lIE COPY The Doument of. RETURr TO FPLE X The World Bank REPORTSRETURN 07SKTO FOR OFFICIAL USE ONLY WITH N ONE WEEK Public Disclosure Authorized Report No. P-2128-BEN
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL DEVELOPMENT ASSOCIATION
Public Disclosure Authorized TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED DEVELOPMENT CREDIT
TO THE PEOPLE'S REPUBLIC OF BENIN
FOR A
THIRD HIGHWAY PROJECT Public Disclosure Authorized
October 21, 1977 Public Disclosure Authorized
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation. CURRENCY EQUIVALENTS
Currency Unit CFA Francs (CFAF) US$1.00 = CFAF 245 CFAF I million US$4,081
Fiscal Year
January 1 - December 31
System of Weights and Measures: Metric
Metric US Equivalents
1 meter (m) 3.28 feet (ft) I square meter (e2) 10.8 square feet (sq. ft) I cubic meter (m ) 35.3 cubic feet (cu ft.) 1 kilometer (km) 2 0.620 mile (mi) 1 square kilometer (km ) 0.386 square mile (sq. mi) 1 hectare (ha) 2.47 acres 1 metric ton (t) 2,204 pounds (lb)
Abbreviations and Acronyms
DLT Directorate of Land Transport DRB Directorate of Roads and Bridges DSP Directorate of Studies and Planning EDF European Development Fund FAC Fonds d'Aide et de Cooperation GSD General Studies Division OCBN Organization Commune Benin-Niger des Chemins de Fer et des Transports STI Services des Techniques Industrielles UNDP United Nations Development Programme USAID United States Agency for International Development FOR OFFCIL Uu ONLY
BENIN
THIRD HIGHWAY PROJECT
CREDIT AND PROJECT SUMMARY
Borrower: People's Republic of Benin
Amount: US$10.0 million in various currencies
Terms: Standard
Project Description: The project would facilitate access to the port of Cotonou by providing for the rehabilitation of a 107 km section of the country's main north-south road axis. The project would also expand the highway maintenance program begun under the two previous highway projects, including the elimination of the backlog of bituminous and laterite roads resurfacing. It would provide technical assistance for highway mainte- nance and for strengthening the country's transport planning and coordination capacity. Finally, it would include some pre-investment studies. The major beneficiaries of vehicle operating cost reductions would be the local truck owners and operators, but cost reductions are expected to be passed on to farmers in the form of higher farmgate prices. About 300,000 people live in the area influenced by the main road and more than one million in the areas served by the other project roads.
Estimated Costs: US$ million equivalent (net of taxes and duties) Local Foreign Total
(i) Rehabilitation of Godomey- Bohicon-Abomey road (107 km) 2.3 8.0 10.3
(ii) Re-surfacing about 195 km of bituminous roads 1.0 4.2 5.2
(iii) Re-graveling about 273 km of laterite roads 0.4 1.4 1.8
(iv) Equipment procurement 0.2 2.2 2.4
(v) Technical assistance and fellowships 0.3 1.0 1.3
(vi) Pre-investment studies 0.1 0.2 0.3
TOTAL 4.3 17.0 21.3
This document hu a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. of which:
Physical Contingencies 0.3 1.2 1.5
Price Contingencies 0.5 2.1 2.6
Financing Plan: US$ million equivalent Local Foreign Total
IDA 1.0 9.0 10.0 Kuwait Fund 0.6 6.4 7.0 The OPEC Fund - 1.6 1.6 Government 2.7 - 2.7
TOTAL 4.3 17.0 21.3
Estimated Disbursement (US$ million) 1978 1979 1980
Annual 3.8 4.3 1.9 Cumulative 3.8 8.1 10.0
Estimated Completion Date: June 30, 1980
Economic Rate of Return: The overall economic rate of return of the project is expected to be about 75 percent.
Appraisal Report: No. 1506-BEN of October, 1977 INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE PEOPLE'S REPUBLIC OF BENIN FOR A THIRD HIGHWAY PROJECT
I submit the following report and recommendation on a proposed development credit to the People's Republic of Benin for the equivalent of US$10.0 million on standard IDA terms to help finance a Third Highway Proj- ect. The project would be co-financed by the Kuwait Fund for Arab Economic Development (US$7.0 million) and The OPEC Special Fund (US$1.6 million).
PART I - THE ECONOMY
1. An economic mission visited Benin recently, from September 19 to October 7, 1977. The following paragraphs are consistent with its main findings and incorporate the conclusions of the 1975 IMF consultation mission report. The Bank's last economic report is dated August 20, 1973. Annex I contains basic country data.
Past Development
2. With a GDP per capita of only US$130, Benin is classified by the UN as one of the world's 29 least developed countries. It is an overwhelmingly rural nation: about 70 percent of the population is dependent on agricul- ture which accounts for 30 percent of GDP and 90 percent of foreign exchange earnings. Insufficient and irregular rainfall limits the production of high value tree crops. Seventy percent of the total agricultural output consists of subsistence low-value root crops (yams and cassava). Palm oil, cotton and groundnuts are the country's major export crops. GDP per capita in the rural sector is very low, averaging about US$50.
3. Transport and commerce are the second most important activities in Benin. The port of Cotonou has traditionally been the door to the sea for landlocked Niger and a transit port for the western part of Nigeria. A sizeable share of the imports of consumer goods (beverages, tobacco, radios, etc.) and exports of agricultural products registered as Benin trade, is in fact unofficial border trade to and from Nigeria. Due to the recent conges- tion of the port of Lagos, the transit function of the Cotonou port has further developed. In 19.76 it is estimated that about half of the port's total traffic (960,000 tons) originated in or was destined for neighboring countries (30 percent to Niger and 20 percent to Nigeria). Transport and commerce generate about one third of Benin's GDP (at factor cost), account for 10 percent of its foreign exchange earnings, and employ about 12,000 persons.
4. The country has an embryonic industrial sector, and the known mineral resources .- limestone and phospha~te - have not yet been exploited. There are plans in the near future to start exploiting the Onigbolo lime- stone deposit. There are also indications of the existence of oil offshore. - 2 -
Political Situation and Recent Economic Development
5. Since independence in 1960, there have been numerous changes of Government, in part due to regional and ideological differences. A major turning point occurred at the end of 1972 when the present military Govern- ment came to power and established a socialist regime which took measures aimed at decreasing foreign influence and increasing the country's self-reli- ance. Nationalization of foreign private interests in key sectors (banking and credit, gasoline distribution, services related to the port and industry) took place and the various technical assistance programs were scaled down. These measures disrupted the economy since there was an inadequate number of Beninese to replace the departing expatriates. The situation was further aggravated by changes in the staffing of public services which resulted in further losses of productivity.
6. The agricultural sector was most seriously affected by these de- velopments. Support services, especially input distribution, deteriorated. Furthermore, the Government's pricing and marketing policies, being mainly guided by the Government's desire to keep the cost of living and the level of salaries low in the urban centers, did not provide enough incentive to the farmers. Production of most cash crops stagnated during 1974-1976 and cotton production dropped sharply from 50,000 tons in 1972/73 to less than 20,000 tons in 1975/76. Maize production was also affected by attempts by the Government to prohibit traditional border trade with Nigeria and by the establishment of a state grain trading monopoly.
7. Farmer incentives have recently been improved. Farmgate prices were increased to generally more satisfactory levels for the 1976/77 season and farm inputs were distributed on time for the first time in four years. But the farmers' response has been limited and preliminary results for the 1976/77 season are not encouraging. Low rainfall may also have contributed to this.
8. In the modern sector, transport and other economic activities have been stimulated by the rapid growth of transit trade with Nigeria. Transport was the only growing sector in Benin over the 1971-75 period. In 1976, the Government took further measures to improve the port's handling capacity which had fallen to a low 12 tons/hour in 1975 as opposed to 23 tons/hour in 1972/73. To attract Nigerian traffic away from the congestion at the Lagos Port, border formalities are being simplified. A project for the expansion of the part facilities has just been appraised. The Government of Nigeria has financed construction of a coastal expressway linking Cotonou with the Nigerian border and is planning to build several other roads linking the western part of Nigeria to the Benin-Niger axis.
9. Public investment in recent years has been at a low level. Total gross investment is estimated to have stagnated at about US$50 million/year over the 1971-75 period (i.e. to a low US$16 per capita compared with US$32 in neighboring Togo and US$89 in the Ivory Coast), while public investment is estimated to have averaged about US$25 million per year, (i.e. also a low - 3 -
US$8 per capita compared to US$27 and US$55 in Togo and the Ivory Coast re- spectively).
10. While the Government has not been successful recently in spurring economic growth, it has maintained a strict financial orthodoxy. The current budget, which was in chronic deficit during the sixties (requiring support from France until 1970), has been in equilibrium since then, even generating a small surplus of about 7 percent of current revenues between 1971 and 1975. This was achieved through an austerity policy of limiting expenditures on materials and freezing civil servants' salaries, which had not been increased for 10 years prior to January of this year. Revenues (in real terms) in- creased very little due to the zero growth of the economy, and recurrent cost financing has been difficult.
11. Benin has succeeded in maintaining the equilibrium of its balance of payments despite the sharp deterioration of its trade balance, the deficit of which increased to US$40 million in 1974/75 (11 percent of GDP). The improvement of the service account, due to increased transit shipments to Nigeria, helped to compensate for this. As of mid-1976, Benin, a member of the West African Monetary Union, held net foreign exchange reserves of $32.6 million, equivalent to 2 months of imports.
12. Recent trends in the agricultural sector have inevitably resulted in a growing gap between the incomes of the urban population and the farmers, some of whom shifted back to subsistence crops. However, the illicit trading of food crops to Nigeria makes it difficult to assess the true cash income of farmers.
Prospects
13. Benin's economic prospects are for modest growth over the next decade, with real GDP expected to rise by 3 to 5 percent per annum. A favor- able indicator is that, with the publication of a development plan for the period 1977-79, serious efforts are being made to relieve the stagnation of recent years. Cooperation with Nigeria has become a major factor for Benin, since Nigeria offers a large neighboring market and access to investment resources. The two countries are already associated in the extension of the Cotonou clinker grinding plant (200,000 tons) to be completed in early 1978. Discussions are also well advanced concerning joint investment in a project to produce 40,000 tons of refined sugar at Save for the Nigerian market; and an expanded cement plant based upon the Onigbolo limestone deposit, producing 500,000 tons per year. The implementation of these projects could consider- ably improve the balance of payments outlook for Benin, given adequate price and marketing guarantees by Nigeria'.
14. The past low level of investment in Benin has been linked to the Government's desire to reorganize economic institutions and to staff them with Benin nationals, prior to embarking on substantial new investments. The recently published plan contains ambitious investment proposals totaling - 4 -
US$1.0 billion over three years, of which three very large undertakings in industry (Save sugar, Onigbolo cement and an oil refinery) with high capital costs, account for half. Local financial resources are likely to remain limited which implies that such a program would need to be largely foreign- financed.
15. Benin's total external debt at the end of 1975 amounted to US$160 million, including undisbursed, or about 40 percent of the country's GDP. External public debt service amounted to about 7 percent of the country's exports in 1975. This burden is not insignificant for Benin, considering its present limited foreign exchange earning potential. In addition, the debt service burden may rise appreciably if the various large-scale projects described above were to materialize within the next several years.
16. Given Benin's extreme poverty, modest development prospects and difficulty in mobilizing domestic resources, foreign donors should continue to provide aid to Benin on the softest possible terms and also to cover a high proportion of local costs. Benin's main sources of foreign assistance are, in addition to the Association, EDF and Canadian, French, Nigerian and US bilateral aid.
PART II - BANK GROUP OPERATIONS IN BENIN
17. To date the Bank Group has extended 7 credits to Benin, totalling US $46.8 million., Three of the credits were for agriculture (28 percent of total lending) and three for highway construction and maintenance (64 per- cent). The seventh operation was an education project with a large rural training component. Annex II contains a summary statement of Bank Group operations in Benin as of August 31, 1977, as well as notes on the execution of ongoing projects.
18. The Hinvi Agricultural Development Project (1969), which provided for the construction of an oil palm mill and maize storage silos as well as for palm plantings and food crop development was IDA's first operation in Benin. The project has been completed satisfactorily although two con- secutive years of drought have retarded the growth of palm trees. Yields are expected to be 20 percent below appraisal estimates because of limited rainfall. The Second Agricultural Credit was the Zou-Borgou Cotton Pro- ject (1972). This operation, co-financed by FAC, aimed at expanding cotton and food crop production in the Zou and Borgou provinces. Due to organizational and managerial problems in the agricultural sector, insuffi- cient producer prices and low rainfall, the project failed to achieve its main objective, resulting in a severe setback to Benin's cotton program. A technical assistance project to help remedy the situation and prepare for a possible follow-up project was recently approved by the Board. It provides financing for the services of six experts, to strengthen the institutions concerned. -5-
19. The Bank Group's involvement in the transport sector in Benin began in 1969, when the Bank acted as Executing Agency for a UNDP "Land Transport Study". This study led to the financing of a four-year highway maintenance project in 1970, which was completed in 1974, followed by a Second Highway Project in 1973. Under the first project the Government Department then responsible for maintenance was re-organized and a training program was carried out. The Second Highway Project, co-financed by USAID, comprises principally the reconstruction of 320 km of the Parakou-Malanville road, Benin's most important North-South trunk road, and the continuation of the road maintenance program. This project was completed in June, 1977 with the help of a supplementary credit of US$9 million approved in March 1976, due to severe cost overruns. The third highway operation, approved May 26, 1977, is a feeder roads project which provides for the construction and maintenance of about 1,270 km of feeder roads and for the preparation of a long term feeder road development program in support of agriculture.
20. The first Education project, which became effective in 1976, provides for the improvement of ongoing rural youth training programs and the construc- tion and equipping of a skills upgrading center in Cotonou. The project also includes a pre-investment study for a follow-up training/education project currently under preparation.
21. In the short term, IDA operations will focus on the development of transport infrastructure including, in addition to the proposed project, a project for the extension of the port of Cotonou, for the preparation of which the Association has already advanced US$500,000 under the Project Preparation Facility. This project will likely involve the participation of seven co- lenders. In the medium term, depending upon the findings of the economic mission, IDA operations will focus on development of rural areas including the oncho-free zones and on education.
PART III - THE TRANSPORT SECTOR
22. Benin's transport system consists of about 7,200 km of roads, 579 km of railways, one deep-water port of about 900,000 tons annual handling capacity and one international airport at Cotonou. The backbone of the system is the "Benin Route" which extends the length of Benin from the Port of Cotonou to landlocked Niger. It comprises 440 km of the Cotonou-Parakou railway and the Parakou-Malanville road (320 km). The Benin Route carries most of Niger's exports and imports, generating about 10 percent of Benin's foreign exchange earnings. Because of Niger's rapidly increasing imports and the congestion in Lagos, Nigeria, transit traffic to these countries has increased considerably over the last two years.
23. Road transport is the predominant mode, carrying about 70 percent of domestic freight and 90 percent of domestic passenger traffic. About 760 km or 10 percent of the road network are paved, and 2,600 km or about one-third of the network are all weather-gravel roads. The remainder of the network (3,800 km) consists of partly improved earth roads and tracks. Statistics on the evolution of the road vehicle fleet for the 1971/76 period are not available but in 1975 12,000 vehicles were regis- tered, reflecting a compound growth rate of 2 percent per annum since 1970.
24. The railway is operated by the Organisation Commune Benin-Niger (OCBN) for the governments of Niger and Benin, and forms a key segment of the "Benin Route." In addition to the main trunk line from Cotonou to Parakou, the railway operates two coastal lines: Cotonou-Segboroue (eastern line, 107 km) and Cotonou-Pobe (western line, 34 km). The Government had originally agreed under Section 4.14 of the First Highway Credit (No. 215-DA) to close these two lines one year after the rehabili- tation of the roads running parallel to them, unless the Government and the Association agreed that increasing traffic dictated otherwise. Postpone- ment of the closure of the western line was deferred until January 1, 1976 on condition that no capital expenditures were made and operation deficits were eliminated. However, the Government, for social reasons, has continued limited service on this line but is not investing in it and the rates cover marginal cost. The Government intends to extend the eastern line to a clinker plant under construction at Onigbolo. OCBN is following a prudent investment policy and revenues are now covering the marginal costs of operations. To reflect this new situation the Government and the Association have agreed to waive the provisions of Section 4.14.
25. The port of Cotonou has now reached its maximum capacity, with the fast growing traffic to Niger and Nigeria, handling about 960,000 tons in 1976. A project to expand port capacity has just been appraised by the Association and representatives from several co-financiers.
26. The international airport of Cotonou is used by the major carriers in the region. Interior air transport is not very significant being limited to four flights a week to Parakou, with the possibility of charter to other destinations. There are plans to relocate the Cotonou airport and to modernize the one at Parakou, but considering the high cost of these projects and the lack of financing, they are unlikely to materia- lize in the near future.
Transport Coordination
27. In the past, the Ministry of Transport was responsible for overall transport planning and coordination through the Directorate of Land Trans- port which, for lack of qualified personnel and inadequate funding, has never played its intended role. OCBN has been the de facto land transport coordi- nator. With the expected completion of construction in the early 1980's of a bituminous road running parallel to the OCBN railroad over its entire length, transport coordination will become a more important issue. The Government has decided that the newly created Directorate of Studies and Planning (DSP) in the Ministry of Transports would henceforth be responsible for overall trans- port coordination and planning and would assist in the formulation of transport policy. The proposed project would provide for technical assistance to strengthen DSP's transport planning and coordination functions. In parallel the Government has also agreed that DRB would employ appropriate statistical procedures for its economic analysis of the country's road network (Development Credit Agreement, Section 4.02 (a)).
Transport Investments
28. Data on transport investments and their financing are hard to obtain because of the lack of a central transport planning and data collec- tion unit. The available data show that transport investments, excluding railways, amounted to US$37 million equivalent in 1970/75. The highway subsector continues to absorb the major portion, although during the 1976/80 period port investments are expected to rival road investments because of the planned expansion of the port of Cotonou. Transport investments are financed mainly from abroad. Besides IDA, major contributors have been Nigeria, EDF, USAID and CCCE. The Fonds d'Aide et de Cooperation (France) is almost the exclusive source of foreign financing in the air transport subsector.
Road Transport Industry
29. The road transport industry in Benin consists of about 350 small operators with an average of less than four trucks each. Many truckers work most of the year on contract to OCBN for transit traffic to Niger. To handle the growing transit traffic with Nigeria, a national transport company, TRANSBENIN, with private and state participation was recently created. For the national traffic, the Government has set up state owned trucking companies in each region, and has made available to them $3.0 million for the purchase of trucks. The creation of new companies by the Government, if not coor- dinated and properly planned, may lead to over-capacity in the trucking industry. The Government has agreed that DSP would study the size, components and expansion prospects of the transport industry, and make recommendations to maintain the balance between supply and demand in the industry (Development Credit Agreement, Section 4.02(b)).
Highway Administration
30. The Directorate of Roads and Bridges (DRB) of the Ministry of Equipment is responsible for the construction and maintenance of 4,900 km of roads. The remaining 2,300 km of unclassified feeder roads and tracks are the responsibility of the Ministry of Interior and local authorities. Technical work is carried out by DRB's Studies and New Works Service, its Highway Maintenance Coordination Service and the central mechanical work- shops in Cotonou and Parakou. At the regional level DRB is represented by three district offices and ten subdivisions. DRB's operations were re- organized under the two previous highway projects and its highway maintenance capacity has been strengthened. Further technical assistance and additional staff training would be provided under the proposed project. Under a feeder road project which was recently approved by the Board, it was agreed that a specialized division for feeder roads construction and maintenance would be established in the Ministry of Equipment. -8-
31. Major design works and supervision of construction are performed by foreign consultants under the supervision of DRB. Feeder roads construc- tion is carried out by force account. There are no domestic consultants yet, but the Government intends to strengthen the Studies and New Works Service in the Ministry of Equipment which could become the nucleus of a small state consulting firm.
32. Routine maintenance of the highway network is carried out by DRB's subdivisions and the Ministry of Interior and local authorities for feeder roads. The Government has recently launched a campaign to encourage volun- tary participation of the urban and rural population in road maintenance work. Road maintenance has improved considerably, both qualitatively and quantitatively. Under the First Highway Project (1971), maintenance program- ming and budgeting techniques were introduced. A central equipment mainten- ance division was created and training in equipment maintenance was begun. Two years after the start of the project, routine maintenance interventions had been made over more than 80 percent of the network under DRB's respon- sibility. Under the Second Highway Project (1973), further improvements included the planning of routine and periodic maintenance of laterite roads and proper servicing of highway equipment. Under the proposed project, the program for improvement of maintenance for laterite roads would be continued and expanded to include bituminous roads. Despite this progress, the mainten- ance program still suffers from financial and technical shortcomings which the proposed project tries to address.
Road Development and Financing
33. Road expenditures almost tripled between 1970 and 1975 from US$4 million to US$11 million, and more than doubled (US$24 million) in 1976 with the construction of a coastal link with Lagos and the Parakou Malanville road. On the other hand, road maintenance expenditures have declined from US $400 per km of major road in 1972 to an average of US $340 during the period 1973-75, at a time when costs rose considerably.
34. Over the next three years, Benin's development plan calls for allocating about 10-15 percent of total public investment to highway infra- structure, averaging some US$30 million per year. These investments will include a new bridge at Cotonou to replace the existing one (US$10 million), and the paving of the first segment of the Bohicon-Parakou road (US$17 mil- lion) and other works. The Government's commitments for counterpart funds for these road projects will total about $2.5 million per year until 1979. Ideally, the Government should allocate something like $5.0 million per year to maintaining the present road network. But this target is unrealistic in the short to medium term in the light of the commitments for road construction and the other constraints on the availability of government resources for this type of expenditure. The Government and the Association have therefore agreed on an annual budget allocation for highway maintenance increasing from US $3.0 million in 1978 to US $3.7 million in 1980. Thereafter, the Government has agreed to maintain or adjust its road maintenance alloca- tions as shall be necessary to meet road maintenance requirements (Development - 9 -
Credit Agreement Section 4.04 (b)). This increasing funding level could come from higher budgetary contributions, or increases in fuel or road user taxes. It is understood that all these options would be considered and discussed with the Association.
PART IV - THE PROJECT
35. A report entitled "Appraisal of a Third Highway Project" - People's Republic of Benin (N 1506-BEN) and dated October 25, 1977 is being circulated separately. The proposed project evolved from the Dahomey Land Transport Survey of 1969 which was financed by UNDP with the Bank acting as executing agency. An appraisal mission visited Benin in July and again in December 1976. Negotiations were held in Washington in August 1977. The Beninese delegation was led by Lieutenant-Colonel Richard Rodriguez, Minister of Equipment.
Project Description
36. The proposed project would comprise:
(a) rehabilitation of the Godomey-Bohicon-Abomey road (107 km), including detailed engineering and super- vision of construction;
(b) resurfacing of about 195 km of bituminous roads;
(c) resurfacing of about 273 km of laterite roads;
(d) strengthening of the ongoing routine maintenance program through the purchase of equipment and spare parts.
(e) technical assistance and fellowships to the DRB in the Ministry of Equipment for the preparation of the maintenance elements of the project, for staff training and strengthening of road maintenance planning, and for assistance to the DSP in the Ministry of Transport; and
(f) preinvestment-study of the Ouidah-Allada road (40 km).
Implementation is scheduled to start at the beginning of 1978 and to be com- pleted by 1980.
37. The Godomey-Bohicon road is a part of the main north-south artery originally constructed between 1961 and 1966 as a low standard one lane road. The road, which carries between 500 and 1,200 vehicles per day, has now badly deteriorated. It would receive a double 'surface treatment and drainage struc- tures would be rehabilitated. - 10 -
38. The bituminous and laterite roads resurfacing programs would help eliminate a substantial maintenance backlog. The roads selected for resur- facing have been in service over six years or more and have never received a surface treatment or a new laterite layer.
39. The use of equipment procured under the two previous highway proj- ects was significantly curtailed by the lack of spare parts and repair facil- ities. Under the proposed project, the stock of spare parts of the central mechanical workshops in Cotonou and Parakou would be increased from 3 percent to 12 percent of the replacement value of the equipment, and some additional essential pieces of equipment would also be procured. The Government has agreed to ensure that an adequate stock accounting system, acceptable to the Association, is established for the workshops by December 1979 (Development Credit Agreement, Section 4.05).
40. Technical assistance to the Ministry of Equipment would consist of the provision of 55 man-months of services by two highway engineers and a mechanical expert to assist the DRB, including planning and monitoring re- current and periodic maintenance operations and preparing a comprehensive program for staff training. Technical assistance to the Ministry of Transport would consist of the provision of 30 man-months of the services of transport specialists (an economist and an engineer) to help reorganize the Directorate of Studies and Planning and to widen the scope of its activities to include data collection, coordination of all modes of transport, and formulation of transport policy. All consultants would be selected in agreement with the Association (Development Credit Agreement, Sections 3.02 and 3.03).
41. A pre-investment study would be undertaken of the Ouidah-Allada road which is expected to carry about 200 vehicles per day. Maintenance costs are high on this road and the Government proposes improving it to paved standards. Terms of reference for this study have been agreed with the Government.
Implementation
42. The Directorate of Roads and Bridges of the Ministry of Equipment would be responsible for the execution of the project, except for the tech- nical assistance for the Directorate of Studies and Planning which would be the responsibility of the Ministry of Transport. The Government would appoint an agent who would be in charge of monitoring the project and making quarterly reports to the Association (Development Credit Agreement, Section 3.08). Particular emphasis would be given to the appointment and training of counter- part staff (Development Credit Agreement, Section 3.04).
Project Costs and Financing
43. The total cost of the project, excluding taxes and duties, is estimated at US$21.3 million, including contingencies. The foreign exchange component would be about US$17 million (80 percent). Cost estimates are based on mid-1977 prices. The Kuwait Fund ($7.0 million) and The OPEC Special - 11 -
Fund (US$1.6 million) are expected to provide parallel financing for the Godomey-Bohicon-Abomey road (total cost US$10.3 million), with the Government contributing the balance (US$1.7 million). The remaining elements of the Project would be financed by an IDA contribution of US$10.0 million, equi- valent to 47 percent of total project costs, or 90 percent of the costs of the project elements financed. The balance of 10 percent (ie $1.0 million) would be financed by the Government. The IDA Credit would cover US$9 million in foreign exchange costs and US$1.0 million in local costs. Government contri- bution to total project financing would be US$2.7 million or 13 percent of total project costs.
Procurement
44. The bituminous road maintenance work would be divided into several operations. Shoulder clearing and drainage rehabilitation (US$1.0 million) would be executed by force account. Road patching operations (US$0.2 mil- lion) would also be carried out by force account by a special unit to be set up in DRB. The application of a single or double surface treatment on about 195 km of road (US$3.9 million) would be executed by contractors selected on the basis of international competitive bidding in accordance with Bank Group guidelines. The resurfacing would be done after completion of the force account works on individual road sections and in accordance with a work schedule agreed upon by the Government and the Association (Development Credit Agreement Section 4.06). Resurfacing of 273 km of laterite roads (US$1.9 million) would be carried out by force account by two road maintenance brigades to be reactivated under the proposed project. The bulk of equipment and spare parts for the resurfacing brigades and work- shops (about US$2.4 million) would be procured on the basis of international competitive bidding and in accordance with Bank Group guidelines. In bid evaluation due consideration would be given to matching new with existing equipment and to the after-sale servicing offered. Procurement of items costing less than US$50,000 for the construction of DSP's office space in Cotonou and for spare parts up to a maximum of $100,000 may be done on the basis of competitive bidding advertised locally in accordance with procedures acceptable to the Association. Items costiag under US$10,000, including office furniture and equipment, small tools, etc., may be procured on the basis of quotations obtained locally; the total amount of such purchases should not exceed US$200,000. Disbursements for force account work would be against certificates of expenditures with supporting documentation retained by the executing agency and made available to supervision missions. Consultants for the technical assistance program and for the pre-investment studies would be selected following Bank Group guidelines. The billing rate for consultant services is estimated to average US $6,500 per field man-month including salaries, overheads-and fees. Reimbursable expenses payable to consultants are estimated to average US $2,500 per field man-month. Procurement for civil works for the rehabilitation of the Godomey-Bohicon-Abomey road would be done in accordance with the procedures of the financing agencies concerned. - 12 -
Disbursement
45. The IDA credit would be disbursed to cover:
(i) 92 percent of total expenditures for resurfacing of bituminous and laterite roads;
(ii) 100 percent of foreign expenditures and 90 percent of local expenditures for equipment, spare parts and materials for the maintenance program; and
(iii) 90 percent of total expenditures for technical assistance, fellowships and consultant services.
Disbursements would include about US$300,000 in retroactive financing for consultant services for detailed engineering of the Godomey-Bohicon-Abomey road and preparation of the maintenance elements of the proposed project. In view of Benin's present poor liquidity situation and in order to avoid delays in project implementation, it is proposed that IDA make an advance payment of US$250,000 to the Government as part of the Association's contri- bution to project financing. These funds would be deposited in a special account and disbursed against eligible expenditures under terms and condi- tions satisfactory to the Association.
Justification and Benefits
46. The first objective of the proposed project would be to preserve and rehabilitate the most trafficked south-north road in the country. The second objective would be to eliminate the backlog of periodic maintenance on bituminous and laterite roads. A third objective would be for further overall improvement of the ongoing routine maintenance effort.
47. The rehabilitation of the Godomey-Bohicon-Abomey road, the main- tenance of the bituminous roads and the maintenance of the laterite roads have been analyzed separately, giving on the basis of savings in transport costs only the following economic rates of return: 35, 155 and 54 percent respectively. These rates are high but not unusual for maintenance projects, in which relatively modest outlays enable the recouping of substantial and otherwise foregone transport benefits accruing to an existing facility. The overall economic rate of return on these three project components is expected to be about 75 percent. The economic rate of return is only moderately sensitive to variations in costs and/or benefits.
48. The major beneficiaries of vehicle operating cost reductions would be the local truck owners and operators, but cost reductions are expected to be passed on to farmers in the form of higher farmgate prices. About 300,000 people live in the area influenced by the Godomey-Abomey road and more than one million (or one-third of the country's total population), in the areas served by the other project roads.
49. The technical assistance aspects of the project would also contri- bute to the institution building effort in sectoral management which was initiated under the First Highway Project. The aim is to develop the capacity - 13 -
of the DRB in the Ministry of Equipment and the DSP in the Ministry of Trans- port to plan and carry out highway maintenance programs, to evaluate and coordinate transport investment proposals and to formulate sound policies.
50. There are no special risks attached to the construction of the Godomey-Bohicon road. For the maintenance element the main risk is that the work would be impeded either by further difficulties in the timely provision of adequate funds to the Road Maintenance Fund, or by frequent changes in personnel. There is little risk that the benefits would accrue when the work is done.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
51. The draft Development Credit Agreement between the People's Republic of Benin and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the draft resolution approving the proposed Develop- ment Credit, are being distributed separately to the Executive Directors.
52. The following events are specified as additional conditions of effectiveness: that all the conditions of effectiveness of the Kuwait Fund Loan Agreement and of The OPEC Fund Loan Agreement, with the exception of the effectiveness of the Development Credit Agreement, have been fulfilled; and that the Special Account shall have been opened as provided in Section 2.02 (b) of the Development Credit Agreement. Features of the draft Devel- opment Credit Agreement of special interest are referred to in Section III of Annex III.
53. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association.
PART VI - RECOMMENDATIONS
54. I recommend that the Executive Directors approve the proposed Credit.
Robert S. McNamara President
October 21, 1977 Attachments
ANNEX I TABLE 3A Page 1 of 4 pages BENIN - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ------…------___---- BENIN REFERENCE COUNTRIES (1970) TOTAL 3280.5 MOST RECENT AGRIC. 33.9 1960 1970 ESTIMATE TOGO LIBERIA IVORY COAST**
GNP PER CAPITA (USS) 70.0* 100.0* 130.0*/a 170.0* 280.0* 350.0
POPULATION AND VITAL STATISTICS ______POPULATION (MID-YR. MILLION) 2.1 2.7 3.2/a 2.0 .1.3 5.4
POPULATION DENSITY PER SQUARE KM. 19.0 24.0 28.0/a 36.0 12.0 17.0 PER SQ. KM. AGRICULTURAL LAND 62.0 80.0 94.0/a 81.0 215.0 32.0
VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 51.4 50.6 49.9 51.0 42.8 46.1 CRUDE DEATH RATE (/THOU.AV) 31.5 26.6 23.0 26.6 23.5 23.3 INFANT MORTALITY RATE (/THOU) 1100./b d ...... 137. 3 LIFE EXPECTANCY AT BIRTH (YRS) 3 4 .*3 8.5 41.8 38.5 41.0 41.0 GROSS REPRODUCTION RATE 3.3 3.3 3.3 3.3 2.6 3.1
POPULATION GROWTH RATE (3) TOTAL 3.1 2.8 2.7 2.7 3.3/e 3.4/e URBAN *- 6.0 5.9/b 6.0 .. 8.77a
URBAN POPULATION (% OF TOTAL) 9.3 .. 13.1 13.0 26.2 28.0
AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 46.0 44.9 45.4 45.0 40.7 42.5 tS TO 64 YEARS 50.2 52.6 52.1 52.0 56.0 54.8 65 YEARS AND OVER 3.8 2.5 2.5 3.0 3.3 2.7 AGE DEPENDENCY RATIO 1.0 0.9 0.9 0.9 0.8 0.8 ECONOMIC DEPENDENCY RATIO 0.9/f 1.0/a 1.0/c 1.3/a 1.0/a 0.9/b
FAMILY PLANNING ACCEPTORS (CUMULATIVE. THOU) ...... USERS (%OF MARRIED WOMEN) ...... EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 1100.0 1300.0 1500o0 720.0 580.0 2600.0 LABOR FORCE IN AGRICULTURE (%) 55.0 52.0 *- 78.0 72.0 82.0 UNEMPLOYED (%OF LABOR FORCE) ...... 20.0/b 6.0 INCOME DISTRIBUTION % OF PRIVATE INCOME REC'D BY- HIGHEST 5% OF HOUSEHOLDS 31.4/c ...... 61.7/c HIGHEST 20% OF HOUSEHOLDS 51.77- .. .. 72.67E. LOWEST 20% OF HOUSEHOLDS 5.57c *- *- *- 5.37E LOwEST 40% OF HOUSEHOLDS 15.87E .. *- *' 10.97E* DISTRIBUTION OF LAND OWNERSHIP ______% OWNED BY TOP 10% OF OWNERS ...... % OWNED BY SMALLEST 10% OWNERS ...... HEALTH AND NUTRITION POPULATION PER PHYSICIAN .. 29260.0 36000.0/d 28140.0 10450.0 15320.0 POPULATION PER NURSING PERSON .. 2440.0 2560.07w 4200.0 4140.0 3130.0/c POPULATION PER HOSPITAL BED .. 870.0/b 880.01B 820.0/b 530.0 850.0ft
PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 96.0 98.0 98.0 94.0 88.0 108.0 PROTEIN (GRAMS PER DAY) 54.0 55.0 56.0 51.0 36.0 60.0 -OF WHICH ANIMAL AND PULSE .. 18.0/c .. 19.0/c 10.0/d 18.0/d DEATH RATE (/THOU) AGES 1-4 45.0/d .. .. . EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 26.0 40.0 43.0 76.0 53.0 76.0 SECONDARY SCHOOL 2.0 5.0 11.0 11.0 9.0 11.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 13.0 13.0 13.0 13.0 12.0 13.0 VOCATIONAL ENROLLMENT (X OF SECONDARY) 13.0 4.0 2.0 10.0 5.0 7.0 ADULT LITERACY RATE (%) 20.0/e ...... 15.0 20.0 HOUSING PERSONS PER ROOM (URBAN) OCCUPIED DWELLINGS WITHOUT PIPED WATER (%) ...... * ACCESS TO ELECTRICITY (X OF ALL DWELLINGS) ...... * RURAL DWELLINGS CONNECTED TO ELECTRICITY (%X *- *- *- CONSUMPTION RADIO RECEIVERS (PER THOU POP) 13.0 32.0 52.0 22.0 132.0 17.0 PASSENGER CARS (PER THOU POP) 1.0 4.0 5.0 4.0 11.0 10.0 ELECTRICITY (KWH/YR PER CAP) 5.0 12.0 18.0 33.0 330.0 120.0 NEWSPRINT (KG/YR PER CAP) ...... *- 0.1 0.2 ______-- …__-… ------…-----…-- --- SEE NOTES AND DEFINITIONS ON REVERSE zi
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s7 ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1975 ANNUAL RATE OF GROWTH (%. current prices) US$ Mln. X of GDP 1970 -75 GDP at Market Prices 420.6 100.0 8.0% Gross Domestic Investment 59.3 14.1 3.3% Gross Domestic Saving 12.6 3.0 -17.4% Current Account Balance -50.0 -11.9 -20.0% Exports of Goods, NFS 127.6 30.3 5.8% Imports of Goods, NFS 174.3 42.2 8.8% OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1975 Value Added Labor Force1/ V. A. Per Worker US$ Mln. Mln. Agriculture 129.5 34.7 Manufacturing 36.6 9.8 Government 62.7 16.8 Unallocated 145.0 38.7 GDP at factor cost 373.8 100.0 1.4 lOO.O 100.0 GOVERNMENT FINANCE General Government Central Government Mmn.) of ODP (CFA? Bln.) of ODP 175197 197075 1975 1975 19717 75 Current Receipts 15.7 17.4 17.9 Current Expenditure 15.0 16.7 16.6 Current Surplus -05.7 --. J8 1.3 Capital Expenditures 5.1 '5.7 5.4 External Debt Disbursements 3.9 4.3 4.5 (gross) MONEY, CREDIT and PRICES 1971 1972 1973 1974 1975 1976 *T-illion CFAFoutstanding end periodT Money and Quasi Money 12.26 13.89 14.79 18.45 31.86 30.63 Bank credit to Public Sector -0.82 -0.51 -1.16 -2.42 -2.95 -2.30 Bank Credit to Private Sector 8.53 10.41 12.73 16.45 32.45 32.10 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 18.4 20.2 20.3 23.6 35.4 31.2 General Price Index (1969 - 100) .. .. 117.3 130.9 144.0 . Annual percentage changes ins General Price Index ...... 19.3 Bank credit to Public Sector . . . Bank credit to Private Sector 15.3 22.0 22.3 29.2 97.3 1.1 NOTES All conversions to dollars in this table are at the exchange rates noted on the following page. I Total labor force in 1974. 2/ February 1975 not available not applicable ANNEX I Page 4 of 4 TRADE, PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS 1970 1973 1975 1976 (US $ million) MERCHANDISE EXPORTS (AVERAGE 1971-74, RECORDED Exports of Goods, NFS 74.1 115.8 127.6 US $ million % Imports of Goods, NFS 94.1 159.3 177. 6 Cotton 10.7 27.4 ~~J_- ~~~~~Cocoa Beans 8.2 21.0 Resource Gap (deficit = -) -20.0 -43.5 -50.0 Palm Products 6.8 17.4 Interest Payments (net) -2.9 0.2 0.5 All other commodities 3.4 34.3 Workers' Remittances TOTAL 9.1 100.0 Other Factor Payments (net) 13.0 16.7 21.0 Net Transfers 1_ Balance on Current Account -9.9 -26.6 -28.5 EXTERNAL DEBT, December 31, 1975 Direct Foreign Investment 6.8 3.4 US$ million Net M1T Borrowing 0.3 11.1 Public debt (disbursed), incl. guaranteed 93.7 Disbursements Non-guaranteed private debt Amortization _ Total outstanding and disbursed Subtotal Investment, Borrowing 7.1 14.5 10.3 Capital Grants!/ 8.6 9.2 11.2 Other Capital (net) 1.7 0.0 DEBT SERVICE RATIO FOR 1975 3/ Other items n.e.i. -0.6 -3.0 _ Increase in Reserves (+) 6.9 -5.9 -7.0 .. Public debt (disbursed), incl. guaranteed 7.0 Go2/ er (der2. 38 Non-guaranteed private debt Gross Reserves (end year) 20.6 39.4 73.8 79.46' Total outstanding and disbursed Net Reserves (end year) 14.4 20.0 23.7 32.6-2/ (1971) (1974) Petroleum Imports 2.8 6.4 8.6 .. IBRD/IDA LENDING, August 31, 1977 as Y of Pecorded Imports 3.7 5.7 5.9 .. IBRD IDA (US $ million) EXCHANGE RATES (CFAF per US $) Outstanding and disbursed 0.0 32,2 Undisbursed 0.0 16.6 Year Period Average End of Period Outstanding incl. undisbursed 0.0 46.8 1970 278 278 1971 278 256 1972 252 256 1973 223 230 1974 241 222 1975 214 224 1976 239 248.5 2Q 1976 . 237 1/ Includes 50% of net foreign government transfers under current transfers and 50% under capital grants. 2/ End June, 1976. 3/ Preliminary estimate of ratio of debt service to exporfs of goods and non-factor services. July 26, 1977 ANNEX II Page 1 of 3 pages THE STATUS OF BANK GROUP OPERATIONS IN BENIN A. STATEMENT OF IDA CREDITS (as of August 31, 1977) Credit /1 Number Year Borrower Purpose Amount Undisbursed (US$ million) 144-DA 1969 Dahomey Oil Palm 5.2 /2 0.0 /4 215-DA 1970 Dahomey Road Maintenance 3.5 - 307-DA 1972 Dahomey Cotton 6.1 0.0 /5 415-DA 1973 Dahomey Roads 20.8 /3 5.5 583-DA 1975 Dahomey Rural Education and Training 4.0 3.9 716-BEN /6 1977 Benin Technical Assist. 1.7 1.7 717-BEN /6 1977 Benin Feeder Roads 5.5 5.5 TOTAL 46.8 16.6 of which has been repaid 0.0 TOTAL now outstanding 46.8 TOTAL now held by IDA 46.8 TOTAL undisbursed 16.6 /1 Prior to Exchange Adjustment. /2 Including a Supplementary Credit of $.6 million made in 1974. /3 Including a Supplementary Credit of $9 million made in 1976. /4 Balance $24,448.00. /5 BALANCE $29,229.79. /6 Not yet effective. ANNEX II Page 2 of 3 pages B. Projects in Execution 1/ Credit No. 307 Zou-Borgou Cotton Project; US$6.1 million Credit of May 24, 1972; Closing Date: September 30, 1975 The Project was to comprise the provision of staff and equipment to the National Agricultural Society for Cotton (SONACO) to administer agri- cultural extension, credit and primary marketing services; the establishment of a revolving fund to supply credit to cotton growers; construction of two cotton ginneries; rehabilitation of 620 km of feeder roads; applied research; and a feasibility study for agricultural diversification in the project area. The project initially reached appraisal production estimates (42,000 tons of cotton in 1973), but production has fallen considerably in the past three years (17,600 tons in 1975/76). This was due to a combination of deficien- cies in project management, input supply and extension services, unfavorable Government pricing policy and unfavorable climatic conditions. Since cotton production never reached the expected level, only one ginnery was built in- stead of two as provided under the credit. The other components of the proj- ect were implemented more successfully, although because of cost overruns, the feeder roads construction program had to be reduced from 620 km to 425 km. A non quantifiable but important benefit of the project has been the organi- zation of effective farmers groups which have demonstrated their ability to handle primary cotton marketing, to organize the distribution of farm inputs, to market household items and to invest their savings in rural community dev- elopment (schools, wells, dispensaries). The project has also been successful in expanding production of rice and hybrid maize and introducing ox-drawn cultivation. Credit No. 415 Second Highway Project; US$11.8 million Credit of July 3, 1973; Closing Date: December 31, 1977 Due to inflation and currency realignments, project cost estimates increased to US$23.2 million or 77 percent above the original cost estimates. The Association provided a supplementary credit of US$9.0 million on March 10, 1976, which became effective on October 5, 1976. All contracts for improve- ment of the southern section (151 km) of the Parakou-Malanville road and two sections (20 km) of the Godomey-Bohicon road, as well as for consultants' ser- vices for supervision of construction and for technical assistance have been awarded. Construction of the Southern section of the Parakou-Malanville road was successfully completed in June 1977. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any prob- lems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 of 3 pages Credit No. 583 Rural Education and Training Project; US$4.0 million Credit of September 5, 1975; Closing Date: June 30, 1981 This project consists of two main components: (i) buildings and equipment for a skills upgrading center in Cotonou; and (ii) technical assis- tance, buildings and equipment for an ongoing rural youth training program. The project is proceeding well, about on schedule despite some delays in declaring the credit effective. Bids for buildings and equipment have been called. Tenders are expected to be returned by June 1977. The technical assistance team is being recruited. The chief of the skills upgrading cen- ter has taken post and the one for the rural youth training program will do the same in December, 1977. Credit No. 717 Feeder Roads Project; US$5.5 million Credit of May 30, 1977; Closing Date: September 30, 1981 This project consists of a 3-year program for the improvement and subsequent maintenance of about 1,270 km of feeder roads, the purchase of highway maintenance equipment and spare parts, and technical assistance to the Ministry of Equipment. This project is not yet effective. Credit No. 716 Technical Assistance Project US$1.7 million Credit of May 30. 1977; Closing Date: June 30, 1980 This project which is of an interim nature is designed to prepare the way for a regional development project. It would be carried out over two years and would include mainly provision for technical assistance to SONAGRI, the project's executing agency, in financial management and project preparation and evaluation, procurement of trucks and staff vehicles, pro- vision of consultant services to make investment proposals for areas to be cleared of onchocerciasis, and in adaptive research in cotton and foodcrops. This project is not yet effective. ANNEX III Page 1 of 2 pages Section I Timetable of Key Events A. Proiect Identification (i) RMWA identification mission March/May 1974 (ii) Consultants Lamarre-Valois under the Second Highway Project July 1975 B. Pre-Appraisal Mission - May, 1976 C. Appraisal Mission Departure - June 29, 1976 D. Negotiations Completed - August, 1977 E. Loan Effectiveness Planned - February, 1978 Section II Special Bank Implementation Actions Special Bank activities in implementing the project are to assist the Government in the review of consultants' proposals for technical assis- tance to DRB and DSP. Section III Special Conditions (i) Conditions of effectiveness (a) all the conditions of effectiveness of the Kuwait Fund Agreement and of The OPEC Fund Loan Agreement, with the ex- ception of the effectiveness of the Development Credit Agreement, have been fulfilled; and (b) the Special Account for the purpose of prefinancing project expenditures has been opened. ANNEX III Page 2 of 2 pages (ii) Other special conditions A summary of other special conditions included in the Credit Agree- ment are that the Government shall: (a) cause DRB to collect and record such data as required for the proper planning of maintenance improvements (para. 28); (b) cause DSP to study the size, components and expansion prospects of public and private transport in Benin and make recommendations to maintain the balance between demand and supply in the road transport industry (para. 30); (c) increase its Road Maintenance Fund at specified levels for each year until 1980 and thereafter to maintain or adjust these levels as shall be necessary to meet road maintenance requirements (para. 35); (d) cause an adequate stock accounting systems to be introduced by the central workshops by December 1979 (para. 40); (e) select consultants for technical assistance in agreement with, and on terms and conditions acceptable to, the Association (para. 41); and (f) award contracts for the resurfacing of bituminous roads only after completion of the required field work by DRB (para. 45). 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