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Document of The World Bank IE L W FOR OFFI('IAL USE ONLY Public Disclosure Authorized Report No. 2290-SE Public Disclosure Authorized SENEGAL STAFF APFPRAISAL REPORT SECOND AVIATION PROJECT Public Disclosure Authorized February 2, 1979 Public Disclosure Authorized Western Africa Projects Department Ports, Railways, & Aviation Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS Currency Unit: - CFA Francs (CFAF) US$1.00 - CFAF 220 CFAF 1 million. - US$4,545 FISCAL YEAR Government (Borrower) July 1 - June 30 ASECNA January 1 - December 31 SYSTEM OF WEIGHTS AND MEASURES: Metric 1 meter (m) 2 3.28 feet (ft) I square meter (5 ) 10.8 square feet (sq.) 1 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.) I hectare (ha) 2.47 acres 1 metric ton (t) 2,204 pounds (lb) ABBREVIATIONS AND ACRONYMS ASECNA - Agence pour la Securite de la Navigation Aerienne en Afrique et a Madagascar DAC - Directorate of Civil Aviation Dakar Airport - Dakar-Yoff International Airport DSP - Directorate of Studies and Programming GDP - Gross Domestic Product ME - Ministry of Equipment VASIS - Visual Approach Slope Indicator System VOR - Very High Frequency Omni-Range FOR OFFICIAL USE ONLY SENEGAL STAFF APPRAISAL REPORT SECOND AVIATIONF PROJECT Table of Contents Page No. I. THE TRANSPORT SECTOR ................................... 1 A. Economic Setting ............................. 1 B. The Transport System .......................... .1 C. Transport Planning and Coordination .............. 2 D. Bank Assistance to the Transport Sector .......... 3 II. THE AVIATION SUBSECTOR ............................... 4 A. Organization .............................. , 4 B. Air Services .............................. , 4 C. Past Traffic .............................., 6 D. Traffic Forecast .............................., 66. Tables: 2.1 Traffic at Ziguinchor and Cap Skirring Airports in 1977 2.2 Air Traffic at Dakar AiLrport 1971-1977 III. THE EXECUTING AGENCY ..... .. ..................... 11 A. Background ..................... 11 B. Organization .................... 11 C. Budgeting, Accounting and Auditing . ...............12 IV. THE PROPOSED PROJECT .. 13 A. Project Objectives . 13 B. Project Description . 14 C. Cost Estimate ., 15 D. The Borrower . 16 E. Implementation . 16 F. Procurement ....................................... 17 G. Financing and Disbursement ........................ 17 H. Project Monitoring ................................ 18 This report has been prepared by Messrs.. K. Ewing (Engineer), H. Levy (Economist), and P. Levy and R. Venkateswaran (Financial Analysts) based on an appraisal mission in July 1978. This documenthas a restricteddistribution and maybe usedby recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. TABLE OF CONTENTS (Continued) Page No. V. ECONOMIC EVALUATION .................................... 19 A. Investment Objective ..... ........................19 B. Investment Alternatives .......................... 19 C. Benefits .........................................20 D. Rate of Return ................ .. ................. 21 E. Sensitivity and Riisks ............................ 22 VI. FINANCIAL EVALUATION ................. ................. 23 A. Background ..............................................23 B. ASECNA's Past and Present Finances Articles 10/12 Accounts...................... 24 C. Financial Objectives .............................. 27 D. Future Financial Position ........................ 28 E. Risk Analysis .................. ..... 32 Tables 6.01 Consolidated Income Account, 1973-78 6.02 Actual and Forecast Income Account Dakar Airport 6.03 Actual and Forecast Income Account Other Airports 6.04 Consolidated Actual and Forecast Income Account 6.05 Historic Source and Application of Funds Statement Articles 10/12 Accounts 6.06 Historic and Projected Pro Forma Balance Sheet Article 10 6.07 Determination of Annual Increases in Landing Fees (Article 10) 6.08 Passenger Revenues (Article 10) 6.09 Variation of F'ixedAsset and Depreciation Accounts, Dakar Airport 6.10 Variation of F'ixed Asset and Depreciation Accounts Other Airports 6.11 Projected Source and Application of Funds Statement Dakar Airport Account 6.12 Projected Source and Application of Funds Statement Other Airports 6.13 Projected Source and Application of Funds Statement Consolidated Account All Airports 6.14 Source and Application of Funds under Financial Risk Analysis (Article 10) VII. AGREEMENTS REACHED AND RECOMMENDATION .... ...............33 ANNEXES Annex 1 Detailed Description of Project ............... 50 Annex 2 Assumptions Used in Financial Projections ..... 53 Annex 3 The Financial Outlook for Operations of Minor Airports ................................ 55 Annex 4 Related Documents and Data Available in Project File ............................... 58 MAPS SENEGAL SECOND AVIATION PROJECT STAFF APPRAISAL REPORT I. THE TRANSPORT SECTOR A. Economic Setting 1.01 Senegal is located along t?e Atlantic Ocean on the western tip of West Africa. Most of its 196,000km are in the Sudan-Sahelregion and the climate is typical of the area: a long dry season (up to nine months in the north) and a season with limited rainfall, which is subject to considerable annual fluctuation,particularly in the north and the center. Senegal's predominantlyrural populationis about 5.0 million and growing at an annual rate of 2.7%. About 70% of the people live in villages of less than 10,000 inhabitants. 1.02 Between 1970 and 1974, the country's gross domestic product (GDP) grew at an average annual rate of 1.9%, and in 1977 per capita income was about US$420. While about 80% of Senegal's labor force is employed in agri- culture, this sector generates only about 25% of GDP because of poor soils and low rainfall, compoundedby severe cyclical droughts, the last one having occurred in 1977-78. The principal crops are groundnuts,mainly for export, and millet for domestic consumption. Senegal's economic growth is hampered by a scarcity of natural resources. The main mineral resource is phosphate rock, the price of which is depressed by a world market slump. Tourism is the country's third largest earner of foreign exchange after groundnutsand phosphate. A pleasant climate most of the year and good beaches on the Atlantic Ocean south of the Cap Vert peninsula are attractinga growing number of European tourists. 1.03 An important component of the country's GNP has been the services provided by Dakar, the national capital and former capital of French West Africa. While this role has diminisheddue to the growth of other cities in the region, Dakar's substantialinfrastructure and advantageouslocation make it a staging point for traffic to and from MIali,Mauritania, Gambia and Guinea-Bissau and a stopover for airline traffic between Europe and Latin American and for international shipping. B. The Transport System 1.04 The transport system consists of a 1,034 km railway; a 13,300 km road network, including 2,600 km paved and 3,300 km all-weather roads; a deep-water, protected port at Dakar (the only one with such characteristics in the Sahel zone) and three secondary ports; and an international airport at Dakar and a network of smaller domestic airports. All components of the system, except the road network, serve an important international function and reflect the country's role as a regional center and transit point. - 2 - 1.05 The railway comprises about 660 km of mainline between Dakar and the Mali border forming part of the international line linking Dakar with Bamako (Mali) and 374 km of branch lines. In FY1978 the railway carried about 1.7 million tons of freight, the bulk of which was short-haul phosphates from the mine to Dakar port and Mali transit traffic. The railway has tradition- ally been the dominant carrier of domestic freight, but due to deteriorating service and efficiency it has lost its position over the past decade. Passenger traffic declined substantially with the expansion of the road network and the road vehicle fleet, particularly for shorter hauls. The railway has recently started to regain freight traffic as a result of strong managerial action, technical assistance and training programs implemented under the Third Railway Project (Loan 1518-SE, US$11 million, March 17, 1978). 1.06 The road network, generally well-developed relative to the size and growth of the national economy, is concentrated in the more heavily populated coastal regions and the groundnut-producing areas near Dakar, with a number of main roads running parallel to the railway. However, many of the paved roads were built before independence in 1960; a large proportion were not designed for present traffic volumes and have suffered substantial damage. Some rural and feeder roads are also in poor condition. The Government's main priority in the medium term is rehabilitation and proper maintenance. The Bank will support this policy with its proposed Fourth Highway Project, which was appraised in December 1978. With very few exceptions, no new investments are being planned for constructing or upgrading roads to those areas lacking year- round road access and being served mostly by air transport. 1.07 The road vehicle fleet comprised about 74,000 vehicles in 1974 and is estimated