa 2.23 11.2 Audits/Advisoyservicea/studicshraining 1.68 TOTAL 581.00

4 Annex 2A: Second Transport Sector Program (PST2)

Project Description

ProjectComponent 1- InstitutionalBuilding and Reforms

1. The project wili support a number of institutionalstrengthening and reform measuresin all the componentslisted above including training, studies, seminars, limited technical assistance, policy and regulatoryreform measures.

Project Component 2 - Modernizationof the Land TransportDepartment (US$4.91 million)

2. The project will finance the reform and modernizationof the testing systemsfor the processingof drivers' licenses,the full computerizationof the land transportdepartment, physical improvementsof some facilities,the purchaseof equipmentand other goods, locally-providedtechnical assistance, training and studies.

ProjectComponent 3 - Sustainableand Transparent Financingof the Road Sub-sector(US$ 1.9 million) 3. The projectwill financethe implementationof the reformmeasures to improvethe managementof the Road Fund. Specificmeasures include the setting up of the Road Fund Advisoryand Review Board, the employmentof a secretariatto supportthe Board,the preparationof detailedprocedures for the preparationof the annualroad maintenanceprogram, accounting and financial management and normsand standardsfor road works,audits and variousstudies that will be required.In addition,office equipment,vehicles and incremental recurrentcosts willbe financed. Project Component4 - Promotion of Private sector Involvementin Sector (US$2.3 million)

4. The projectwill finance(i) the pnvatizationof infrastructureand transportentities (ii) the privatization sectorwill be promotedin particularthrough the mobilizationof increasedprivate participation in financing sectoralactivities. ProjectComponent 5 - Environment- (US$5.02 million) 5. The projectwill supportmeasures to help the governmentbetter define its environmentpolicy, draw a proper regulatoryframework and establish clear operationalguidelines to implementmeasures aimed at mitigatingthe negativeenvironmental impacts of the proposedproject.

ProjectComponent 6 - Road Maintenance,Rehabilitation and construction(US$ 330.57 milion) 6. The projectwill financethe strengtheningof about 600 km of paved roads and periodicmaintenance of about 600 km of pavedroads. Regardingthe annualroutine maintenance, about 5000 km (3000 km of paved roads and2000 km of unpavedroads) will be maintainedat the beginningof PST2; at the end of the program, 11200km (4200km of pavedroads and 7000km of unpavedroads) will be maintainedeach year. The project will also financethe buildingof three new roads with a total lengthof about 130km and the rehabilitationof a limitednumber of bridges.

7. Priority will be given to roads in relativelygood conditionto prevent their further deterioration. Selectioncriteria for the sectionsto be financedwill includethe economicrate of the return but also non- quantitativefactors such as the needsof regionalintegration.

5 8. Institutional strengthening and policy reform measures included in the capacity building and reform sections will also be financed as well as equipment. The center of experimental research (CEREEQ) for road works and materials will also benefit from project financing to train its staff and acquire critically needed equipment.

Project Component 7 - Railways (US$ 76.96 million)

9. The project will finance: (i) track renewal for the Tamba-Kidira and Thies-Tivouane sections; (ii) the construction of a third track for Hann/Thiaroye; (iii) rehabilitation of the Dakar-Tamba section; (iv) various infrastructure rehabilitation; (v) various communications and other equipment; (vi) measures needed to accompanypolicy reforms; and (vii) training and studies.

Project Component 8 - Civil Aviation (US$ 71.93 million)

10. The project will support: (i) the rehabilitation of the main runway, the parking area and the warehouses of the Dakar airport; (ii) the extension of the runway at Dakar; (iii) the modernization and expansion of the Dakar passenger handling area; (iv) the detour of the national road at the Saint-Louis airport; (v) the building of a new airport in Ziguinchor; (vi) navigation and safety equipment and aids in all major airports; and (vii) various policy reform and regulatory measures.

Project Component 9 - Modernization and Development of the maritime and river transport sector (US$ 72.57 million)

11. The project will finance: (i) for the port of Dakar, the expansion works for the container terminal, regrouping of the phosphate handling facilities, the rehabilitation of the petroleum wharf, and the replacement of various equipment' and materials; (ii) for the port of Kaoloack, the establishment of a system of periodic hydrographic surveys, some minor expansion and rehabilitation works, signaling and navigation aids; (iii) for the port of Zinguinchor, minor expansion and rehabilitation works, signaling and navigation aids; (iv) for all three port, institutional strengthening measures, training and studies; and (v) for the merchant marine department,reform and institutional strengthening measures.

Project Component 10 - Rural Transport (USS 10.93 million)

12. The project will support the design of a rural transport strategy, the establishment of a rural transport unit including equipment, a priority pilot rehabilitation works programs and studies and training.

Project Component 11 - Coordination (US$ 3.91 million)

13. The project will finance incremental recurrent costs, equipment, studies and training for the project coordination unit.

6 Annex 2A BIS : Second Transport Sector Program (PST2)

Description of the Project financed by IDA

1. The objectives of the Project are to obtain a sustainable improvement in the supply and performance of the transport infrastructure (including services), help improve sustain economic growth and improve access (Refer to Annex 6, Table C). The Project consists of the following parts:

Part A: Land Transport Administration Modernization & Planning

2. Advisory Services and Technical Assistance for reform and modernization of testing systems for driver's licenses; computerization of Land Transport Directorate (DTT) and for road safety campaigns, studies and training.

3. Acquisition of goods and materials including technical documents, fumiture for regional offices and equipment.

4. Physical improvements of DTT, construction and rehabilitation of regional division of DTT, construction of runways for road safety education, driving license testing and inspectionyards.

Part B: Sustainable and Transparent Financing of the Road Sub-sector

5. Advisory services to implement reform measures to improve the management of the Road Fund (RF) including: the setting up of the Road Fund Advisory and Review Board (RFARB); incremental staffing and costs of a Technical Secretariat (TS) to support the (RFARB); preparation of detailed procedures for the operations of the RFARB and the RF; preparation of the annual road maintenance financing program, accounting and financial management and norms and standards for road works; audits and various studies that will be required; and rents, utilities, fuel, travel allowances.

6. Acquisition of office equipment, materials and two vehicles for the TS .

Part C: Social and Environmental Sustainability

6. Actions to strengthen the Borrowers' capacity in environmental management in transport including training, studies and technical assistance.

7. Works to support Environmental Social Impact (ESI) mitigation measures under PST2 sub-projects in the roads, ports, railways and civil aviation subsectors.

8. Acquisition of equipment to support ESI mitigation measures under PST2 sub-projects in the railways, ports, roads and civil aviation sub-sectors.

Part D: Road Maintenance, Rehabilitation, Construction

9. Advisory services, technical assistance and training for: the expansion and update of databases on state of road infrastructure; organizational adjustmentand fine tuning of the Dept. of Public Works (DTP); creation and operations of an autonomous Road Works Agency; preparation and update of three-year rolling Road Maintenance and Rehabilitation Program (RMRP).

10. Training of key personnel involved in the road sub-sector (CEREEQ, CFP, etc...) other than for DTP.

7 11. Advisory services and technical assistance for : restructuring CEREEQ and strengthening its normative role; reform and restructuring of CFP including setting-up of an accounting and financial management system.

12. Advisory services, studies and training for mobilization of private participation in roads sub-sector financing.

13. Studies,Engineering and Supervision of road works.

14. In line with RMRP, periodic maintenance of about 200 km of paved roads, regraveling of about 600 km of earth roads, elimination of black spots on about 1200 km of earth roads, as well as the rehabilitation of up to ten bridges.

15. Acquisition of equipment (office, didactic, vehicles, materials, etc..).

Part E: Railways sub-sector

16. Provision of technical advisory services and training for: (a) the privatization of the operation of international railway services on the Dakar-Bamako corridor; (b) the implementation of SNCS restructuring and new strategy; and (c) management and staff training for SNCS.

17. Provision of technical advisory services for the mobilization of private participation in railway projects designed to support mining development.

18. Provision of equipment and carrying out of works for track renewal of the ThiesiTivaoune section, rehabilitation of the track between Dakar and Thies and construction of a third track between Hann and Thiaroye.

19. Carrying out of studies, engineering and supervision related to works in the railway sub-sector.

20. Provision of goods and carrying out of works for track renewal of the Tambacounda-Kidira section, remodeling of the Kidira border station, track rehabilitation of the Thies-Tambacounda section, safety fencing and pedestrian overpasses.

21. Acquisition of a radio-block system for the Thies-Kidira section, improvement of signaling for Dakar- Thi6s-Bel Air, acquisition of telecommunication equipment, in-motion weighing equipment and didactic equipment for SNCS's training center.

22. Implementation of a program designed to facilitate the retrenchment of up to 314 SNCS staff declared redundant as a result of closure of the passenger rail lines Dakar/Saint-Louis and Guingueneo/Kaolack, including the provision of severance payments.

23. Implementation of a program designed to facilitate the retrenchment of up to 550 SNCS staff declared redundant as a result of the privatization of the operation by SETI of international railway services on the Dakar-Bamakocorridor, and restructuring of SNCS, including the provision of severance payments.

Part F: Airmorts and Civil Aviation sub-sector

24. Provision of technical advisory services including studies for privatization of Air Senegal, privatization of airports management, and reorganization of the DAC, including regulatory arrangements.

25. Provision of training for sub-sector staff.

27. Rehabilitationof offices of DAC and DMN.

8 28. Acquisition of office, didactic, computer and other equipment and office furniture for DAC and DMN.

29. Expansion and modernizationof terminal at LSS airport; rehabilitation works at LSS airport including, inter alia, the main runway 18/36, parking area for cargo planes; reinforcement of parking areas at LSS airport for jumbo jets; lengthening of runway 03/2 at LSS airport and lengthening of runway of St. Louis airport/deviationof road.

30. Provision of logistical assistance and navigation and safety equipment for airports and handling equipment for LSS airport.

31. Implementation of a program designed to facilitate the retrenchment of AANS staff declared redundant as a result of privatization of management of airports and restructuring of civil aviation and meteorological departnents, including the provision of severance payments.

Part G: Modernization and Develonment of the Port of Dakar

32. Provision of material and naval equipment for the Port of Dakar, including inter alia, tug-boat and barge.

33. Expansion of the container terminal including phosphate terminals regrouping and rehabilitation works for the petroleum wharf, and public facilities (electricity and water).

34. Carrying out of studies, provision of technical advisory services and training for the PAD personnel.

35. Provision of technical advisory services and logistical assistance to PAD to facilitate a greater participation of private sector in the financing and managementof port infrastructure.

Part H: Modernization and Development of Maritime and River Transport

36. Strengthening of sub-sectoral institutions including the Merchant Marine Department (DMM and Ministry of Maritime Transport (MPTM) including provision of training and technical advisory services and carrying out of technical studies.

37. Provision of technical advisory services for updating of the Maritime Code.

38. Establishmentof a system of periodic hydrographic surveys of Kaolack Port.

39. Provision of advisory services and training for mobilization of private participation in ports development and maritime transport including Dakar-Ziguinchormaritime route.

40. Acquisition of office, didactic and logistical equipment and materials for DMM and for the Ecole Nationale de Formation Maritime.

41. Equipment for the secondary ports of Kaolack and Ziguinchor, including river and maritime signaling and navigation aids.

42. Expansion and rehabilitation works for Kaolack and Ziguinchor ports including improving access to the port, docks and passengers terminals at Dakar and Ziguinchor.

9 Part I: Rural transDort Sub-sector 43. Provision of technical advisory services and studies for design of a rural transport strategy, preparation of a national rural project, and establishment of a rural transport coordination.

44. Provision of training related to activities in paragraph 1 above.

45. Acquisition of office and didactic equipment for activities in paragraph 1 above.

46. Carrying out of priority and emergency program of rehabilitation, periodic maintenance, treatment of critical spots, and exceptionally, improvement of rural roads in conformity with the Borrower's new strategy for rural transport.

47. Studies, engineering and supervisionrelated to civil works carried out under this Part I.

Part J: Coordination

48. Provision by technical advisory services, equipment and logistical assistance for the coordination of the Project.

10 Annex2B: SecondTransport Sector Program (PST2) AnnualWork Programand BudgetPlanning/Review Process

1. PST2 will be implementedon the basis of Annual Work Programs and Budgets (AWP) prepared in conformity with the Government's budget calendar. CELCO is responsible for coordinating the budget. The AWP is submitted to the prescribed decision making bodies (MPTM, MTTA, National Assembly and the respective boards of directors of the national companies for instance). Before the start of each fiscal year and following the Government budget calendar,all the agenciesinvolved in the project includingCELCO will prepare a program of the activitiesthey intend to have financedunder the PST2 and called the AWP. This should include: (i) a definitionof the objectivesfor the coming year; (ii) a presentationof the proposed strategy and a detailed descriptionof the program of activitiesto achievethese objectives;(iii) an estimate of the costs and expendituresto be incurred;and (iv) the financingplan proposedto meet those costs on the basis of the financingsources available.

2. In the case of the road component,the annual programwill be made in part of the update of the first year of the three-year rollinginvestment program alreadyprepared.

3. CELCO's budget includes investment costs (to be clearly defined but to include equipment, office equipment and materials, works, construction,vehicles, training and studies) and operatingcosts. The budget of other agencies is made mostly of investment costs and, in some cases, operating costs. Both investmentand operating budgets are prepared based on the respectivework programsproposed for the relevantyear by agency, departmentor company.

4. As soon as possible and well before the budget circular has been issued, CELCO should contact all the agencies and/or companiesto start discussionson the program of activities to be financedunder PST2 for the coming year. CELCO shouldthereafter request in writing that the programs be communicatedto it along with the correspondingbudgets and financingplans. It then consolidatesthese programs and budgets.The productionof a single AWP reflectingall the inputs received is the responsibilityof the financial expert who will be assistant by all CELCO staff as appropriate.

5. The costs and expendituresshould be presented accordingto the main categoriesfinanced by each lender. The budget blueprint should then be transmitted to the lenders for review and comments before the respective programs and budgets are approved by the decision making bodies as appropriate. Once these bodies have approvedthe programsand budgets,they become the main managementtool for the coming year and the basis on which disbursementsare to be made.

6. The following timetable is proposed for the AWP (subject to its conformitywith the Governmentactual budget calendarfor any given year).

7. June/July: In line with the Government budget timetable, CELCO contacts the PST2 agenciesto discuss the AWP and request in writing that they submit AWP proposals. The draft AWPs are produced and sent to CELCOwhich consolidatesthem. Budget meetingstake place betweenthe Ministryof Finance and technicalministries.

11 8. August/September:The AWP are sent to the lenders for review and comments. The Government budget is sent to the Prime Minister for review and subsequent approval by the councilof ministers.It is later sent to the NationalAssembly for debate and adoption.

9. November/December: Budget is adopted by the Assembly, the budget law is voted and sent to the Presidentto be signed. The lenders are again sent the most up-to-dateversion of the AWP reflectingthe budget at this stage to provide further commentson those parts which are not part of the Governmentbudget. Their views and commentsare communicatedto the Government and the ffnal AWP is adoptedfor the followingyear.

12 Annex 2C : Second Transport Sector Program (PST2) Summary Environmental Evaluation/Action Plan

1. Previous projects undertaken in the transport sector did not give priority to environmental concerns. The PST2 takes into accountthe environmentalimpact of project activities. A comprehensive environmentalassessment study has been carried out by a team of national consultants who limited assistancefrom an internationalconsultant. The studyclosely followedWorld Bank guidelines.

Specificproposals include:

* From an institutionaland capacitybuilding point:

(i) the establishment of an environmentalmanagement unit within the Project Coordination Unit (CELCO)responsible for the follow-upof the implementationthe proposed action plan and to coordinatethe activitiesof the agenciesin the projectin the field of environment;

(ii) the design and implementationof a large program to create awareness educate and disseminationinformation on environmentalmanagement in all the agencies and involving all the stakeholdersand populationconcerned with the project;

(iii) the use of national consultants,the well targeted assistance from internationalones when needed,to conduct specificenvironmental studies;

(iv) institutional strengtheningof all the agencies involved with the project in environmental management;

From a regulatory and legislativepoint:

(i) the promotionof the environmentlaw to be appliedto the wholetransport sector;

(ii) the updating of the differentenvironment codes (for road, maritime,aviation and rail operations);

(iii) the preparationof the decreeon the implementationof the systematiccarrying out of EnvironmentalImpact Assessment studies to the whole sector (EIA).

* At the level of studies and assessments:

(i) the preparationof an environmentalframework and road map for projectactivities;

(ii) the definitionof performanceindicators.

2. The environmentalassessment of PST2 coversthe followingsubsectors:

(i) the road transport; (ii) river maritimetransport; (iii) railwaytransport; and (iv) air transport.

13 It includes all the project components. The environmentalmanagement priority program (EMP) developedcame to the followingconclusions:

* The overallimpact of project activitieson the environmentcould present major risks. * However, the negative impact that had been identified and the measures proposed to mitigate them are well known (Table 1).

3. The projectwill take into accountthe recommendationsof the EMP in order to mitigatethese impacts. It will be implementedaccording to the deadlinesindicated and will financeall the costs related to environmentalmanagement (Table 2).

4. Someof the key impacts identifiedcan be summarizedas below:

* Reforestation:Construction and rehabilitationworks (roads, rail, routes, airports) are likely to have an impact on natural resourcesthrough the destructionof the forest and plants, which would lead a warming of the atmosphere,the lowering of humidity and the disappearanceor displacementof animal species. The building of bridges, fences, the initiation of reforestationprograms, the careful planningof road maps and the creation and managementof green spaces and access roads are some of the measuresto be undertaken.

* Refuse: Important refuse and garbage production could result from the project activities . These would invade both urban and rural areas. A refusemanagement plan has been proposed, starting with a meticulous identification of the principal sources of production in each sub-sector. Revenue generatingactivities that could or shouldbe created to dispose of the garbage and refuse have also been identifiedand would be promoted.

3 Nuisances: The project includes measuresto eliminate or mitigatevarious other negative impacts: sounds, smells, landscape)in order to improve the quality of life and the living environmentof the projectbeneficiaries. The reinforcementof technical controls,the relocationof markets which invade the port areas, and the establishment of specific domains or areas are some of the measures considered.

* Eau: The impact on water systemswill be dealt with when needed through the establishmentof used water treatment and the creation of mechanismsto protect undergroundwater as well as lakes and rivers. A better planning of the road system, especiallyfor new roads will be one of the tools used as well as well designeddrainage systems and garbage collectionand disposal.

Habitat: The bulk of the project deals with the maintenance and rehabilitation of existing infrastructure. When new constructions pose a threat to habitat or leads to the need for resettlement, the issues will be carefully investigated by involving all the stakeholders before a decision is taken and, if necessary, adequate compensation measures will be taken.

.14 Annex 2C, Table 1. SENEGAL: (PST2): Mitigation measures for environmental impacts

8ub-aedb'- Air -ubt7.7 ater 7. Ref~ liunda upe.

5RoaslJfwaasspo$ ..... :promotion of environment- constructionof drainage works. Establishment of a garbage construction of bridges or . road regulation, . destruction and friendly fuels; controls Provision of garbage collection; collection and management transit areas; reforestation, parking design and collection of refuse protection of underground and system. creation of sites and couloirs, nagemnent, treatment of oily surface waters; better mapping. construction of fences, better technical control residues mapping system for vehicles, better working hours, establishment of better assistance mechanism for accidents

(n) (M) (n) (M)

hirer nsaaAtlis5 .reinforcement of anti- . used water treatment . construction of isolation . Compensation plans . displacement of pollution measures, . reinforcement of anti-pollution fences, reinforcement of fight market near port improvement of disposal measures against pollution, organization of areas; creation of equipment (loading and . regular cleaning of congested disposal sites, promotion of spaces to isolate unloading. Installation of zones systematic cleaning passenger traffic packaging systems

(n) (n) (n) (n) (n) (o) cleaning of wagons construction of supporting . construction of recycling units. . construction of passes. . construction of establishment of a Requirement to wear masks underground Establishment and management Establishment of shields against program of installation of drainage systems of railways refuse management compensation programn noises reforestation and system . grass clearing/bush clearing . organization of green spaces. - construction of security technical follow-up filling up of ditches areas. of locomotives and organization of access cars zones reforestation programs, landscaping

(n) ;(M) _ (n) (M) (n) (n) requirement of acoustic . closing of running areas . recycling of scraps . establishment of . organization of . filling up of certification . coverage of open-air canal of . storage and destruction of compensation programs. appropriate work trenches Air Senegal refuse Filling up of ditches hours . reinforcement of measures to protect endangered bird species (n) (n) (n) (M) (n) (n) Source: Environmental Impact Assessment of PST2 activities. Mitigation Measures and Directives to take Impacts into account. August 1998 (M) Major Risk -(n) Minor risk (0) Negligible risk

15 Anmex2C, Table 2. SENEGAL: (PST2): Priority ProgramAclho: EnvironmentadMnagenent (Estimated Costs (Thousand dollars) - Implementation Timetable)

EM EW "s'Iw.lia. s.10 .I hupMtuti uu. . Creation CELCO (200-C) . Establishment of Environment Strengthening of environment Introduction of environment . Establishment of environment Unit at DTP (50-CML) or at the unit of PAD (30-CML) progrm during restrucicring Unit duning reorganization of DAC Road Works Agency Introduction of enviro( neatal of SNCS (50-CML) (50-C) program at DMM (20-CML) Preparation of firameworkfor environment management (200- ____sls>RssXX______M) . ReijlilmttewyIL~glwJatIe .Promotion of environment law Update of environmental Update of environmental Preparation of specifications . Update of environmern provisions Preparation of provisions of road regulations provisions of merchant marine (envirommentalclauses) for of civil aviation code inplementation decree for (50-M) code (50 - M) SNCS, SETI) (20-C) (50-C) environmental assessment . Update of specifications studies (IAS) (20-L) (environmental clauses) (20-C) Equipment for certification laboratory

(20-L ______Cafrying out of ESE (Medina- Preparation of EE for container Carying out of ESE for the Carrying out of EA of the Gounassea boundary Guinea terminal and by-pass road (North Thiaroye- Bargny, Semme- moderization of Dakar airport roads), (Saraya-boundary Mali, zone) (150 C) Tambacounda sections (25-C) S6dhiou-boundary Guinea Bissau .Carrying out of environmnental (400-C) Carrying out of ESE for the road) (150-C per project) audit of PAD (200-C) construction of St-Louis, Tobor, . Preparation of manual of . Carrying out of EE for Kaolack Ziguinchor airporot environmnentalguidelines (100- Port (25-C) (150-C per project)

2wreesjisg22 22a2 ' 2S2 ia = 0 d2S . sss2 .Development of environmental . Introduction of environmental . Establishment of . Introduction of environmental 1frrnm.lo2 Trslnlng . awareness program (30-ML) education at ENFM and ESP envirormental awareness education at CFP * Awareness campaign with (25-ML) program during rehabilitation transporters(30-ML) and renewal of tracks (30-C) pollution control based on .Rehabilitation of drainage .Processing of used water at Dakar PAD's environmental audit report network and used (300-ML) airport (500-ML) .Establishment of control program for the disposal of phosphate and its by-products

(100-ML)______

Source: Environmental Impact Assessment of PST2 Activities: Mitigation Measures and Guidelines for taking into account of the impacts. August 1998. (M) Major risk (n) Minor risk (0) Negligible risk

EIA: Environmental Impact Assessment DAC: Civil Aviation Department EE: Environmental Evaluation SETI: International Rail Transport Management Company EES: Environmental and Social Evaluation CFP: Professional Training Center AE: Enviromnental Analysis C: Short term (Project Year I ) CELCO: PST2 Coordination Unit M: Medium term (Project Year 2.) DTP: Public Works Department L: Long term (Project Year 3) DMM: Merchant Marine Department (20-CML): The project is costed at 20.000 dollars for the short medium and long term periods PAD: Dakar Port ENFM: National Maritime Training School SNCS: National Railroad Company

16 Annex 3A: Second Transport Sector Program (PST2)

Estimated Project Costs

Project Components* Local Foreign Total

-, , ,t, ,, ,, ,,, , ; ,,,:_r ...... !P ... .4...... 1:...... -.. ---- ...... <.:.:...... --. .... -US inllon ------!! ! ! !! :!...... :!! 1!::::!::-!!-::!!::,:''"'!-'!''''''''.''.'''.'.' .''."!.''''.'".''' 1.11 '"''' !'' ning -&:c y D:!, ' !!! !t ! ! !*'::!' n.a. n.a. n.a. 2.adTa:orAniiitatoMderiao~P 2.71 1.70 4.41 ~.Sustain~bIo& TransparentNb itcng1 d Sii g 1.00-- 0.78 1.78 ...... 0.64 1.59 2.23 3...... al.. nt tt i ,ab.0.81 2.45 3.26 ...... 6. Road Ma~~~~~~~i:A...... nne eaiiain,Cntu~iu161 ..,,.,,....., 157.16 263.29 ..7!=...... Raiways !::::. ::-!.!:...... :.! ;:!! !! ! :::: :: - ::! :!:- !:: -:!:!!!!! ! ! !!!!!! !!! !!!!!1 18.3i 46.64C1CA1081 64.95C ~~~~~~~~~~~~~~~.....I..!!.,::!:'Civil!:::! :!:: !!...... Avial;iop . . :.. . .!..!...... 18.67 35.51551 54.18~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~8.7541 ...... etnd 9 Int.... !...... MaiieD&Wek ...... '' ...... net26.08 Z..O..... o..u 35.62 61.70 ::-!..:: ...... -.:-.::. : : ::...... ::.::!:-::::::::4.U0b4U§ liiETKIrRrTrnsorl !!!:::::::':::::::::::...... :::::!:..:: : . ...! ::::::::-...... ::!!:::! ...... :::.: :.-.::.... : : 4.00 6.46 10.46 ~~~~~~~~~~~~~.iI1.Coordination ...... , !!!::!:::-!:.::.:.:::-:.:-::---.!.v .v ...... 1.30~~~~~~~~~.1.71 3.01 TotalEaseline Cost 179.65 289.62 469.27~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~796529.2692 ......

~~~~~PhysioatContingencies.. 11.93 19.08 31.01~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~11931908310 ...... 29.42 51.30 80.72

...i iii i i'i . - i i i i i i i i ii ;.ii jjjjj.i i :: : : : ::... 3 6j,-

;- i .i..i i!:ii i :; :, iiiiii....i.i . i.!... ' .!. ... :':. -'....'::..:.!.'.'!::.....!!j:j.:'.' ::':j...... ii.:..!::::i:i..i:!...... 'i ...... - -lii;j;;

1 7 Annex 3B: Table 1 - PST2- Summary Project Financing Plan (in US $ million)

...... iR... .i ...... , ...... I...... 1'':'':'''''''''-ri Lol .,tal . oE''Totai 81.53 8.47 90.0 15.49

38.05 6.95 45.00 7.75

38.90 4.10 43.00 7.40

40.70 20.01 60.71 10.45

12.57 1.43 14.00 2.41

6.5 0.76 7.26 1.25

57.51 12.49 70.00 12.05

11.0 1.3 12.30 2.12

39.43 7.27 46.70 8.04

133.15 133.15 22.92

21.04 21.04 3.62

33.81 4.03 37.84 6.51

,..,,,...... ,.--.-.:.....di' Siii- i::::5 02 - i: i ...... 0 ...... 3 0221.00 581.0'01 1 00

1 ...... SECOND TRANSPORT SECTOR PROJECT

Table 2. Detailed Project rmkancingPlan by Component (1999-2005)

Indicative MultilateralDonors cost Projet ProjectDescApfion US $ IDA EU BOAD BID AfDB NDF AFD OthersKF GOS PEs Private Compo Million

1 IndtilutonalStrengthening & PolicyDevelopment

2 Land Tpod Adminlstration 4.91 4.32 0.59 Modernization& Planning2.1. 3 Tnparent & Sustainable 1.90 1.90 PublicFinancing in Road Subsector 4 PromoteFurther Private Sector 2.30 1.70 0.60 Involvenentin Sector

5 Socialand Environmental 5.02 0.67 4.35 Sudainability

6 RoadMaintenance, 330.57 38.40 45.00 46.71 14.00 10.00 36.70 12.30 127.46 Rehablitation,Conatruction

7 RaIlways 76.96 19.76 16.91 19.09 10.00 8.20 3.00

8 Alrpot & CivilAviation 71.93 10.19 12.00 14.00 17.91 4.99 12.84 9 Pots & MaritirneTransport 72.57 6.00 11.00 2.91 19.30 33.36 10 RuralTransport 10.93 3.26 3.09 3.10 1.48 11 ProjectCoordination 3.91 3.80 0.11

I TOTAL 581.00 90.00 45.00 43.00 60.71 14.00 7.26 70.00 46.70 12.30 133.15 21.04 37.84 * includes BOT for Port activities

19 Annex 4: Second TransportSector Program (PST2) - Cost Benefit Analysis Summary-ProgramEvaluation

E ...... ,snauY :l4 E i ...... ^w...... aT>~: --- ...... ,.-t,-i - wP .f Vnlue rE...... flows K. ---...... - Fi - Tm a .. E - . i ...... ,.,,,: ,, ...... ~~~~~~~~~~~~~~~~~~~~~~~~~...... -..., ...... ~~~~...... ca...;-...-- ...... ~~~~~~~~~~~~~~~~~~...... v ...... ProgramBenefits2,395,016.7

(Un4isc...... owit) ..... ,.-. 70 Bn per yr. 13 -15 bn/yr .. sts. 280,902.3 .. ... i.....,,.,

...... Net ProgramV Xenefit: 300,828.38 ...... 4...... ~~~~~....Program ...... IRk:; 35%

1. Senegal is a country with a population of 8.5 million, which is growing at a rate of 2.6% per annum. Over 40% of this population lives in urban areas where growth is estimated at about 5% per annum. Illiteracy remains high (about 80%), as does unemployment (about 30% of the labor force), and under-employment (approximately 76%). The incidence of poverty is also significant, with 54% earning less than US$1 per day. Trheper capita income is estimated at US$560 per annum.

2. In terms of economic development historical growth has been slow. However, since 1994, after the devaluation of the cfa, there has been significant economic activity, with GNP growth at about 5% per annum since 1995. This is forecast to continue for the next 5 years. The composition of the GNP is as follows: services account for 54% of GNP, followed by agriculture at 19% and industry at 17%. ODA remains an important element accounting for almost 12% of GNP, with transport registering 10%. Balance of payments remains negative with imports slightly higher at 54%.

3. Injected into this scenario is renewed interest in overall economic growth within the region - led by ECOWAS (Economic Community of West African States). Established in 1975 a revised treaty was signed by 16 West African States, including Senegal, in 1993. The principal objective of the Treaty, to be achieved in stages, is the creation of an economic and monetary union. To this end a regional trade liberalization scheme has been adopted for the creation of a free trade zone by 1999 and a study is under way for the adoption of a common external tariff. The Community has been pursuing the physical integration of its member states through the development and modernization of regional highways and telecommunication networks. A further emphasis has been placed on promoting the involvement and integration of the private sector and the general public in the development and integration of the economies of the region. Senegal, as one of the members, is striving to become a focal point for regional economic activity, not only linking it with its neighbors but also providing key infrastructurefor linkage to other parts of the world, notably as well as North and .

4. Alongside these developments is improved economic activity in Mali, a land-locked country bordering Senegal to the East. With a projected GNP growth of 5% per annum and increased import/export activity Mali is looking to its neighbors for its window on the world. Senegal is the natural choice to transport goods for shipment to their foreign destinations. In competitionwith Senegal, however, are the countries of Cote d'Ivoire and Guinea, which both border Mali, and which both have international ports.

2 If the differencebetween the presentvalue of financialand economicflows is large and cannotbe explainedby taxesand subsidies, a brief explanation of the difference is warranted, e.g., "The value of financial benefits is less than that of economicbenefits because of controlson electricitytariffs."

20 5. Transport infrastructure in Senegal is extensive with: (a) 14,500 km of classified road, of which 4200 is paved; (b) 1058 km of rail network consisting of 906 km of main track and 152 km of secondary track; (c) an international port at Dakar which is able to handle all types of cargo including containers, as well as three secondaryports located at Kaolack, Saint-Louis and Ziguinchor; and (d) an international airport at Dakar which serves as a major hub for traffic in , as well as three secondary airports at Ziguinchor, Saint-Louis and Cap Skiring. All of this infrastructureis, however, in a serious state of deterioration, having suffered years of neglect and overal poor managementand maintenance.

Project Area

6. The proposed project will directly benefit all 10 regions of the country. This is particularly true with respect to the roads component which on average will repair/rehabilitate a total of about 90 km of paved road and 220 km of unpaved roads per region. The rail component will also directly benefit the populations of six regions, including Dakar, Diourbel, Tambacounda, Kaolack, Thies and Fatick. The port and aviation components, although centered in Dakar, will have far-reaching effects domestically and regionally.

The Project

7. The PST2 project has been prepared to assist Senegal to realize its potential for economic growth, and take advantage not only of the growth of its neighbors and regionalization of the area, but also foreign interest in Western Africa. To this end the PST2 is a sector program which consists of investments in each of the key transport sub-sectors. Total program costs have been estimated at US$581.0 million with the following investment breakdown: (a) road component at US$330.6 million (57% of total program costs); (b) port component at US$ 72.6 million (12% of total); (c) rail component at US$76.9 million (13% million); (d) aviation component at US$ 71.9 million (12% of total); and (e) other activities including institutional strengthening,land transport modernization,promotion of private sector involvement, social and environmental sustainability,rural transport and project coordination at US$29.0 million (6% of total).

Economic Evaluation

8. Investments in each of the main transport sectors has been analyzed separately to ensure that each sub- component is economically viable. Both non-quantifiableand quantifiable benefits were identified for each of the main project activities. Details of these analyses are found in the project files, with summary analyses presented in the following Annexes: 4A,B,C,D.E.F. The results of the cost-benefit and sensitivity analyses of each component are presented below:

Su b tr -a - 10% -0 -+-10°costs.e ...... b.e.e -1 0 % ...... P!rog ra 35% 32% 31% 29% 49% ...... *Roa:s : 52%. -.-46% 46% 46% 62% *pOrt 16% 14% 14% 12% 11% *RalI 18% 16% 16% 16% 23% *vltiON 19%/o 17% 17% 16% 25% a/ break-even analysis - % cost increase and parallel % benefit decrease required for EIRR to reach the 12% discount rate used as the opportunitycost of capital. Methodologv

9. The methodology employed for the program evaluation is a traditional cost-benefit analysis conducted under a with and without project scenario. It is based on traffic projections estimated in the project feasibility studies conducted in 1997 and 1998. The projections in key areas indicate a traffic growth rate in keeping with

21 GNP growth, and are between 5% and 6% during the first five years, depending on the sub-sector, followed by 2%-4% growth rates as follows:

...... Groiwth'. .. Rae ...... G.t.. .-...... ae ...... Got...... Rat. Gr..hRa...... 0...... 0.... 0 2r10-2 a .2

...... ' ' "':':.* ..':':...... :...... -...... 5%:2 0 M ...RoadsShveucles ...... nZX 05% / 5 - . 5% 5% :~~~~~~...... :.: ...... - O-...... z Z t ..AWvehii...... 2%-%6% 2%25%4% 2%3% 3%2%

Rail.. cargo . 30%o5.5%: 3%-5.5% 3%-5.5% 3%-5.5% :...... - . 20/o-3% 2%-3% 2%-3% 2%-3% ...... Aviatiou:.....- .... . - E ...... *...... carg ...... g ...... , 44%% 33%% 33%% 3% 5% 4% 4% 4%

10. Costs have been adjusted to reflect revised estimates and benefits also adjusted to reflect increases in base year traffic. Financial costs have been used as economic costs in the analyses for the port and railway as these entities have a tax-free agreement with the government. The financial costs for the road and aviation component have, however, been adjusted to exclude taxes and duties (about 15%). There are no shadow prices available for Senegal. Both non-quantifiable and quantifiable benefits have been identified. In addition a limited distributional analysis has been performed, specifically with respect to employment generated by each sub-component, as well as the estimated budgetary impact of the income generated. A 12% discount rate was applied to determine the NPV, although it is noted that the opportunity cost of capital in Senegal in 1998 is closer to 9%. The project implementation period is 5.5 years with a project life thereafter taken as being 20 years. Benefits

11. A series of non-quantifiable benefits have been identified for each transport sub-component noted. These are detailed in the project files and summarized in the following annexes. However, there are three specific benefits which are common across the board and are noted herein as follows:

(a) Improvements in Service and Efficiency: Institutionalrestructuring and the development of tools to adapt to the demands of globalization will significantly improve service and efficiency in the transport sector. Paramount in this assessment is the role which the private sector will play to ensure competitiveness and cost effectivenessof the various transport systems.

(b) Positioning Senegal as a TransportHub for the Region: Geographically Senegal is in an excellent position to take advantage of economic growth not only domestically but also regionally. With improvements in all of the key transport systems, Senegal is poised to become a significant transport hub.

(c) Accident Savings: Senegal has a history of road, rail and air accidents which bear examination. With serious congestion at the Port of Dakar, accidents in that sub-sector are waiting to happen. The project will contribute significantly to the aversion of future fatalities as well as injuries both in the workplace and for system users.

12. In terms of quantifiable benefits, these were identified individually for each sub-component and are likewise detailed in the project files. Summaries of these benefits are presented in the following annexes. However, there are a number of key benefits which are common to each of the transport systems. These include:

(a) VOC Savings: The HDM III model was used to evaluate and define road maintenance strategies over several years based on economic viability criteria, specifically vehicle operating cost (VOC) savings for the road component. It was used to define a three-year road maintenance program for both

22 the paved and unpaved sub-components.In addition VOC savings were calculated for the proposed new roads under the roads component as well as the proposed access road for the North Zone of the Port of Dakar.

(b) Costs Savings: These are among the main benefits which have been quantified and valued for each of the transport sub-sectors.This assumptionis based upon the fact that with improved infrastructureand facilities, costs will decrease in both operations and maintenance. Furthermore, with private sector participation, all costs will come under significant scrutiny as will operational efficiency, with further adjustments made to ensure improved cost recovery. Maintenance cost savings for each of the transport sub-sectors have been quanitified and valued. In addition, for both the port and aviation components, handling cost savings have also been included. Finally, with proposed staff reductions in both the railway and aviation components, it has been estimated that there will also be staff cost savings even with projected increases in salary structures.

(c) Incremental Increase in Revenue: In line with increased traffic generated as a result of improvements in the transport systems and networks, revenues are assumed to also increase. The benefit which has been included consists of the incremental increase in revenues calculated as a result of increasedtraffic in the "with" project situation compared to the "without" project situation.

(d) GNP Value-Added - Container Exports, Tourism: The project is assumed to realize increased container traffic handled in the Port of Dakar and increased tourist traffic, moving through the Airport of Dakar as a result of project implementation. This increase will be reflected specifically by increased exports by container through the port, and increased tourist spending in Senegal in general. The resultant benefits have been quantified and valued and are included in the cost-benefit analyses detailed in the project files.

Distributional Benefits

13. Employment Benefit - The project is estimated to directly employ about 13,000 unskilled workers each year during the 5.5 years project implementation period as follows: 4500 through the road component; 2500 through the rail component; 3,200 through the port component; and 3,500 through the aviation component. With an average household of 8 (including children, spouse and extended family members) it is estimated that this income will directly support almost 100,000 Senegalese annually during project execution. Furthermore, using 2.5 as a regional employment multiplier, a further 30,000 indirect jobs will also be created, supporting another 200,000 plus. Estimates for employment generation after project completion were not calculated.

14. Fiscal Benefits: These have been estimated for each of the transport components separately and concern the income tax generated as a result of project employment during construction. It is assumed that a 15% with- holding (or income tax) on earnings during this period will be equivalent to a total annual fiscal impact in the range of 10 million cfa during project execution alone. This does not take into consideration benefits derived from indirect employment.

Propram EIRR

14. The Economic Internal Rate of Return (EIRR) for the program as a whole has been calculated to be 35%. The high rate is due for the most part to the significant benefits which are derived from the largest component, roads rehabilitation and reconstruction. This component accounts for 62% of the economic costs with a resultant 52% EIRR. Applying a discount rate of 12% the NPV for the program is estimated at almost US$550 million.

23 Proiram Sensitivitv

15. As with each of the sub-components, a series of sensitivity analyses were carried out for the program as a whole. The individual results are presented in the annexes and indicate a strong viability. Program-wise the results are also positive, as is indicated in the table below:

-: !...... :: s~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...... i EI R R ...... :...... iE i - i- - - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...... ; ...... g

...... B.ase...e 3 %35% 550.0 Sensitvit 1 +10% Same 32% 518.3 Sensi... . same -10% 31% 463.6 Sesitii 3- -+10% -10% 29% 434.9

break-r.ven . 49%s7 49%ZO ...... __

a/ break-even analysis - % cost increase and parallel % benefit decrease required for EIRR to reach the 12% discount rate used as the opportunity cost of capital.

CriticalRisks

16. There are two main critical risks associated with the program which have been identified. Both are inter- related. The first risk concerns traffic volumes and the second private sector investment. In a situation where the private sector is unwilling or unable to invest, the level of traffic forecast for each of the networks, excepting the roads component, would be reduced because the efficiencies garnered from private sector participation would not be realized. Under this scenario the benefits could decrease. However, it is the government which has shown itself to be committed to the privatization process. The extent of privatization will in part be dependent on the terms which both sides are able to negotiate to ensure minimal financial, social and economicrisk.

24 Table1: TransportSector Project EconomicAnalysis - Combined Program Analysis

TotalCosts (in mC FA) Total Total Benefits (in mCFA) Total Net j 'o r-O

11654.1 7922.3 1161.6 1697.0 22435.0 0 594.8 0 0.0 594.8 -21840.2 200 23122.2 6864.0 3394.5 5994.2 39374.9 0 905.0 576.4 988.4 2080.6 -37294.3 :::::2001i 57340.5 8150.9 4452.9 6192.9 76137.2 36062.7 1443.2 708.9 1071.0 38859.87 -3727. 202 11468.1 4623.3 2220.0 3798.1 22109.5 38636.7 1954.6 2588.3 1262.5 44353.6 22244.1 203 11468.1 241.6 111.0 2487.8 14308.5 41354.7 2720.8 3017.5 1457.7 48454.0 34145.5 2004 743.4 241.6 7511.0 1487.8 9983.8 44224.5 3041.4 3459.1 1951.4 52572.8 42589.0 2005 ~~~~~~ ~~~758.3241.6 7511.0 1470.7 9981.6 47253.8 3402.4 4138.0 2449.8 57133.5 47151.9 2006 ~~~~~ ~~~~773.4241.6 11211.0 1496.0 13722.0 50450.8 3872.6 4536.2 2946.9 61706.2 47984.2 2:.007, 788.9 241.6 11211.0 508.7 12750.2 53824.5 4481.4 4946.6 3531.4 65616.3 52866.1 2008 ~~~~~~ ~~~804.7241.6 481.0 508.7 2036.0 57383.8 5011.7 5469.5 4158.6 71306 69270.0 2009 ~~~~~~ ~~~820.7241.6 481.0 1781.4 3324.7 61138.5 5648.6 5915.6 4790.3 76766.5 73441.8 2010.... 11468.1 241.6 481.0 551.1 12741.8 65098.6 6411.7 6597.5 5508.1 83516.8 70775.0 2011 ~~~~~~ ~~~743.4241.6 481.0 551.1 2017.1 69274.8 7324.3 6969.7 6269.5 89742.3 87725.2 .2012 765.7 2416.0 481.0 804.2 4466.9 73678.2 8414.3 7432.8 7035.1 96467.5 92000.6 2013 ~~~~~~ ~~788.7265.7 481.0 562.8 2098.2 78320.6 9288.6 8143.2 7886.8 103541.9 101443.7 204614 812.3 265.7 481.0 562.8 2121.8 83214.3 10296.7 8801.7 8825.1 110098.5 10797. :2015 836.7 265.7 481.0 562.8 2146.2 88372.2 11455.0 9581.4 9719.6 118128.3 115982.1 2:016 861.8 265.7 481.0 804.2 2412.7 93809.9 12782.6 9791.5 10793.1 125995.6 123582.9 2017 11468.1 265.7 481.0 562.8 12777.6 99535.8 14300.8 10188.4 11908.1 134708.3 121930.7 2018 ~~~~~~ ~~743.4265.7 481.0 562.8 2052.9 105570.8 16034.2 10428.4 13025.2 143826.6 141773.7 2019 ~~~~~~ ~~769.4265.7 481,0 562.8 2078.9 111928.7 18010.6 10676.0 14271.3 153520.6 151441.7 2.020 796.4 265.7 481.0 1793.1 3336.2 118626.1 20261.7 10933.7 15519.4 163968.6 160632.5 2021 ~~~~~~ ~~824.2265.7 481.0 562.8 2133.7 125680.4 22823.3 11204.4 16865.7 175097.5 172963.8 -2022 853.1 265.7 481.0 562.8 2162.6 133109.9 38018.3 37154.2 18255.2 183873.3 181710.7 2023 882.9 265.7 481.0 562.8 2192.4 140933.8 38653.2 38380.3 19730.1 193086.7 190894.3 Totals 152356.5 35073.6 56480.0 36992.2 280902.3 1817484.1 236126.9 183259.0 176036.5 2395016.7 77777 T77RR NP772

25 Annex 4A: Second Transport Sector Program (PST2) - Cost Benefit Analysis Summary-Road Maintenance, Rehabilitation & Construction

...... re.ent..alu...f.n..ws Fii al 1... act...... ' !:: Ei...... ::'.''i'X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...... - ...... -'...... nolmG...... :-:-'''l ...... A ...... al sis- T..r.r.-hi-.S ...... la...... u ali.. s ... i''-''!::'':''''''m''a...... la m f... mea Benefts(Udiseonted) 1,817,484.1 .osts (Undiscounto) 60 Bn/yr. 13bn toS bn A..Muntna.... '.15!:.:::::.:'...... :...... s:::,:::::::::...... W.orks 151,47/5.515 7 .5 a yeary _ a C..A.::Nt Ga. .... Wo: 2 ...... ,...... 1235090 ...... 1:r am : 163,82852% ::::::::::...... _

...... !: :!::::.:'.....::::':.-:':: :::....::::::::::...... ,,^'MDiadc.'' '''5''''' '283,836.0 ..r^i!,g,,...... 17 4 0<3 ...... , ...... =.J...... 3 ...... ,...... a,,.

Summary of Benefits and Costs:

Methodology

17. The HDM model was used to evaluate and define basic road maintenance strategies by: (i) simulating road deterioration and the frequency of maintenance operations for each fundamental alternative; (ii) simulating vehicle operating costs; and (iii) making comparisons between different strategies of road maintenance or construction and defining the optimal solution for the maintenance programs over several years based on economic viability criteria such as the economic rate of return (TRE), the Net Present Value (NPV), the benefit-cost ratio, etc.. The use of the HDM model was based on technical and economic parameters that include road geometry, the natural of the soil and road degradations, driving conditions, road maintenance cpsts, vehicle operating costs, traffic counts, existing road maintenance strategy, etc. A three-year road maintenance program was prepared as follows:

(a) the selection of the road sections to be evaluated was done based on the Relative Degradation Index (DRI)4 , itself a function of the International Road Degradation Index (IRI). Only those sections with an DRI of more than 1000 were selected;

(b) the breaking down of the selected road network into homogeneous sections on the basis of traffic, soil nature, the level of deterioration of the sections; and

(c) the conducting of detailed studies on a given number of Homogeneous and Representative Deteriorated Sections (HRDS) of the sections defined above.

3 If the difference between the present value of financial and economic flows is large and cannot be explained by taxes and subsidies,a brief explanationof the difference is warranted, e.g., "The value of financial benefits is less than that of economic benefits because of controls on electricity tariffs." 4 The RelativeDegradation Index (RDI)= traffic times (IlI-3)y

26 18. The HDM model was used to make an economic evaluation of the arrived-at three year road maintenance program. For each proposed maintenance strategy, the model computed the evolution of road deteioration, vehicle running costs, road maintenance costs, economic indicators (ERR, NPV, benefit/cost rations). The results for different maintenance strategies were compared with the base case of what would happen to the network if investments under the project were not undertaken using discounted streams of differential benefits and costs.

Paved Roads

19. A total of 139 homogeneous sections were identified on the basis of network-wide road characteristics and traffic data that were updated by specific studies. Thirteen strategies were defined for the paved roads taking into account past and current experience in Senegal and the technical and financial capability of the enterprises performing road maintenancework. Three types of maintenance works will be normally undertaken for paved roads: (i) rehabilitation, double layer paving with various materials; (ii) periodic maintenance, single-layer paving with various materials; and (iii) routine maintenance: (a) resealing; (b) pothole patching; (c) maintenance of shoulders. All strategies include basic routine maintenance on selected road sections consisting of patching at least 50% of potholes.

20. The paved roads represent about 4,300 km or 29% of the priority road network About 57% of the paved roads are reportedly in good shape, 14% in average condition and 29% in bad shape. The main objective of the project is to minimize road transport costs by limiting further deterioration of the road infrastructure.The main savings are to come from road user costs in the form of VOC, time savings and savings on the future maintenance costs.

21. The 13 strategies mentioned above were applied to each of the 139 homogeneoussections. Maintenance and rehabilitation costs were estimated in financial and economic terms. Vehicle characteristics and unit costs were defined for typical vehicle classes. The traffic growth rates were defined based on recent traffic trends. The HDM evaluation helped define the best maintenance strategy acceptable from both an engineering and and economic perspective.

22. The simulation was made over a twenty-year period yielded an NPV of CFAF 33,569 million at a discount rate of 12%. The ERR varied between 19 and 453% depending on the strategy adopted. The main benefits considered are a reduction in vehicles operating costs (VOC) and road maintenance costs. Time saved due to better road conditions was not taken into account.

SensitivityAnalysis

23. The robustness of the returns and NPVs shown can be judged by looking at their changes for different strategies, which can reduce the ERR from 225% to 31%.

Unpaved Roads

24. The network of unpaved roads is 10,311 km long of which about 82% are estimated to be in a bad state, 2% in an average state and only 16% in a good state. With the HDM, a first selection of sections was made on the basis of the driving conditions of the roads, traffic levels, the extent of road degradation and topography. Next, indication from field division managers were integrated to enlarge the section base. This yielded a total of 99 homogeneous sections retained for the three-year maintenanceprogram.

25: The HDM economic evaluation defined four maintenance strategies: (i) basic maintenance of specific roads; (ii) grading without regravelling; (iii) grading and 50% spot regravelling; and (iv) grading and 100% regravellingper year, the last three options involving gravel resurfacing when the residual thickness of laterite is less than 50mm.

27 26. Using the HDM program finally defined an optimum program with an NPV of CFAF 152,074 million at a discount rate of 12% over 20 years. The ERR estimated vary between 17 to 406%.

Sensitivity Analysis

27. The robustness of the returns and NPVs shown can be judged by looking at their changes for different strategies. For instance, for section 31B above, a switch from the first strategy to the second would raise costs by about 20% and reduce the ERR from 19% to 13%. The same analysis can be applied to the other sets of numbers and strategies.

New Roads

28. Preliminary studies, some dating back to over three years, have been done for three new roads linking Senegal to the neighboring countries. The main justification of these projects outlined in the studies are regional integration, provision of better accessto markets for agricultural production in the areas involved and promotion of cross-border trade. More work will be undertaken to better identify and quantify the underlying assumptions,more fully identify the potential benefits and quantify them.

Program Analysis

29. In addition a program analysis was conducted to determine program viability. The results indicate a 52% EIRR with the break-even analysis indicating that costs would have to decrease by 62% in parallel with project benefit decrease by 62% for the EIRR to reach the opportunity cost of capital (12%). Details on the economic evaluation conducted may be found in the project files.

28 Table 2: - SecondTransport Sector Project EconomicAnalysis - Road Component(in m CF A)

I WIthout~~~~~~~~~~'oar WlkhProject~~~~~~ Coat.... o.. P...ct...... 73ojec Cots C.i...& .... r d....C .... C C .. o...... Worka .....Mit~~...... 1-Wt1u~~vig s.. avns Ilmi 1~991,486.80 11,468.10 186.00 11,654.1 0.00 0.00.0.00.-10,167.30.-10,167.3 204J~~~ 1,498.6922,936.20 186.00 23,122.2 0.00D...... 0.00.0.0 .. -2,3.51..21,623.5

2003 ~~1,548.9511,468.10 18.011,648.1 2673.42 6808.20 4135.77 -90,96733.1 310,416.62

2004 ~~1,547.23 0.00 743.40 743.40 27,268.09 71,492.60 44,224,51 803.83 45,028.34 205 1,559.61 0.00 758.27 758.27 27,813.46 75,067.23 47,253,78 801.34 48,055.12 20606 1,572.09 0.00 773.43 773.43 28,369.72 78,820.60 50,450.87 798.65 51,249.53 ::JA200-7 1,584.66 0.00 788.90 788.90 28,937.12 82,761.63 53,824.51 795.76 54,620.27 :20080 1,597.34 0.00 804.68 804.68 29,515.86 86,899.71 57,383,85 792.66 58,176.51 2009 ~~1,610.12 0.00 820.77 820,77 30,106.18 91,244.69 61,138.51 789.34 61,927.86 :2010 1,623.00 11,468.10 0.00 11,468.1 30,708.30 95,806.93 65,098.63 -9,845.10 55,253.53 2011 ~~1,635.98 0.00 743.40 743.40 31,322.47 100,597.27 69,274.81 892.58 70,167.39 2012: 1,649.07 0.00 765.70 765.70 31,948.92 105,627.14 73,678.22 883.37 74,561.59 203 1,662.26 0.00 788.67 788.67 32,587.90 110,908.49 78,320.60 873.59 79,194.19 2014 ~~1,675.56 0,00 812.33 812.33 33,239.65 116,453.92 83,214.27 863.23 84,077.50 40'$ 1,688.97 0.00 836.70 836.70 33,904.45 122,276.62 88,372.17 852.26 89,224.43 2016 ~~1,702.48 0.00 861.80 861.80 34,582.54 128,390.45 93,807.91 840.67 94,648.58 207 1,716.10 11,468.1 0.00 11,468.1 35,274.19 134,809.97 99,535.78 -9,752.00 89,783.78 2018 ~~1,729.83 0.00 743.40 743.40 35,979.67 141,550,47 105,570.8 986.43 106,557.22 2019 ~~1,743.67 0.00 769.42 769.42 36,699.26 148,627.99 111,928.73 974.25 112,902.97 2020 ~~1,757.61 0.00 796.35 796.35 37,433.25 156,059.39 118,626.14 961.27 119,587.41 :20.21 1,771.68 0.00 824.22 824.22 38,181.91 163,862.36 125,680.45 947.45 126,627.90 2022 ~~1,785.85 0.00 853.07 853.07 38,945.55 172,055.48 133,109.93 932.78 134,042.71 2023 ~~1,800.14 0.00 882.93 882.93 39,724.46 180,658.25 140,933.79 917.21 141,851.00

uith refers to the recurrentcosts requiredby the triannualworks program - * ithoutrefers to the recurrentcosts associatedwith the minimummaintenance scenario NV~~2483 with refers to the VOC resultingfrom the applicationof the triannualprogram

w* isotlut refers to the VOC associatedwith the minimummaintenance Scenario

2 9 Annex 4B: Second Transport Sector Program (PST2) - Cost Benefit Analysis Summary - Railways Component

- -- q- :---: I:-Present Value-t* F'LO'-'''''-''WS Fica -mpa:- Eenio FiaQa

...... ,.,:,,....-,.,...... iRi-.-z....E...... i . . - - -. ! !, '' '' ' ' - -01. M I kV - - : i : t 4 4 ~~~~~~. t.::..-...... -. -.....-.:.-:. .-..... :i:...E - ..... 2------......

: -:- -:-- : :- --. -;- . ---:--:--::::;:::::...... ;.:::::xo:::::::-:::::-...... :::::::x......

,':-...... -' :--. - B Jenlefits(Un~scount-d - 236,126.9 800 Minimal Costs - -d -counted) 35,073.6 - . ... -... . -...... -...- Net BEmelits:-Progrm) - 14,264.57 IRR: (Program): RRA.DkaRot t...... -...... 18% ...'...... 28% C. Tamb-Kidira24% .. i...... aou an ... 17%i.

Summary of Benefits and Costs

1. The investment program for the railroads consist of a core program with four specific projects valued at a total of 31,218 million. This represents 73% of the total program costs. The core program's main objective is the rehabilitation, maintenance and restructuring of key physical infrastructure and assets, with non-core activities including the purchase of mobile equipment, signalingand communicationsequipment.

2. The main quantifiable benefits expected from the investment program are: (i) savings in operation and maintenance of rolling stock due to improvedfacilities. Total first year savings system savings are estimated at 162.5 m CFA; (ii) savings in staff costs due to a reduction of 800 personnel 300 of which have been identified but not yet released under the PAST program.Even with salary and benefit restructuring and a higher level of trained personnel,first year savings are estimated at 142 m CFA; (iii) savings from reduced derailments due to improvementsin signalization and telecommunicationas well as rehabilitation and reconstruction of both track and equipment. First year savings are estimated at 14.36 m CFA for the entire system; (iv) incremental increase in rail revenue due to increased freight movements. First year system wide benefits are estimated at 290 m CFA; and (v) trafflicdiversion benefits due mainly to the recapture of lost to Mali. First year benefits are estimated at 48 m CFA. In addition, due to the discrepancybetween project life (20 years) and actual asset life of the investments made under the program (30 - 60 years), a salvage value for these investmentshas also been calculated and included in the analysis.

3. The main non-quantifiablebenefits identified included: (i) improvements in rail service and efficiency, (ii) improvements in turn-around time and availabilityof locomotives; and (iii) reduced track and work related accidents.

4. In addition the following social and fiscal benefits have been identified: (i) employment impact - the program will directly employ about 3000 unskilled workers annually, translating to 1440 m CFA/annum of income. A regional multiplier of 2.5 indicates that approximately 7,500 indirect jobs will also be created; (ii) fiscal impact - assuming an average 15% with-holding or income tax on estimated earnings resulting from direct employment created by this component, the fiscal impact is estimated at about 800 m CFA during project execution alone.

30 Main Assumptions

5. The main assumptions made are: (i) traffic will grow at an average annual rate of between 2%-5.5% depending on the traffic type; (ii) the rail company enjoys fiscal incentives that exempts it from taxes and duties, with the result that the economic and financial costs are equivalent; (iii) project construction period is 4 years; (iv) project life is 20 years; (vi) estimatedthat traffic will grow as follows: international cargo at 5.5%, national cargo at 3%, international and national passengers at 2%, and PTB passengers at 3%.

Sensitivity analysis

6. The proposed investments appear sound. The EIRR for the Rail Program has been calculated at 18% with the break-even analysis indicating that costs would have to increase by 23% and benefits decrease in parallel by 23% for the NPV to reach the 12% discountrate (opportunity cost of capital). The main risks facing the project are inadequate management, uncertaintiesrelated to the restructuring of the rail company as a result of the privatization of the international rail services on Dakar-Bamakocorridor, and inappropriate government policies, regulatory environment and support. The project includes appropriate institutional strengthening, policy and reform measures to mitigatethese risks.

The detailed economic analysis may be found in the project files.

31 Table 3: TransportSector Project Economc Analysisb- Rail Component (in unCFA)

(.1~f Wo.sCs..ot ...... --- rafe awaeI~h e--- Ntnbdil eni Viar .)aksrlTansbgThIes/ProjecEnv.VESP Iroject3rd PumrI Ta~buI MesI Sv~!b Pvers. alueM ro.e..Proje.I...... I aa...... s taxstbaXMImG&M Tlva~~ C~~atu Cmis Cetta.. Retita Tamba Kldfra Ttvae. &...... ~~2615.6 611.2 2592.0 109~~~..592.0. 7922.3.7327..-994. 75..0 51.0.54. 611..- -2096.6 -259.0 e9 61.2531232..630.84..010 0.9.0.1120.90.0.-959. 1010.61.2 -4539.2.. 112.0. 2001.916.86103 1 ..... 3.0.... 9.0.10..515 377 1080.6.04.0.44. -6707.7 15.5. -79..-0651.18. ~~916.8 3487.5 219.0...4623.3 202.0..93.2.1384.0..224.0..51.36.1954.6...2668.7..202.0 823.6.-2103.5 .. 224.0..

2008s 1. 61. 52.0. 241.67924.6 457.4 104. 2693.0 71. 183 70851. 770.247.4 -104.7 -2069.0 7169.2 200292312241.663.0 6241.6 5014.6 12969296.5 835.30 92 24 9564.6 5407.0 514.6 1229.6 24596.5 835.3 20141 241.6 241.6 583.1 1443.53711.7 3299.46977.2820.21 88.25 61707.71583.1 1443.5 329.4 97.2 ...... 2416621.6 66530197. 1369.4 1168.10 12 948.42 734.3 78.2653 19. 356994 14.1 * 202 246.0 416. 7635 200.4 41801 137.1 2.28 101.308194.3 59968.3 763.5 8200.4 421803.1 1347.1 2 16.8 265.7 4265.7 841.1 223.5 45846.10 51. 23.39 510.1198.302.64. 235 561 11. 2...... 265.7 2465. 931.0 2541.7 49740.8 1709.0 24.56 154.967 17029.7 100931. 931.0 2541.7 49740.8 1709.0 2015:'; 265.7 2657103.6 28 69048.6 1547.4 1927.9 25.79 123.77 301145. 11189.3 2103. 2869.6 1547.4 1927.9 2016 ~~~~~~~~~~265.7 2657115.6 313242.4 60507.421766 2.812.431. 29 12782.6 12160.9 3113.6 3902424 65. 200176.6 2017:: 265.7 265.7 1290.0 3666.7 259 5812 6715425.84 4.70 13002.8 361403. 1290.0 3666.2 6715.4 2591.1 *:.:::07 265.7 265.7 1445.9 4147.5 74679.3 2700 29815.6663.2 15767.0 41. 298. 1445.9 4147.5 74679.3 2780.0 * 2019 ~~~~~~~~265.7 265.7 1624.0 146941 85.726 30 7144.32 13 12270 183 010.6 17744.9 1645.4046941 85.7 363144.3 2020 ~~~~~~~~~~265.7 265.7 51826. 5142.6 293755. 8355.8 392.9 173.59 20618.7 19996.0 51826. 5142.6 293755. 355.8

* 2021 ~~~~~~~~~265.7 265.7 2058.316018.9 10498.9 1402.1213.56 185.742 72282.3 702257.625. 6 053189.9 10498.9 1402.2

:202aI' 265.7 265.7 2321.12256818 54.1110.4559.7 236.29 198.7512,8 32801.3 37752.6 2321.1225681854.1 110. 4559.7 atbneis nlue avns noprtinad antnnc f.olngsoc;stf.svns;dralen.avns.adin. reeu b/5% incr57eas7annual 91e 54in47.81090 245 1567129. 101. 3102517 94. 70...... 25725av046 26in43. 979 2.9 137 1450 119313.626. 434 12.

206,26.726.7113. 3424 05.4216. 2.0 12.3 272. 151.9113. 3424 05.4 212. Annex 4C: Second Transport Sector Program (PST2) - Cost Benefit Analysis Summary - Ports Subcomponent

iiiiii:fiiii::jjjijjjjjj ....ji iiiii. iii. iiiiiiii .ii.i...... i i :iiii:i ..ii .::-ii...... i ...... -i .:ij:: ...... jj iii:iiii i' i i:ni.iiijij(iiiiiiiiiiiioiiiiiiiisiiij ts.i...... i...... ii(.n.i i.....te,.i183,259a0eI. ....'iiiiii M.Iinimal ...... N gigible.iiiiij A.jjjPuhlj c Component 1,0 en,:5f:(iij:iAEfl: because_____ of _ _ _ _

iiii.. iiiiiejiiiiiijiiiiiiiii...... lNelgil

iE >;,,;.jjjiiiiii::iijijjjjii'j:!iiiiiiiji;'' j::j jjjj' 1 /0 ...... Bi Pivae omponlenti!ii 3ii7,000.0 special status

Net>B=nefits...... 7,515.64 .

Summaryof Benefits and Costs

1. A cost-benefit analysis was carried out for the main investment component which consists of rehabilitation,reconstruction and expansion of the Port of Dakar, with a total value of 48,100 mcfa which represents 77% of programcosts.

2. In addition to readily quantifiable ones, other economic benefits expected are: (I) institutional strengtheningof the maritime sector; (ii) improvementsto the River Port of Kaolack;and (iii) improvementsin wvatertransport between Dakar and Ziguinchor.

3. The main quantifiable benefits consist of: (I) voc savings due to improved road access. First year savings have been estimated at 119 m CFA; (ii) savings in container ship waiting time due to improvedship positioningwhere first year savings have been estimatedat 120 m CFA; (iii) savings in cargo handling costs leading to first year savings of 1327 m CFA, and (iv) GNP value-addedresulting from increased exports,with a first year benefit of 390 m CFA. In addition, due to the discrepancybetween project life (20 years) and actual asset life of the program investments (30 - 60 years), a salvage value for these investments has also been calculated and included in the analysis.

Mahnassumptions

4. The made assumptionsmade are: (i) traffic will grow at an averageannual rate of between 2% and 6%, depending on the traffic type; (ii) the port continuesto enjoy fiscal incentives that exempts it from taxes. As such the economic and financial costs are equivalent; (iii) project constructionperiod has been divided into two phases which will follow each other in terms of timing. The first concerns works to be -financedby the public sector and the second those to be financed by the private sector; (iv) project constructionperiod for the first phaseis 4 years and the second phase 5 years; (v) projectlife is 20 years.

S. The expansion of the containerterminal, includingthe building of a third wharf post, in line with posts 62 and 63, was the subject of an economic analysis based on updated costs-benefits.A comparisonof the situationwith and withoutthe project, indicatesthat the implementationof the project is economicallyfeasible if the projectis divided into two phases, with the first phase brought into service in 2002. Taking into account

S If the differencebetween the present value of financialand economnicflows is large and cannot be explainedby taxes and subsidies,a brief explanation of the difference is warranted, e.g., "The value of financial benefits is less thian that of economicbenefits because of controlson electricitytariffs. "

33 traffic growth, the time required for detailed technical design studies, mobilizationof financing and execution of the works, the second phase would not commencebefore the year 2004 and take 4 years to complete.

Sensitivity Analysis

6. The proposed project is sound, with a base case EIRR of 16%. It is considered that with private sector involvementmore program efficiencies and benefits will occur than have been quantified and valued. For this reason the EIRRcalculated is consideredto reflect the most conservativeproject scenario. Sensitivityanalyses were conductedon the proposed programwith the break-even point identifiedas being one where project costs would have to increase by 11% and benefits decrease in parallel by 11% for the EIRR to decrease to the opportunitycost of capital (identifiedas 12%)

7. In addition to the sensitivity analyses undertaken, two main risks associated with the improvement program for the port of Dakar have been identified. The first concerns traffic volumes and the second private sector investments.In a situation where the private sector does not invest, the level of traffic forecast would be reduced because the efficiencies garnered from privatizationwould not be realized. Under this scenario the second phase of the port program will either have to be postponed to a time when traffic would justify the expenditureestimated, or a more modest investmentwould need to be detailed to ensure economic feasibility.

Details of the economic analysis may be found in the project files.

34 Table 3: Transport SectorProject EconomicAnalysh - Port of Dakar(m CFA)

~~~~~~~~~...... Y Fi. .. VC Waiing Coa Vauet C ainr Vlu...... i..

...... Sa.4 s Savin,,.. .gs.i S.a.xi Ad...... c .. Sa... : ene Ii .99~ 1110.051.6 1161.6 -i 0 -6 6 .2000 3330.0 64.5 3394.5 390.7 185.7 576.4 -2818.1 2.001 4440.0 12.9 4452.9 480.5 228.4 708.9 -3744 2002 2220.0 2220.0 119.3 120.5 1327.4 600.9 146.0 274.2 2588.3 368.3 2003 - 111.0 111.0 121.6 145.7 1543.1 712.3 169.7 325.0 3017.5 2906.5 200 7400.0 111.0 7511.0 123.9 170.9 1764.5 827.8 194.1 377.8 3459.1 -4051.9 200 7400.0 111.0 7511.0 130.7 206.9 2103.0 1030.6 231.3 435.5 4138.0 -3373.0 2006 11100.0 111.0 11211.0 134.3 231.1 2308.7 1130.6 254.0 477.5 4536.2 -6674.8 320."7- 11100.0 111.0 11211.0 136.7 255.3 2521.6 1234.0 277.4 521.5 4946.6 -6264.4 202* 481.0 481.0 139.2 279.5 2738.2 1443.5 301.2 567.9 5469.5 4988.5 44400 12481.0 481.0 141.6 304.9 2960.9 1566.3 325.7 616.2 5915.6 5434.6 .....:... i.. 20102 481.0 481.0 153.1 348.3 3363.5 1695.5 370.0 667.0 6597.5 6116.5 I281 481.0 481.0 155.7 376.4 3414.6 1935.2 375.6 712.2 6969.7 6488.7 :2712 0 481.0 481.0 159.5 403.2 3644.5 2064.8 400.9 759.9 7432.8 6951.8 20.i3 .0 481.0 481.0 1 62.1431.3 4090.9 2199.5 450.0 809.5 814 3.2 7662.2 .i2.014 481.0 481.0 165.9 460.6 4346.1 2490.2 478.1 860.9 8801.7 8320.7 ..2015 . 481.0 481.0 175.7 5 11.14804.9 2646.3 528.5 914.9 9581 .49100.4 -201-6i- 481.0 481.0 175.7 511.1 4804.9 2802.4 528.5 968.9 9791.5 9310.5 .20.11 481.0 481.0 175.7 511.1 4804.9 3143.5 528.5 1024.7 10188.4 9707.4 .2018 . 481.0 481.0 175.7 511.14804.9 3324.5 528.5 1083.710428.4 9947.4 2l09 481.0 481.0 175.7 511.1 4804.9 3511.2 528.5 1144.6 10676.0 10195.0 .2020- 481.0 481.0 175.7 511.1 4804.9 3705.6 528.5 1207.9 10933.7 10452.7 .2021. 481.0 481.0 175.7 511.1 4804.9 3909.7 528.5 1274.5 11204.4 10723.4 .202,2 481.0 481.0 175.7 511.1 4804.9 4121.4 528.5 1343.5 25,669 37154.2 36673.2 a) economic costs equal financial costs b) increased container traffic as value-added to GNP assumed: 50% of containers are for export; 85% of cont. 20 'ft @ US $20,000; 15% are 40 ft @ US$ 40, 000

35 Annex 4D: Second Transport Sector Program (PST2) - Cost Benefit Analysis Summary - Civil Aviation Component

. j.. jj.i:14140 ,::: ; :::::; j;::::::::::::j;:::ji.i:j;jj...... 9

ass:ts,with,':j non-coreA.Air.post ~~~akar activie :::aid: i-:::::nldgifrsutesrnthig 16970.3. to n, ...... an th B...... 3 ._ ...... _ 75 .4. _.. _ _ _ __. ....ti-...... -"^tii:MUiiiij ' i i iiiiiti17,03 A.amountin...... iiiain: ,,, jt...... j...... i teiladn ::::::^ mintenance4 7 ! t...... F...... ! !irt y alon v savingsin st.f ...... costs.. .o...... 75jj!i iiiiiii!iini; iiij! iA | A i t 169r 70.3/ J." agvn::a ......

pur;hase5ombie teqipment.ii 1/ouJ Summary of Benefits and Costs: irstyearbeneints cof 24 m CFA; (ii) nraei ors pnigwt stmtdfrtya eeiso 0 1. TIn investinentprogram for the aviation sector conductedw careprogram for the AirporyeatimDakar which is estimated at a total value of 16,970.3million cfa. This represents 72% ofthe total program. The core program'smain objective is the rehabilitation,maintenance and restructuringof key physical infrastructureand assets, with non-core ac5ivifiesincluding infrastructure strengthening, aid to navigation and safety, and the purchaseof mobile equipment.

2. The main quantifiablebenefits identifiedconsist of: (i) incremental increase in passenger revenueswith npt yenarbenefits of 24 m CFA; (ii) increase in tourist spending with es;imated first year benefits of 105 m CqFA;(iii) savings in terminal and runway maintenance, amounting to 80 m CFA in the first year alone; (iv) savings in staff costs of 750 m CFA in the first year; and (v) cargo handling cost savings of an esbimated 28 m C>FAin the first year. As with both the rail and ports components, due to the discrepancy between project life and actual asset life of the program investments, a salvag. "Thevalue or finvestments has been calculated and included in the analysis.

3. The main non-quantifiable benefits include: (i) improvements in service and efficiency; (ii) improvements in traffic management; (iii) positive linkage the proposed World Bank Pilot Project for the promofion of Agricultural Exports; and (iv) increased private sector activity within the airport.

4. In addition a limited distibufional analysis was conducted which indicates that: (i) employment impact - during the project. construcfion period a total of about 3000 unskilled workers are expected to be directly employed annually, which translates to a total worker income of about 360 m CFA; (ii) fiscal impact - assuming an average 15% with-holding or income tax project employment is esfimated to generate about 17 million CFA for the governiment.

Main Assumptions

S. The main assumpfions made are: (i) traffic will grow at an average annual rate of between 3%-5% depending on the traffic type; (ii) project construction period is 4 years; (iii) project life is 20 years.

6 If the difference between the present value of financial and economic flows is large and cannot be explained by taxes and subsidies, a brief explanation of the difference is waffanted, e.g., "The value of financial benefits is less than that of economic benefits because of controls on electricity taniffs."

3 6 Sensitivity analysis

6. The proposed investments appear sound. The base case EIRR for the component has been estimated at 19%, with the break-even analysis indicating that costs would have to increase by 25% and benefits to decrease by an equivalent25% for the EIRR to reach the opportunitycost of capital 12%.

7. The main risks facing the project are inadequatemanagement, uncertainties related to privatizationof Air Senegal,and inappropriategovernment policies, regulatoryenvironment and support. The project includes appropriateinstitutional strengthening,policy and reform measures to mitigatethese risks. The following pages detail the economic evaluation.

Details of the project economic analysismay be found in the project files.

37 Table 5: Transport Sector Project Econondc Analyss - Aviation Component (in mCFA)

. E g E ...... ~~~~~~~~~~...... 1~1 Costs ...... e ...... Total...... t Year~~~~~~~~~~~~~~~~~~~~~~~~~.O&iivi CliiO Lw Saf ? je .r.c lnrnL Te.fan. N(It.ul Slag -r~ec ~~~~~~~~~~~~~~~~~~~~...... -i!!...... :::::'',!'!! !!!! !!:! .,,0--ora /s! ,!..,.l.D ,,, .. ,,:,! !',',,', . - .! ... .. '... O-hr...... '.....'...... Mle Re. .. - - ... !...... C ...... -. .Ces...... V. l a.... e..... !. i ...... ::!..!!!!: ...... ' .....!!!:: !. ..:. .:.:.!...... ! ::.:.:!!.!: !...... !.!..!!.!.!!!!.:...... !!:!!!!!!!:!!:!!!.!!!!!

.. !'9 1697.0 .!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-.!!!.:.! 1697.0 0 0 0 0 0 ...... 0.0 .1697.0 ,..2,''W. 5091.1 42.4 35.7 825.0 5994.2 24.0 103.8 28.6 80.0 750.0 988.4 ' -5005.8 '.!2001| 5091.1 169.7 107.1 825.0 6192.9 33.0 211.7 30.6 83.2 712.5 1071.0 -5121.9 2002j 3394.1 297.0 107.1 3798.1 44.0 423.5 31.6 86.5 676.9 1262.5 -2535.6 !'"-2'00$ 1697.0 381.8 337.5 71.4 2487.8 57.0 635.3 32.4 90.0 643.0 1457.7 -1030.1 :.200 i 914 424.3 1012.6 8.4 35.7 1481.0 70.0 1143.5 33.4 93.6 610.9 1951.4 470.4 '!'''25005 424.3 1012.6 33.8 1470.7 86.0 1651.7 34.4 97.3 580.3 2449.8 979.1 :200M 424.3 1012.6 59.1 1496.0 100.0 2159.9 35.4 100.3 551.3 2946.9 1450.9 ''.:.240O 1 424.3 84.4 508.7 115.0 2752.8 36.6 103.3 523.8 3531.4 3022.7 2008...... 424.3 84.4 508.7 1 29.0 3388.0 37.6 106.4 497.6 4158.6 3649.9 .!'-2009 424.3 84.4 508.7 146.0 4023.3 38.8 109.5 472.7 4790.3 4281.6 -'!20i0 . .. 4.1697.0 84.4 1781.4 163.0 4743.2 40.0 112.8 449.1 5508.1 3726.6 2011 tDl466.7 84.4 551.1 180.0 5505.5 41.2 116.2 426.6 6269.5 5718.4 .0g'2012 466.7 84.4 551.1 200.0 6267.8 42.3 119.7 405.3 7035.1 6484.0 -'20Si'3 . 466.7. 337.5 804.2 220.0 7114.8 43.7 123.3 385.0 7886.8 7082.5 -- 20i4 466.7 96.1 562.8 241.0 8046.5 45.0 127.0 365.8 8825.3 8262.5 ' 201t5 466.7 96.1 562.8 263.0 8932.0 46.4 130.8 347.5 9719.6 9156.8 2q16 ! i.0 I X96.1 .466.7 562.8 286.0 9994.6 47.7 134.7 330.1 10793.1 10230.3 -t 2017 466.7 96.1 562.8 311.0 11095.7 49.1 138.8 313.6 11908.1 11345.3 ;'l2018 1697.0 96.1 1793.1 337.0 12196.8 50.6 142.9 297.9 13025.2 11232.1 :2019 466.7 96.1 562.8 364.0 13425.0 52.1 147.2 283.0 14271.3 13708.5 '- 2020 466.7 96.1 562.8 392.0 14653.1 53.8 151.6 268.9 15519.4 14956.6 2021} '- 466.7 96.1 562.8 392.0 16008.3 53.8 156.2 255.4 16865.7 16302.9 2022 466.7 337.5 804.2 392.0 17405.9 53.8 160.9 242.7 18255.2 17451.0 ! ,,2,',0,23.:,Y, 466.7 96.1 562.8 392.0 18888.1 53.8 165.7 230.5 14790 19730.1 19167.3 a! economic cost taken as 85% of financial cost: 6970.3; b/ economic cost taken as 85% of fmnancialcost: 3375.4; c/ total environmental mitigation costs estimated at CFA 357.0; d/ total staff reduction costs are estimated at US$ 3.0 million 1650.0 ; f/ difference between with and without project traffic est., with 5501otourists assumption: US$35/day for tourist expenditure = CFA 19250; e/ difference between with & without project revenue est. assumption an average stay of 4 days per tourist = CFA/tourist 77000 i/ assumed Ist yr. saving of 750 m CFA decreasing by 50/.tyr; gt estimated handling cost saving in CFAtton of cargo ontotal traffic: 1680; ht estimate of 80.0m CFAtyear base saving with project

38 Annex 4E: Second Transport Sector Program (PST2) Land Transport Modernization/Planning Component Economic Impact/Risk Assessment

1. The main objectivesof this componentconsist of: (i) institutionalreform; (ii) promotionof private sector activity;and (iii) establishmentof a favorableenvironment for economicand social development. The reorganizationof the Departmentof Land Transport (DTT)began in 1992 underthe auspicesof the PAST project. Institutionalissues were addressed but not fully resolved. The proposed program is thereforea continuationof the efforts begun under the PAST project, with particular emphasis on: (i) reform in the issuance of driver's permits (specificallyexamination and candidate evaluation);(ii) computerizationof DTT and the developmentof informationtechnologies (databases, etc.); (iii) civil works and equipmentpurchase; and (iv) transportstudies. 2. The specific objective of the program is to enable DTT to fulfill its public obligationsmore efficiently and in a timely manner through : (i) an improved knowledgeconcerning the supply and demandof transportthrough the developmentof a comprehensivenational transport sector database;(ii) improvedevaluation system for driverspermits; and (iii) improvedmethods of followingand controlling the numberof road vehicles. Benefits 3. These are multipleand varied and generallyfall under four distinctcategories, as follows: (a) reformof the examinationsfor driver's permitsand evaluationof candidateswill: * improvethe systemfor writtenand oral exams; * introducetransparency and homogeneityin exams; * improvethe successrate of oral candidates;and * reducethe numberof trafficaccidents. (b) computerizationand informationdatabase upgrade of DTT will: * permit the development of genuine client/user interfaces and guarantee with much more reliabilitythe integrityand securityof information; * more easily consolidateall informationemanating from the regions; - more easily consolidateall informationemanating from the regions; * allowthe regionsto have more timelyaccess to information;and * enable seamless inter-connectivitybetween the police, military and customs with respect to informationconcerning the road network.

In the case of driver's permits, automationof procedureswill lightenthe workloadof both administrative staff and examiners,enabling more time to be spent with clients and candidates. Furthermore,the processingof driverspermits in Dakar and the regionswill be quicker,with less errors and better quality of service to the public. The new informationtechnology introduced will also allow for future linkageto the internet. (c) civilworks improvementswill: * improveworking conditions and the qualityof serviceto clients;and * improvethe successrate of practicalexams.

39 (d) transportstudies will: * improve overall knowledgeof Senegal's transportsector (i.e. function,capacity, limits, roles, etc.); * decreasetraffic accidents,notably those involvingchildren; * introducemore reliable informationand allow for the improvementsin the systemto be more closelymonitored. Costs and Justification of Investments 3. Programcosts are estimatedat 2,700.5m CFA: (i) 60.5 m CFA for driverpermit reform;(ii) 137.5 m CFA for computerizationand informationtechnology upgrade; (iii) 495 m CFA for civil works; (iv) 1,045m CFA for equipmentpurchase; and (v) 962.5 m CFAfor studies,training and accidentprevention. 4. The DIT presentlygenerates about 617 m CFA/yearin revenuefor the GOS. This includes,regular transporttaxes, vehicle registration,drivers permits, technical inspectionsand licenses. With program improvementsit is estimatedthat the total contributionof DTT's activitiesto the economyin 2001 alone will be about 900 m CFA. This would indicate that with the program DTT will mobilize more than sufficientresources over the programlife (of about 10 years)to warrantthe recommendedinvestments. ProjectRisks 5. One of the main risks is that insufficientmanpower and financial resourceswill be allocatedto DT7 so that it will not benefit froma consistentbudget or trainingprogram for its personnel.Another risk is that, as a result of present high importduties and local domestictaxes, particularlyon fuel and car usage generally,any increasesin taxes associatedwith vehicle use, to financethe DTT component,will be negativelyviewed by the generalpublic. 6. Consideringthe Government's interest in maintaininginflation at 3% and support productive sectors, taxes will most likely be kept at present levels. As to the other risks, the realization of the program allows the DTI to overcomethe inefficienciesof its qualified personnel under the present scenario. Performance Indicators 7. In order to followthe progressof the componentthe followingperformance indicators have been establishedto monitorDlT's progress: * updatingtransport data everytwo years; * reductionof traffic accidents; * increasein the numberof technicalinspections for vehicles; * increasein DTT's revenue; * completecomputerization of the productionof transportlicenses; and * reductionin fraud relatedto the attainmentof transportlicenses Poverty Impact 8. This componentwill have a positiveimpact on poverty through improved mobility, reductionin transportcosts, creationof both direct and indirectemployment, and in improvedconditions for obtaining driverspennits, which will allow for a larger segmentof the population,specifically young Senegalese,to be quicklyinserted into the economy.

40 Annex 4E: Second Transport Sector Program (PST2) Summary - Social and Poverty Impact

TheUrban Sector 1. A profde of urbanpoverty. More than 40% of the populationof Senegallive in urbanareas. It is estimatedthat by the year 2000, about45% of the populationwill live in urbanareas. Dakar alone accounts for more 56%of the urbanpopulation and about 21% of the total population.The urbanpopulation is growingat an averagerate closeto 4% per annum. On aggregate,the urbanpopulation is richerthan the rural population. Giventhat the majorityof urban poor live out of the city, it is clearthat they tendto incurhigh costs in time, moneyand effort in connectionwith variousmarket activities (labor and productmarkets) and in gaining accessto education,health and othersocial activities. 2. Both urban and rural householdsspent a significantshare of their annualbudgets on transport. The shareof totalhousehold expenditure going to transportis consistentlyhigher that the shareof healthand that of education. A desegregationof this budgetitem revealsthat on average67% of householdexpenditures on transportcorrespond to transportservices, the rest is accountedfor by investment(buying an vehicle)and maintenancecosts. A more efficienttransport system is thereforelikely to have a significantimpact on the poor. 3. Project inpact. As conceived,the projectwill impact on the poor in terms of increasedaccess to markets and services, improved safety and employmentthrough network expansionand infrastructure rehabilitation. As far as the civil aviationand maritimecomponents of the project are concerned,it is reasonableto expectincreased employment at least in tourism. Expansionof this sectorcan createjobs for low incomeindividuals in hotelsand restaurants, and in urbanand interurban transportation. 4. Thesafety dimension.Safety considerations are an importantfactor to accountfor in thiscontext. The standardof livingis an multidimensionalconcept that goes beyondincome. Giventhe risk associatedwith mobilityin a motorizedenvironment, and that most of the accidentsinvolve public transportusers (mostly CarsRapides and pedestrians,it is noteworthythat the projectincludes safety measures appropriately targeted to publictransport drivers and pedestrians. 5. Employmentgeneration. It is likelythat the increasesystem efficiency, its expansionand overall economicgrowth will make it possiblefor the ownersof the CarRapides to renewand increase their fleet on a sustainablebasis. This will create additional employmentopportunities for low-income households. Furthermore,all minor civil works, maintenanceand rehabilitationwill be executedby small size local contractorsusing labor intensive methods. TheRural Sector 6. Theproject includes three componentsthat deal specificallywith transport issues in the rural areas:(l) Supportthe designof a Rural TransportStrategy; (2) Establisha Rural CoordinationUnit; and (3) Perform EmergencyRehabilitation works. A projectis supposedto be a policy instrumentthat translatinga coherent strategy. Thereis no such strategyyet for Senegal,hence the necessityof the first component.As far as the benefitsof the emergencyworks are concerned,the projectwill ensurethat the criterionfor selectionbe consistentwith both efficiencyand equity considerations. 7. It is expectedthat after completion,the followingwill be achieved:(i) reducedtransaction costs; (ii) increasedagricultural production; and (iii) increasedaccess to markets;and (iv) improvedaccess to social services.The savingsin transactioncosts wouldbe reflectedin the reductionof traveltime and transportation

41 costs. The increase in transport efficiency would be reflected in the reduction of transport costs for merchandises.,with significantimpact on rural productionand trade.

42 Annex 5A: Second Transport Sector Program (PST2) - Financial Summary for Revenue Earning Project Entities: Port Autonome de Dakar

> ---- ACTUAL-- c ESTIM. -> -PROJECTIONS------(UNAUDITED) Year EndingDecember31, 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 200 (in Millions CFA Francs) INCOME STATEMENTITEMS Units Vokane (000's Tons) 10090 10012 11334 12056 12419 Revenues 6813 8963 9613 10682 10712 11186 13218 13619 13913 16530 1700 Operating Income 1809 2963 3402 3662 3697 3546 5643 5766 5814 8164 843 Net Income 279 296 750 1156 993 135 1414 865 4346 948 80

FUNDSSTATEMENT ITEMS Net Income 279 296 750 1156 993 135 1414 865 -346 948 80 a Depreciation 2570 2342 2752 2880 2945 3289 3801 4227 4967 6524 582 Cash Flow from Operations 2849 2638 3502 4036 3938 3424 6215 5092 4611 6472 662 Borrowings -97 -2200 404 680 2162 3410 4372 10760 3029 1861 -350 Equity Invest. +Others 0 0 0 0 0 0 0 0 0 0 Total Sources 2752 438 3906 47f5 6100 6834 9587 16862 7640 8333 311 Capital Expenditures 2386 -75 798 863 4520 3918 1110 3330 4440 2220 Working Capital Change 366 613 3108 3862 1680 2916 8477 12633 3200 6113 311 Other 0 0 0 0 0 0 0 *11 0 0 Total Applicotions 2752 438 3906 4715 6100 6834 9587 15852 7640 8333 311

BALANCE SHEETITEMS Current Assets 8037 8988 10806 11263 5672 6774 6969 6227 5626 5900 670 Net Fixed Assets 28652 24344 24779 26803 29647 33051 33930 36920 40991 43092 429 Total Assets 36689 33332 35685 37066 36319 38826 40889 43147 46617 48992 496 Current Liabilities 7019 6598 7996 7498 2708 2772 2876 2942 2994 3141 319 Debt 7827 5627 6031 6711 8873 12283 16655 27415 30444 32305 2879 Equity 6000 6000 5000 6000 5000 5000 5000 5000 60005000 600 Retined Earnings 0 0 0 0 0 0 0 0 0 0 Others 13120 13415 14166 15608 16687 16708 18111 18961 18601 19536 2032 NetWorth 18120 18415 19166 20608 21587 21708 23111 23961 23601 24536 2532 Others 3723 2692 2393 2249 2161 2060 1971 1881 1797 1766 173 Total Liabilides and Equity 36689 33332 35686 37066 35319 38823 44613 56199 68836 61747 5906

FINANCIALRATIOS Operating Income/Revenue(%) 27 33 36 33 34 32 43 42 42 49 U Net IncometRevenue(%) 4 3 8 11 9 1 11 6 -2 6 Retum on Av.lnv.rapital (%) 1 1 2 3 3 0 3 2 -1 2 Debt Serv. coverage ratio 4.4 3.9 6.5 7.1 76.5 5.0 6.2 4.5 3.3 3.5 3. Xash Flow/Sales(%) 42 29 37 38 37 31 39 37 33 39 3

Source: HistoricalBalance Sheets, Income Statements and Missionprojections

Background

8. The financial results of the port of Dakar have shown a steady improvement under the PAST. Sales have increased about 25% p.a. from 1993 to 1997 while earningsbefore depreciation,interest and taxes (EBIT) have gone from 27/o to 34% of sales revenues.Net income improvedfrom 4% of sales in 1993 to 9% in 1997. The liquidity positionhas also improvedwith the currentratio increasingfrom 1.1 to 2.1 over the same period. The debt-equityratio rose changedfrom 30% in 1993 to a low of 23% in 1994 before climbingagain to 29% in 1997. 9. The main reasons of this overall improvementsare a lower increasein operating costs (about 10%p.a..) than the increase in revenues, dwindling amounts of interest paymentsand a good amount of non-operating revenues. 11. The project aims to realize investments in equipment, human resource development, environmental protection, extension of port facilities to increase throughput capacity especially for container and cereals

43 handling,and civil works to either to reconfigureexisting physical layout to obtain more efficient operationsor for rehabilitationpurposes. 12. The investmentswould be financed through mixture of traditional on-lending of IDA funds from the Governmentto the port company,private sector type financing from the French Agencyfor Developmentand innovative Build-Own-Transfer(BOT) schemes. The bulk of investments (about more than 70% of total projected investments)would be realizedthrough the BOT scheme. 13. The financial projections show that, based on the assumptions described below, the proposed investmentsunder the project would yield satisfactoryresults: (i) EBIT would increasefrom 34% in 1997 to more than 40% in 1999 and beyond after a brief dip to 32% in 1998; (ii) net income would stabilize at around 6%; and (iii) the overall liquidity situation would be good. The additional debt incurred under the project would however decrease the debt service coverageratios from the high levels of 1995 and 1996.however, they would still be adequateat more than 3. Meanwhile,the debt-equityratio would reach its highest level of 57% when all the project-relatedloans are drawn down in 2002.

Basic Assumptions:

Income Statements:

Only modest increasesin the level of the fees charged in an effortto keep the port competitive. * An increasein revenuescoming mainlyfrom a highervolume of business; * A reductionin operatingcosts resulting from a more efficientmanagement put in place; and * Assets depreciatedover 20 years for civil works and constructionand 10 years for equipment.

Balancesheets: * Investmentswould be carried out in two phases:the first phase would be in 1999-2002and thesecond phase, mainly under the BOT system,would be in 2004-2007. * Investmentswould be 80% financed by debt and 20% internally-generatedcash flow. The loan would be over 15 years at 8% with a five year grace period. It has been assumedthat any foreign exchange movementsthat would threatenthe financialstability of the Port or make it unable to meet its debt servicingrequirements would be reviewedwith the objectiveof transferringthe excess foreign exchange risk on the Government * Accountsreceivable and payablehave been taken at 45 days

FinancialAnalysis

14. The port componentshows a internalfinancial rate of return of 9%. The main benefits are derived from savings in operating costs and an increasein revenues from more quantities of goods handled than would have been the case without the project investments. 15. A sensitivity analysis was carried out to determine the impact of adverse developmentsof the key parameters,investment costs, savings and additionalrevenues on the overall project performance.The results summaized below show that the investmentswould still have satisfactoryresults under the assumptionsmade. The assumptionsare consideredas probablythe worst that could happen: a 25% increasein investmentcosts, a 25% decrease in the projectedsavings and a 25% in the projectedadditional revenues.

44 Annex 5 B: Second Transport Sector Program (PST2) - Financial Summary for Revenue Earning Project Entities: AANS (Airports Management) (To be privatized by 6(2000 - Timetables attached)

>- -ACTUAL-- - EST. > --- PROJECTIONS ------c (UNAUDITED) Year Ending December31, 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2006 ( In Mions CFA Francs) INCOMESTATEMENT ITEMS Revenues 3172 4054 5410 5818 6400 6850 7620 7830 8050 8280 8510 8740 8740 Opwating Income 578 694 499 1751 2327 2948 4411 4812 4972 6139 5305 6469 5401 NIt Income 616 -1185 1786 41624 877 273 816 *52 -331 -163 67 304 390

FUNDSSTATEMENT ITEMS Net Incom 4616 41185 1786 .1624 877 273 816 -62 -331 4163 67 304 390 Depreciation 608 1204 803 1451 1451 1886 2322 2860 3298 3298 3298 3298 3298 Cah Flow from Operations 92 19 2589 -173 2328 2159 3138 2808 2967 3135 3365 3602 3688 Borrowhngs 0 0 0 0 0 8277 6680 10094 0 0 0 0 0 Equity Change 0 0 0 0 0 0 0 0 0 0 0 0 0 Total Sources 92 19 2589 *173 2328 10436 9818 12902 2967 3135 3365 3602 3688 Capital Expenditures 4496 925 2106 1588 0 8713 7032 10625 0 0 0 0 0 Working Capital Change -4404 -906 483 .1761 2328 1723 1786 1277 1967 2135 2365 97 1.83 Dbt Principal Repayment 0 0 0 0 0 0 0 0 0 0 0 2505 2505 Other 0 0 0 0 0 0 1000 1000 1000 1000 1000 1000 1000 TotalApplicatIons 92 19 2589 -173 2328 10436 9818 12902 2967 3135 3365 3602 3688

BALANCE SHEET ITEMS Current Assets 6503 6203 9379 4666 1774 1952 2172 2232 2294 2360 3100 4169 5325 NetFixed Assets 5963 6331 7818 11189 13669 23014 21974 32138 31190 31392 29594 26295 22997 TotalAssets 12466 12534 17197 15856 15443 24966 24146 34370 33484 33752 32694 30464 28322 Current Uabilities 468 888 1022 2796 1507 2480 2115 2298 1743 2173 3652 3526 3498 Debt 448 0 4612 0 0 8277 14968 25052 25052 25052 22546 20041 17536 Equity 10193 10193 10193 10193 10193 10193 10193 10193 10193 10193 10193 10193 10193 Retained Earnings 3 454 0 5670 4046 4923 6196 6013 5961 5630 6467 5534 5838 Others 1208 1361 1370 46089 -3588 -4192 *8316 -9186 -8465 -9296 -8064 -8829 -8743 Net Worth 11862 11600 16175 9774 10651 19201 22031 32072 31741 31579 29142 26939 24824 Others 146 146 0 3285 3285 3285 0 0 0 0 0 0 0 Total Liabilities and Equity 12466 12634 17197 15856 16443 24966 24146 34370 33484 33752 32694 30464 28322

FINANCIALRATIOS Operating 18 17 9 30 36 43 58 61 62 62 62 63 62 Income/Revenue(%) Net Income/Revenue(%) -16 -29 33 -28 14 4 11 -1 -4 -2 1 3 4 Retumon Av. Inv. Capital(%) -4 -9 10 -10 6 1 3 0 -1 0 0 1 1 Debt Service Coverage Ratio - - - 3.7 3.5 2.4 2.5 2.6 1.2 1.3 1.4 Cash Flow/Sales (%) 3 0 48 -3 36 32 41 36 37 38 40 41 42

Source: HistoricalBalance Sheets, Income Statements and Missionprojections

Background

I1. The financialresults of AANS, the entity responsiblefor airport man,agement,have shown big swings overthe last five or six years: from a break-evenresults in 1993, AANS showed a net loss of CFAF million 57 in 1994 that widened dramaticallyto CFAF 1.3 billion in 1995. Then there was a reported huge turnaroundin 1996 with a net profit of CFAF 1.8 billion in 1996. These results have to be viewed within the context of an unsatisfactoryaccounting and financial managementsystem as reportedby successiveaudit reports. 2. In 1998, at the request of the World Bank, the financial accounts of AANS were restated after an exhaustiveinventory by two different accountingfirms to correct all the anomaliesunderlined by the reports of the auditors.The result is a net loss of CFAF 1.6 billion instead of the CFAF 134 million previouslyreported for 1997.The status of AANS as a public entity receiving subsidieswhen and as needed and with no debt in its

45 books and no net worth to speak hide any possible inadequacy in its financial structure and its real cash generationpotential in terms of being able to meet debt servicingobligations. 3. In the years from 1990 to 1997, earnings before interest, depreciationtaxes have gone from 28% of sales in 1990 to a low of 9% in 1996 before climbing to a record 30% in 1997. These movements appear chiefly explainedby major decreasesin revenues and a substantialincrease in personnel costs in 1996. Other costs have also shown important increases.In general, costs seem to have been higher than those experienced by similar entities elsewhere, a result of both inadequate cost controls and the financing of government servicessuch as the civil aviationand the meteorology departments. Personnel costs have shown huge increasesof 25% between 1994 and 1995 and 63% between 1995 and 1996 before decreasingby 32% in 1997. On the other hand, fees charged per unit by the Dakar airport, which generates at least 95% of all AANS's revenues, are only about 75% of those collected at similar airports such as Abidjan and Nairobi. This underlinesthe upward potential for an eventualincrease in fees. 4. The financial projections show that, based on the assumptions described below, the proposed investmentsunder the project along with the proposedreform measures would yield satisfactoryresults for the new airport managementsetup: (i) the level of profitability,even under the very conservative assumptions made regardingthe level of fees, would be adequate;(ii) the overall liquidity situationwould be good with the current ratio consistentlyabove or near 2 except for the first year of principalrepayment; (iii) the debt-equity ratio would be highest (73%) when all the loan funds have been disbursed. It shouldbe pointed out, however, that non-loan financing have been put at 20% because of the uncertainties still surroundingthe terms and conditions under which privatization of airport managementwill take place. The level of equity financing and/orfinancing from internal cash flow has the potentialof being significantlyincreased.

Basic Assumptions

5. For the income statements:

* no increase in the level of the fees charged despite the fact that the fees charged by Dakar are currently lower than those of similar airports.The increase in revenues shown are the result of a modest increase of 3% p.a. in the number of passengers and the shipments going through the airports.It is currentlyestimated that currentpassenger traffic at Dakar Airport is only 62% of the overall airport throughput capacity; . a reduction in operating costs resulting from a more efficient managementput in place with the privatization and a marked reduction of personnel costs to better reflect actual needs (reductions of CFAF 750 million p.a. have been assumed in personnel costs in 2000-2001and CFAF 1 million thereafter,consistent with the proposedreform programto take civil aviationand meteorologicalservices out of AANS budget); * assets depreciatedover 20 years for civil works and constructionand 10 years for equipment; * After privatizationin 2000-2001,the new entity would pay taxes at the normalrate of 35%. * For the balance Sheets: * investmentswould start in 1999-2000; * investmentsfor the Ziguinchorairport have not been included; * investmentswould be 80% financed by debt and 20% with internally-generatedcash flow. The loan would be over 15 years at 8% with a five-year grace period; and * accountsreceivable and payablehave been taken at 45 days.

6. In the Reform Area:

* airportmanagement would be privatizedin 2000 for Dakar and the four secondary airportsof Cap Skirring,Ziguinchor, St-Louis and Tambacoundawould be privatized;and * the new airport managementwould contributeabout CFAF 1 billion to fund used to finance the operationsof the four secondaryairports and the recurrent costs and other needs of the civil aviation departmentand the meteorologydepartment.

46 Financial Analysis.

6. The civil aviation component shows a internal financial rate of return of 9%. The main benefits are derived from savings in operating costs (most specificallypersonnel costs) and an increase in revenues from more passenger and freight traffic. than would have been the case without the project investments and/or the implementationof the reform program. 7. A sensitivity analysis was carried out to determine the impact of adverse developmentsof the key parameters,investment costs, savings and additionalrevenues on the overall project performance.The results summarizedbelow show that the investmentswould still have satisfactoryresults under the assumptionsmade. The assumptionsare consideredas probablythe worstthat could happen: a 25% increasein investmentcosts, a 25% decreasein the projected savings and a 25% in the projected additionalrevenues.

47 Annex 5B bis : Privatization of Management of Airports, Reorganization of Civil Aviation Administration, Meteorological Department and Regulatory Framework and Staff Reduction: Timetable of Actions

DIAGNOSTICDE LA GESTIONDU SOUS-SECTEURDE L'AVIATION CIVILE Calendrier

Etapes/Tiches Responsa Calendrier indicatif bilites T3 T4 Ti T2 T3 T4 1998 1998 1999 1999 1999 1999 1. Mise jour du diagnostic Consultant Etude de privatization de la gestion des s aeroports du Senegal (rapport provisoire CGCPE disponible) CELCO Transmission a 1' IDA Examen et commentaires de l'IDA Transmission des commentaires au consultant Prise en compte des commentaires-rapport ddfinitif Consultation et adoption d'un projet de plan d'actions Transmission du scenario retenu a 1' IDA Examen et commentaires de 1' IDA Adoption fiale du plan d'actions

48 MISE EN PLACE DU PLAN D'ACTIONS APPUI A LA DAC ET A LA DMN Calendrier de mise en oeuvre

Etapes/Taches Respons Calendrier indicatif abilites T3 T4 TI T2 T3 T4 1998 1998 1999 1999 1999 1999 Restructuration de la DAC et de la DMN Elaboration des termes de reference pour la restructuration et mise en place de la DAC et de la DMN Transmission des termes de reference + liste restriente + modele de dossier de consultation a 1' IDA Examen et reponse de 1' IDA lancement de la consultation Ouverture et analyse des offres techniques Transmission des resultats a 1' IDA Examen et reponse de l'IDA Ouverture et analyse des offres financieres-> proposition d'adjudication Transmission des r6sultats a l'IDA Examen et r6ponse de 1' IDA Negociation + signature de contrat Elaboration des textes juridiques, organigramme fonctionnel et hi6rarchique, description des profils de postes, dimensionnementdes effectifs, budget pr6visionnel a cinq, manuel de procedures de gestion comptable et financi6re, bilan d'ouverture Transmission a 1' IDA Examen et commentaires de 1' IDA Finalisation des rapports Adoption des d6crets de reorganisation de la DMN et de la DAC

49 PLAN D'ACTIONS POUR LA PRIVATISATION DE LA GESTION DES AEROPORTS Calendrier de mise en oeuvre

Etapes/Taches Responsa Calendrierindicatif bilit6s . . TI T2. T3 T4. TI T2 1999 1999 1999 1999 2000 2000 Privatisaton de la gestion des airoports Elaborationdu dossierd'information Elaborationdu projet de Dossierd'appel d'offres Transmissiondu projet de DAO a 1' IDA Examenet reponsede 1' IDA Lancementde l'appel d'offres Ouvertureet analysedes offrestechniques Analysedes offrestechniques Transmissiona 1' IDA Examenet commentairesde 1' IDA Note d'instructionpour presentationdes offres financieres Remisedes offresfinancieres par soummissionairesayant fianchi l'etape de selectiontechnique Analysedes offresfinancieres et proposition d'adjudication Transmissiona 1' IDA Examenet commentairesde 1' IDA N6gociationset conclusionsde la transaction (signaturede la conventionde concession) D6nonciationde la conventionavec Etat du SenegalUASECNA(Conformement aux termes prevus notamment delais minimum a observer) __ _

50 PLANS D'ACTIONS POUR LA MISE EN OEUVRE DU PLAN SOCIAL DANS LE CADRE DE LA PRIVATISATION DE LA GESTION DES AEROPORTS

Etapes/Taches Respons Calendrier indicatif abilites TI T2 T3 T4 TI T2 ______1999 1999 1999 1999 2000 2000 Plan social lection d'un consultant Elaborationdes termes de reference+ liste restreinte+ projet de consultation Transmissiondu projet de DAO a 1' IDA Examenet r6ponsede 1' IDA Lancementde la consultation Ouvertureet analysedes offres techniques Transmissiona l' IDA Examenet commentairesde 1'IDA _ __ Examendes offres financieres- >adjudication provisoire TransmissionA 1' IDA Examenet commentairesde I' IDA N6gociation+ signaturedu contrat Elaborationdu plan social (Analysede la reglementationen existante,modalit6s de calculdes indemnit6s,analyse des experiencespassees, evaluation du montantdes indemnisations, determinationet 6laborationd'un chronogrammedes actionsa mener et des precautionsa prendre) lll . Transmissiondu plan social a l'IDA Examenet commentaires Mise en oeuvredu plan social Paiement des indemnites __ _

51 Annex 5C: Second Transport Sector Program (PST2) - Financial Summary for Revenue Earning Project Entities: Air Sen6gal (To be privatized by 12/31/99 - Timetable attached)

>-----ACTUAL------Reconst. ESTIM. PROJECTED (unaudited) Year EndingDecernber 31, 1993 1994 1996 1996 1997 1998 1999 in MillionsCFA Francs) INCOMESTATEMENT ITEMS Revenues 1136 1904 2000 2449 1770 1718 1800 OpratingIncome 1238 1667 1830 2472 2835 2600 2800 Net knooe 185 52 51 -368 -2394 736 342

FUNDSSTATEMENT ITEMS Net Income 185 52 61 -368 -2394 735 34 Oepreciation 2832 2664 3427 2694 2603 2973 2621 ah Flow from Operations 3017 2706 3478 2326 109 3708 2863 Borrowings 0 493 -1735 1377 1149 3006 136 Equity Change 0 0 0 0 0 0 0 rotal Sources 3017 3199 1743 3703 1258 6714 2999 apital Expenditures n.a. 2056 3046 2478 3033 1368 221 Working Capital Change n.a. -2701 -5262 -944 4565 1664 4293 Debt Repayment n.a. 3844 3961 2169 2790 3682 707 Totai Appilcations n.a. 3199 1745 3703 1258 6714 2999

LANCE SHEET ITEMS Current Assets 2163 2097 2307 2490 2599 710 1108 Net Fixed Assets 867 1062 2071 2200 1260 1230 1180 Tota/ Assets 3030 3169 4378 4690 3869 1940 228 Current Liabilities 2381 2433 2270 2487 3366 4438 6097 lebt 1962 2191 1988 669 1313 1313 1313 Equity (1) 200 200 200 1560 1560 1S60 1660 RetainedEarnings -1712 -1918 -2551 -2137 -2461 -4124 631 Ohers -200 427 1437 1081 450 -1731 -1848 Net worth -1712 -2345 -914 504 -1541 -4296 6606 Otrs (2) 399 880 1034 1030 721 484 48 Total Uabiltes and Equlty 3030 3159 4378 4690 3859 1940 228

FINANCIALRATIOS Operating IncomelRevenue(%) 109 87 92 101 160 161 1S6 Net Income/Revenue(%) 16 3 3 -16 -135 43 19 Retum on Av.lnv.capital (%) 6 2 1 -8 42 38 1 Debt Service Coverage Ratio 0.7 0.6 1.3 0.7 0.0 0.5 0.3 Cash Flow/Sales(%) 266 142 174 96 6 216 169

Source: HistoricalBalance Sheets, Income Statements and Missionprojections (') Companyto be privatizedby December1999 (1) Conversionof GovemementLoan to Equity (2) Subsidies

Background

1. The financial results of Air Senegal have been poor over the PAST implementation period, despite moderate profits shown in 1994 and 1995. Net losses have represented 20% of sales in 1993, 5% in 1996 and 94% in 1997 after the accounts were restated by an accounting firm. The main causes of this unsatisfactory performance include a week asset base in terms of the number of planes in operations, poor and inadequate management and a costly and fatal accident that not already reduced the company's own fleet from two to one place but also affected its image.

52 2. As of December31 1997, cumulativelosses amount to 2.6 times its capital share, meaning a negative net worth of about US$ 2 million equivalent if Governmentloans are considered as quasi-equityand US$ 4 million otherwise. 3. A decision has been taken to privatize the company which has continued to be a drain on public finances with no visible signs of improvementsand no clear contributionto the tourism sector. In agreement with the World Bank and the IMF and withinthe contextof the PFP, the deadlineset to completeprivatization is December31 1999. 4. The project has no specific investmentsfor the company except in terms of privatizationassistance and limitedpersonnel training. The only sure asset that the companystands to offer any potential suitor is its routes to regionaldestinations following the liberalizationof air transportthat is taking place.

MainAssumptions 5. No financial projections have been prepared. It has been however estimated however that based on recent performance, the results for 1998 and 1999 the last full year before privatization, would show significantlosses amountingto morethan 70% of total revenuesin both years.

53 Annex 5C bis: Privatization of Air Senegal: Timetable of Actions

Ce documentconstitue une mise i jour du plan d'actionarrete enjuin 1998.Les actionsrealises sont mentionnees.

Etapes/TAches Responsa Calendrierindicatif bilites T4 TI1 T T3 T4 .1998 1998 199 1999 1999 1999 9 1. Apurementdes comptesde Air Senegal Consultan (versionprovisoire disponible) ts CGCPE_ CELCO_ 2. Elaborationde la strategiede privatisation I_ I I I S&lectiondu consultant ^ Finalisationdes termes de referencepour la selectiond'un consultanten charge de l'6tudede la strategiede privatisation+ propositionde dossierde consultationdes cabinets+ listerestreinte * Transmissiona 1' IDApour avis de non objection * Examende 1' IDA et reponsede 1' IDA * Lancementde la consultation * Depouillementet analysedes offres techniques * Transmissiona 1' IDApour avis de non objection * Examende 1' IDA et reponsede 1' IDA * Analysedes offresfinancieres - propositiond'adjudication * Transmissiona l' IDApour avis de non objection * Examende 1' IDA et reponsede 1' IDA * Negociation * Avis de I' IDAsur le projet de contrat * Signatureet notification __ _

54 PRIVATISATION DE AIR SENEGAL CALENDRIER DE MISE EN OEUVRE (Suite et fin)

Etapes/Tkches Responsa Calendrier indicatif bilitks T3 T44 TI T2 T3 T4 199 1998 199 199 1999 1999 8 9 9 Elaboration de la strategie de privatisation * Mise a jour de l'etude strategique * Elaboration des differents sc6narios de privatisation basee sur 1'etude strategique mise a jour+ diligences a mettre en oeuvre par le Gouvernement - options de traitement de la dette * Transmission du rapport provisoire a 1' IDA * Examen et commentaires de I' IDA * Rapport definitif * Adoption d'un scenario de privatisation + diligences a mettre en oeuvre par le Gvt + Air Senegal EWecutionde I 'option de privatisation Elaboration du projet de Dossier d'appel d'offres + dossier d'information Transmission du projet de DAO a 1' IDA Examen et reponse de I' IDA Lancement de 1' appel d'offres + Publicite active Ouverture et analyse des offres Analyse des off-res et proposition d'adjudication Transmission a 1' IDA Examen et commentaires de ' IDA Avis de I' IDA sur les instruments juridiques de la privatisation Negociations et conclusions de la transaction Reprise par l'operateur choisi -_-___

55 Annex 5D: Second Transport Sector Program (PST2) - Financial Summary for Revenue Earning Project Entities - CEREEQ

CEREEQ >---ACTUAL-- -c Est. >---PROJECTIONS-----< (UNAUDITED) ear Ending December31, 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200 (in Milions CFA Francs) INCOMESTATEMENT ITEMS Revenues 320 319 400 372 415 460 600 650 600 660 676 700 725 Opeirating Income 262 314 290 263 307 331 365 396 429 443 460 473 484 Net Income -22 -63 40 71 76 58 39 40 36 41 17 30 52

FUNDSSTATEMENT ITEMS Net Income -22 -63 40 71 76 58 39 40 36 41 17 30 62 Depreciation 22 15 19 29 47 29 32 43 79 111 163 146 145 ash Flow from Operations 0 *48 69 100 123 87 71 83 116 152 170 176 197 Borrowings 0 0 0 96 0 0 -1147 94 292 239 38 35 0 Other -9 4 -3 12 1 0 0 0 -1 0 -1 0 0 Total Sources 4 -62 56 207 124 87 -1076 177 406 391 207 210 197 Capital Expenditures 8 3 54 139 36 0 0 50 125 389 319 60 47 Working Capital Change -17 -65 2 68 62 87 -1076 127 281 2 -112 160 160 Debt Repayment 0 0 0 0 21 0 0 0 0 0 0 0 0 Other 0 0 0 0 5 0 0 0 0 0 0 0 0 TotalApplicatfons -9 -62 56 207 124 87 -1076 177 406 391 207 210 197

BALANCESHEET ITEMS Current Assets 986 906 1028 858 889 779 700 790 1018 939 776 1068 1457 NetFixed Assets 54 41 76 187 180 382 296 318 422 774 994 772 432 TotalAssets 1040 947 1104 1045 1069 1161 996 1108 1440 1713 1770 1840 1889 CurrentUabilities 405 379 499 262 230 305 104 82 86 79 82 84 164 Debt 1184 1184 1184 1184 1184 1184 38 131 423 662 700 735 663 Equity 65 56 65 65 56 65 1239 1239 1239 1239 1239 1239 1239 Others net Profits -22 463 40 92 77 68 39 41 36 42 17 31 63 Retained Earnings -606 4628 -691 -651 -569 -482 -424 -386 444 -309 -267 -251 -221 Net Worth 473 636 -596 -604 -427 -369 854 895 931 972 989 1019 1071 TotalLiabilites and 1040 947 1104 1046 1069 1161 996 1108 1440 1713 1770 1840 1889 Equity

FINANCIALRATIOS Operating 82 98 73 71 74 74 71 72 72 68 68 68 67 IncomelRevenue(%) Not IncomelRevenue(%) -7 -20 10 19 18 13 8 7 6 6 3 4 7 Retumon Av.lnv.capital(%) -2 -7 4 7 7 5 4 4 3 2 1 2 3 Debt Serv. coverage ratio 0.0 0.0 0.0 0.1 0.1 0.1 1.9 0.6 0.3 0.2 0.2 0.2 0.3 Cash Flow/Revenues(%) 0 -15 15 27 30 19 14 15 19 23 25 25 27

Source:Historcal BalanceSheets, Income Statementsand Missionprojections

Background 1. CEREEQ(Centre Experimental de Recherches et d'Etudes pour I 'Equipement) is a public entity created in 1975 with of an industrial and commercialnature to undertake research and promote use of adapted and locally-madematerials for the road constructionand public works sector. The specific services offered by CEREEQ are: the geo-technicalcontrol of road works (about 40% of revenues), research and studies (388%), and laboratory testing (22%). CEREEQ is currently being restructured as a national company with majority governmentownership. 2. CEREEQ's work has been seriously hampered by the inadequacyof its equipment which is very old, fully depreciated and a source of high maintenance and operating costs. Its staff is however generally recognizedas having a good potential althoughthey need training. Financial results have varied for the last few years. Net results have improvedfrom losses in 1993 and 1994 to a net profit thereafterreaching a high of

56 about 20%/oof sales in 1996. Likewise,cash flow improved from a negative 15% of sales in 1994 to a high of 33% in 1996. However, CEREEQ continuedto receive investmentsubsidies that reached as high as 28% of sales in 1996.At the same time, the carryoverof past losses made the net worth highly negative while the loans receivedfrom the Governmenthave never been servicedand no interest accountedfor. 3. A key objective of the proposed project is to improve the quality and efficiency of the road sector through, among other things, a better control of the works, the use of more adapted construction or road- building materials, adequatetesting and sustainableand efficient institutions.Because CEREEQ will be called on to play a vital role in this process, the project will assist it by financing minor office rehabilitationworks, equipmenttraining and limited technicalassistance. 4. The attached financialprojections indicate that as a result of the project investmentsfor CEREEQ, and efficiency improvementmeasures, EarningsBefore Depreciation,Interest and Taxes (EBIT) would improve from an average of about 20% over the last five years to more than 30% of sales. At the same time, the liquiditysituation would improve. Finally, even after the investments are financed through a combination 75% from a loan and 25% from internationallygenerated cash flow, the financial structure of CEREEQ would show a debt-equityratio of 42% at its highest level and a debt service coverage ratio of at least close to 3.

Main Assumptions:

* an increasein the level of activity of between 5 and 10% on averageas a result of CEREEQ's ability to satisfy a higher level of demand than has been the case so far because of the inadequacyof its equipment; * lower equipmentmaintenance costs; * financingof the investmentswith 75% of credit on-lentby the Governmentat 5% over 12 years with a three-yeargrace period; * he restructuringof the current unserviceddebt to the Governmentas part of the overall reform of the debt of nationalcompanies; * receivablesof 45 days and payablesof 45 days; * depreciationschedules over 10 years for equipment,20 years for civil works, and 4 years for capitalizedexpenses; * CEREEQis restructuredas a national companywith majoritygovernment ownership and private sector investors as a first step towards full privatization.

57 Annex SE: Second Transport Sector Program (PST2) - Financial Summary for Revenue Earning Project Entities: SNCS

>------ACTUAL-- ESTIM. >------PROJECTIONS---c SNCS (NationalRailroad (UNAUDITED) Comnpany) Year ErdingDecember 31, 1990 1991 1992 1993 1994 1985 1996 1997 1998 1999 2000 2001 2002 200 (in MilliorsOFA) INOIME STATEMENT TEMS Units Volunm (000tons) 2144 2442 2378 2088 2408 2733 2896 3041 3218 325 Ravenues 10448 9304 9674 7947 9394 12082 11925 11038 12020 12821 10924 15218 16254 16838 ng hIcome 9991 8432 8989 9081 8693 10691 9475 9655 11022 11423 8155 8283 8360 8369 nmteem 185 52 51 -368 -2394 735 342 551 -325 -491 -2110 1519 2085 2544 FNDSTATEMENT ITEMS NInconm 185 52 51 -68 -2394 735 342 551 -325 -491 -2110 1519 2085 2544 Deprec)aUon 2832 2654 3427 2694 2503 2973 2521 2926 2926 3201 3394 3554 3662 Flow *OmOpealon. 3017 2706 3478 2326 109 3708 2863 3477 2601 2710 1284 5073 5747 62 Benewlngs 0 493 -1735 1377 1149 3006 136 -1963 0 11667 8213 6817 4594 oew 0 0 0 0 0 0 0 0 0 0 0 0 0 Tom(Sowcze n.a. 3199 1743 3703 1258 6714 2999 1514 2601 14377 9497 11980 10341 Cap Expenditures n.a 2056 3046 2478 3033 1368 2217 1797 0 13726 9662 8020 5404 Working Capial Chan n.a. -2701 -5261 -944 4564 1663 -6293 -8393 -4070 -7460 -8275 -4240 -3173 -1 Dod*Repanent n.a 3844 3958 2169 2789 3683 7075 8110 6671 8111 8110 8110 8110 811 TOMApPJk.tlon n.a. 3199 1743 3703 1258 6714 2999 1514 2601 14377 9497 11890 10341 6206

BALANCESHEEr iTEM8 CurntAssuet 4524 6349 6133 7448 9663 13743 14702 12746 10804 11498 8084 11261 12028 13377 Not FbrndAssat 64434 64296 65407 65339 81060 79004 77913 76196 75946 89147 98366 105976 111022 TolAnsl. 68958 70645 71540 72787 90723 92747 92615 88942 86750 100645 106450 117237 123050 13377 Cuent UabUles 3424 4916 5185 7042 9718 13331 13255 11735 11307 11462 11543 13136 12063 10501 Debt 17087 17463 17520 18276 18530 18145 17246 16722 15283 26950 35163 41980 46574 4657 Equity 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 RebaId EarnIngs 0 185 236 273 -95 -2660 -1925 -1582 -1031 -1356 1847 -3958 -2439 -34 Other Proft 3377 3244 3244 2839 642 3943 3550 3758 2882 2716 1097 4726 5292 5751 Net WaorN 10377 10429 10480 10112 7547 6263 8625 9176 8851 8360 6250 7768 9853 12397 Othe 38070 37837 38355 37357 54928 52988 53489 51309 51309 53873 53494 54353 54560 -560 Total Lie J"eand Equfty 68958 70645 71540 72787 90723 92747 92615 88942 86750 100645 106450 117237 123050 13377 FNNIALRATIO OperatIng 96 91 93 114 93 88 79 87 92 89 75 54 51 50 IncomalR.venue(%) Notlncome/Revenue(%) 2 1 1 -5 -25 6 3 5 -3 -4 -19 10 13 1 RetsmonAv.hv.caplbl#(%) 0.3 0.1 0.1 -0.5 -2.6 0.8 0.4 0.6 -0.4 -0.5 -2.0 1.3 1.7 19.0 Debt ar.coverageratio 0.2 0.2 0.2 0.1 0.0 0.2 0.2 0.2 0.2 0.1 0.0 0.1 0.1 0.1 ah Flow/Sais (%) 29 29 36 29. 1 31 24 32 22 21 12 33 35 37

Source:Hlstorial Balance Sheets, Income Statemerts and Mission projecons n.a. not avaabbe

Background

1. The financialresults of SNCS have shown a steady improvementunder the PAST. Sales have increased about 10%p.a. from 1993 to 1997 while earningsbefore depreciation,interest and taxes (EBIT) have gone from a negative 13%to 13% of sales revenues.Net results have gone from a net loss representing5% of sales in 1993 to a net profit representing5% of sales in 1997. The liquidityposition has not on the whole improved with the currentration staying stable at about 1 during the period. However,the financial structurehas worsenedas a result of the 1994 CFAFFranc devaluation.SNCS is in arrears in its debt repaymentso that the numbersin the balance sheets do not representthe real situation.The debt-equityratio is unsatisfactoryat more than 65% during most of the period. 2. The project aims to realize investments in equipment, human resource development, environmental protection, and mainly track rehabilitation to improve efficiency and reduce the frequency of derailments. During the course of project implementation,the internationaloperations between Dakar and Bamako would be privatized.The financial projections show that, based on the assumptions described below, the proposed

58 investmentsunder the project would yield satisfactoryresults in terms of earnings before depreciation,interest and taxes (EBIT) which would grow from 13% in 1997 to more than 20% in 2000 and thereafter. However,if SNCS debt is not restructured,the additionaldebt incurredunder the project would constitute a heavy burden on the company,leading to significantlosses for a few years and to a weak financial structure.The debt-equity ratio would be a high 85% in 2000, current ratio less than one for a few years and the debt service coverage ration wouldbe much below 1 for many years.

Main Assumptions

For the income statements:

3. Internationalservices on Dakar-Bamakocorridor would be operated by SETI, the company set up to that effect starting in FY 2000. At that time, the fees paid to SNCSwould be about CFAF 8.2 to 8.5 billion p.a. These would be in additionto the fees paid by SEFICSand the operation of suburban services in the Dakar area:

* a reduction in operating costs resultingfrom a the decrease in the costs of materials and supplies and personnelbecause of the transferof activitiesto SETI;

* assets depreciatedover 25 years for track investments,20 years for civil works and constructionand 10 years for equipment;

For the balance sheets:

* investmentswould be 85% financed by debt and 15% with internally-generatedcash flow. The loan would be over 25 years at 8% with a 10-year grace period. It has been assumed that any foreign exchangemovements that would threatenthe financial stabilityof the SNCS or make it unable to meet its debt servicingrequirements would be reviewedwith the objectiveof transferringthe excess foreign exchangerisk on the Government;and

* accountsreceivable and payablehave been taken at 45 days.

FinancialAnalysis

4. The rail componentshows a internal financial rate of return of 20% and a NPV of CFAF 21 billion at 12%. The main benefits are derived from savings in operatingcosts and some increases in revenue from more quantities of goods transported at the national level than would have been the case without the project investments. 6. A sensitivity analysis was carried out to determine the impact of adverse developmentsof the key parameters,investment costs, savings and additional revenueson the overall project performance.The results summarizedbelow showthat the investmentswould still have satisfactoryresults under the assumptionsmade. It shows that costs would have to increaseby 170%for the NPV to come to 0 and the IRR to drop to 8%.

59 Annex 6: Second Transport Sector Program (PST2) Procurement and Disbursement Arrangements

A. Procurement

1. A Country Procurement Assessment Report (CPAR) was completed in July 1994. For the program, findings of the CPAR remain valid. In general, Senegal's procurement laws and regulations do not conflict with IDA Guidelines. No special exceptions, permits, or licenses need to be specified in the Credit documents for International Competitive Bidding (ICB), since Senegal's procurement practices allow IDA procedures to take precedence over any contrary provisions in local regulations.

2. IDA-financed Works and Goods will be procured in accordance with Bank's Guidelines under IBRD Loans and IDA Credits (January 1995 revised in January, August 1996 and January 1999). IDA's standard bidding documents will be used for all procurement under International Competitive Bidding (ICB). National Competitive Bidding (NCB) advertised locally would be carried out in accordance with Senegal's procurement laws and regulations, acceptable to IDA provided that: (i) any bidder is given sufficient time to submit bids (four weeks); (ii) bid evaluation and bidder qualification are clearly specified in bidding documents; (iii) no preference margin is granted to domestic manufacturers; (iv) eligible firms are not precluded from participation; (v) award will be made to the lowest evaluated bidder; and (vi) prior to issuing the first call for bids, draft standard bidding documents are submitted to IDA and found acceptable. Consultant Services contracts financed by IDA will be procured in accordance with the Bank's Guidelines for the Selection of Consultants by World Bank Borrower published in January 1997, revised in September 1997, and January 1999.

3. Table A below summarizes the program elements by disbursement category, their estimated costs and procurement methods. All IDA financed civil works, equipment, materials and other goods will be procured in compliance with IDA Guidelines mentioned above. Bank funds financed under ICB are forecast to be US$ 50.11 million (56% of total Bank financing). National Competitive Bidding (NCB) will be carried out in accordance with Senegal's procurement laws and regulations, acceptable to IDA. About US$10 million (or 11%)of Bank funds are expected to be utilized under this category. Bank funds will amount to about US$16 million under the category for consultants services (or about 18%). Included in other procurement method category of about US$31.3 million will be financed under other procurement methods including prudent shopping, selection of consultants following IDA guidelines, direct purchasing of goods, and expenditures following the Government's expenditure procedures acceptable to IDA. This latter method will be applied in particular to the rail, and civil aviation components where the executing agencies are PEs -- which have established commercial practices with the government acceptable to IDA. Finally, more than 70% of the project is financed by donors, other multilateral as well as the government, all of which use other procurement methods. This category of financing has been identified as NBF (non Bank financed) in Table A.

4. The appraisal departure took place prior to November 1, 1998. The project therefore does not fall under the new Bank Guidelines which require a formal Procurement Assessment Review. Nonetheless, the project team did carry out an informal review and assessment of procurement procedures, in particular with respect to the on-going PAST project and its coordinating agency CELCO, to identify any issues or capacity constraints. For improved quality control and compliance with IDA procedures, a procurement specialist (acceptable to the Bank) has been recruited to work directly with CELCO, and a procurement training program has been implemented for those government agencies which will be responsible for the execution of the PST2 program. As noted above, Table A summarizes project costs by procurement agency, Table B outlines the thresholds for procurement methods and prior review, and Table C presents the Allocationof Loan Proceeds. Procurementprocedures, along with other project elements will be

60 annually reviewed - see para. 4.section (c) -- with a more detailed review and assessment carried out at the Mid-termReview, scheduled to be held no later than January 31, 2002.

Civil Works

5. The main method of procurement civil works is ICB. This method accounts for almost 79% of Bank financing under this category. The main component which utilizes ICB is the roads sector (75%/6), followed by the ports/maritime (13%), the railway (8%) and the civil aviation (5%/O)sectors. Unless otherwise indicated, procurement arrangements for the civil works contracts exceeding US$500,000 in value will be subject to ICB. NCB procedures, acceptable to IDA, are expected to be used only for contracts between US$50,000 and US$500,000, mainly for the roads component (6% of the Bank's total), with other procurement methods used for the remainder (about 1% of the Bank's total). Other contracts valued at less than US$50,000 will follow another procurement method as noted below for small works contracts. Pre-qualification will be used for large - exceeding US$1.0 million and complex civil works components.

Small Works Contracts

6. Contracts for small works - mostly for road rehabilitation -- estimated to cost less than $50,000 each, up to an aggregate amount of US$1.42 million, would be procured under lump-sum, fixed-price contracts awarded on the basis of quotations obtained from at least three qualified domestic contractors invited to bid by way of discounts either on the total price or on the unit prices. The invitation shall include reference unit prices established by an engineer or an architect, a detailed description of the works, including basic specifications, the required completion period, a basic form of agreement described in the Manual of Procedures, and relevant drawings, where applicable. The award would be made to the contractor with the lowest price quotation for the required work, provided he demonstrates he has the experience and resources to successfully execute the contract. These small contracts would be for works relating to rehabilitation or repair of office buildings, rural roads, earth roads rehabilitation, periodic paved road maintenance and rehabilitation works.

Goods

7. Contracts for Goods financed by IDA during the three first years (totaling US$14.2 million) related to furniture, office equipment, computers, vehicles and spare parts, would be procured through ICB in agreement with the Bank's Guidelines mentioned above. The main procurement method for goods is ICB. This method will be used primarily for the railways and civil aviation components and accounts for over 80% of all procurement under this method. Procurement arrangements for goods below US$200,000 would be subject to NCB procedures acceptable to IDA. Contracts for small equipment locally available from the shelf at economical price, costing less than US$50,000 each would be subject to national shopping, provided it does not exceed an aggregate amount of US$1.5 million -- or 9% of goods.

61 Prior Review for Works and Goods.

8. Prior review thresholds which are in the high range ($100,000 for goods and $200,000 for works, corresponding to the SOE threshold for goods and works) have been incorporated into the project, based on the fact that:

i) contracts involved in this project would be large contracts and at least 80% of their total amount would be subject to prior review;

ii) several Project personnel have been recently trained in World Bank procurement procedures at the September 1998 seminar co-sponsored by the Bank and ISADE in Dakar;

iii) CELCO's procurement capacity has been recently strengthened through the hiring of a procurement expert who happens to be a longtime lecturer at the above and other similar procurement seminars co-sponsored by the Bank.

Consultant Services

9. Consultant services financed by IDA will normally be selected through competition among qualified short-listed firms in which the selection will be based on Quality and Cost Based Selection (QCBS) by evaluating the quality of the proposal before weighting the quality and cost scores and adding them. This includes: (a) advisory services and studies; (b) training and institutional development; (c) engineering services and supervision; and (c) promotion of private sector participation. For contracts above US$200,000, advertisement for receiving expressions of interest will be issued in the Business Development Edition. For contracts above US$100,000, technical evaluations must receive IDA non- objection before financial proposals are opened. For audits of a standard nature the Least Cost Selection (LCS) will be used -the firm with the lowest cost will be selected provided its technical proposal receives the minimum mark. Services for small studies which can be delivered by Individual Consultants will be selected through comparisons of at least three CVs and qualifications. Short-lists for contracts under US$100,000 may be comprised of national consultants if a sufficient number of qualified firms (at least three) are available at competitive costs. If foreign firms express interest, however, they will not be excluded.

Prior Review for Consultant Services

10. The total value of contracts requiring IDA prior review is US$ 16.2 million. It will be obligatory for all TORs, sole source selection of individual consultants and firms, regardless of the contract amount, and contracts of a critical nature as determinedby IDA and contracts and amendments costing or resulting in a total contract amount of US$ 100,000 equivalent or more for firms, and US$ 50,000 equivalent or more for individuals.

11. IDA will also review the procurement plan showing the selection process. The cost estimate, the contract packaging, applicable procedures and timing of key steps.

Modification or waiver of the scope and conditions of contracts

12. Before agreeing to any material extension, or any modification or waiver of the conditions of contracts that would increase in aggregate its cost by more than 15 percent of the original price, the Borrower should specify the reasons thereof and seek IDA's prior no-objection for the proposed modification.

62 Procurement Readiness, Schedule and Supervision Arrangements.

13. Advance procurement for civil-works and goods would be made in accordance with Bank procurement Guidelines. With the current project processing schedule, no retroactive financing will be necessary for the project. Major contracts to be executed during the first project year are expected to be signed by the time of credit Effectiveness. With the current project processing schedule, no retroactive financing wifl be necessary for the project. During project implementation, the Coordinating Unit will benefit from the assistance of a procurement specialist for the handling/coordination, and supervision of works, as well as quality control on the procurement actions of other implementation entities of the project. A detailed procurement plan for works, goods, and services to be procured under the project is provided in the project files and noted in Annex 8. It will be updated by the coordination unit on a regular basis. During implementation, all bidding documents, bid evaluation reports, and draft contracts transmitted to IDA for review will contain an updated copy of the procurement plan. During negotiations, the Government will confirm it will furnish to IDA technical audit reports, in form and substance acceptable to IDA, on implementation of the infrastructure work-program and the corresponding equipment, and progress reports based on time-bound performance indicators and use of funds, three months before each annual review.

B. Disbursement

14. The proposed IDA Credit will finance an investment program for the transport sector in Senegal. It wili be disbursed over a period of five and one-half years, according to the categories presented in Table C. The Credit will follow the standard disbursement profile for Senegal.

15. Disbursements of the credit will be fully documented at time of submission of withdrawal applications, except for expenditures against contracts valued at less than the equivalent of (US$ 50,000) for goods, (US$ 50,000) for civil works, US$ 50,000 for individual consultants and US$ 100,000 for consulting firms which would be made against Statement of Expenditures (SOEs), and would be kept available for examination by auditors, technical audits, and by IDA supervision missions. Applications for direct payments can be submitted for amounts exceeding US$ 100,000 equivalent.

Counterparts Funds, Program Account, and IDA support for Operating Costs

16. Government's counterpart funds needed for twelve (12) months to cover the share of investment not financed by IDA and other will be deposited by the government in a Program Account (PA).

17. Operating costs consist of incremental operating costs incurred as a result of project implementation, management and supervision including office equipment and materials, vehicles, salaries, fuel, utilities, rent, communication costs and travel allowances of project staff, but excluding salaries of Borrower's civil servants.

Special Account

18. To facilitate disbursements, the government would also open a Special Program Account (SPA) at a commercial bank for IDA's share of eligible expenditures. The authorized allocation would be FCFA 2,500,000,000 representing about four months of disbursement. IDA would make an initial deposit of FCFA 1,250,000,000 once the credit is declared effective and CELCO prepares and submits a withdrawal application for the said amount to the Bank. The remaining balance will be made available as soon as cumulative disbursements reach SDR 6,000,000. IDA would replenish the SPA upon receipt of appropriate documentation satisfactory to IDA for incurred eligible expenditures. Each replenishment

63 request will be accompanied, as necessary, by an up-to-date bank statement and a reconciliation statement.

Accounting/Auditing

19. CELCOand the other implementingagencies will maintaineach separateset of accountingrecords for the portion of the programthey are directlyin charge of. In additionto maintainingthe accountsat the central level, CELCO will be responsiblefor the consolidationof the program accounts and the productionof the annual financialstatements. An accountingand financialmanagement system, based on internationallyacceptable accounting principles acceptable to the Bank, has been established. During appraisal, an IDA Financial Management Specialist assessed and rated it as adequate. It was agreed, however,not to proceed immediatelywith PMR-baseddisbursement method during the first 18 monthsof implementationwhile the financial managementsystem is reinforced further to ensure and orderly transitionto LACI. To that end, the Bankwill carry out at the end of the first year of implementation,a comprehensiveand detailed assessment of the program financial managementto determine its full readinessfor LACI. A secondassessment will be carried out at the end of the third quarter of the second year of implementationto evaluatethe effectivenessof the transitionto LACI.. During the first two years of implementation,meanwhile, disbursements under the program will be made in accordancewith the SOE-basedapproach. The programwill stillbe requiredto submit,in additionto its financialstatements, five quarterlyreports, namely a Summaryof Sourcesand Uses of Funds, a ContractExpenditure Report - Goods & Works, a Contract ExpenditureReport - Consultants, a ProcurementManagement Report - Goods & Works, and a ProcurementManagement Report - Consultants. All procurementdocuments, contracts,and invoiceswould be maintainedseparately by CELCOand be made accessibleto supervision missionsand auditors.

20. During negotiations, the governmentprovided assurancesthat: (a) program accounts will be audited in accordance with international audit standards by experienced and internationally recognized audit firms acceptableto IDA. The audit reports and related project accountswill be submittedto IDA within 6 months after the end of Governmentfiscal year; (b) in additionto their standardshort form report with the opinion, the auditorswill be requiredto: (i) carry out a comprehensivereview of all the SQEsas well as the internalcontrol procedures governing their preparationfor the relevantperiod under audit, and express a separateopinion thereon; (ii) review the managementand utilizationof the special account and express a separateopinion thereon as well; (c) finally,the auditor will complete their in- depth review, started at interim,of the internalcontrol systemof the programwith a viewto identifythe major weaknessesand shortcomingsand proposing practical recommendationsfor improvement.The resultsof this reviewwould be documentedin a ManagementLetter to be submittedalong with the audit reports; and (d) reports on the constructionprogram and technicalaudits by an independentengineering firm will be submittedwithin three monthsafter the end of the governmentfiscal year.

21. The financialauditors will also performinterim audits (9 monthsinto the fiscal year) to reviewthe internal control system includingmanagement performance, and issue reports to that effect within one month from the end of their work. The findingsand recommendationsof the interim reports will be attendedto by managementright away before the return of the auditors for the final audit (mostly 3-4 months after closing of the fiscal year of the program). The contracting of auditors (financial and technical),on multi-yearcontract, acceptable to IDA, and certificationby the financial auditorsthat the CELCO'saccounting system is operational,is a conditionof credit effectiveness.

64 Reporting

22. CELCO will submit the followingreports preparedjointly with the implementingagencies: (a) semi-annualprogress reports; (b) an annual report and a proposedfinancing plan, four weeks beforethe joint annual review, and not later than September30 each year; (c) a detailed progress report on technicaland financial programactivities not later than four weeks before the date of mid-term review; and (d) relevant sectionsof the implementationcompletion report (ICR) three monthsbefore the closing date.

Supervision

23. The program will require intensivesupervision during the start-up phase when implementation arrangementswould be put to the test. In additionto the first annual review meeting, two supervision missionswill be scheduledduring the fiscal year to monitorprogress and coordinatewith Government and donors. The programwill be supervisedevery four monthsfor the first year, then every six months thereafter. Supervisionmissions will consist of field trips, includingwork sites, to review financialand managementpractices, bidding, and paymentsprocedures. A mid-termreview, includinga full technical and financial audit of the program, as well as beneficiaryassessment, will be conducted no later than January31, 2002, and an end-of-programevaluation will be performedduring the secondsemester of the fifth year.

65 Annex 6, Table A: Project Costs by Procurement Arrangements (in UJS$millionequivalent)

...... r...eI...... T...t...... kmiii i6afm...... (...... d..gti ds ...... C.... O.....her...... 1.~~~~~~~~~~~~~~...... 111...... 1.51.(1.51)...5 (.51)...... 1 00 .... 1.00 ~~Routine oad...... e...... 8.70. 87..70 4 Roadraii~~~bJpeuiod. m int 22~~.6...... (1 21... . 90...... (4 10.. . 42.... (.21) 1331616208 (2452 S RO*dOOIIAtZiICIiWI- 11.7 (5.0)...33.39..4..0..(5.0) 6 Rnil ...... 2.74IC(2.6) 1.3h377 (.60 ...... l 1.5 (13)..5.0.5.5.4954.9.(.0

3 EvirnmetalSocalUst. 1.23 1.23 4 ...... o..... n... 12.0 (19.0) 0.30 (0.30) 0.42 (0.2) 1.7162.77 (14.52)

. A..t/.....tio 1.04 (0.5)1.0 5.07 (2.56) 7...... ariim 0...... 5(0t.2) 0.25 (.5) 56.69 74.44 (20.) 8...... (.3)02 51.09nprt023 (0.23) 2 .ai1n3.7s1Dve4p. .76 (5.)4.76(58 4 ..t..o....PrPr..... a .... ecor.6.... 3.007 (2.00)13.00 (2.00)

...... t....co.ta 2.00 (1.90) 02 2.23 (1.90)

to Rdntg s0f .68 (1.68) 1.68 (1.68) SNC14Fnan Usta1f 4.22(.2)1.23(.2

Total~~~~...... :1 50.11. (10.280.) 0J2(0[{g1.1716.7 (. ....ote...... i.gr.. np.e.hss.r.heaout.t.e..an..b.h...crdt;..Iohe-roueen etos nlueprdn shopping,....selection...... of. onsltn..folo..g...gudelne,.epeditre.foloingGoern en's.dmn.sra.veprcedre accptbl to.... nddiec.prcas.gofgods...... B.I-o Bnkfianed (v)Oprain cst-icldeinreena opeatngcotsincrrd n ccuntofprjet mplmetaio, anaemntan sperisoninluingof.c.euimen.ad.atrils vehicles,.saais, .e,utltes.et.cm uicto.ossad.rvlaloace.fpojc.tafbtexldngslreso.o.oe' Cvlsrat..(e. TbeC).v.Gosinlds.ucas.feqimnt.eatdsppisan.eice.vi.terpourmn

componentgood caeoyrfr0o tnadzto ofeuimn ( 3.() of2guielne).05(0

...... 6 6 Annex 6, Table B: Thresholds for Procurement Methods and Prior Review

US $ thousands US $ milhons Value >500 ICB PR = 32.59(52.75) 200< Value <500 NCB PR= 3.97 (4.41) i0

value >100 ICB PR = a73(5re4) 50< Value <100 NCB Post Review Value <50 Other(3 Quotations Post Review ShoppingIconimercial Practices/direct contracting)

| Co~sa1iingPiims Value >100 QCBS+ ShortList Issue an advertisementin the LCS for audits B.D. to get expression of interests. Technical evaluation receives oDA no- objection before opening financial proposals. Value <100 QCBS+ ShortList Short Lists may be comprised entirely of national firms if there is at least three reliable firms. If foreign firms express interest, however, they wil not be excluded.

Value >50 Comparisonof at least 3 Cvs Prior review and no objection by IDA. Value <-50 Comparisonof at least 3 Cvs Prior Reviewand no objection by IDA.

(1) Q~~utmgCostsN/A AnnualWork Programmne+ Post review Budget 4~~B~etance N/A Other Prior review of

- ~~~~~~~~~~~~~~~proposedplan

Total PR = 54.17 ~~sll ?iiorR~~~~~~~~vlew ~~~Or 64 % of procurement

Total value of contrcts subject to prior review: US$54. 17 million * LAimitedto a total of 20 contracts during project lifetimne

Prior Review for consultants services is required for-. * All TORs for consultants, studies and trainings. * Annual training and procurement plans. * Sole source selection of individual consultants and firms. * Amendments to contrats with consulting fi-rmsor individuals that bring the total value of the contract to USS 100,000 equivalent for above for firms and US$ 50,000 for individuals.

67 Annex 6, Table C: Allocation of Loan Proceeds

Amount of the Credit Amiount of the Credit Amount of the % Of Categories Allocated (MilUons Allocated (MiEions Credit Expenditure 3WD) USD) Allocated * to be WPPF PPF and Unalocated xpresed In financed PPFand Unalocated kidcuded eMllin T)____ clI W)ds 100%(letd9n) 88%(I.o.U la PAD 3.35 3.82 2.4 lb SNCS 233 2.865 1.7 1a 06w 3325 37.88 23.8 1. K +aqad.2ZJuw*w 0.44 0.Q0 0.3 2 DTT 1.32 1.50 0.9 3. EN (S Iwan_M 0.28 0.31 0.2 4. Rolb. Rook MuistruetonC 25.33 28.80 18. 6 Akpa. +CiA bon 3.es 4.3 2.8 S. RralTranapot 204 232 1.5 TOal 38.93 44.35 27.8 Goods d Eqapwat i00% (foeign) 85% (local 2a PAD OO. 0.00 00 2b. aNCS 11.22 1Z79 8.0 1. Opwation underPRiosphalb indusy 7.01 7.99 5.0 Z Operationunder condillonaly 4.21 4.80 3.0 2e. C&M 4.48 5.08 32 1. OTT 0.80 0.88 0.4 2- Boad Sacrutaa Road Funds 0.30 0.34 0.2 3. EUi E*oAmmnsr 0.30 0.34 0.2 4. Rblab Roads+ kt.+Constructian 1.30 1.48 0.9 S. AIrpor onWAvtl 1.50 1.72 1.1 •. RrlTrpeot 0.19 0.22 0.1 7. mm 0.26 03O 0.2 Total 15.68 17.87 11.2 CuirutanlaSWvIce traiing AdaudI. 100% 3.. PAD 0.44 0.50 0.3 3b. 9NCS 0.83 0.72 0.5 3. C r 15.14 17.24 10.8 1. K.dsdc+ DMMOAPT+... 0." 0.87 0.8 2 DTr 1.8S 211 1.3 3. Boad SwtrIat 1.40 1.80 1.0 4. PdlSbr 1.49 1.70 1.1 5. _ 0.02 0.02 0.0 6. Rab. RoeA + Maint.*Cnaruction 8.84 7.79 4.9 7. AkpetCM Avation 0.87 .77 0.5 S. Tanpetual 0.61 .70 0.4 9. Coordineaon 1.47 1.f8 1.1 Totl 16.21 18.46 11.6 Swar_n P nis forhRedundantSll 100% 4a SNC8 3.69 4.20 2.6 4b. AANS 163 3.00 1.9 Total 8.32 7.20 4.5 5. kicamwa OperAt Costs 1.88 2.12 1.3 9 % 8 Radin d Projetpeatlon Adance 2.O0 0.00 1.4 AmourntdLs pursuantto auctin 202 (c)of Oe 7. Unallwatsd 9.W0 0.0 5.4 90.00 90.00 64.3

68 Annex 7: Second Transport Sector Program (PST 2) Project Processing Budget and Schedule

Time taken to prepare the-project (months) 11 11 First Bank nission (identification) 08/07/1997 08/07/1997 Appraisal mission departure 10/05/1998 10/19/1998 Negotiations 01/14/1999 02/22/1999 Planned Date of Effectiveness 09/01/1999 07/01/1999

Prepared by: Cellule de Coordination du Programie d'Ajustement Sectoriel des Transports (CELCO) in collaboration with Executing Agencies: Ministries of Finance (MEFP), Equipment and Land Transport (METI), Tourism and Air Transport (vITA), Fisheries and Maritime Transport (MPTM, and Department of Land Transport (DTT), Department of Public Works (DTP), Vocational Training Center of MElT (CEP-METT),Road Research and Quality Control Laboratory (CEREEQ), Port of Dakar (PAD), Dept. of Merchant Marine (DMM, ASECNA-Senegal), SONATRA (Air Senegal), MEFP (Road Fund rest), State Portfolio Management Unit-CGPE-MEFP

Preparation assistance: Cr. 2266-SE; PPF Q-0770; PHRD TF025093

Bank staff who worked on the project included: Name Specialty Emmanuel Mbi Task Team Leader Pierre Henault Highway Engineer Karim-Jacques Budin Pr. Railways Specialist Michel Audige Sr. Ports Operations Specialist Susanne Holste Transport Specialist Moctar Thiam Rural transport Specialist Francesco Addis Young ProfessionaVTransportPlanner Louis Fernique Adviser (Road Mgmt)/Highway Engineer Alassane Diawara Policy Issues Tidiane Toure Procurement Specialist Boniface Essania Nssah Poverty Specialist (Economist) Robert Robelus Adviser (environment) Petro Geraldes Lead Adviser Steve Brushett Peer Reviewer/Adviser Wolfgang Chadab Sr. Disbursement Officer Kishor Uprety Counsel Claude Isaac De Infrast. Oper. Off. (Trans. Ec., Eng.) Kingson Apara Adviser (Procedures) Bonaventure Mbida-Essama (Consultant) Financial MgmtlPrivate Sector Spec/Engineer Sidle Silue (Consultant) Transport Economist Elizabeth Ranidn (Consultant) Transport Economist Prosper Biabo (Consultant) Financial Analyst Alexandre Dossou (Consultant) Highway Engineer Hatem Chabani (Consultant) Junior EngineerfTransport Planner

69 Annex 8: Second Transport Sector Program (PST 2)

Documents in the Project File*

A. Project ImplementationPlan

* Project ImplementationPlan (in progress) * ProjectExecution Manual (Manuel d'execution du Projet) * Terms of Referencefor: a) Project CoordinationUnit (CELCO) (and key Staff) b) Creation for AutonomousRoad Works Agency c) Evaluationof the Experienceof the Road Fund Advisory and Review Board (Evaluationde l'Experience du Comite Consultatif et de Suivi du Fonds Routier) d) Privatizationof SONATRA-AirSenegal (see annex 4 pre-app. aide-mem.) * Draft InterministerialOrdinance creating and establishingthe attribution of the Road Fund advisory and Review Board. Draft Decree repositioningthe Project CoordinatingUnit (CELCO) in the Ministry of Finance. TTimetable for Privatizationof Air Senegal (CalendrierIndicatif) AnnualWork Programmingand Planning underPST2 (Planificationet Programmation BudgetaireAnnuels (PTBA) dans le Cadre du PST2), Annex 7 of pre-appraisalaide-mem. * EnvironmentalAssessment (Etude des Impacts des Activites du PST2 sur l'Environnement: Mesures d'attenuation et directives pour la prise en compte de ces impacts (versionprovisoire), July 1998. - Governmentconsolidated Project Documents + Annexes (August 1998) -- GOS Appraisal Report TThree-Year Rolling Road maintenanceand RehabilitationProgram (Programmed'Entretien p6riodiquetriennal 1999-2001),Preliminary Report, May 1998. * Letter of Transport SectorPolicy (Declarationdes Politiquessectorielles), January 1999 * Actions a entreprendredans la mise en oeuvre de la reforme et restructurationdu Fonds Routier, July 1998 - Institutionaland DiagnosticAssessment of DTP, ProvisionalReport, April 1998 * Restructuringand Market Study of Training Center (CFP), Final Report, June 1998 * Financial and Accounting Systemof Training Center (CFP), Outline of Principles, August 1998 * Study on Planningand FinancingAspects of the Rural Transport Sector, Preliminary Report, June 1998

B. Bank Staff Assessments

* Countryassistance Strategyfor Senegal, Report No. 17269-SE,January 1998 * Mission Aide-Memoiresof December 1997, March 1998, June 1998 * Project InformationDocument, September 1998 * Project EnvironmentalData Sheet,September 1998 * PreliminaryDraft Economic Analysisof Select Components(in French), September 10, 1998 * DetailedEconomic Analysis of project program,as well as individualeconomic analyses of the roads, rail, ports and aviationcomponents (in English),November 6, 1998 * Poverty and Transportin Senegal (June 1998) * Addendum to Financial Summariesof Revenue Earning Project Entities (Annex 5)

70 * Addendumto Estimated Project Costs and Allocationof Credit proceed (Annexes3 and 6-c): Detailed project Costs,Implementation Schedule. * Evaluation of the Financial and AccountingManagement of the Road Fund Mechanism(in French), July 1998. * Proposals for the Reform of the Road Fund, July 1998. * Project Financing Plan by Donors (all components),August 1998. * Medium-TermStrategy for the Transport Sector, Final Report, June 1997

C. Other

* Land Transport AdministrationProject ComponentDocument (PST2: Documentde pr6sentation de projets de l'Administrationdes TransportsTerrestres), June 1998 * PST2: Document du volet routier, RapportFinal, Juillet 1998 * Medium-Term Strategyfor the TransportSector, Final Study, June 1997 * Study of Fiscal Implicationsof Road Fund Restructuring,Final Report, December 1997 * Update of the Memento des Transports(Memento des TransportsTerrestres au Senegal), ProvisionalReport, May 1998 * Study on Planning and Financing Aspects of the Rural Transport Sector (Rapportsur les aspects institutionnels,les probl8mesde financementet de planificationdes transportsruraux), PreliminaryReport, June 1998 * Study on the Technicalproblems in the Rural Transport Sector (Etude sur le developpement des moyens de transport dans le domaine des transports ruraux), ConsultantFinancial and Technical Proposals, June 1998 * Study on the Developmentof Rural TransportModes, Rapport d'orientation, Aouit1998 * Study on Road Traffic in S6n6gal,Final Report, June 1998 * Study on Vehicle OperatingCosts and Road MaintenanceCosts, Final Report, June 1998 * Review of the Officialprices Bulletin (in progress, expectedNovember 1998) * Diagnostic organisationnelde la DTP, Rapport phase 2, Mai 1998 * PST2: Document de presentationdu volet ferroviaire,Rapport Final, Juin 1998 RRestructuring and Repositioningof the Railway Company after privatizationof International railway traffic (La SNCS apres la creationde la SETI: Perspectiveset Strategies),August 1998, rapport predefinitif SNCS: Presentationdes projets PST2, Novembre 1997. e PST2: Document du volet Transportsaeriens, Rapport Final D6finitif,Juillet 1998 * Directionde la Meteorologienationale: Budget d'Investissementdont le financementest demand6dans le cadre du PST2, Juin 1998. * Etude sur la privatisation,la gestion des aeroports et de la restructurationdu secteurAviation civile du Senegal (in progress),expected October 1998. * Fiche d'Inventaire des Immobilisationsdes ActivitdsAeronautiques Nationales du Senegal,projet de rapport provisoire,vol. 1, 2, 3, Aouit1998 * Projet de Rapport de mission d'apurement des comptes des Activites AeronautiquesNationales du Sendgal,Aoat 1998 * Rapport d'avis technique sur des ordres: Affaires:Dakar-Yoff, locaux techniquesAir S6negal, Bureau Veritas, Juillet 1998 * Plan de formation du personnel d'Air S6negalpropose a la Banque Mondialedans le cadre du PST2, Mai 1998 * Projet d'Investissement propose a la BanqueMondiale pour la deuxieme phase de l'Assistance au sol des Avions, Avril 1998. * Projet d'Investissementpropose a la BanqueMondiale pour le projet d'extension du Hangar du CentreIndustriel d'Air Sen6gal,Avril 1998.

71 * Etude sur la gestion des Aeroports du Sendgalvol. 1, 2, (Novembre 1996) vol.3 (Juin 1998), Rapports d6finitifs. * Business Plan of Air Sen6gal(Plan de Developpementd'Air Senegal) vol. 1, 2, July 1998 * Privatisation de la gestion des A6roportsdu S6negalet Reorganisationde I'AviationCivile, Rapport d'Orientation,Aofit 1998 * Mission d'Apurement des comptesd'Air Senegal, rapport d'Orientation, Aouit1998 * Sous-composantemarine marchandedu PST2: Projet de rapport final, Juillet 1998 * Modernisationde la gestion du secteurdes transports waritimes,Rapport General, Juillet 1998. * PST2: Study of the Freight and Passengersline Dakar/Ziguinchor(Etude de la desserte maritime Dakar/Ziguinchor),Provisional Report, May 1998. * Freight Traffic Study for the Port of Kaolack (Etude de relance des activites du port de Kaolack), Final Report, May 1998 * Programme d'lnvestissementdu Port Autonomede Dakar (PAD) 1997-2002,Juin 1998 * PST2: Rapport d'Etudes sur le volet fluvio-maritime,Juin 1998 * CFD: Port Autonomede Dakar (PAD), rapport Final, Janvier 1998 * Restructuringand Market Study of Training Center (Elaborationd'un Plan Strategique- CFP), Final Report, July 1998. * Financial and AccountingSystem of Training Center (Mise en place d'un SystemeComptable et Financier au CFP/TP), Outline of Principles,August 1998 * PST2: Centre de Formation et de Perfectionnementdes Travaux Publics; Elaborationdu plan Strategique,rapport final, Juillet 1998 * Etude sur la transformationdu CEREEQen societe a participationpublique majoritaire,Juillet 1998 * Projet d'appui au CEREEQ (Assistanceet Renouvellementdu materiel),Mai 1998

D. Work in Progress * Etude sur la restructurationde l'Aviation Civile

*Includingelectronic files.

72 Annex 9: Status of Bank Group Operations in Senegal Operations Portfolio

Difference Between *xpected Original Amount in US$ Millions and actual Last PSR Fiscal disbursements a/ Supervision Rating bl Project ID Year Borrower Purpose ZBRD IDA Cancel. Vndisb. Orig Prm R.v'd Dev Obj Imp Proq

Number of Closed Projects: 72

Active Projects SN-PE-2327 1989 GOVT OF SENEGAL SMALL RURAL OPS. II 0.00 16.10 0.00 4.21 3.93 0.00 S S SN-PE-2342 1991 GOVT OF SENEGAL TRANSPORT SEC. SECAL 0.00 69.73 3.73 8.59 2.66 2.43 S S SN-PE-2357 1993 GOVERNMENT HUMAN RES DEV'T II 0.00 40.00 0.00 8.74 .21 0.00 S S SN-PE-35615 1995 GOVT OF SENEGAL COMM NUTRITION 0.00 18.20 0.00 7.35 7.80 5.59 S S SN-PE-2376 1995 PRIV.SCTR.CAP.BLDG 0.00 12.50 0.00 6.45 4.43 1.13 S S SN-PE-2346 1995 REP. OF SENEGAL WATER SECTOR 0.00 100.00 0.00 62.80 56.63 48.99 HS S SN-PE-35621 1996 GOVT OF SENEGAL PILOT FEMALE LITERAC 0.00 12.60 0.00 6.58 -2.93 0.00 S S SN-PE-2373 1996 GOVERNMENT HIGHER EDUC r 0.00 26.50 0.00 18.89 -. 79 0.00 U U SN-PE-46768 1997 GOVERNMENT OF SENEGAL SUST.PART.ENGY.MGMT. 0.00 5.20 0.00 4.88 2.10 0.00 S S SN-PE-46648 1997 OMVS REGIONAL POWER 0.00 10.50 0.00 8.65 5.66 0.00 S S SN-PE-44383 1997 REPUBLIC OF SENEGAL URBAN TRANS REF TA 0.00 6.60 0.00 5.59 2.79 0.00 HS S SN-PE-41567 1997 GDVERNMENT OF SENEGAL ENDEMIC DISEASES 0.00 14.90 0.00 13.95 3.71 0.00 S U SN-PE-51610 1990 GOVT. OF SENEGAL AG.EXPORT PROMOrION 0.00 8.00 0.00 7.83 1.00 0.00 S S SN-PE-51357 1998 GOV. OF SENEGAL ENERGY SEC. ADJ. 0.00 100.00 0.00 77.66 -1.05 0.00 S S SN-PE-2369 1998 GOVT OF SENEGAL INTEGR.HEALTH S.DEV. 0.00 50.00 0.00 46.70 10.40 0.00 HS S SN-PE-2365 1998 GOVERNHENT URB DEVT 4 DECEN PRO 0.00 75.00 0.00 73.45 16.38 0.00 S S

Total 0.00 564.03 3.73 362.32 112.93 58.14

Active Projects Closed Projects Total Total Disbursed (IBRD and IDA): 196.81 1,240.10 1,436.91 of which has been repaid: 0.00 187.15 187.15 Total now held by IBRD and IDA: 561.10 1,001.67 1,562.77 Amount sold : 0.00 5.46 5.46 of which repaid 0.00 5.46 5.46 Total Undisbursed : 362.32 .73 363.05

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS - highly Satisfactory, S * satisfactory, U * unsatisfactory, HU - highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994.

Note: Disbursement data is updated at the end of the first week of the month.

73 ANNEX 9 SENEGAL - STATEMENT OF IFC's Committed and Disbursed Portfolio As of 3 1-Jan-99 (In US Dollar Millions)

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1980 BHS 0.00 .46 0.00 0.00 0.00 .46 0.00 0.00 1981/88 ICS 1.80 0.00 0.00 0.00 1.80 0.00 0.00 0.00 1994/96 SOGECA 0.00 .33 0.00 0.00 0.00 .28 0.00 0.00 1996/97/98 AEF SERT .87 .43 0.00 0.00 .87 .43 0.00 0.00 1997 GTI Dakar 14.80 1.67 0.00 12.30 5.44 .38 0.00 6.56 1998 SEF SENTA .40 0.00 0.00 0.00 .40 0.00 0.00 0.00

Total Portfolio: 17.87 2.89 0.00 12.30 8.51 1.55 0.00 6.56

Approvals Pending Commitment Loan Eauitv Quasi Partic 1998 GTI DAKAR INCR. 3.11 .22 0.00 0.00 1998 TOLSA-THIES 3.00 .90 0.00 0.00

TotalPending Commitment: 6.11 1.12 0.00 0.00

74 ANNEX 1 0

Senegalat a glance 9902-07

Sub- POVERTY and SOCIAL Saharan Low- Senegal Africa income Developrent diamond' 1997 Population, mid-year (millions) 8.8 614 2 048 Life expectancy GNP per capita (Atlas method, USS) 503 500 350 GNP (Atlas meFtod, US$ blons) 4,4 309 722 Average annual growth, 1991-97

Population (%) 2.7 2,7 2,1 Labor force (%) 2,7 2,6 2.3 GNP Gross per primary Most recent estimate (latest year available, 1991497) capita enrollment Poverty (% of population below natonal poverty line) 33 Urban population (% of total population) 42 32 28 Life expectancy at birth (years) 52 52 59 Infant mortality (per 1,000 live births) 60 90 78 Child malnutrtion (% of children under5) 20 27 .. Access to safe water Access to safe vater (% of population) 51 44 71 Illiteracy (% ofpopulation age 15+) 67 43 47 Gross primary enrollment (% of school-age population) 59 75 91 eSnega/ Male 66 82 100 Low-income gmup Female 53 67 81

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic Rtos GDP (USS billions) 1,9 3,8 4,8 4,5 Gross domestic investment/GDP 13,6 11.4 17,4 18,7 Trd Exports of goods and services/GDP 35,3 25,6 33,0 32,6 rade Gross domestic savings/GDP 6,8 4,2 11.9 13,2 Gross national savingsJGDP 4,1 0,1 10,4 11,6

Current account balance/GDP -1111 -12,0 -7,0 -7,1 Domestic Interest payments/GDP 1,0 2,6 2,1 1.9 Investment Total debtUGDP 21,2 85,7 77,3 80,8 Savings vtm Total debt service/exports 6,0 23,3 14,5 14,0 Present value of debt/GDP 50,2 Present value of debt/exports 140,8 Indebtedness 1976-86 1987-97 1996 1997 199842 (average annual growth) GDP 2,0 2,0 5,7 5,2 6,2 SenegaJ GNP per capita -1,1 -0,5 3,7 2,6 3,4 Low-income group Exports of goods and services 0,1 1,9 2,1 1,6 7,2 _ __ __

STRUCTURE of the ECONOMY_ 1976 1986 1996 1997 Growth rtes of output and investmmnt (%) (% of GOP) 30 Agdculture 29,8 22,3 19,9 18,5 20 Industry 13,6 17,5 21,9 22,2 1 Manufacturing 12,5 14,8 14,8 1.1_ Services 56,5 60,2 58,2 59,3 Private consumption 79,1 80,4 77,3 76,6 -so General govemment consumption 14,2 15,4 10,8 10,2 -GDI -e SGDP Imports of goods ar.d services 42,1 32,8 38,5 38,1

(average annualgrowth) 11997 Growth rates ot exports and Imports I%) Agriculture -0,7 1,0 7,5 -2,2 Is Industry 3,4 2,9 7,3 6.7 10 Manufacturing 4,1 1,6 4,8 3,6 s Services 2,7 2,2 4.6 7,2

Private consumption 2,5 1,7 7,7 5,8 9g General govemment consumption 3,7 -1,6 -6,8 -0,5 Gross domestic investment -1,5 2,7 10,5 9,1 -10 Imports of goods and services 1,0 -0,4 4,2 3,0 -Exports Imports Gross national product 1,8 2,2 6,5 5,4

Note: 1997 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond wil be incomplete.

75 Senegal

PRICESand GOVERFNT FINANCE 1976 1986 1996 1997 Infatton(%) Domeslfcprfes 0 (% change) 40 Consumerprices 1*1 6.1 2,7 1.8 30 ImplicitGDP deflator 3,8 7.6 3,7 2,5 20 Governmentfinance is- (%of GDP,knch,des cunent grants) o 3 4 , Currentrevenue 17.5 17,6 16,8 16,8 a r2 9s 94 ss 9s 97 Currentbudget bahance -0,2 3,7 4,5 GDPdeflator - CPI Overall surps/delicit -2,8 -1,S -,1

TRADE (US$ nmlbEs) 1976 1986 1996 1997 Exportand knport levls (US$millions) Totalexpors (fob) 514 657 986 932 1S00 Groundnut 65 80 50 1400 Fish 68 38 30 12D0 Manufactures 152 250 254 1000 Totalimports (ciO 1 004 1 440 1 352 Mlo iii Food 195 395 329 40 Fueland energy 178 176 191 2C Capitalgoods 139 186 184 o el 92 94 9S 9s 97 Exportpfice index (1995u100) 94 100 94 Importprke index(1995.100) 68 105 97 o Exports * Imports Tenna of trde (1995-100) *137 96 97 _

DALANCEo PAYMENTS 7S76 1986 1996 1997 Currnt accountbalance to GODPtio(% (US$ fitbns) Exportsof goodsand seicbs 696 1e071 1c587 1s488 o kmportsof goodsand erice 861 1 370 1 852 1 737 2 Resourcebalance -165 -300 -265 -249 Net income -61 -.165 -130 -115 Net currenttransfeIs 1 12 58 42 * Currentaccount balance -215 -453 -337 -322 *8 FinancingItms (net) 205 592 392 454 -10 Changesin netreserves 10 -139 -55 -132 *12 Memo: Reservesinduding gold (USSm No) 25 21 299 395 Conversionrate (DEC, ca#VAS$) 239,0 346.3 511.6 53,7

EXTERNALDEBT and RESOURCE FLOWS 1976 98 1996 1997 (USSmillbons) Comosition of totti debt,1997 (US$ millions) Totaldebt outstanding and dsbursed 410 3225 3 716 3671 IBRD 15 110 23 15 f: MGM IDA 55 353 1 194 1276 Totaldebt service 45 268 251 227 E:860 IBRD 1 14 14 10 127 IDA 0 6 14 16 Compositionof netresource Ido_ Ofciai grats 96 218 308 271g Officialcredtors Is? 584 475 452 Pnvatecreditors *30 41 30 -21 Foreigndirectinvestnent 45 27 94 0 o1103 C: 302 Portfolioequity 0 0 WorldBank program Commitewnts 36 116 42 * A - IBRD E - BIlae.ai Disbursements 16 78 95 104 8- IDA D -Othermurtiateral F -Pr,,ate Pdncipalrepayments 0 10 17 16 C-IMF G-Shonr Notflovw 16 68 78 89 _ Interestpayments 1 10 11 10 Nettransfers 15 59 67 78

DeveloprnentEconomics 99 02 0'

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2 8 ~~~~ I.~. Age Bracket

Senegal:Vehicles Fleet New registrations (1993-1993)

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79 Senegal:Road Safety

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m- Road Sub-sectorat a Glance

s{^B*T.W5.-. Distribution in Kn:Region Paved Unpaved Dakar 291 14 Thies 469 492 Diourbel 201 341 Fatick 385 448 Ziguinchor 324 802 Kolda 517 1422 Kaolack 368 1067 Louga 592 1035 St-Louis 671 1418 Tabacounda 467 3273 X Lo4ga ~~~~~~~~~~~TOTAL4265 10312

Senegal:Road Network, Total= 14579 kms

Un.P.-d (71%

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Senegal:Traffic Bracket by Read Type (VPD) in 1996

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81 Scnogal: Traffic Bracket for Rural Roads (VPD) in 1996

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Senegal:Railways Network in 1996, Total= 1058 kms Main Track= 906 kms SecondaryTrack= 152 kms Dakar-Thies Double Una 1396 3 branch Llnes 8%

South North Wet-East Une 81%

Senegal:RalMys Net rkAge in 1998

* kbR '7years

472.7kM2g1 ya 74.70years 41%

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1002 1004 1000

83 SNCS: Passengers Traffic (in thousands)

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1970 1075 10980 I gs 1990 10ss

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C Annendix 1

January13, 1999

Mr. JamesD. Wolfensohn President WorldBank 1818H Street,N.W. Washington,D.C. USA

Dear Mr. Wolfensohn,

RE: SENEGAL'SLETTER OF SECTORPOLICY

The transportsector plays a strategicrole in the economyof Senegal,accounting for approximately10% of the GDP and generatinga significantshare of the total budgetaryrevenues of the State. The Governmenttherefore attacheshigh priorityto the sector's rolein promotinggrowth and reducingpoverty.

The attached secondletter of sectorpolicy (LSP2) for the sector,which followsthe first one publishedin 1991, is consistentwith this priority. The principlesunderlying the Govermment'spolicies and proposedreforms and regulatorychanges under the LSP2 include: (i) adapting transport infrastructureto the needs of economic growth and of regional integration; (ii) further strengtheningsector institutions and the Administrationto improvecapacity to performthe essentialfunctions of planning,co-ordination, regulation, and supervision;(iii) extensivestakeholder involvement in the decision-makingprocess regarding the managementand development of the sector, (iv) adoption of regulatoryand fiscal frameworksdesigned to induce co petition and promote private sector regulatoryand fiscal frameworksdesigned to induce competitionand promote private sector participation in the developmentand managementof the sector; (v) continued promotion of local private contractors to develop technical and management capacity to efficiently carry out increased shares of maintenance works for road, rail and port infrastructure;(iv) continued emphasis on maintenance and rehabilitation,while pursuing selectiveinfrastructure expansion (encompassingall transport modes); (vii) developmentof rural transport including the definition of a coherent policy, preparationof an appropriate strategyand definition of an action plan for the provisionand maintenanceof rural roads (includinga pilot priority programof rural roads rehabilitation);and (viii) ensuringenvironmental and socialsustainability in the sector.

1. INTRODUCTION

In the aftermath of the oil shock, Senegal like many other countries especially in the developingworld, experienceda deep economicand financialcrisis the forerunning signs of which appearedin the early 1980's. Againstthis backdrop,various successiveadjustment measures were taken most of which aimed primarily at restoringmacro-financial balance.

In the latter part of the 1980'sand despitethe combinationof adjustmentand sectoralpolicies, emphasiswas laid until the early 1990'son financialadjustment. This policystarted to changeafter the implementationof the emergencyprogram in 1993followed by the devaluationof the CFAfranc in 1994.

Regardingthe particular case of the transport sector,the main objectiveof the TransportSector Policy (DPS 1) adoptedin 1990 was to encouragethe creation of an environmentconducive to an upgrade of infrastructures and servicesimplying significantly increasing the supportof this sectorto the rest of the economy.

Within this framework,the Transport SectorAdjustment Program (PAST)was drawn up and implemented,a far-reaching integrated program combining harmoniouslyinstitutional reforms for improved operational

1 effectivenessin the managementof transport infrastructures,on the one hand, and the realizationof massive investmentsaiming at restoringor expandingnetwork capacities, on the other.

Despite a difficult launching characterizedby almost two years delay, PAST made it possibleto carry out important reforms allowing basic changes in the mode of managing the sector through notably easy interventionof the private sectorin infrastructuremaintenance especially at the executionand servicelevels.

However,the investmentprogram could not be carried out in due time both because of the delay in its launching and in the mobilization of external funding and also due to the disturbances induced by the devaluationof the CFAfranc.

Nonetheless,following an evaluation seminar gathering all program participants,the impact of PAST was deemed globally satisfactory on the sector itself and on the production activities, partly because the infimastructureswould have been at a more advancedstage of deteriorationwithout PAST.

A follow-up program is, however, required to consolidate achievements and to support continuous modernizationof transportinfrastructures in viewof the exigenciesof economicglobalization.

This SectoralPolicy Directive (DPS2) underpins the follow-upprogram and the SecondTransport SectorPolicy (PST2).It takes into considerationnot only PAST achievementsand shortcomingsbut also the new economic environmentmade up of the orientationsof the IX OrientationPlan for Economicand SocialDevelopment and the DecentralizationPolicy, which has been reinforcedsince January, 1997.

1. DESCRIPTIONOF THE SECTOR

2.1 RETROSPECTIVEEVALUATION OF THE 1990 TRANSPORTSECTOR POLICY (DPS1)

2.1.1 Strategy and Program of Action

In 1990, under DPS1 the governmentoutlined, a mediumterm strategy for the transport sector based on a numberof principlesinter-alia: a) to restructuresectoral institutions and to promotethe privatesector, b) to recognizethe prioritynature of infrastructuremaintenance and rehabilitation; c) to improveon road, seaport,airport and railwaysecurity; d) to developvocational training and retraining.

In order to concretize the strategy, a program of action was prepared and aimed at achieving the macro- economicobjectives of the transportsector by: a) reducingtransport cost; b) strengthening the management of the sector and also expanding its investment and maintenance programmingcapacity; c) privatizingas much as possiblework executionor serviceprovision in the sector; d) Restructuringparastatal transport bodies by changing them into national companiesto be run along commercial lines with substantially greater financial and administrative autonomy excluding any operationalsubsidy from the government.

2.1.2. Evaluation

In the railway, maritime and airline sub-sectors,the institutions restructuringprogram has almost been fully completedwith the change of parastatalsinto national companies.However, the skeleton contractsfollow-up mechanismsigned between the governmentand the autonomousbodies proved to be inefficientand in most cases, no evaluationwas carriedout.

In the road infrastructuressub-sector:

2 * PublicWorks Directorate has been restructuredin a normativeconcept and controlsense; * maintenance(periodic and regular)has since then been carriedout 100%by the privatesector; * the infiastructumalprojects that have been carried out recorded economicprofitability rates of more than 12%; * considerableefforts have been made to raise the level of the RoadFund.

This, notwithstandingsome basic objectives,have not been achieved:

* with regard to road maintenanceplanning, the Road Databasehas not yet been fully operational,hence there is not yet any mediumterm slidingprogramming of maintenancework; * as far as the Road Fund is concerned,serious weaknessesare still apparent in terms of management efficiencyand transparency,planning, progranmiing, budget implementationand fund release; * management tools have been put in place with technical assistance though they are not completely operational;furthermore, the local stafftraining program was not properlydesigned; * The PublicWorks Vocational Training Center did not fully play its training and advisoryrole towardsthe Small and Medium-sizeEnterprises and the Small and Medium-sizeIndustries that intervenein regular maintenancework.

2.2. STATE OF THE SUB-SECTORSAND RECOMMENDEDREFORMS

2.2.1. General Issues

2.2.1.1. Co-ordination Issues

The implementationof PAST revealedsome co-ordinationproblems and weaknessesresulting from program complexityand the diversity of program participants from both the donors and the government'ssides, transport networksbeing managed by three different ministerial departments.In connectionwith the latter point, the fact that PAST Co-ordinationCell (PAST.COCELL)was positioned in the ministerialdepartment responsiblefor some component parts of the program with the same status as others constituteda major constraint.

Consequently,in anticipation of TSP2, PAST. COCELLwill be positioned in the office of the Minister of Economy,Finance and Planning (MEFP),hence at a higherlevel of co-ordinationso as to put it in a positionto further extendits action with all due authorityand to be at the confluenceof most of the informationgenerated by the program.

This reformwill be followedby a redefinitionof CO.CELL'smandates, an increasein its human and material resourcestogether with the establishmentof adequateco-ordination and data-processingprocedure and tools.

2.2.1.2. Environmental Concerns

The review of transport infrastructureprojects implementedin the past revealed that their impacts on the environmentwere not fully taken into considerationin the absence of an adequateanalytical framework. In designing a medium term strategyfor the transport sector, a diagnosisstudy was carried out in May, 1997 which allowedthe definitionand adoptionof new orientationsin this area.

In preparationof TSP2, a deeper study was carried out allowing the exhaustiveassessment of the various impactsthat the transport sector has on the environment.It recommendeda set of measureslikely to mitigate the potentialimpacts that had been identified.The correspondingdirectives will be printed in manualform and will, henceforth,be systematicallyapplied by transportinfrastructure professionals.

Adequatemanagement units and mechanismswill be put in place within the various TSP2 executionagencies and also within PAST. COCELL in order to ensure that these environmental concerns are taken into consideration.The samewill applyto the requiredtraining programs and sensitizationmeasures.

3 2.2.1.3. Poverty Issues The contributionof TSP2 to reducingpoverty will attract specialattention (which has not alwaysbeen the case underPAST) in view of the prioritygiven to this issue by the government.

At the macro-economiclevel, the impact of the increased efficiencyexpected from the transport sector on higher employmentrate hence on incomeas well as on lower cost of living through reducedtransaction cost (contributionof transportcosts) would be analyzed.

As far as the least favored groupsare concerned,analysis will focus, in the urban area, on the impact that the variousProject components will have on the sectorsemploying unskilled labor. The regular road maintenance work effectedby the Small and Mediumsize Enterprisesalready contribute significantly to the fight against poverty.

In the rural area, advantagewould be taken of the involvementapproach retained in designingthe strategyfor rual transportby involvingthe least favored groups in the decisions affectingtheir lives as well as in the implementationand assessmentof such decisions.

2.2.2. Road Infrastructures

2.2.21. Institutions a) Public Works Directorate (PWD)

PWD is responsiblefor building, equipping and maintaining road infrastructures.Under PAST, it was restructuredin 1992 in a normativeconcept and control sense with a view to adapting it to the progressive reduction,then considered,in state control. Finally, while PAST was halfway through, state control was completelydropped.

However,these reformsdid not permit PWDto clearly achievethe objectivesthat had been assignedto it. The only two elementsof satisfactionwere the privatizationof road maintenanceand the retraining of many senior staff for the private sector.On the other hand, some essentialfunctions including planning and programming, the effective use of regional divisions, the financial and technical follow-up of road maintenance, staff management,training and the setting up of road networkmanagement tools such as the RoadDatabase (RDB), have not alwaysbeen fulfilledin a satisfactorymanner.

This is due to many exogenousand endogenousfactors linked, inter alia, to relatively heavy administrative bidding and payment procedure, to the poorly qualifiedsmall and medium size enterprises entrusted with regularroad maintenance,to the absenceof effectiveinternal procedure and to the staffs lack of motivation.

In order to overcomethese shortcomings,PWD will be further restructuredwith the creationof an autonomous road works agency.The creationof suchan agencyis at the core of the governmentsstrategy under TSP2, and it is consideredto be crucial to the successof the measuresproposed to improve the managementof the road sub-sector.An insight study will be undertakento assess the institutional,tax, adrministrative,financial and operationalconsequences of the reform and to define a plan of action for its implementation.The approved calendar should allow for the adoptionof the texts that will govern the Agencyand the establishmentof its governingbodies at the initiationof PST2that is, at the beginningof the secondhalf of 1999. b) ThePublic WorksVocational Training Center(PWVTC)

LTD like PWD and LTD has also been restructuredunder PAST in order to redirect its action until then devotedto the training of regular maintenancestaff under state supervisiontowards a more central training role and qualitativeupgrading of both civil servantsand staff of the SMEs involvedin the implementationof road programsand land transport.

LTD thus underwent a significant change from a monopolyposition consisting in the routine training of captivepublic customerswith guaranteedoperating resources to a situationwhere it has to go after the public and privatecustomers and to definetraining needswhich will have to be borneby the customer.

4 LTD has not yet adaptedto this new environmentas it still facesproblems including the fact that its activities have not been really directed towardsmeeting training needs in road maintenanceoperations. Lastly, it does not generatesufficient income even in its other areas of activities.

Necessaryinternal adjustments will be carriedout in orderfor LTD to better adapt to the dynamicsintroduced by the new contextof the sub-sector.In this perspective,LTD's accountshave been reconstituted,an inventory of its assetstaken and a new accountingand financialsystem established.

An audit systemwill be put in placewith the settingup of an accountingand financial systemwhile the Road Fund subsidieswill be granted on the basis of performancecriteria to be definedwith the assistanceof the Road Fund AdvisoryCommittee (RFAC). When TSP2 is midwaythrough, the govermmentwill make a decisionon whetherto maintainLTD on the basis of an overallassessment of its performance. c) The RoadResearch and Quality ControlLaboratory (CEREEQ)

The missionof CEREEQ,which is currentlya public establishmentof an industrial and commercialnature, is to define and promote technologicalresearch and rational utilizationof building materials.In this connection, it puts at the disposalof the govermmentbodies and private personsfrom the building and public workscircles, testing techniquesand results of experimentalstudies enabling to ensure the technical quality of the works carried out. It intervenes both upstream (study phase) and downstream (follow-upof later behavior) of constructionworks.

CEREEQ is confrontedwith a number of obstacles in carrying out its mission as a result of its obsolete equipment,lack of personneltraining and the relativelylow level of the resourcesgenerated.

In the end, CEREEQwas changedinto a companywith majoritypublic shareholding in a moveto better adapt it to the changing sub-sector. It will receive assistance under TSP2 to finance staff training, purchase laboratory,communication and support equipment,sampling equipment and the constructionof an equipment storing warehouse.

The laboratoryequipment is intended to equip laboratorieswith building materials, soils and foundations, roads, chemistry as well as meteorologicalcells. The pieces of equipmentconsist of a boring machine, a destructivedrilling, a samplingcore drill and data processingequipment.

2.2.2.2. Road Network

Road infrastructurewas classifiedaccording to the definitionof law 74-20 dated January 24, 1974 and the application decree n°74-718 of the same year establishing a distinction between classified network and unclassifiednetwork.

a) The ClassifiedNetwork

Classifiedroad networkis selectedmainly on the basis of administrativecriteria and consists of: (i) national roads linking long distance administrativeregions; (ii) regional roads linking various departmental chief towns;(iii) departmentalroads linkingvarious district and rural communitychief towns;(iv) listed earth roads linking departmentalroads to agriculturalproduction centers; (v) urban public road networkmade up of major urban roads (The Great Public Road Network)linking up national roads with the major centers of regional capitals.

The most recent inventory(December, 1996) reported classifiedroad networklength at 14,576km of which 4,258 km of paved roads (29.21%), 10,311km of unpavedroads (70,74%)and 7 km of paved roads (0,05%). Reviewingroad networkexpansion, it appearsthat the latter has remainedvirtually stationarysince 1992 and that most of the expansion of paved roads took place between 1961 and 1981. However,the on-going asphaltingof the Tambacounda-Kidira-Bakelroad will expand pavedroad networkby 250 km.

5 In the fiamework of PAST, a top priority network of 925 kms (65% of the classified network) was retained, as the Government lacks sufficient means to handle maintenance of the entire network This includes all the paved roads and nealy one-half of unpaved roads.

The most recent inventories of detenorated roads (in 1998 for paved roads and in 1994 for unpaved roads), mention that 28.5%/,or 8455 kms of the network of paved roads is in poor condition. This is explained by the priority granted to the mainterance and restoration of paved roads in the framework of PAST (approx. 1500 knms),to the detriment of most of the classified network (with actual refilling of earth roads involvingonly about 365 kms). Moreover,just as for restorationand regular maintenance,current maintenancefor the entire system has mainly focusedon blacktopped roads.

The Dept. of Public Works (DTP) is responsible for planning and programming construction, restoration and maintenanceactivities, and also manages work and study contracts. b) The UnclassifiedNetwork

This network is not well known because it was constructedwithout a global plan and by various contnbutors (DTP, local groups, agriculturaldevelopment projects, NGOs, etc.). It conssts mainly of earth roads and feeder roads. No one knows the exact condition of these roads, because a global maintenancemanagement plan does not exist.

Hence, despite its importance in supporting activities in the nirl areas, the unclassified network has not yet been integrated into an institutionalframework permitting its actual management.

2.2.23. Fundingof Infrastructuresand the RoadFund

For now, the State has exclusive responsibility for financing infrastructures and maintenance. New works and reinfoivementare financed by developmentpartners through grants or loans matched by counterpart funding by the State.

Under PAST, there have been serious delays in raising outside funds and setting up counterpart funds by the State. GenerA speaking,this presents a problem in coordinating interventions;an improvementin that area will help avoid drastic over-expnditures causedby these delays.

Current maintenance is financed chiefly with internal funds through the Road Fund, and a few donors help with reglar naintenance.

The Road Fund's resource level, as well as the mechanisms and procedures governing it, have markedly improved as PAST has been implementedover the years. In addition to an advance account opened for the DTP at a commewial bank, the State has raised the credit alocated to the Fund regularly,reaching 13 billion CFA F in 1998, compared to 10 billion in 1997 and 4.5 billion in 1993, or 18.3%/o,20 % and 16.7% respectivelyof total internal resources in the ConsolidatedInestments Budget (BCE). Starting in 1999,the State will set aside a minimum of 15 billion CFA F to the RoadFund.

However, in order to better adapt Fund operations to the changes desired in the sector, including getting private entities to share in the financing of investmentsand maintenance,the necessarylegislative and regulatoryactions will be taken to ensure its continuedfunding and endow it with all the autonomy and transparency required within such a oontext

Considering that the biggest constraint at this moment lies less in the level or availability of resources than in the planning, programming and execution of maintenance work, a for the Road Fund Consultative and Follow-up Committee (CCFR) will be set up, while awaiting the actual establishment of the Road Works Authority (Agence Autonome de TravauxRoutiers). The study to be conducted on the creation of that Agency wil evaluate the appropriatenss of maintaining the CCFR in the form currentlyproposed, or whether it should be restructured so it can be adapted accordingly.

6 Govemnmentrepresentatives will be seatedon the CCFR,in additionto thosefrom the privatesector and road users, with a viewto contnbutingto greatertransparency and a highersense of responsibilityin managingthe RoadFund. The Committee'smain functionwill be to advisethe authoritiesand provideall the supportthey mayrequire in their effortsto improvethe decision-makingprocess involving road maintenance work, As for the continuousmanagement of mattersconceniung it, the CCFRwill be backed by a secretariatcomposed of highlyqualified professionals.

2.22.4. ActionsPlanned for PST2

The physicalobjectives of the 5-yearroad maintenance programme are: i) restorationof the blacktoppednetwork and the unpavednetwork carying traffic over 40 vehiclesper day,in orderto ensurea properservice level and allowtheir contimnouspreventive maintenance; ii) eliminationof criticalpoints throughout the unpavednetwork and guaranteeof trafficcirculation across the entirenetwork of national,regional and departmentalroadways carrying morethan 10 vehiclesper day; and iii) the eliminationof criticalpoints in the rest of the networkin orderto cut trafficinterruptions down to brief amountsof timecompatible with the servicelevel required to ensurethe economic and socialfunctions of the roadsystem.

Prioritywill be givento currentmaintenance work (light reshaping,clean-up and clearing)on thoseparts of the networkalready in good condition,while work for excessivelydilapidated roads and thosewhich must be restoredin the slort termwill be kept to the strictestminimum. Hence, the currentmaintenance schedule will gradually evolve dependingon the network'soverall improvement, increasing from approximately 5000 kmsper year (including3000 kmsof blacktoppedroads and 2000kms of earthroads) at the beginningof PST2,to 11,200kms (including 4200 kms ofblacopped roadsand 7000 kmsof earthroads) by the end ofPST2.

At the same time, a catch-upprogramme for the networkwill be implementedthrough intensive maintenance of bladktoppedroads, repair of critical points along the earth roadsand restorationor constructionof strnctures.

Intensivemaintenance of blacktopped roads wil involvecatching up on the repairof points covering 0.50/o, 0.4% and 0.3% ofthe schedulednetwork in 1999,2000 and 2000,respectively, and covering0.2% startingin 2002. It willalso involveother operations (resealing [deflachage?] and maintenanceof shouldersfor the most degradedtrunks). This has all becomenecessary due to the delaysin reinforcingthe roads,which concerns 1% of the total networkin poor iepair.

The repairof cnticalpoints along the earth roadswill involve5000 kms, or nearlyall of the networkin poor repair (8500kms), besides the 3000kms carryingless than 10 vehiclesa day.

A budget of 2 billion CFA F per year, or 10 billionF over 5 years will be alotted to restorationwork and the constructionof structures.

The periodicmaintenance programme provides for: i) the reinforcementof approximately600 kms of blacktopped madspresently in poorcondition which could not be restoredin the PASTprogramme, and the regularmaintenance of approximately600 kms of roadspresently in a mediumstate of degradation;and ii) potholepatching 2000 kms of earth roadsincluding 600 kms in 1999.

The othermaintenance work wil involverenovating the road markingsystem over 600 kms of blacktoppedroads per year, and the renovationof 20% of the road signsalong pavedroads which will not be maintainedregularly, and buildingcrossroads for an equivalentof 100million CFA F peryear.

The newworks programme will first involvethree tunks ofroadway for a total of 130kms. Theseroads are: Diana Mlary - "Croisement(Crossroad) 22", Sedhiou - Tanaff - Guinea Bissau Border and Saraya- Mali Border.

Finaly, an institution-buildingprogramme wiU be implementedto accompanythe investmentprogramme. It wil targetthe trainingof managers,setting up a databaseand programmingtools, support for preparationof invitationsto tenderand contractoffers, providing support to constructionsupervision and strengtheningthe capacitiesof SMEs interveningin roadmaintenance.

More specifically,in orderto improveoveraU road maintenanceefficiency, PST willfinance the followingstudies: 1) researchon materials(with the draftingof quany maps) and establishmentof a road structureslist; ii) reviewand revisionof the standardspecifications manuals applicable to currentmaintenance work and periodicmaintenance; iii)

7 review of the Special Technical ClausesManuals (CCTP - Cahiers des Clauses TechniquesParticulieres) customarily used in contracts for restoration and new works, plus the preparation of standard CCTPs; iv) studies to bring the RoadwaysData Bank (BDR) up to par and the collectionof nussing data on the status of the classifiedroad network; and finally, v) the elaborationof standard specificationsmanuals for technicaland economic studies.

2.2.3. Railroad Transport

This subsectoris managed by a public firm, the NationalRailroad Company of Senegal (SNCS - Societe Nafionale de Chemnnsde Fer du S&nggal),and by a private company,the Chemical Industries of Senegal Company for Railroad Operations (SEFICS- Societe d'ExploitationFerroviaire desIndustries Chimiques du Senegal. Each company has its own fleet of material. SEFICS is allowedto operate on publicrailways by paying a fee to SNCS.

Since 1996, railroad lines carrying passengers but losing money have been eliminated. Nonetheless, the SNCS continues to run a subuib servicebetween Dakar and Rufisque, which is steadily growing. This line, known as "The Little Blue Train" (Le Petit Train Bleu- PTB), wil undergo some reforms as part of the Urban Transport Reform Project

By December 1999 at the latest, international traffic operations (72% of SNCSprofits) will be turned over to another company, the International Traffic Operations Company (Societ d'Exploitation du Traffic International - SE77), of which the majority shareholders will be private. SETI, created jointly by Mali and Senegal, will have exclusive operation of international traffic (againstpayment of fees for using the infrastructureand rolling stock when the latter belongs to SNCS), with the exception of the functions of traffic security and train dispatching, the maintenance of infiastuctures and investments for causewayrenewal.

The current state of the rails on the international line between Tambacounda and Kidira (approx. 155 kms), which is over 80 years old, is a serious handicapto SNCS efficiency.In the frameworkof PAST, actions will be undertaken to renovateapproximately 60 kms of railway with help from the IDA. As part of the PST plan, special emphasis will be placed on renewingthe remaining line.

Due to changes taking place in the subsector, SNCS is obliged to readjust rapidly, this should be achieved by strengthening the commercial function within the company, the development of new products and restructuring correspondingto its new missions. A study is underway in preparation of PST and the necessary steps will be taken following the schedule set by SETI, including financing the social plan which will arise from it. Of course, funding of the SNCS InvestmentProgramme by backers will be linked to these reorientationsand setting up SETI.

In conclusion, the investment programme approved in the framework of PST2 comprises: i) renovation of the railways and strengthening the platform and structures between Tambacounda and Kidira; ii) restoration of the railways,the platform and structuresbetween Dakar and Tambacounda;ui) constructionof a third line between Hann and Thiaroye; iv) renovating the line between Thies and Tivaouane; v) refitting the rail workshops in Thies vi) restoration of the International Railroad Station in Kidira; vii) acquisition and overhaul of locomotives; viii) acquisition of an 80-tonne lifting crane; ix) acquisition of container cars; x) fitting wagons in the international pool with air brakes; xi) installation of line-up train weighing systemnsat the Thies, Guinguineo and Kidira train stations; xii) refittingof the signals network for the Dakar and Bel Air stations,thereby completingthe signals system between Dakar and Thies; xiii) acquisition of a computerizedradio block for the Thies-Kidira line; xiv) construction of an underground telephone network and changing the telephone exchanges of ThiMsand Dakar; and xv) financing the resulting socialplan set up by SETI and salvagingthe socialplan, which is in progress but not yet completed.

2.2.4. Administrationof Road Transport

The Land Transport Directorate (DTI) is in charge of the regulation, control and coordinationof transport of people and goods over land. Important measures have been taken in the framework of PAST in view of modernizing and reinforcingits road securitypolicy.

These measures have materialized in the setting-up of a new, more functional organizational chart and noticeable advances in the computerization of transport papers (registration papers, drivers' licenses, technical inspections, transport authorizations)and the establishmentof a data bank.

8 These actions will be pursued and consolidatedin the context of PST2 to allow the DTT to fulfill its missions more effectively. The actions retained cover i) the reform of drivers' license exams, notably with the design of teaching supports and the publication of a highway code manual, with its translation into the national languages; ii) continuation of the computerization programme; iii) construction of infrastructures (three regional division offices, road safety routes, routes for talkng driving license tests and constructionof drnvingpractice areas; iv) procurementof archive equipment and technical inspection equipment; v) studies to be conducted on transportation, including updating the National Transport Plan; and vi) implementationof a training programme.

Finally,the consequencesthat the creationof theAgence Autonome de TravauxRoutiers (RoadWorks Authority)will have on the DIT missions will also be analysed in light of the study implementedto that effect and the necessary reorganization measureswill be taken.

2.2.5. Maiitime and River Transport and Ports

This su-sector is predominated by the Port of Dakar (PAD),as comparedto the country'sother ports. More than 90/ of Senegal'sexternal trade transits through this port On the other hand, Ziguinchor and Kaolack are the most active secondaryports.

With PAST, important work has been achieved to rehabilitate the PAD infiastructures, whose state of repair has greatly improved.However, these effortsmust be pursued and consolidatedin upcoming years. The implementationof PAST has, moreover, allowed greater involvementby the private sector in the management of activities. However, wide-ranging reform of certain procedures,particularly concerning handling and warehouse services, is still clearly imperativeto provide this port with all the operational efficiencyit requires.

In the futur, it will be important to evaluatethe appropriatenessof investing in infrastructureswhich couldencourage containertransport and optimize the potentials of transshipmenttraffic.

The posslilities involvingthe private sector in financing infrastructureswill be studied, particularlythrough Build- Own-Transfer (BO'I)4ype operationsor public-privatejoint ventures.

From that perspective, the programme approved for PST2 concerns: i) continuing to develop the North Zone of the PAD, for which funding is already secured through the ADF; ii) support and assistance to SONAPAD to prepare three BOT files bearing on financing the extension of the container terminal and construction of the distribution platform and the cereals terminal; iii) the technical studies and the petroleum wharf rehabilitation work, iv) the technical studies and work in order to group together phosphate terminals ; v) the replacement of the naval equipment of the PAD ; vi) the implementation of the environmental plan of action ; and vii) the implementation of a five-year training plan.

Furthertnore, useful steps will be taken to update the studies relating to the establishment of an nineral port at Bargny, a necessary investment to make some mining projects profitable.

In spite of the existence of waterways over appreciable distances and ports or ports of call with adequate facilities in general along the various rivers, transport by inland waterway remains marginal in the transport system as private carriers seem to give preference to road transport. Therefore, the Government has an important role to play in promoting the development of this form of transport which may be a major support for regionalization and contribute to opening up areas which are inaccessible by road as well as to sub-regional integration.

Government's efforts should be mainly focused on navigation regulation and safety, on the improvement of navigability, navigation assistance and human resources development in addition to the effort made by private carriers who will be responsible for the purchase of transport equipment and the management of the commercial departments.

In the medium tenn, the development of transport by inland watenvay is related to that of coastal navigation at national level, especially between Dakar and the secondary ports. Significant savings could thus be made on the costs of road and rail transport.

9 Secondary ports are still under state ownership and the Government entrusted chambers of commerce and industry with the task of running them. However, considering the low level of activities carried out in these ports, the cash-flow generation capacity is inadequate and does not make it possible for chambers of commerce to have sufficientmeans to finance developmentinvestments. Within the frameworkof PST2, specialattention willbe givento the Kaolackand Ziguinchorports.

As regardsthe Kaolackport, a plan to boost the activitiesmust be implementedin additionto the promotionof the private sectorto encourageits involvementin the managementand improvementof the accessto this port by ships (beacons,hydrographic surveys and possiblydredging).

As regards the Ziguinchorport, interventiontakes place within the generalframework of the revitalizationof the sea link betweenDakar and Ziguinchorand includesthe improvementof access to the port as well as the rehabilitationof wharfsand the creationof passengerterminals in Dakar and Ziguinchor.

Finally,at the institutionallevel, the necessarysteps will be taken withinthe frameworkof PST2 to enhancethe interventionmeans of the MerchantMarine Department(DMM). Therefore, in additionto the updatingof the maritimelegislation, the activitiesto be financedinclude the modernizationof human resourcesmanagement through the implementationof a five-year training programme, computerizationof tasks and technical assistancein orderto achieveprivate sectorpromotion and environmentalprotection.

2.2.6. Air transport

Senegal has 14 national airports open to public air traffic out of which 4 receive internationalflights (Dakar, Cap-Skirring,Saint-Louis and Ziguinchorfor the sub-region).

Significantinvestments for repairing runways,but also for the acquisitionof power generationequipment, safetymeasures against fire and assistancein terms of navigationand landing were made within the framework of PAST.

However,it would be better for air navigation safety to be enhanced on the one hand through strict implementationof internationalstandards and practicesin this regard, which calls for real supervisionby the governmentand on the other hand throughthe improvementof meteorologicalassistance.

As regards LSS InternationalAirport air trafficjam causedby a concentrationof flights at certain periods of the week still exists as well as the need to improvesafety. It will also be necessaryto rehabilitatespaces in order to increasethe capacity of check-infacilities, police controlon arrival and baggage claim area. Finally, the rationalizationof ground assistanceprovided for airline companies,taking into accountthe securityand safety requirements,could make it possibleto reducelanding fees considerably.Thus, the PST2 will finance the air terminalextension and modernizationwork, the acquisitionof handlingequipment and the cargoplane parking area and runwaysrehabilitation.

The study under way at ASECNA (Agencyfor Air Navigation Safety in Africa and Madagascar)on the developmentof the LSS InternationalAirport will make it possibleto better define the necessaryrestructuring measuresand investmentsto enhancethe internationaltraffic function of the said Airport.

In fact, the study is aimed, inter alia, at: ) determiningthe repercussionsof the nationaleconomy development perspectiveson the Airport traffic by the year 2015 ; ii) analysing the present facilities capacity and their abilityto face traffic growth and, if necessary,transferring some facilities to other places in the site ; and iii) determiningthe date of a possibletransfer of the Airportto another site.

With regard to other airports, the PST2 will mainly finance: i) navigationand safetysupport equipment to continueand completethe programmestarted within the frameworkof PAST; ii) lengtheningthe Saint-Louis Airportrunway includingthe modificationof the layout of the existing road which runs along the said Airport and the extensionof the fence; and iii) the constructionof a newairport in Ziguinchor.

Finally, the promotionof the private sector involvementin the managementof the sub-sectorwill be furiher strengthenedespecially with:

10 * the privatizationof Air Sdndgal(Senegal Airline Company) which will comeinto effectin December1999 at the latest. In additionto the recapitalizationof the company,a series of actions aimed at ensuring the successof the transactionwere undertakenand involvethe coverage,by the government,of the.liabilities resultingfrom the plane crash in Kafountineand Tainbacoundaand, the financingof a socialplan with a view to downsizingthe staff. The PST2 will finance the actions required for the implementationof the privatizationincluding especiallythe updating of the market survey,considering the establishmentof a single operating area (ZOE), the designing of the strategy, the actions relating to the offer of sale (developinginformation and DAO documents,marketing media, etc ...) and the supportto the Committee in chargeof the privatization.

* the privatizationof airports managementas well as the restructuringof the Civil Aviation and National Meteorologybefore June 2000.To this effect,the ongoingthorough study initiatedwithin the frameworkof PST2 preparationwill make it possibleto clearly definethe roles of the CivilAviation Department (DAC) and the National MeteorologyDepartment (DMN) and the appropriatemeans to be made available to them. The PST2 will finance various support actions relating to the restructuringof these departments including the development of legal instruments, organization charts, manuals of procedures,budget estimatesas well as training. As regardsthe implementationof the privatization,in view of the fact that it is a relativelynew area in the sector, the Governmentwill seek, as much as possible, to draw from the experiencegained by other countrieswhere it was alreadyachieved.

These various reformsin the sector will surely result in staff cuts which will require the implementationof socialplans to be financedby the PST2 as well as the related communicationstrategy.

2.2.7. Rural transport

In Senegal,a clearly defined nationalstrategy or policy is yet to be implementedregarding rural transportlike other sub-sectors.There is no appropriateinstitutional framework for coveringthe activitiesin this area and the interventionsin this field are not basedon systematicplanning.

The designingand constructionof facilities are not carried out accordingto the rules and the latter are not properlymaintained.

Also, no special attention was given to the developmentof means of transport in rural areas, although an appropriatestrategy would have made it possibleto obtain appreciableproductivity gains in the transportation of agriculturalproductions and to meet rural populations'social needs in a satisfactoryway.

The solutionto transportproblems in rural areas will requirethe implementationof a real strategytaking into accountthe improvementof the institutionalframework on the one hand and the developmentof appropriate meansto facilitatethe circulationof peopleand goods,on the other. A real national policywill be definedon a participatorybasis. In particular, the necessaryreforms to involve the decentralizedstructures will be examinedas well as the sourcesof financinglikely to be mobilizedto meet the needsin terms or rural transport.

As regardsthe definitionof the strategy,three (3) themeswere identifiedand are presentlybeing studied within the frameworkof PST2 preparationand should give preliminaryinsight into the rural transport situation in Senegal. The studies are focusedon the present institutional,financing and planning aspects, the technical aspectsand the developmentof the meansof rural transport,which constitute the assessmentphase. The studies will be discussedwithin the frameworkof seminarson rural transportduring which the necessaryadditional studieswill be identifiedin order to undertakereforms and implementa Rural Transport Projectas of the last quarter of the year 2000. Followingthe findings of the second study relating to the technical aspects, an inventoryof the road networkwill be undertakenwith a view to establishinga data bank. The latter will be used also to develop a priority programmefor the gradual improvementof the rural track network. The implementationof the priority programmewill providethe opportunityto experimenta pilot phase which will includeawareness-raising and the involvementof the populations,NGOs and other stakeholdersas well as the review of the local tax system and the assessmentof possiblecontributions from the Road Fund and the communities.The experiencegained during this pilot phase will provide an impetusfor the developmentof a large-scaleproject.

11 2.2.8. Urban transport

Due to its importance,this sector receiveda separate sectoralpolicy atatement adopted in September1996. Within this framework,it benefitsfrom an importantinstitutional reform and expertisecapacity strengthening programme.

The basic objectiveof the advocatedreforms is to reorganizethe urban transport sector in Senegal in order to improveits effectivenesson a long-termbasis. This objectiveis in keepingwith the Government'sglobal policy definedby the 9th OrientationPlan for Economicand SocialDevelopment and is aimed,inter alia, at:

a) making the regulationmore likelyto promotesound competitionbetween the various actors and enhance investmentsin the sector; b) developingprivate initiative and supportingchanges in the area of self-organization; c) improvingthe qualityof state interventionin the provisionof servicesand basic infrastructure.

Permanentdialogue will be promotedbetween the PAST CoordinationCommittee (CELCO/ PAST) and the Dakar Urban TransportExecutive Board (CETUD)in order to createsynergy of actionsand programmes.

3. GENERAL ORIENTATIONS

The Government transport policy is in line with the IXth Orientation Plan for Economic and Social Developmentthe main objectiveof which is the promotion of competitiveeconomy in order to achieve sustinable human developmentby laying specialemphasis on the need to have infrastructurewhich is able to support production activities efficiently. In the dynamic approach adopted by PAST, it is also aimed at strengtheningthe achievementsat the institutional,organizational and financial levels. Furthermore,it takes into accountthe need to developnew capacitiesin areas which are not yet exploitedsufficiently (rural roads, coastal navigation,transport by inland waterway),to support sub-regionalintegration and promote greater private sector involvement,especially as regards the financing of investmentsand the managementof the infrastructure.

The infrastructuremust be seen in a contextwhich enables it to providemore substantialsupport for the rest of the economy(agriculture, industry, mining, trade,tourism) and meet populations'social needsmore efficiently.

To this effect,a moretrade-oriented approach will be adoptedfor the managementof the sector,which involves the application of the "user-has-to-pay"principle whenever possiblein order to have a satisfactorylevel of collectionof resourcesrequired for adequatemaintenance of the infrastructure.

In this perspective,a real partnershipbetween the various actorswill be soughtfor especiallyby involvingthe latter in the decision-makingprocess in terms of planning and management.

The Govermnentwill continueto cafry out reformsin order to adapt laws, regulationsand the tax systemto the desired changes(for examplein the Civil Aviationsector). The institutionalreforms already conducted in the sector will be enhanced through further management transparency and more effectiveness.Finally, competitivenesswill be seen as a wholewhich dependson both the publicand private sectors.

Specialattention will be given to rural transportdevelopment. The objectivebeing to bring the transportsector to play its role fully in providing support for the developmentof rural areas. In accordance with the decentralizationpolicy spirit, real concertationwill be carried out to this effectwith the decentralizedstructures as well as with the private sectorand NGOs. Appropriateinstitutional measures will also be taken to promote balanceddevelopment of rural transport.

Greater importancewill be given to vocationaltraining in all sectorsto make it possibleto better appropriate the reformsto be undertaken,among others.

12 Finally, by banking on the developmentof links with borderingcountries, the transportpolicy will materialize the orientationof the Plan making of sub-regionalintegration one of the major focal points of the national economicpolicy.

3.1. GENERAL ORIENTATIONSREGARDING INSTITUTIONS

> Carryon with the modernizationof the sector;

3.1.1. For Government services

> improveplanning and coordinationof activitiesand investments; > position CELCO/PASTin the Ministry of Economy,Finance and Planning and redefineits mission in orderto take into accountthe need for coordinationbetween donors and nationalactors; > updatethe NationalTransport Plan; > providedepartments with modemmeans of management; > set up an independentroad works agency; > financeroad works on a sustainablebasis; > redefine the functions of the Ministry of Equipment and Land Transport (METT) resulting from the establishmentof the independentroad works agency; > ensure sustainabilityto road maintenancefunding; > supporthuman resourcescapacity strengthening in publicservices and in the private sector; > improvethe managementof transportinfrastructure in rural areas; > ensuresystematic application of guidelinesto mitigatethe negativeimpacts of projectson environment; > standardiseand regulatetechnical specifications for studiesand works.

3.1.2. For autonomousstructures

> definethe relationshipswith the State throughenterprise layout; > improvemanagement and maintenancemethods for infrastructures; > improveinvestment programming; > ensurefinancing of infrastructures; > get the private sectorinvolved in investmentfinancing and infrastructuremanagement; > developa maintenanceculture, exercisea managementthat can lead to financial equilibriumand follow the performanceindicators jointly identifiedwith the State; > implementappropriate programmes and measuresfor greater security and follow up the mitigation of adverseeffects on environment.

3.1.3. For the Private Sector

> participatein promotingthe sectorand improvingits overallcompetitiveness; > participatein infrastructurefinancing and management; > undertakeconstruction and maintenancestudies and works stickingto technicalnorms and rules;

3.1.4. For Regional, Municipal and Local Authorities

> participatein investmentfinancing and upkeepof rural feederroads; > participate in financing and implementing programmes and measures pertaining to environment monitoringand security; > help revitalisesecondary as well as transportationriver ports, while ensuringwise management;

3.2. GENERAL INVESTMENTS GUIDELINES

> Improveco-ordination of transportsso as to increasetheir overallefficiency; > improve sectorplanning through sliding investmentand multiannualprogrammes for the investmentin and maintenanceof infrastructures,especially roads; > adapt networksto economicgrowth and administrativeand sub-regionalintegration needs, while searching to balancemaintenance with investment;

13 > promote security of agricultural goods and improve mobility of populations by bailing out landlocked rural populations; > maintain and improve the quality of infrastructures and the security of roads, ports, airports and railroads; > give priority to maintenance and rehabilitation of existing infrastructures, so as to conserve and strengthen transport supply and allow an increased productivity; >' get the various stakeholders involved in maintenance funding and infrastructures building; > adopt a minimum (12%) economic rate of return for investments (ERR) in all sub-sectors; (exceptionally, in the road sub-sector investments representing an ERR below 12% will have to be discussed with donors and can only be eligible after a satisfactory assessment of their contribution to regional integration and fight against poverty is made; > help fight against poverty through labour intensive technologies, especially in rural areas, where local human resources should, whenever possible, be used for the building and maintenance of transport infrastructures; > ensure a systematic application of guidelines for the reduction of adverse impacts on environment; > improve the port and airport traffic processes; > reduce aircraft maintenance and maintenance costs.

3.3. OBJECTIVES AND ACTION PLANS

In the light of the guidelines so identified, specific objectives have been singled out for each sub-sector, with the necessary measures and activities to reach them.

3.3.1. Objectives

Road infrastructures

1. ensure a good conservation of the existing road network; 2. ensure coherent and harmonious development of network; 3. modernise Land Transport Administration

Railroad transport

1. improve operational efficiency

Maritime and River Ports and Transports

1. improve the competitiveness of the Port of Dakar; 2. improve the public image of the Port of Dakar; 3. adapt the national policy to present context of international maritime transport; 4. bring secondary ports back into the national transport system to support local development.

Air transport

1. ensure security supervision; 2. conserve and strengthen the national air transport supply; 3. strengthen the status of LSS Airport as a major hub for international traffic

Rural transport

1.ensure a sustainable development to rural development;

3.3.2.Action Plans

The Action Plans selected to reach the objectives are contained in the following tables:

14 3.3.2.1. ROAD INFRASTRUCTURES OBJECTIVES ACTIONS TO BE UNDERTAKEN BODIES SCHEDULE INVOLVED 1. Ensuring a good * To adopt the legislative and regulatory texts required to change PWM into an autonomous Road Work Agency METT, MEFP, July 1999 conservation of the * To establish the bodies of the autonomous Road Work Agency METT July 1999 existing road stock * To make the Road Work Agency operational January 2000 * To make the Road Work Agency operational METT from 1999 * To take necessary measures to ensure their systematic follow-up with a view to improving interventions planning METT and co-ordination * To make reinforcement and maintenance programming instruments operational, notably the Road Data Bank and METT, MEFP 1 999 the H.D.M. model * To draw up and implement a refresher training program for PWM staff on programming and control METT 1999 * To prepare on an annual basis sliding pluriannual investment and maintenance programs based on objective METT, MEFP criteria which take into account economic, social and administrative and regional integration exigencies * To increase substantially the internal resources of the Road Fund consistently with real maintenance and MEFP 1999 rehabilitation needs while maintaining a minimum annual budget of CFAF 15 billion * To take necessary measures to make the Road Fund Advisory Committee and its secretariat operational (RFAC) MEFP, METT January 1999 * To periodically assess the operation of RFAC and of its secretariat and take the necessary corrective measures MEFP, METT * To devote at least 75% of the expenses to road maintenance and roadway consolidation MEFP, METT * To catch up progressively with asphalted road network by (de point a temps?) timely work on 0.5% of the segment METT From 1999 in 1999, 0.4 in the year 2000, 0.3% in 2001 and 0.2% as from 2002 and (deflachage?) and processing of the embankments over 1% of bad condition segment over the next five years * To undertake treatment of critical points over 1000 km of earth road annually METT From 2000 * To define and implement a rehabilitation and construction works program METT Mars 2000 * To carry out a program designed to consolidate 600km of asphalted roads over the next five years ME1fT from 1999 * To Carry out a periodic program designed to ensure maintenance of 600 km of averagely deteriorated asphalted METT from 1999 roads over the next five years * To refill 2000 km of earth roads of which 600 km in 1999 METT from 1999 * To renew the horizontal signboards over 300 km of asphalt roads at the rate of 600 km on average annually MErTT from 2000 * To renew 20% of paved roads signboards which will not be subject to periodic maintenance (about 3000 km) METT from 2000

15 ROAD INFRASTRUCTURES(continued)

OBJECTIVES ACTIONSTO BE UNDERTAKEN BODIES SCHEDULE INVOLVED l * Implementa programmeto buildnew crossroadsin orderto easetraffic flow METT from 2000 * Implementa materialsresearch programme including drawing up maps locatingraw materialsquarries METT, from 1999 CEREEQ * Preparea road structureslist METT, from 1999 CEREEQ * Revisethe standardspecifications manuals applicable to currentmaintenance work and preparea Manualof General METT from 1999 AdministrativeClauses for regularand periodicalmaintenance work * Reviewthe Manualof SpecialTechnical Clauses (CCTP) used for marketsfor restorationand for new worksand prepare METT from 1999 standardCCTPs * Take the necessaiymeasures to improvethe means and proceduresof technicaland financialcontrol and follow-upof METT,CELCO from 1999 maintenancework, particularly by settingup instrumentsand indicatorssuch as performanceindicators, technical and financialreports, cost analyses,etc. * Set up a systemawarding long-termcontracts for maintenancework METT,MEFP, from 1999 PR/CNCA * Take the necessarymeasures to effectivelycontrol vehicle loads and apply toughersanctions to discourageinfractions METT from 2000 * Set up and implementa trainingprogramme for the SME/SMIin chargeof maintenance METT from 1999 * SupportCEREEQ with laboratory,testing, communications and supportequipment and materials METT from 2000 * Implementthe Training programmefor the CEREEQ from 2000 * Set up an accountingand financial systemat CFP.TP METT from 1999 * Conduct a general evaluation of the CFP.TP so the necessarydecisions can be made about the appropriatenessof METT 2001 maintaining it 2. Ensure coherent * Defineand regularlyupdate a minimum structuringprogramme for the extensionof the road network,indispensable for METT, MEFP 1999 and harmonious the administrativeand socialintegration in the contextof regionalisation developmentof the network * Reservea maximumof 25% of total expendituresfor new works METT,MEFP 1999 * If possible,for eveiy infrastructureproject proposed for inclusionin the programme,maintain an economicrate of return METT,MEFP 1999 of at least 12%/o;for projectswith an ERR < 120, evaluateproposal based on socialimperatives and to administrative and regionalintegration * Take the necessarymeasures to involvethe privatesector in financingand managementof infrastructures METT, MEFP from 2000 * Blacktopthe Diana Malary-Carrefour22 trunk (KoldaRegion) in supportof administrativeintegration. METT, MEFP from 1999

16 ROAD INFRASTRUCTURES(continued)

OBJECTIVES ACTIONS TO BE UNDERTAKEN BODIES SCHEDULE L______INVOLVED METT, MEFP from 2001 * Continue and intensify co-operation with bordering countries with a view to completing the opening up of the country at sub-regionallevel by providing support for the constructionof the SWdhiou- Tanaff -Guinea Bissau Border and Saraya - Mali Border roads in order to establish permanent links with Guinea-Bissauand Mali respectively * Systematisethe realisation of impact studies on the environmentand implement guidelines with a view to METT 1999 minimising the negative effects of projects on the environment 3. Modernising * Carry on with the modernisation of the Land Transport Department(DTT) METT 1999 Land Transport Administration * Strengthen and ensure the sustainabilityof DTT managementtools especiallyby making transport documents METT, MEFP 1999 computerised management system more operational * Carry on with the driving licence reform by improving the testing system,especially through the preparationof METT from 2000 educational aids for oral questions and the publicationof a highwaycode translation into national languages * Improving the working conditions of the DTT through the rehabilitationof the premises of some regional METT from 2000 divisions, the creation of tracks for road safety educationin semi-rural areas , the constructionof areas for driving tests and manoeuvring in the various regions of the country and provisionof more equipment(filing, technical visit equipment,...) * Implement road safety measures by making the permanent road safety committeesoperational, conductingand METT 1999 developing training actions (retraining of drivers, staff development,... ) and strengthening informationand awareness-raisingactivities * update the National Transport Plan (NTP) METT from 1999 * conduct the necessary studies for the classification of inter-urbanbus terminals, the organisation and development METT from 1999 _ of waybills, the setting up of a land transport observatory and the elimination of black spots

17 3.3.2.2 RAIL TRANSPORT OBJECTIVES ACTIONSTO BE UNDERTAKEN BODIES SCHEDULE INVOLVED 1. Improve the * develop a corporate plan defining in the medium term the global orientationsand a plan of action for SNCS, METT, MEFP 1999 operational taking into accountthe restructuring resulting from the setting up of the SETI SNCS efriciency * define and implement the necessary restructuringmeasures to adapt SNCSto its new mission, especiallyby METTr,MEFP, 1999 -2000 implementing a social plan with the establishmentof the SETI in view SNCS * promotethe national private sector involvementin the International Traffic DevelopmentCompany (SETI) MEFP, METT 1998 * finalise the selection of SETI's private shareholders MEFP August 1999 * set up the SDB (Dakar - Bamako Company)and the SETI MEFP October 1999 * sign the agreement with SETI MEFP,SNCS October 1999 * make it possible for SETI to resume international traffic effectively MEFP, SNCS December1999 * renew the railway and strengthen the platform and structures between Tambacoundaand Kidira, which is MEFP, 2000 essential for ensuring the efficiency of SETI; METT,SNCS * rehabilitate the railway, the platform and structures betweenDakar and Tambacounda,which is essential for MEFP, METT, 1999 ensuring the efficiency of SETI. SNCS * build a third railway between Hann and Thiaroyeto make it possible for the traffic to flowfreely between Dakar MEFP , METT, 1999 and Rufisque SNCS * renew the railway between Thies and Tivaouane,taking into account the ICS productioncapacity which is going MEFP, METT, 1999 - 2000 to double in the year 2000 SNCS * install train weighing systems at the Thies, Guinguineoand Kidira railway stations MEFP, METT, 2000 SNCS * developthe Kidira International Railway Station MEFP, METT, 2000 SNCS

* improvethe SNCS efficiency through the acquisitionand rehabilitationof railway tools, the acquisition of rolling MEFP,METT, 2000 stock (wrecking cranes, adapting airbrakes to wagons and carriage, ...) and the rehabilitationof the Thies SNCS workshops * completerailway signals between Thies and Dakar by putting up signals at the Dakar and Bel-Air stations MEFP , METT, 2000 SNCS * rehabilitate the underground telephone networkand renew the telephone exchange in Thies and Dakar MEFP, METT, 2000 SNCS * install a computerisedradio link between Thies and Dakar MEFP, METT, 2000 .______ISNCS __

18 3.3.2.3 MARITIMEAND RIVER PORTS AND TRANSPORT ACTIONS TO BE UNDERTAKEN BODIES SCHEDULE OBJECTIVES INVOLVED l.Improve * establish pluriannual programmes of maintenance and rehabilitation, and modernisationof infrastructures and SONAPAD 1998 competitiveness of equipment, taking into accounttechnological progress developments the Port of Dakar

* continue with simplificationmeasures for customs and port procedures, with a view to adapting them to current MPTK MEFP, 1998 context of maritime transport. SONAPAD * Further development of the North Zone of the PAD SONAPAD 1999 * Implement rehabilitation studies for a Petroleum Warf SONAPAD 1999 * rehabilitate the Petroleum Wharf SONAPAD 2001 at the earliest * implement the technical study on bringing together phosphate terminal SONAPAD 1999 * regrouping the phosphate terminals SONAPAD 2001 at the earliest * work out BOTs for private financing of the container terminal extension, the constructionof the distribution MEFP, 2000 platform and cereals terminal SONAPAD * undertake extension of the container terminal in the form of a BOT SONAPAD 2003 * build the distribution platform and the cereals terminal in the form of a BOT SONAPAD 2003 at the earliest * implement the programme for naval equipment acquisition SONAPAD 2000 * implement the PAD five-year training plan SONAPAD from 1999 * update the technical and feasibility studies on the mineral terminal of Bargny MPTM, MEMI 1999

19 MARITIMEAND RIVER PORTSAND TRANSPORT(continued)

OBJECTIVES ACTIONS TO BE UNDERTAKEN BODIES SCHEDULE INVOLVED 2. Improve the * restructure the professions of shipping agents by creating the environmentfor authorisationand monitoring MPTM,MEFP, 1999 public image of the tallyingwith efficiency and quality of servicesrequirements. SONAPAD Port of Dakar * promulgate draft legal texts empoweringthe Director General of the Port to grant authorisationto forwarding MPTM,MME 1999 agents

* implement the environmental action plan of the Port of Dakar MPTM, 1999 SONAPAD * create an Emergency and Intervention Centre to manage accidents M.Int, 1999 MPTM,MEFP, SONAPAD * establish a Health and Security Committeefor stevedores MTE,SONAPAD 1999 * strengthen the training provided to civilian security men MPTM, M. Int, MEFP, SONAPAD * increase military and paramilitary staff secondedto the Port MPTM, M. Int, 1999 MEFP, SONAPAD * buy the necessary equipment to strengthen and improve the security system inside and outside the docks MPTM,MEFP, 2000 SONAPAD * ensure systematiccompliance with measures for the protection of the environment,as well as for informationand MPTM, 1999 sensitisation of various communities in the Port SONAPAD

* take measures to ensure free flow of vehicles on the rod network,immediately bordering the Port, with the view MPTM,METT, 1999 to improve servicing SONAPAD * initiate appropriate measures in order to clearly identifythe State domain given the Dakar Port Authority. MEFP, MPTM, 1999 SONAPAD * transfer irregular markets and bus and taxi terminals to other sites near exit and entry gates of the Port MPTM, M. Int, 1999 Dakar Commune, ISONAPAD I

20 MARITIMEAND RIVER PORTSAND TRANSPORT(continued)

BODIES SCHEDULE OBJECTIVES ACTIONS TO BE UNDERTAKEN INVOLVED 3. Adapt national * modenise the law of the sea by updating the Maritime code and by adopting appropriate laws MPM 1999 policy to current international * computerise the tasks to be performedby the Merchant Marine Department ( DMM) MPTM from 1999 shipping context * design and implement a training programme for the DMM staff,by way of support to modemisation MPTM from 1999 * provide support to DMM to assist in actions to promote an involvementof the private sector in shipping business MPTM from 1999 and environmental protection

* promote the involvement of the private sector in the managementof secondaryports, running of transport services MPTM 1999 and investment financing 4.Reintegrate * work out a strategy to promote a sustainable developmentof the Dakar - Ziguinchor line MPTM, MEFP 1999 secondary ports into the national * improve the daylight beacons and buoys to facilitate ship positioning in the Port of Ziguinchor to further MPTM 1999 transport system strengthen the Dakar - Ziguinchor line to support local * modernise the Dakar terminal to further strengthen the Dakar - Ziguinchor line MPTM,SONAP 2000 development AD * build a terninal in Ziguinchor MPTM 2000 * improve the access to the port of Kaolack 1999 * review the modalities for transferring the management the Port of Kaolackto the private sector MPTM, MEFP 1999

21 3.3.2.4 - AIR TRANSPORT BODIES SCHEDULE OBJECTIVES ACTIONS TO BE UNDERTAKEN INVOLVED * Work out the legal texts, hierarchical and functional organisational charts, job descriptions, staff numbers, five- MTTA, MEFP e Quarter 1999 1.Ensure security year plan forecast budgets, manual of procedures for financial and accounting management, performance and supervision instrument panel indicators and opening balance sheets for the restructuringof Civil Aviation Directorate (DAC) and National Meteorological Department (DMN) with a view to taking on board the privatisation of airports managementand globalisation of world economy PM, MTTA Ist Quarter 2000

* Adopt the decrees for the restructuring of DAC and DMN

* Implement the social plan resulting from the restructuringprocess MEFP 4 th Quarter 1999 MTTA * Draft the technical control procedures and guides for the DAC staff and users in the Civil Aviation sector MTTA I' Quarter 2000

* Set up a legal and regulatoryvibrant framework for the regulation of the Civil Aviation Sector MTIA 2000

* Draft a checklist of legal texts pertaining to Civil Aviation, as well as operational guidelines MT'A 2000 * Draft a guide on security as well as operational guidelines MTIA 2000 * Provide DAC with basic computer tools and equipment to carry out monitoring and supervisionrequired for the MTTA 4thQuarter 1999 sector * Enhance the DAC capacities to carry out the monitoring, supervisionand regulation activities required for the MTTA 2000 sector, through the implementationof an appropriate staff training programme * Refurbish the DAC officesso as to provide DAC staff with sufficientspace to carry out its mission MTTA 2000 * Within the restructuring process, enhance the DM:Ncapacities by implementing an appropriate staff training MTTA 2000 programme

22 AIR TRANSPORT(continued)

BODIES SCHEDULE OBJECTIVES ACTIONS TO BE UNDERTAKEN INVOLVED 2. Maintain and * Adopt a plan of action to promote effective private managementof airports MEFP, MTTA I'h Quarter 1999 strengthen the national air transport supply MEFPs,MTTA 4 t Quarter 1999 * Finalise the selection of private operators for airport management * Sign the conventionon airport management transfer with selectedprivate operators MEFP, MTI'A I' Quarter 2000 * Implementthe social plan resulting from the privatisation of airport management MEFP MTTA 4thQuarter 1999 * Adopt a privatisation scheme for Air Senegal, including the accelerating procedures to be implemented by the MFP, MTTA 2nd Quarter 1999 Government and Air Senegal * Finalise the selection of the company taking over Air Senegal MEFP, MTTA 4thQuarter 1999 * Sign the convention on the transfer of Air Senegal MBFP,MTTA 4t Quarter 1999 ^ Finalise the rehabilitation of air navigation and airport securityequipment MEFP, MTTA 2000 * Lengthen the runway of Saint Louis Airport in view of adapting it to technical features of charter companies' MEFP, MTTA 2000 aircraft, requirements from tour operators and cargoes,and subsequentlystretch the fence and rework the design of the road along the airport * Build a new airport in Ziguinchor and provide it with security equipmentto sort out present problems encountered MFP, MTTA 2001 . ______bythe airport

23 AIR TRANSPORT(continued)

BODIES SCHEDULE OBJECTIVES ACTIONS TO BE UNDERTAKEN INVOLVED * Implement the recommendationsfrom the study on the development of LSS International Airport, while taking MTTA, MEFP, 1999 3. Strengthen the into accountthe new background of private management MUH role played by L.S.S International Airport as a hub for * Start extension and modernisation of airport terminal MTTA 2000 international traffic * Lengthen runway 03/21 so as to better adapt the infrastructure to traffic requirements MTTA 2000 * Rehabilitate aircraft parking areas and somerunways like 18/36 so as to better adapt them to traflic requirements MTTA 2000 * Develop the areas surrounding LSS International Airport and improve security and servicesoffered outside it in MTTA, M.INT 1999 order to improve its public image MEFP, MUH, 2000 * Clear the irregular settlements surrounding L.S.S International Airport MTTA

24 3.3.2.5. RURAL TRANSPORT

BODIES SCHEDULE OBJECTIVES ACTIONS TO BE UNDERTAKEN INVOLVED ME'IT 1998 l.Ensure * Conductthe necessarystudies to identifythe reformswhich mustbe made at the instituional level the mode of funding sustainable and planning proceduresto promotesustainable development of rural transportationstructures: the study will proposea developmentof detailedaction plan for implementingthe reforms rural transport METT 1998 * Conduct a study to identify measures to be taken to improvetransport means in the rural areas and promote their utilisation: the study will propose a global support progamme for the developmentof balancedutilisation of rral transportmeans METT 1998 * conduct a study to evaluate the technical problems mithe developmentof ural transport ifrastucures (design, restoration,maintenance of rural roads,...) and to determine the best solutionsfor Senegal: the study will lead to the elaborationof a detailedaction plan of the measuresthat must be taken to strengthencapacities METT,MEFP 1999 * Basedon these studies,engage in a global consultationamongst all participatingparties (State, local groups,associations, unions,NGOs, donors, etc.), aiming to define a frameworkfor consensusfor the hannoniousand coherentdevelopment of rural transport METT, MEFP 2000 * Implementrecommended institutional, legislative and regulatoryreforms METT, MEFP 2000 * Designa general supportprogram for sustainabledevelopment of rural transportand seekfunding for it: this will involve determining the actions and measures needed to support the organisation, management, capacity-buildingand developmentof means and infrastructuresin the area of rural transport * Take an inventoryof the road networkin order to set up a data bank that can serveas a frameworkfor the definitionof METT, MEFP 1999 interventionprogrammes on the network * Implementa priority programmefor repairingto propercondition and restoring10 to 12kms of rural roadsper month MEFP, METT 1999

25 SIGNED BY:

MINISTRY OF EQUIPMENT MINISTRY OF FISHERIES AND MARITIME AND LAND TRANSPORT TRANSPORT

MIISTRY OF TOURISM AND AIR TRANSPORT

MINISTRY OF ECONOMY, FINANCE AND PLANNING MAP SECTION IERD30032

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