Document of The World Bank OpWy

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 1829a-SYR Public Disclosure Authorized

SYRIA

STAFF APPRAISAL REPORT OF

A THIRD HIGHWAYPROJECT Public Disclosure Authorized

March 16, 1978 Public Disclosure Authorized

Projects Department Europe, Middle East and North Africa Regional Office

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. CURRENCY EQUIVALENTS

Currency Unit = Syrian Pound (SL) S:L1 = US$0.26 SL 1,000 = US$256 SL 1,000,000 = US$256,410 US$1 = SL 3.9

WEIGHTS AND MEASURES

Metric System British/US System

1 meter (m) = 3.28 feet (ft) 1 kilometer (km) 2 = 0.62 miles (mi) 2 1 sq kilometer (km ) = 0.386 sq miles (mi ) 1 hectare (ha) = 2.117 acres (ac) 1 liter (1) = 0.2200 imperial gallons (1 gal) = 0.2642 US gallons (gal) 1 metric ton (m ton) = 2.205 pounds (lb)

ACRONYMS AND ABBREVIATIONS

ADT - Average Daily Traffic ER - Economic Return ILO - International Labor Organization MOC - Ministry of Communications MOT - Ministry of Transportation SPC - State Planning Commission UNDP - United Nations Development Programme USAID - United States Agency for International Development

SYRIAN ARAB REPUBLIC

FISCAL YEAR

January 1 to December 31 FOR OFFICIAL USE ONLY

STAFF APPRAISAL REPORT

THIRD HIGHWAY PROJECT

SYRIAN ARAB REPUBLIC

Table of Contents .

Page No.

I. THE TRANSPORTATION SECTOR ...... I

A. Effects of Geography and Economic Growth on Transportation ...... 1 B. The Transportation System ...... I C. Transportation Policy, Planning and Coordination ...... 5 D. Previous Projects ...... , 7

II. THE HIGHWAY SUBSECTOR ...... 8

A. Network ...... 8 B. Traffic ...... 9 C. Administration ...... 11 D. Planning ...... 12 E. Financing ...... 13 F. Engineering ...... 14 G. Construction ...... 15 H. Maintenance ...... 16 I. Training ...... 17

IIl. THE PROJECT ...... 17

A. Objectives ...... 17 B. Description ...... 18 C. Engineering ...... 20 D. Cost Estimates ...... 22 E. Financing ...... 26 F. Implementation ...... 26 G. Disbursements ...... 29 H. Environmental Impact ...... 30

IV. ECONOMIC ANALYSIS ...... 31

A. Main Benefits and Beneficiaries ...... 31 B. Highway Construction ...... 32 C. Other Project Elements ...... 38

V. AGREEMENTS REACHED AND RECOMMENDATIONS ...... 39

This report was prepared by Messrs. B.H. Van Waes (Engineer) and Graham Smith (Economist). KThisdocument has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. Table of Contents (continued)

ANNEX

Related Documents and Data Available in the Project File

Chart

IBRD 18196 Syrian Arab Republic, Organization Chart of the Ministry of Communications

MAPS

IBRD 13261 Syrian Arab Republic, Transportation Infrastructure IBRD 13262 Syrian Arab Republic, The Highway Network I. THE TRANSPORTATION SECTOR

A. Effects of Geography and Economic Growth on Transportation

1.01 The Syrian Arab Republic has an area of about 185,000 sq km of which only 34% is inhabited or cultivated, the remainder being mostly desert. The population in 1977 is estimated at 7.9 million and is growing at 3.3% p.a. About 47% of the population lives in urban areas and 25% in the two largest cities, Damascus, the capital (1,140,000) and Aleppo (880,000). Only 25% of the population is in the work force, of which half is employed in agriculture. Per capita GNP in 1976 was estimated at US$780, which represents a 2.5% per annum increase in real terms since 1970.

1.02 The basic layout of the Syrian transportation system (Map IBRD 1326L) has been dictated by its topography and different climatic zones; the coastal mountains to the west, the narrow fertile plain in the west-center, the Euphrates basin in the northeast and the desert areas in the center and east. The only natural corridors are the coastal and central plains for north- south movements, and the Euphrates River and the gap in the mountains between Homs and Tartous for east-west movements. Other important transportation corridors have to cross mountains (Damascus-Beirut and Aleppo-Lattakia) or the desert (Damascus-Baghdad). Rapid economic growth since the beginning of the 1970's has led Syria to initiate a major reorganization of its transportation system and to undertake large-scale construction projects to restructure its network and meet the new demands placed on it.

B. The Transportation System

1.03 As of 1976, Syria's transport system consisted of: (i) 15,700 km of roads serving about 125,000 vehicles; (ii) 1,672 km of railways, comprising 341 km of narrow gauge lines in the southwest and 1,331 km of standard-gauge lines in the north; (iii) two general purpose ports and one crude oil port; (iv) two international airports, three secondary airports for domestic services, and one national airline; and (v) approximately 2,700 km of oil pipelines, comprising two international crude oil pipelines, a domestic crude oil line and a domestic oil products distribution system. Of this transportation system, 25% of the highway network, 32% of the railway network and 40% of Lhe port capacity have been built since 1970.

1.04 Inland transportation is dominated by highways, for both passengers and fr.ight. Although the role of the railways, at present very small, is expected to expaiLd appreciably in the next five years, highway transportation wil-Lremain dominafnt. Of an estimated 8 billion intercity passenger-km in 1976, highways carried nearly 98%, railways 2% and air a fraction of 1%. As for freight, of an estimated 8 billion intercity ton-km (exclusive of crude oil) highways carried 96% and rail 4%. International transit traffic of freight has grown rapi,iiyLn recent years, reaching a peak of 3 million tons in 1975, of which over 80% moved by highways. The railways have been hampered fromnplaying a greater role by the inconvenient layout of the network (see para. 1.06). -2-

(a) Highways

1.05 Details of the highway subsector are discussed in Chapter II.

(b) Railways

1.06 The Syrian railway network (Map IBRD 13261) is divided into two single-track systems of different gauges, the narrow-gauge system (the Hedjaz Railway) serving the capital and the southwestern half of the country and the standard-gauge system (the Northern Railway) the second largest city and the northern half of the country. There is no practical possibility of through shipments between the two systems. Each is managed by an autonomous authority under the Ministry of Transportation (MOT). Operating conditions on both systems are very poor, and the disconnected route sections, different gauges, low traffic volumes and low operating efficiency have all led to operating deficits. Traffic remained more or less static during the period 1970-75 in terms of passengers and tons, while increases in average trip distance led to a modest growth in terms of passenger-km and ton-km. Performance improved appreciably in 1976, with the opening of a new line from Lattakia to Aleppo, Deir-Ezzor and Qamishli. Traffic since 1970 has been as follows (all values in thousands):

Passengers Freight Year Number Pass-km Number Ton-km

1970 1,113 86,500 1,406 101,700 1971 1,072 83,700 1,136 124,900 1972 1,035 68,700 1,172 154,000 197:3 988 68,900 828 123,100 1974 1,237 101,300 1,056 157,200 1975 1,292 135,600 1,066 124,900 1976 1,084 165,800 1,337 305,300

Period % Average Annual Growth Rate

1970-76 -0.5% 11.5% -1.0% 20%

The principal commodities transported are wheat, barley and cotton. Up until 1976 average trip distances were far too short for economic operations; around 80 km for passengers and 100-150 km for freight. The system was incapable of competing effectively with highway transportation.

1.07 To correct this situation the railway is now carrying out a large- scale modernization and expansion plan, under preparation since the 1960's, aimed at providing the entire country with a unified standard-gauge railway network connecting the seaports with the main centers of production and con- sumption in Syria, Iraq, Jordan and Turkey. The expanded network would amount to about 2,500 km, consisting of three main routes: the first east-west from the port of Lattakia to Aleppo, Deir-Ezzor, Qamishli and Northern Iraq; the second line also east-west from the port of Tartous to Homs, the phosphate mines southwest of Palmyra, Deir-Ezzor and Central Iraq; and the third line - 3 - north-south from the Turkish border to Aleppo, Homs, Damascus and the Jordanian border. About 40% of the plan has been completed. Work is now underway on construction of the Homs-Damascus line and the line to the phos- phate mines at Mahin, and on reconstruction of part of the Homs-Tartous line. With the opening of these new lines in the early to mid-1980's, the railways should be able to carry 10-15% of freight traffic and should relieve the Damascus-Aleppo and Homs-Tartous highways of some of the excessively heavy truck traffic that is now contributing to their rapid deterioration.

(c) Ports

1.08 The principal ports of Syria are Lattakia for general cargo, Tartous for general cargo and export of Syrian crude oil, and Banias for the export of crude oil in transit from Iraq. The port of Tartous is relatively new, having been opened in 1965; it surpassed Lattakia in general cargo volume for the first time in 1975. Lattakia is the only port used by a significant number of passengers. Both Lattakia and Tartous experienced a rapid increase in traffic after 1973, both in Syria's own international trade and in transit traffic to its neighbor countries, whose Gulf ports became acutely overloaded; the result- ing congestion of the Syrian ports was aggravated by the closing of Beirut port in 1976 and the diversion to them of some traffic that formerly was routed through Lebanon. By mid-1977, however, waiting times at both ports were much reduced. The total volume of seaborne trade in 1976, excluding Iraqi crude oil, was 14.0 million tons, 50% up on two years earlier. This growth applied equally to non-oil trade, which reached 4.7 million tons (2.2 million through Lattakia and 2.5 million through Tartous) and to Syrian crude oil exports, which reached 9.3 million tons. The volume of imports exceeded that of non- oil exports by more than 4:1. Imports covered a wide variety of commodities: manufactured goods, foodstuffs, metals and cement. The primary export com- modity at Lattakia was cotton, produced mostly in the Jezireh region, and at Tartous, phosphate mined near Palmyra; 320,000 tons were loaded in 1976. Passenger and freight traffic at all ports during the period 1970-76, includ- ing transit traffic, is shown below (in thousand persons or tons):

Freight (excl. crude oil) Crude Oil Year Passengers Exports Imports Total exports

1970 5 521 1,882 2,403 34,566 1971 6 322 2,076 2,398 31,522 1972 10 597 1,670 2,267 26,680 1973 8 591 1,505 2,096 33,968 1974 10 500 2,494 2,994 29,160 1975 11 646 2,823 3,469 36,530 1976 n.a. 908 3,758 4,666 19,301

Period % Average Annual Growth Rate

1970-76 15% 10% 12% 12% - 4 -

1.09 The port expansion program under the Fourth Plan calls for works to enlarge the port of Lattakia, to raise its capacity from 1.6 million to 3.0 million tons annually by 1980. Similar expansion works are being carried out at Tartous to raise its capacity for general cargo to 4.5 million tons by 1980, with emphasis on container-type freight movements and roll-on roll-off traffic. Banias is being expanded for importing crude oil to supply the new refinery coming on stream in 1979.

(d) Civil Aviation

1.10 Syria has two international and three local airports operating scheduled services, administered by the Civil Aviation Authority under the MOT. While the role of civil aviation in internal transportation is small and likely to remain modest, the national airline is rapidly expanding its services internationally. Passenger and freight traffic and aircraft move- ments at all Syrian airports during 1970-76 were as shown below:

Passenger Arrivals & Departures Freight & Mail Aircraft Movements Year (000's) (Tons) (Number)

1970 370.6 2,386 5,434 1971 436.8 2,326 6,171 1972 470.3 2,398 6,778 1973 459.5 2,614 6,137 1974 597.8 4,418 7,066 1975 809.3 5,634 7,838 1976 1,106.5 6,807 9,553

Period % Average Annual Growth Rate

1970-76 20% 19% 10%

Traffic at local airports is small compared to traffic at the international airports and represents less than 5% of total passenger movements, while freight is negligible. The substantial reduction in passenger traffic at the domestic airports since 1969 reflects increased competition from highway transportation. The Fourth Plan provides for completion of a new passenger terminal and lighting at Damascus airport, an international airport at Lattakia, expansion of the international Aleppo airport and improvement of the Palmyra airport for tourist purposes. Traffic at Damascus airport is expected to exceed 1.4 million passengers and 10,000 tons of freight by 1980.

(e) Pipelines

1.11 Syria's General Petroleum Company has two domestic pipeline systems, a single crude line from the Karachock fields in northeast Syria via Homs to the terminal at Tartous, through which 9.3 million tons of crude were exported in 1976, and three oil product pipelines connecting the refinery at Homs with Aleppo, Lattakia and Damascus, each with an annual capacity of 350,000 tons. Two major international crude oil pipelines also run through Syria. The pipeline system from the Kirkuk fields in Iraq via Homs to the terminals at Tripoli in Lebanon and at Banias in Syria consists of three separate pipelines. Throughput in 1975 amounted to about 48 million tons to Homs and from there 27 million tons to Banias and 19 million tons to Tripoli, with the remaining 2.4 million tons being refined at Homs for domestic consumption. The Trans Arabian Pipeline Company Line (TAPLINE) from the Abu Hadriya fields in Saudi Arabia to the terminal at Saida in Lebanon consists of one pipeline with an annual capacity of about 25 million tons; throughput in 1974 amounted to 11 million tons.

1.12 Both international transit lines were inoperative during much of 1976. Operation of the TAPLINE was discontinued in April 1975 due initially to a dispute over prices and freight rates and subsequently to the civil war in Lebanon; pumping was resumed in December 1976. Iraq broke off use of its trans-Syrian pipeline a year later, in April 1976, also because of a dispute over transit dues, and in 1977 was exporting its crude through Turkey and the Gulf. The Fourth Plan provides for improvements to the domestic crude oil line and related facilities, a new product pipeline and storage facilities.

C. Transportation Policy, Planning and Coordination

1.13 Four ministries are responsible for administration of the transpor- tation sector: the MOT for highway transportation services and both the infrastructure and services of rail, ports and civil aviation; the Ministry of Communications (MOC) for highway infrastructure; the Ministry of Petroleum for pipeLines; and the State Planning Commission (SPC) through its transportation department, for reviewing the implementing ministries' investment programs and integrating them into the national economic planning mechanism. The MOT was established in 1974 only with a nucleus of staff formerly with the MOC, to bring all the modes of transportation (except pipelines) under a single authority. It is still in the process of building up its capabilities.

1.14 The Five-Year Development Plan is the basic instrument embodying the Government's development policies and strategies. While there is no transportation policy document as such, several recent statements by Govern- ment leaders have emphasized the importance attached to modernizing and expanding the transportation system in response to the burgeoning demand of recent years, with particular stress on the enlarged role the railway is to play. The allocation to the transportation sector in the Fourth Plan as revised in 1977 is SL 3.7 billion, or 18% of the total. This is 2.4 times the sector allocation under the Third Plan as implemented, where transportation accounted for 9.5% of the total. The share of the transportation sector in total investment is somewhat low by international standards. The distribution by mode is shown in the following table (in millions of Syrian pounds): 3rd Plan (1971-75) 4th Plan (1976-80) Planned (%) Implemented (%) Planned (%)

Highways 424 22 296 19 1,205 33 Rail 642 33 520 34 1,045 28 Ports 124 6 85 6 886 24 Air 212 11 106 7 264 7 Pipeline 563 29 533 35 296 8

Total 1,965 100 1,540 100 3,696 100

The distribution shows several shifts from the Third Plan to the Fourth; pipe- lines' share drops substantially, balanced by increases in ports and highways' share. Railways' share drops slightly, while aviation's share remains constant. The highways allocation of SL 1.2 billion refers only to infrastructure, in addition to which the purchase of vehicles could account for an additional SL 1.8 billion. The railways' allocation of SL 1.0 billion, on the other hand, includes locomotives and rolling stock. Thus the distribution of total invest- ment between highways and railways will, to a certain degree, reflect their intended future share of the inland transportation market and the considerable catch-up effort required of the railway.

1.15 The Government, with assistance from USAID, is making preparations for an overall transportation study, that will make a comprehensive inventory of the existing transportation system, review the appropriateness of current regulations and their enforcement, forecast demands for new infrastructure and identify routes and services needing priority attention (Draft Terms of Reference available in the project file). The Government is aware that its own administration should be fully involved in the study if its findings and recommendations regarding policies, regulations and planning are to be adopted and acted upon effectively. While the MOT will bear prime responsibility for the study, personnel from the MOC and SPC will therefore be closely involved.

1.16 As regards competition between modes, users are free to select the mode that best suits their requirements and there is no systematic allocation between modes. At times, however, the Government intervenes in response to specific problems with means determined on an ad hoc basis. Attitudes to the role of the private versus the public sector are largely pragmatic. As regards road transportation, buses, taxis and trucks may be private or government-owned but are subject to a certain degree of regulation in their operation. Bus routes, schedules and fares are allocated and fixed by Govern- ment and adjusted periodically through negotiations between operators and municipalities.

1.17 The commercial vehicle fleet is divided into three categories: (a) private, own-account vehicles of privately-owned firms and institutions; (b) public: common-carrier vehicles owned by private individuals and subject to government regulation regarding operating licenses and rates; and (c) govern- ment: own-account vehicles of government organizations and public-sector companies. In 1977 there were approximately equal numbers of trucks and pick-ups; of the trucks, common-carrier vehicles make up half the total, government-owned trucks 30% and private own-account trucks the remaining 20%. Pick-ups are more or less evenly divided between private and for-hire use. Government trucks include the own-account fleets of such enterprises as the phosphate company, the cotton authority and the wheat authority. Other gov- ernment institutions wishing to transport goods who do not have their own vehicles, use the common carriers.

1.18 It remains to be seen whether the railway will be successful in attracting traffic away from highways as its new lines come into operation. Resistance is to be expected from potential users, both from those who already have their own truck fleets, as is the case for most government-owned companies, and from users of common-carrier trucks, since at present railway freight rates and passenger fares are barely competitive with highway trans- portation. The tariff governing truck shipments for government customers, set by the Ministry of Supply in consultation with truckers' representatives and the MOT, provides rates per ton-km that decline with distance, whereas railway freight rates per km are fixed. Contrary to the normal pattern of economic costs, this makes truck cheaper on long hauls (more than 250 km approximately) and railway cheaper on short hauls. On short hauls, however, truck has an appreciable convenience and time advantage that discourages use of the railway. Railway passenger fares, furthermore, are on average 40% higher than the competing bus services.

1.19 During loan negotiations the need for a review of highway and rail tariffs in relation to the respective costs of transportation was discussed and it was confirmed by the Government that the overall transportation study (para. 1.15), scheduled to start by mid-1978, will include: (a) an analysis of the transportation market in terms of each main commodity category and haul distance, (b) a study of the costs of competing highway and rail services, and (c) a restructuring of the respective tariffs to ensure an economically sound divisiLon of the transportation market to avoid wasteful duplication of invest- ment. These points are included in the terms of reference for the study.

D. Previous Projects

1.20 The project would be the third for the highways subsector (Map IBRD 13262). No projects have been made for other subsectors of the transportation sector since other donors have been active there. Two previous IDA credits totaling US$22.3 million were allocated for highway construction, studies and technical assistance. In view of difficulties encountered in the implementa- tion of projects in Syria and the procurement of works, both generally and specifically in the highway sector, a number of measures have been taken to reduce the risk of similar problems disrupting implementation of the proposed project. Many of the earlier problems arose from the need to upgrade the design standards, because of the unexpected economic growth in Syria since appraisal. This caused delay on two counts: the need to redesign and the need to find additional financing to cover the higher costs. For the present project, alternative alignments and design standards have been analyzed and the final choices made after extensive discussions between the MOC, the SPC - 8 - and the Bank. Through the sometimes difficult experience of the First and Second Highway Projects the Syrian authorities have become familiar with the Bank's procurement requirements, and assurances have been obtained from the Government during loan negotiations that all civil works will be procured according to the Bank's Guidelines.

1.21 The First Highway Project (Credit 46-SYR for the amount of US$8.5 million), the first Bank/IDA project in Syria, was approved in 1963 and not completed until 1975. As the performance audit report (Report No. 1259, August 11, 1976) on this project notes, preparation was accelerated to provide a quick response to Syria's first request for Bank/IDA financing, leaving final design until after signing of the credit agreement. The unsatisfactory experience with this arrangement has led the Bank to adopt, as a general pro- cedure for all highway projects, that detailed engineering be substantially completed at the time loan/credit negotiations. The performance audit report also notes that the project illustrated at an early date how institutional and physical components could be integrated in a single project to bring about significant institutional improvements even under difficult conditions.

1.22 The Second Highway Project (Credit 298-SYR for an amount of US$13.8 million) was approved in 1972 and is expected to be completed in 1981. Proj- ect implementation did not start until 1975 due to the October 1973 war and its aftermath. To accommodate faster than expected economic growth since 1973 the project highways have been upgraded from the two-lane roads originally designed to four-lane highways. The project cost has increased very substan- tially and other external donors have had to be brought in to complete financ- ing of the project. Implementation has been complicated by the desire of the Government to use state-owned contractors for the civil works. On one highway section a state company was awarded a contract under ICB but its performance has been poor. To improve the contractor's efficiency the Government requested the Association's approval to strengthen the contractor's organization by adding two state-owned subcontractors to carry out the earthworks, structures and pavement and by using part of the construction supervision team as manage- ment consultants. The Association agreed to such arrangements, which quickly showed improvement in performance and progress in the works. On another highway section the Government initially requested a Bank loan to cover supplementary works, but subsequently withdrew its request in order to award the contract to a state-owned company. Later the Government was successful in obtaining financing from the Kuwait Fund (about US$40 million equivalent) to help complete the construction works. An Amendment of Credit 298-SYR to reflect the changed circumstances and needs has been made.

II. THE HIGHWAY SUBSECTOR

A. Network

2.01 The total length of Syria's classified highway network (MQapIBRD 13262), excluding city streets, is about 15,700 km of which 11,700 km or 75% 9 - are asphalted; four-lane highways with grade-separated interchanges and par- tial control of access make up about 1%. The distribution of the classified network by type of surface and its growth since 1965 are shown below.

Length of Road (km) Paved Paved as % Year 4-Lane 2-Lane Gravel Earth Total of Total

1965 - 5,914 1,099 2,179 9,192 64

1970 23 8,073 1,500 2,091 11,687 69 1971 23 8,665 1,466 1,554 11,708 74 1972 63 9,023 1,311 1,439 11,836 77 1973 63 9,768 1,381 2,363 13,575 72 1974 163 10,415 1,527 2,354 14,459 73 1975 163 10,577 1,500 2,364 14,604 74 1976 163 11,552 1,667 2,294 15,676 75

Period % Average Annual Growth Rate

1965-76 6.4 - - - 5.0 1974-76 5.0 - - - 4.1

2.02 The rapid expansion and development of the paved network began in the late 1960's and the length of the total network has almost doubled since 1960 while the paved length has doubled since 1965. Although the average density of the network increased significantly to reach 80 km per thousand sq. kkm, similar to that of Turkey and Jordan, it is still low by international standards for countries with about the same per capita GNP. The regional distribution is however very irregular, varying from as much as 830 km per thousand sq. km in the coastal areas to 100 km per thousand sq. km in the central area and as low as 30 km in the northern and eastern areas. This however reflects the marked contrasts in population density between regions; the average length of highway per thousand inhabitants varies far less, ranging between 1 and 3 km in all governorates except the Southwest and Tartous, which have a somewhat higher density.

B. Traffic

2.03 In 1976, the Syrian motor vehicle fleet numbered about 125,600 vehicles, excluding motorcycles. The operational fleet is somewhat smaller as scrappage is not systematically accounted for, but scrappage rates are very, low and are estimated at about 5%. The development of the vehicle fleet during the period 1965-1976 is shown below (in thousands): - 10 -

Year Cars Buses Pickups Trucks Total

1965 27.2 1.6 4.0 8.7 41.6

1970 30.5 1.8 4.7 12.6 49.6 1971 32.2 2.0 4.8 12.8 51.8 1972 33.0 2.2 5.2 14.2 54.5 1973 36.9 2.5 6.2 15.4 61.0 1974 39.4 2.8 5.8 16.1 64.0 1975 53.3 4.2 9.9 22.5 89.8 1976 66.5 5.6 27.2 26.2 125.6

Period % Average Annual Growth Rate

1965-76 7.3 12.1 17.3 10.6 10.6 1974-76 30.0 42.0 65.0 28.0 40.0

The regional distribution of vehicles and ownership levels are very uneven, ranging from 2 to 3 per thousand persons in the south to 36 in Damascus and 7 to 8 in the northeast. The average for Syria in 1976 was 16 vehicles per 1,000 inhabitants.

2.04 Over the ten years up to 1974, the growth of the vehicle fleet had been held down to an average annual growth rate of below 5% through strict quotas on imports, particularly of passenger cars. In consequence, more than half the vehicle fleet was over ten years old. In 1974 the quota system was dropped and the issuing of import licenses was liberalized. The impact was felt immediately; in the following year the number of registered cars rose by 35% and trucks by 50%, and in the two years to 1976 the fleet had doubled. Import restrictions were reintroduced in 1977 to curb foreign exchange ex- penditures. The vehicle fleet is now expected to increase at 7 to 8% per annum to reach 165,000 to 175,000 vehicles by 1980 and 700,000 to 800,000 by 2000, which would represent one vehicle for about 40 inhabitants, still low by international standards.

2.05 Traffic is particularly heavy on the north-south axis connecting the major cities in the central region, on the coastal Ihighwaysand on three transverse east-west highways. The average daily traffic on the Damascus- Aleppo highway is 5,000 to 10,000 and on the other intercity highways 1,500 to 3,000. Truck traffic is generally very heavy and represents 30 to 50% of total traffic.

2.06 International truck transit traffic is substantial on the main high- ways from the ports of Lattakia and Tartous and from Beirut to Damascus and thence on the Damascus-Amman and Damascus-Baghdad highways. From a level of 1.4 million tons in 1973, the total transit volume by road reached 2.8 million tons in 1975, as the economies of Saudi Arabia and the Gulf states boomed. Provisional figures for 1976, however, show a drop off to 1.8 million tons, due primarily to a reduction in traffic to and from Lebanon to less than a - 11 - third of its 1975 volume. The total volume of transit traffic in 1976 aver- aged 250 loaded trips per day with an average load per truck of 19 tons. Syrian vehicles accounted for about a quarter of these trips, in keen com- petition with truckers from Lebanon, Jordan, Iraq, Kuwait and Saudi Arabia.

2.07 Broad-scale data on highway traffic is still lacking. Several indi- vidual counts and surveys were carried out by foreign consultants between 1972 and 1976, but no regular counting program exists. Traffic counting is carried out by MOC personnel on an irregular basis as and when required for specific studies. The Government is aware of the need to have adequate traffic data as a basis for proper planning and therefore is addressing this issue through the overall transportation survey to be carried out by consultants under the supervision of the MOT (para. 1.15). The proposed project will also improve highway traffic data collection by helping the MOC to set up a traffic count- ing and transportation economics unit in the Department for Design of Highways and Bridges. The assistance will be in the form of experts financed by UNDP with the Bank as executing agency and the supply of highway inventorying and traffic counting equipment. During loan negotiations, assurances were obtained from the Government that they will collect and record in accordance with appropriate statistical methods and procedures and on a regular and systematic basis such technical, economic and financial information and road traffic data as shall be reasonably required for proper planning of mainteniance, improve- ments and extensions of its highway network.

C. Administration

2.08 The network is divided into two classes: primary and secondary. The primary network, which carries about 80% of all traffic, consists of: (i) the 800 km of major arteries, namely the north-south axis serving the main towns of Damascus, Homs, Hama and Aleppo with links to Jordan, Lebanon and Turkey and the ports of Tartous, Banias and Lattakia, all of which are being upgraded to four lanes or are planned as such; (ii) the two-lane highways connecting the producing centers in the northeastern and eastern regions with the four-lane system; and (iii) the two-lane highways connecting with Iraq and the other Gulf states. The secondary network consists of high- ways connecting towns and villages to provincial centers and feeder roads. The primary network is the responsibility of the MOC, while the secondary network is administered by the provincial authorities under the supervision of the Ministry for Regional Affairs.

2.09 The present organization of the MOC (Organization Chart, IBRD 18196) dates from 1972 when a reorganization based on recommendations made under the First Highway Project became effective. Within the MOC a single department has responsibility for both construction and maintenance of highways and bridges. The 13 district offices, which report to the provincial authorities on administrative matters and to the MOC on teclnical matters, handle most field operations. Some major construction works are directly supervised by the department itself. Regional centers for maintenance administered entirely by the MOC have been established since 1972 to take over maintenance of the primary network from the district offices (para. 2.25). - 12 -

2.10 The present organization is adequate to respond to the needs of the present network and its planned expansion. However, due to prevailing gov- ernment salary scales and despite an overall salary increase for officials in 1975, the MOC is still unable to compete with private industry or with the attraction of jobs abroad. The resulting lack of trained personnel limits the MOC's efficiency and puts a heavy workload on the few engineers available, so that decision, making is often very slow (para. 2.27).

2.11 In 1974 the MOT was created to deal with services and regulations related to highway transportation while the responsibilities for construction and maintenance of the infrastructure remained with the MOC. The lack of ade- quate direct cooperation between these ministries or through the SPC (para. 2.12) hampers implementation of regulations affecting both, particularly those governing dimensions, axle loads and related design characteristics. During loan negotiations the Government confirmed that the coordination of transporta- tion policies involving the MOC and MOT will be ensured through the Prime Minister's office by means of executive orders. The coordination will be further promoted by a commission, comprising the SPC, the MOT, the MOC, as well as other ministries and agencies involved in the transportation sector. This commission will supervise the overall transportation study (para. 1.15).

D. Planning

2.12 Highway investment proposals are prepared by the MOC and coordinated with the plans for other modes and with other sectors by the SPC. The current Plan stresses the priority that the Government attaches to completing ongoing projects, improving the existing infrastructure and limiting investments to the most urgent needs, taking into consideration constraints on resource availability and absorptive capacity. The main objectives of the plan regard- ing the future of the highway network are the completion of the four-lane highway system, construction or improvement of some 700 km of two-lane primary highways, and paving of approximately 3,400 km of secondary highways and feeder roads.

2.13 While the constraints on resource availability make it unlikely that the plan will be implemented in its entirety within the intended time-frame, the highway development as stated in the plan is both realistic and manageable and addresses itself to those parts of the network which are most in need of improvement. Although no overall long-term planning yet exists, the Plan's provisions are consistent with the long-run needs of the highway network. The Government is fully aware of its weaknesses in long-term planning and has therefore requested that a network development plan for Northeast Syria be prepared under the amended Second Highway Project. This is designed to dovetail with the MOT's overall transportation survey for the whole country, which will define the framework for longer term development (para. 1.15). - 13 -

E. Financing

2.14 Construction and maintenance of the primary network, which makes up about 40% of the total paved network, are financed through the MOC. The sec- ondary network and feeder roads are built and maintained by the provincial authorities with funds provided through the Ministry of Regional Affairs. Construction works are all financed from the general budget, which allocates funds according to the projects listed in the five-year plans, and approved by the Supreme Economic Council. Revenues from users come principally from gaso- line taxes, registration fees, and import duties on vehicles and spare parts. These revenues have grown in step with the expansion of the vehicle fleet, increasing five-fold between 1971 and 1975. Details are shown below (in million of SL):

Revenues from 1971 1972 1973 1974 1975

Vehicle license fees 26.4 29.0 23.0 43.0 77.0 Excise tax on fuel 20.6 40.0 45.0 41.0 37.0 Customs duties

Fuel 2.4 2.5 2.8 4.8 6.2 Lubrication oil 0.6 0.6 0.6 1.1 5.4 Vlehicles 11.9 29.0 33.1 68.9 243.5 Spare Parts 13.3 15.9 18.1 15.5 48.3 Tires 3.2 2.8 2.9 4.3 4.4

TransiLt levy N.A. 9.6 6.4 12.6 20.8 Toll on Damascus-Baghdad highway N.A. 6.5 2.8 4.3 6.8

Total 78.4 135.9 132.7 195.5 449.4

2.15 Total Government expenditures, including funds from foreign sources, on roads increased during the period 1971-76 at an average annual rate of 29%. Details are shown below (in SL millions):

Expenditures 1971 1972 1973 1974 1975 1976

Administration 16.0 16.9 17.3 16.0 21.2 23.7 Construction works 48.2 48.0 41.8 61.3 96.8 175.5 Maintenance works 9.0 9.0 9.0 31.3 44.0 45.3 Equipment Purchases - - - - 7.4 17.1

Total 73.2 73.9 68.1 108.6 169.4 261.6

Revenues significantly exceed expenditures and represent 12 to 13% of total Government tax revenues. However, the economic efficiency of the motor vehicle taxation system could be improved by relating charges more closely to vehicle use. The exceptional wear and tear on the highway system caused by heavy trucks, particularly those which are overloaded, should be paid for - 14 - as far as possib'Le by the vehicles concerned (para. 2.20). On the other hand user charges on transit traffic, consisting of a so-called tax for services rendered (an amount based on the value of cargo in transit), a transit fee per vehicle r2rar_dl e'ss uf c airgo value or weight (introduced in April 1976) and tolls on the Damascus-Baghdad highway, appear, on the incomplete evidence avail- able, sufficient to cover the highway wear and tear attributable to transit vehicles. These issues will be addressed in the overall transportation survey.

2.16 In rectent years, Syria has drawn on several external sources of financing for its primary highway network. The First and Second IDA Highway Projects provided US$22.3 million in total for sections of the primary network. The Government is discussing financing for the four-lane and two-lane primary networks with several external sources and has already obtained commitments for substantial parts of its highway investment plan. The Saudi Fund is lending US$11.3million equivalent, USAID is providing US$45.9 million and the Kuwait Fund US$53 million equivalent.

F. Engineering

2.17 Design standards classify highways in six main categories according to traffic volumes, each category being subdivided according to topography. These standards are satisfactory. The MOC's Department for Design of Highway and Bridges is responsible for preparing feasibility and engineering studies of all highways. Because of staff limitations, most of the design work is carried out by consultants under the supervision of the Design Department. For smaller projects or ones requiring less design work the Ministry staff carries out the feasibility study and design and prepares bidding documents, by drawing on economic and traffic data collected by consultants for other studies, on traffEic counts it has itself carried out, and on designs prepared for other projecits. The quality of project preparation, design and bidding documents is sat:isfactory.

2.18 Highway pavement design is based on a maximum single axle load of 13 tons in accordance with existing regulations. However, widespread over- loading, especially of two-axle trucks, which represent about 75% of total truck traffic, has arisen in recent years. A survey carried out by the Min- istry of Communications on the Damascus-Homs highway in 1976 and 1977 showed that some 25% of all trucks had axle loads in excess of 13 tons, with some in excess of 20 tons. The incentive to overload has come from the rapid growth in freight transportation demand since 1974, which has outstripped the ability of the truck fleet to grow commensurately, while no system has been in force to police the 13-ton limit adequately.

2.19 A rational policy for international trucking compatible with pave- ment design and a workable enforcement system is being sought by the Govern- ment. In August 1977, delegations from Syria, Iraq and Jordan, all of which are faced with the same problem of overloading, agreed to recommend that the Arab League adopt an international legal limit of 12 tons per single axle and 18 tons per tandiem axle, that the limit should be strictly enforced at the - 15 -

point of origin of each shipment, where policing would be less disruptive and more efficient than on the highway, that adequate enforcement on the highway should be provided, and that no truck should be allowed to cross an inter- national border if the axle load exceeds the legal limit of the country it wishes to enter.

2.20 These proposed regulations are laudable; however, for Syria itself an analysis of the number of additional vehicles needed to meet the demand without resort to overloading and a revision of truck freight rates to encour- age more efficient deployment of the truck fleet should still be considered in relation to the overloading. During loan negotiations an understanding was reached with the Government that, as part of the overall transportation study, existing regulations regarding truck ownership and licensing will be reviewed to assess whether they may be acting as a brake to the needed expan- sion of the fleet; and user charges affecting trucks will be reviewed to relate them more closely to usage and if possible to discourage overloading.

2.21 The damaging effect of the average truck using the highway network was shown by the October 1976 survey to be equivalent to an average axle load for all trucks close to 15 tons. However, strict and immediate implementation of adequate measures is not feasible and in order to allow the Government to set up the necessary system for enforcing the axle load regulations, a tran- sition period of two years from signing of the loan agreement has been requested by the Government and is recommended. A first step would consist of strict policing at the point of origin of each shipment, where weigh scales exist. Weigh stations along the highway are not considered a priority at this stage compared to the organizational steps the Government must take to make the enforcement system operational. During loan negotiations assurances were obtained from the Government that it will take such steps as shall be reason- ably required to ensure that dimensions and axle loads of vehicles using its highways are consistent with the structural and geometric design standards of the highways and within two years from signing of the loan the limits imposed by the laws on such dimensions and axle-loads will be duly enforced and observed in accordance with procedures satisfactory to the Bank.

G. Construction

2.22 Construction and improvement works are normally awarded to con- tractors after competitive bidding by means of unit price contracts. The contracting industry consists of state-owned construction companies, private domestic firms and foreign firms. They each have a roughly equal share of the total construction program, but the state-owned companies are gradually increasing their share at the expense of private firms. Excessive government bureaucracy and cumbersome administrative procedures often hamper the effi- cient execution of construction projects.

2.23 The state-owned companies are semi-autonomous contracting units with independent management. They are directly responsible to the office of the Prime Minister through a High Council. A 1976 decision of the High Council - 16 - automatically assigns projects in the public sector to state-owned companies and only if the ,company is unable to undertake the project will it be offered to the private siector. However the Government has agreed that for Bank financed projects, international competitive bidding is adopted and that state-owned companies compete with other bidders for these contracts.

2.24 The domestic private sector has developed a capacity comparable to that of the public sector. Foreign contractors are operating in Syria in large, more complex and specialized types of projects financed by interna- tional or bilateral agencies. The performance of the domestic and foreign private companies is generally satisfactory. The capacity of available con- struction resources, including domestic public and private foreign firms now working in Syria, is adequate to execute projects currently envisaged in the Fourth Five-Year Plan, including works under the proposed project.

H. Maintenance

2.25 Maintenance of the primary network is carried out by the regional maintenance centers under the authority of the Department for Construction and Maintenance of Highways and Bridges of the MOC (Organization Chart IBRD 18196). These centers, which are also equipped to carry out some construction works, such as service roads and bridges, are now in operation in 6 of the 13 provinces. They are adequately staffed with personnel trained in the pilot center at Doueir, outside Damascus, which was set up with assistance provided under the First Highway Project and the ILO. Maintenance expenditures for the primary network increased from SL 9 million in 1971-73 to SL 45.3 million in 1976. Maintenance operations on the primary network are adequate and timely. During loan negotiations assurances were obtained from the Government that, within the framework of its Five-Year Plan and according to its priorities, it would continue to provide all necessary funds and facilities to maintain its network according to sound engineering and financial practices.

2.26 Maintenance of the secondary network is financed through the Ministry of Regional Affa,irs and carried out by the district offices (para 2.09). Since the reorganization of the MOC in 1972 and the creation of the regional centers for maintenance of the primary network, maintenance of secondary highways is entirely the responsibility of the district offices. Because of insufficient funding maintenance operations are declining and the Government, fully aware of tllis,intends to entrust the MOC with establishing maintenance recommendations once the summary inventory, to be carried out in the course of the overall transportation study becomes available. The technical assistance provided under the proposed project will help the MOC to establish adequate maintenance strategies for the district offices and assurances have been obtained from the Government that the necessary funds will be forthcoming. - 17 -

I. Training

2.27 With regard to personnel, the capacity of the highway subsector to meet the demands to be placed on it during the next decade is uncertain. While the potential supply of civil engineers graduating from Syrian uni- versities appears adequate, there is a serious lack of transportationecon- omists, planners and traffic specialists. Furthermore,the actual supply of engineers has been far less than the potential, in view of the large numbers who have emigrated, principally to the neighboring countries and the Gulf states, and the difficultiesinherent in attracting engineers into government service and retaining them within the constraintsof the civil service salary structure. The Government is fully aware of the salary issue and has intro- duced measures to limit emigration of specialistsand to retain them in the civil service. No provision for training and scholarshipsis included in the proposed project, as grant funds are available for this purpose from bilateral aid sources. On the other hand, technical assistance to be financed by UNDP is provided under the project to improve the design and planning capabilities of the Highways & Bridges Design Department of the MOC. During loan negoti- ations the Government confirmed that to overcome the shortage of transportation economies and traffic specialists expertise it has taken the following steps: (i) assign counterpartpersonnel to the overall transportationstudy, and (ii) organize a training course for transportationin the Planning Institute.

lII. THE PROJECT

A. Objectives

3.01 The proposed project is consistent with the Government'sobjectives set forth in the recently approved Fourth Five-Year DevelopmentPlan (1976-80), to focus investmentson completion of the main transportationaxes, main- tenance and improvementof the existing infrastructure,and to develop further the potentiallymost productive sectors of the economy. As part of the high- way investmentprogram described above (para. 2.12), the Government has sought the assistance of the Bank and other external lenders in financing the more costly and technicallydifficult constructionand improvementworks on the primary network. Such works will have a high cost in foreign exchange, partic- ularly if their size and complexity are beyond the experience of the domestic contractorsand it appears likely that foreign contractorswill have to be brought in. Furthermore,in this type of project Syria can benefit most from the thorough study required by the lender and, in the Bank's case at least, the technical expertise availableduring preparationand implementationof the project.

3.02 Such is the case with the three constructionitems selected by the Government for the proposed Third Highway Project. One, the resurfacingand strengtheningof the central north-southhighway, will have a high cost in - 18 - imported materials, and the Bank's involvement is expected to help the Govern- ment in setting up a system to overcome the overloading problem. The second, a bypass around a major city, is a technically difficult and high-cost facility, though economically well justified. And the third is a rural primary road of major significance to the development of the northeast. To complement these construction items the Government has also requested technical assistance for the MOC to strengthen its long-term planning capabilities.

3.03 In focusing its lending for transportation on the primary highway network, the Bank is providing assistance where the need is greatest and where the Bank's expertise and procedures are of greatest benefit. Improvements to the secondary and feeder networks, which do not present major technical diffi- culties and whose foreign exchange costs are much less, are adequately funded and implemented from the Government's own resources, at a level commensurate with rural population and income growth.

B. Description

3.04 The project comprises:

(a) Civil works consisting of:

(i) pavement strengthening on sections of the Damascus-Aleppo highway totaling about 250 km;

(ii) construction of a 25.6 km bypass for the city of Homs; and

(iii) construction of the 103 km Qantary-Tall Tamir section of the Aleppo-Tall Kojak highway (500 km).

(b) Consultancy services for:

(i) construction supervision of the Homs bypass and the Qantary-Tall Tamir highway section;

(ii) tec'hnicalassistance to the MOC in traffic studies and transportation economics.

(c) Supply of:

highway inventory and traffic counting equipment for the MOC including spare parts and other related supplies.

(a) Civil Works

3.05 A detailed description of the civil works follows (Map IBRD 13262). - 19 -

Damascus-Aleppo Highway (250 km)

3.06 The pavement strengthening on sections totaling 250 km of the Damascus-Aleppo highway will provide the existing highway with a new asphalt concrete overlay ranging in thickness from 17 cm to 26 cm with shoulders of related thicknesses designed to accommodate traffic for a 10-year period. The 250 km consist of four-lane sections totaling 137 km and two-lane sections totaling 113 km. The existing pavement on all sections has deteriorated more rapidly than forecast at construction because of the exceptionally heavy traffic experienced since opening. Construction of the highway, which was part of the First Highway Project (Credit 46-SYR), was subject to delays in implementation, during which time heavy traffic grew more rapidly than ex- pected and average axle loadings were more than double the design assumptions in terms of their damaging effect, so that on all sections the total number of equivalent axles since opening has already, by 1977, exceeded the total number of design equivalent axles for the intended 13-year life. Although the Government has taken initial steps to enforce overloading regulations (para. 2.19), full enforcement will not be immediately effective and therefore the design of the proposed strengthening has assumed a progressive approach towards enforcement, by allowing a transition period of two years (para. 2.21).

Homs Bypass (25.6 km)

3.07 The bypass for the city of Homs will consist of a 25.6 km, four-lane highway with grade-separated interchanges on the western side of the city con- necting the highways to Damascus, Tartous and Aleppo, all of which will be completed to four lanes by 1981.

Qantary-Tall Tamir Highway Section (103 km)

3.08 The Qantary-Tall Tamir highway section (103 km) of the Aleppo-Tall Kojak highway will be built as a two-lane, asphalt-concrete paved highway.

(b) Consultancy Services

3.09 A detailed description of consultancy services follows:

Construction Supervision

3.10 Construction supervision for the Homs bypass and the Qantary-Tall TamLr highway section will be carried out by consultants. Syrian counterpart personnel will be integrated into the consultants' supervisory organization and will be trained on the job by them. Construction supervision for the pavement strengthening will be carried out by the district offices of the MOC, which are at present satisfactorily supervising similar works over 273 km. The Department for Construction and Maintenance of Highways and Bridges will be responsible for administration of all civil works contracts. - 20 -

Technical Assistance

3.11 TechniLcal assistance in the form of experts will be provided to the MOC to strengthen its able but understaffed planning and design departments, by helping them to carry out traffic surveys and establish development pro- grams based on economically sound criteria. Counterpart staff will be assigned to the experts. The technical assistance will be funded by UNDP but remains as a component of the proposed project under the assumption that the Bank will be requested to act as executing agency.

(c) Supply of Equipment

3.12 The project will also provide highway inventory equipment, consist- ing of a highway roughometer, speedometer and a deflectometer, and about ten traffic counters and two translator units together with related spare parts and necessary supplies. The equipment will be used by the tMOC to establish highway improvement and maintenance programs. The roughometer will also be used on the Damascus-Aleppo highway to measure the deterioration before and after the construction of the overlays. The results should verify the assump- tions made for the economic analysis and will be recorded in the progress reports (para. 3.21). During loan negotiations the list of equipment and its intended uses were discussed and confirmed with the Government.

C. Engineering

3.13 Engineering of the overlays for pavement strengthening was carried out by the MOC according to a satisfactory methodology. Detailed information is recorded in the project file. The design is based on the residual strength of the existing pavements and a detailed analysis of traffic composition and forecasts. Works designed according to the same methodology are being carried out satisfactorily on the Hama-Saraqeb section (93 km) of the Damascus-Aleppo highway and on the Aleppo-Raqqa highway (180 km) by contractors under the supervision of the MOC district offices. Engineering of the Qantary-Tall Tamir highway section and the Homs bypass was carried out by consultants under the Second Highway Project according to the design standards set out below, which are satisfactory. - 21 -

3.14 The design standards are as follows:

(i) Damascus-Aleppo Highway Design Asphalt Concrete Standard Highway Section No. of Lanes Length Overlay Thickness Axles (km) (cm) (millions)

Damascus-Adra 4 25 22 88.4 Adra-Malula 4 24 26 88.4 Malula-Hasieh 2 76 23 66.1 Hasieh-Shinshar 2 25 17 93.1 Shinshar-Homs 2 12 26 70.8 Homs-Hama 4 44 25 56.0 Saraqeb-Zerbeh 4 37 17 62.0 Zerbeh-Aleppo 4 7 19 79.0

250

(ii) Homs Bypass Bypass Interchanges

Design speed (km/h) 120 40-50 Lane width (m) 3.75 3.75 Lanes (No) 4 - Left shoulder width (m) 2.00 1.20 Right shoulder width (m) 3.00 1.80 Width of median (m) 8.00 _ Minimum horizontal radius (m) 675 45-75 Maximum gradient (%) 3 6 Maximum single axle load (m tons) 13 13 Right-of-way acquisition width (m) 100 _ Design standard axles (millions) 155-165 Pavement type: Asphalt concrete wearing course, densely graded asphalt base course and granular subbase.

(iii) Qantary-Tall Tamir Highway Section

Design speed (km/h) 100 Lane width (m) 3.65 Lanes (No) 2 Shoulder width (m) 3.00 Minimum horizontal radius (m) 425 Maximum gradient (%) 3 Minimum stopping sight distance (m) 155 Maximum single axle load (m tons) 13 Right-of-way acquisition width (m) 50 Design standard axles 34 Pavement type: Asphalt concrete wearing course, open graded asphalt base course, and granular subbase. - 22 -

All structures are designed according to standards set forth in "Fascicule special No. 72-21 bis: Conception, calcul et epreuves des ouvrages d'art. Texte No. 195, Decembre 1971, France".

D. Cost Estimates

3.15 The total cost of the project is estimated at US$113.6 million equivalent including contingencies and right-of-way acquisition. The foreign exchange cost is estimated at US$58 million or about 51%. Details of the project costs are shown below: -23-

SL Million US$ Million Equivalent2/ % Foreign Project Items Local Foreign Total Local Foreign Total Exchange Cost

A. Civil Works

1. Pavement strengthening on sections of the Damascus- 51.8 74.6 126.4 13.3 19.1 32.4 59 Aleppo highway

- 2. Construction of a bypass for the city of Homs 49.4 49.4 98.8 12.7 12.6 25.3 50

3. Constructionof the Qantary- Tall Tamir section of the 50.6 50.6 101.2 13.0 13.0 26.0 50 Aleppo-Tall Kojak highway ___ _

Subtotal A 151.8 174.6 326.4 39.0 44.7 83.7 54

B. Consultancy Services for

Construction supervision for Homs bypass and Qantary-Tall 4.8 7.2 12.0 1.2 1.8 3.0 60 Tamir highway section

C. Supply of

Highway inventory and traffic counting equipment including spare parts, and other related supplies - 0.8 0.8 - 0.2 0.2 100

D. Contingencies

Physical on Item A 10% 15.2 17.5 32.7 3.9 4.4 8.3 on Item B 10% 0.5 0.7 1.2 0.1 0.2 0.3

Price escalation on Item A 28.7 25.0 53.7 7.4 6.4 13.8 on Item B 1.0 1.2 2.2 0.3 0.3 0.6

Subtotal D 45.4 44.4 89.8 11.7 11.3 23.0

E. Right-of-Way Acquisition 14.5 - 14.5 3.7 - 3.7 0

Grand Total 216.5 227.0 443.5 55.6 58.0 113.6 51

a/ US$1 = 3.9 SL - 24 -

During loan negotiations,all cost estimates were discussed and confirmed with the Government.

3.16 Constructioncost estimates are based on quantitiesfrom detailed engineering and umit prices based on a survey of 1976-77 unit prices, a detailed price analysis carried out by consultantsand on unit prices obtained from bidding as of end 1977. They are acceptable. The cost estimates for consultancyservices are based on similar services being carried out, on pre- vailing rates for feasibility studies and detailed engineeringand an average man-month rate of US$6,000, including all overheads. The cost estimates for supply of road inventory and traffic counting equipment are based on prevail- ing unit prices and include allowancesof 25% of the base price for spare parts and supplies and 25% for price contingencies.

3.17 Physical contingenciesfor all items in the proposed project are estimated at 10%. Contingencyallowances for price escalation were estimated overall at 15% (13% on foreign costs, 17% on local costs) on the basis of the implementationschedule (para. 3.21) and the following annual rates of increase: for local expenditures 12% in 1979, and 10% thereafter;for foreign expenditures9% in 1979 and 8% thereafter. The higher inflation rate of local expendituresreflects recent experience. Detailed calculationsand assump- tions are shown below: CULCULATION OF EXPECTED PRICE INCREASES (SL Million)

Expenditures During Year 1979 1980 1981 Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total A. Civil Works

1. Pavement strengthening 20.7 29.8 50.5 20.7 29.8 50.5 10.4 15.0 25.4 51.8 74.6 126.4 2. Homs Bypass 12.4 12.3 24.7 14.8 14.8 29.6 22.2 22.3 44.5 49.4 49.4 98.8 3. Qantary-Tall Tamir 12.6 12.7 25.3 17.7 17.7 35.4 20.2 20.3 40.5 50.5 50.7 101.2

Subtotal 45.7 54.8 100.5 53.2 62.3 115.5 52.8 57.6 110.4 151.7 174.7 326.4

Physical Contingencies 4.6 5.5 10.1 5.3 6.2 11.5 5.3 5.8 11.1 15.2 17.5 32.7

Total 50.3 60.3 110.6 58.5 68.5 127.0 58.1 63.4 121.5 166.9 192.2 359.1

Expected Price Increase 3.0 2.8 5.8 10.0 8.9 18.9 15.7 13.3 29.0 28.7 25.0 53.7

B. Consultancy Services

Construction supervision 1.6 2.4 4.0 1.6 2.4 4.0 1.6 2.4 4.0 4.8 7.2 12.0

Physical Contingencies 0.1 0.3 0.4 0.2 0.2 0.4 0.2 0.2 0.4 0.5 0.7 1.2

Total 1.7 2.7 4.4 1.8 2.6 4.4 1.8 2.6 4.4 5.3 7.9 13.2

Expected Price Increase 0.2 0.2 0.4 0.3 0.4 0.7 0.5 0.6 1.1 1.0 1.2 2.2

Assumptions

Yearly Price Increases (%) 12 9 - 10 8 - 10 8 -

Expenditures

A. 1. Pavement strengthening 40% 40% 20% 2. Homs Bypass 25% 30% 45% 3. Qantary-Tall Tamir 25% 35% 40%

B. Construction supervision 33% 33% 33% - 26 -

3.18 The percentageof foreign exchange cost in total expendituresis based on the assumption that two-thirdsof the contractswill be awarded to local contractors,which is the likely blend of foreign and local contractors. For paveiueitL gLn- n g tLizhe foreign exchange cost is estimated at 53% of total expendituresfor local contractorsand 71% for foreign contractors, while for the oth-r civil works these percentagesare 44 and 60, respectively. They are based on detailed analysis of constructioncosts, and reflect a decliningtrend in the foreign exchange cost in highway projects in Syria.

E. Financing

3.19 The for(eignexchange cost of the whole project is estimated at US$58 million equivalenit,and it is proposed that the Bank loan finance the full estimated foreign exchange cost. Any actual foreign exchange costs in excess of this estimate, and all local costs, estimatedat US$55.6 million equivalent, will be met from Government budgetary allocations. During loan negotiations, assuranceswere obtained from the Government that it will provide the local cost financingand the foreign cost financingnot covered by the proposed loan, if required,and financeany project costs in excess of present estimates. During loan negotiLationsthe Governmentalso confirmedthat it would allocate sufficient funds f-rom the UNDP to finance the technical assistance for the MOC.

F. Implementation

(a) Responsibility for Project Implementation

3.20 The MOC will be responsiblefor project implementation. The Depart- ment for Constructionand Maintenanceof Highways and Bridges will be in charge of the civil works, and the Department for Design of Highways and Bridges will be in charge of the technicalassistance and supply of equipment. Construction supervisionwill be carried out by the district offices for the Damascus- Aleppo pavement strengthening and by consultants for the Homs bypass and the Qantary-Tall Tamir highway section, under the direction of the Department for Construction and Maintenance of Highways and Bridges. Detailed engineering for all civil works has been completedsatisfactorily and preparationof bidding documentsfor all civil works is expected to be completedby mid-1978. No contractswill be awarded before signing of the loan agreement. SYRIAN ARABREV'OBLIC

P-ol-t Iwp4tmata.2o Sch,,dole

1978 1979 __ _ _ -A______

1.02oan greeent ffectiv G. tmrtBank 1.03 Closing dots G-vernest/B.ok . ..

2. P-ve.ent otregthf- 2.01 Preparaio- of bid Cov- -m.t/Bank 1 theOoaaou-AlOPPO 2.02 Bid prepra-tion Contrato- Htigh.oy 2.03 tEa-natic and ase-d G- -cmet/es.k 2.04 Co...t-ortto G-vrce-/Conc--t.ro

3. Co...cr...tion ef the 3.01 Finolieteg bid 0- -t/eecI...laooI0n coma byp... d-.Lent - - ~~~~~~3.02P-aq-lifiti..o ond Coo-cmet/fack 3.03 Bid p-op-rti.. Cont-otios--- 3.04 ET.-naI-n ad -rad GoonntBc 3.05 10 rn o ocneaCnrro

- 4. Cn...o-tioo of cho 0.01 Fioi gbid G...... nt/Coo,,ajtanL~B-ftk Q-t-oy-T.ll Tonir d--neto highoopaCotton 4.02 Proq-11ffO-tlo G-ncn-nt/Ooo biddi,,g ndvrrtcoI 4.03 Old5 ro'rtO 4.04 Eo o2-orl- od o-rd Uooo,o-t/B-nk 4,05 C ot- -or i- C v r n o/ o t .otr______

- _ _ - - - _ _ _ _ V - _ _ _ __- _ _ - .- - - - -

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-- tig q.ip~~~~~~~~~t 8~.03 PidtsiG.er----eneo/B-nk toOlninty Ito 8of 4roforeno and oSq, nn

Conntt-1978/ooI n .2 vlalo ______- 28 -

(b) Project ImplementationSchedule

3.21 Civil works are expected to be implementedover a period of 3-1/2 years starting mid-1978 and ending in late 1981 with 10% of expenditures to be made in 1978, 20% in 1979, and 35% each in 1980 and 1981. Consultancy services for supervisionwill be scheduled over the same period. Technical assistance to the MOC is planned for a period of two years starting 1979. Progress will be recorded and communicatedto the Bank through progress reports every three months. The Governmentwas also asked to prepare a project completionreport within six months of the loan closing date. During loan negotiationsthe project implementationschedule, the progress reporting proceduresand the project completionreport arrangementswere discuused and confirmedwith the Government.

(c) Procurement

3.22 Civil works will be carried out by contractsawarded through inter- national competitivebidding in accordance with the Bank's guidelines for procurement. Because of the differencein complexityof works, prospective bidders for the constructionworks of the Homs bypass and the Qantary-Tall Tamir highway section will be prequalifiedin advance of bidding, while bid- ders for the pavement strengtheningwill be prequalifiedat bidding by sepa- rate envelope. Civil works for the Homs bypass and Qantary-TallTamir highway section will be awarded by single contracts. To shorten the construction period and to encourage local contractors,the pavement strengtheningworks will be broken down into several lots. Bidders if prequalifiedwill be allowed to bid for more than one lot with a rebate possible if they are awarded more than one lot, although constructionperiods will be concurrent. During loan negotiationsassurances were obtained that all civil works will be procured according to Bank's guidelines for procurement.

3.23 Bidders for civil works contractsare expected to include non- resident foreign contractors,resident foreign and Syrian private contractors and Syrian state-owned constructioncompanies, which under their charter are exempt from normal supervisionby the employer. The domestic contracting industry which comprises both Syrian private contractorsand the recently established public companies,is expected to be competitivefor all works. During loan negot-iationsassurances were obtained from the Government that for a state-owned company to qualify for bidding, the Governmentwill, for the purpose of the project, waive the supervisionexemption clause in its charter.

3.24 The consultancyservices for supervision will be carried out by consultants acceptable to the Bank and according to terms and conditions satisfactory to the Bank.

3.25 The highway inventory and traffic counting equipment will be pro- cured in accordancewith the Bank's guidelines for procurementof goods. No domestic suppliers of such equipment are available and the procurementwill be through internationalbidding. - 29 -

(d) Right-of-way Acquisition

3.26 A legal procedure exists for the acquisition of right-of-way, and this should be started as soon as possible particularly for the Homs bypass, since it is located in land in intensive use; but no major difficulties are anticipated. During loan negotiations assurances were obtained from the Gov- ernment that it will make available as needed all right-of-way for the timely implementation of the project.

G. Disbursement

3.27 The proposed loan of US$58 million will be allocated towards the cost of the project items as follows:

US$ million

(i) Civil Works 44.7 54% of total expenditures (repre- senting the expected foreign exchange cost)

(ii) Consultancy services 1.8 100% of foreign expenditures for supervision

(iii) Supply of equipment 0.2 100% of foreign expenditures

(iv) Unallocated 11.3

Total 58.0

3.28 Based on this allocation and on the project implementation schedule, the schedule of cumulative disbursements will be: - 30 -

Cumulative Disbursements IBRD Fiscal Year at end of Quarter and end of Quarter US$ '000 Equivalent

1978/1979 March 31, 1979 4,000 June 30, 1979 8,000

1979/1980 September 30, 1979 12,000 December 31, 1979 16,000 March 31, 1980 20,000 June 30, 1980 24,000

1980/1981 September 30, 1980 28,000 December 31, 1980 32,000 March 31, 1981 36,000 June 30, 1981 40,000

1981/1982 September 30, 1981 44,000 December 31, 1981 49,000 March 31, 1982 54,000 June 30, 1982 58,000

During loan negotiatons the disbursement schedule was discussed and confirmed with the Government.

H. Environmental Impact

3.29 The construction design takes due account of the desirability of minimizing the use of agricultural land for construction. The bypass will help improve the urban environment of Homs by reducing congestion and pollu- tion and by increasing the safety of local road users. The Qantary-Tall Tamir highway section will provide better access to a region lacking in adequate roads that is in the process of being settled. - 31 -

IV. ECONOMIC ANALYSIS

A. Main Benefits and Beneficiaries

4.01 The Damascus-Aleppo highway is the backbone of the country's trans- portation system, serving to connect the main production and consumption centers (Aleppo, Homs, and Damascus) with each other and with the ports and overland international links. The proposed pavement strengthening will pre- vent the rapid deterioration of the existing roadway that otherwise would cause substantially increased wear and tear on vehicles. The principal benefit measured is the avoided additional vehicle maintenance, including tire wear. Of such savings, 73% would accrue to trucks, 23% to private cars and taxis, and 4% to buses.

4.02 The Homs bypass will relieve congestion in the city center providing a safe, high-speed through route for the large volume of traffic travelling between Damascus and Aleppo and between the ports and the hinterland. Quanti- fied benefits comprise savings in vehicle operating costs and drivers' salaries (90% of total benefits) and accident costs (10% of benefits). The direct bene- ficiaries would be passenger car and pickup occupants (48%), truck operators (42%), and bus operators and passengers (10%).

4.03 The Qantary-Tall Tamir highway section will constitute a central link in the proposed 500-km highway from Aleppo to the Iraqi border at Tall Kojak, in the extreme Northeast, that is designed to provide direct access from Aleppo to the potentially rich agricultural areas of the Balikh and Khabour River basins and the oil-producing areas of the Northeast between Qamishli and the Iraqi border. Most traffic at present operating between Aleppo and Qamishli goes via Deir Ezzor, a distance of 590 km, whereas the direct road will reduce the distance 30% to 410 km, for a saving in journey time of approximately 2-1/4 hours. Even on its own, should the other sections not be built, the 103 km Qantary-Tall Tamir section would provide a distance saving between Raqqa and Hassakeh of 95 km. The section is economically jus- tified under either assumption. Benefits have been quantified in terms of user costs, both for the traffic diverted from other routes and the traffic generated by the new highway. Savings in vehicle operating costs account for 93% of total benefits and reductions in accidents 7%. Of the total benefits, 11% accrue to generated agricultural traffic.

4.04 In view of the competitive nature of both passenger and freight transportation in Syria, it is expected that the reductions in vehicle operat- ing costs will be passed on to the public in the form of lower rates and fares (or slower increases). - 32 -

B. Highway Construction

(a) Background

Pavement Strengthening on Damascus-Aleppo Highway

4.05 The 350-km long Damascus-Aleppo corridor contains about 62% of Syria's total population and an even greater share of its industry. The esti- mated 1976 popuLation of the provinces concerned was: Damascus - 1,774,000; Homs - 629,000; Hama - 601,000; and Aleppo - 1,523,000. The populations of the cities of the same names are about half the governorate totals, and are growing at an estimated 4.3% per year. Both agriculture and industry are important: agriculture is still the largest employer of labor, while four- fifths of all mining and manufacturing jobs in Syria are concentrated in this corridor. The major industries are cement (Damascus, Hama and Aleppo), petrol- eum refining (Homs), fertilizers (Homs), sugar refining (Damascus and Homs), and textiles (Aleppo, Homs and Hama). Aleppo is the country's most important city industrially, with a strong element of small-scale private manufacturing of finished goods, while Homs is being developed by government companies as a heavy industry pole to take advantage of its central location and good trans- portation links with the rest of the country. At the same time projects are underway to improve agricultural output in the rich farming area of the Ghab valley northwest of Hama.

Homs Bypass

4.06 The importance of improving the highway network in and around Homs lies in the city's role as the crossroads of the central north-south and east- west corridors. By 1981, Homs will be connected on three sides by four-lane highways, to Damascus and Jordan and Iraq to the south, to the ports of Tartous, Lattakia and northern Lebanon to the west, and to Hama, Aleppo and Turkey to the north. To the east a two-lane highway leads to Palmyra, both a mining area and a major tourist attraction; by the 1980's this highway will also be part of an alternative route from the Mediterranean ports to Iraq. The city of Homs itself generates and attracts considerable traffic, as the site of the country's principal oil refinery and a major fertilizer complex. Other important factories include a sugar refinery and cotton yarn and textile plants. The governorate of Homs is also an important agricultural region growing a wide variety of crops.

Qantary-Tall Tamir Section of Aleppo-Tall Kojak Highway

4.07 The Qantary-Tall Tamir highway section has an extensive zone of influence in and beyond the Jezireh (the area between the Euphrates and the Tigris). To the west is Aleppo, which, besides being an industrial city, is the marketing center for most of the agricultural products of northern Syria, whether they are destined for export through Lattakia or Tartous or for local processing in Aleppo. To the south is the city of Raqqa, the center of the Raqqa province (population in 1976: 296,000) and the focus of cotton distri- bution in the Balkh basin. Tabqa, the town serving the Euphrates Dam 50 km - 33 - to the west of Raqqa, is growing rapidly. To the east are the market towns of Hassakeh (population47,000) and Qamishli (60,000),which are centers of cereal and cotton production and distributionin the northern Jezireh region (total population 570,000). Many oil-field workers also live in the Qamishli area.

4.08 There is no direct road at present between Aleppo and the Jezireh region, there being essentiallytwo missing links, one between the Euphrates River at Qaraqozakand the Balikh valley town of Ain Issa, the other between Qantary, a small town 37 km east of Ain Issa, and Tall Tamir, an agricultural community close to a bridge crossing the Khabour River. On the remaining sections there exist low-standardroads only capable of accommodatingtraffic for the next five to ten years. A low-standardagricultural/military road has recently been built along the Turkish border between Sluk and Ras Al Ain that is carrying some Raqqa-Qamishlitraffic, but it is not designed to take the relatively heavy traffic loads between Aleppo and the Jezireh region that are otherwise obliged to go via Deir Ezzor. The existing paved secondary roads between Raqqa, Deir Ezzor and Hassakeh are in poor condition.

(b) Traffic

4.09 Traffic volumes on the Damascus-Aleppohighway are between 5,000 and 10,000 vehicles per day, over 50% of them trucks and buses. They were estab- lished on the basis of surveys and counts conducted in May 1976 by consultants carrying out feasibilitystudies for bypasses for Homs, Hama and Aleppo under the Second Highway project, and by the MOC in October and December 1976. Growth rates and hourly and seasonal adjustment factors were estimated by reference to various counts in the vicinity of Damascus and Homs during the period 1972-76. In the years preceding 1974 traffic growth nationwide was about 5% per year and between Damascus and Aleppo about 7%; in 1974 to 1976 it jumped up to about 20% per year on the Damascus-Aleppohighway. Over the period 1977-82 it is expected to settle down to about 10% per year, consistent with expected growth in GDP and manufacturingoutput. Beyond 1982 when rehab- ilitation of the Aleppo-Romsrailway line should be completedand the exten- sion to Damascus in operation, traffic growth on the highway is forecast to decline to 8% through 1986 and thereafterto ease to 6%. The average growth rate over the twenty years to the end of the century would be 9%, doubling traffic every 8 years.

4.10 The consultants'feasibility study for the Homs bypass reported 1976 ADTs in and around Homs of 17,000 on the Damascus approach, 8,000 on the Tartous approach, 19,500 on the Aleppo approach, and 15,500 - 23,000 in the city center. The peak-hour volume-capacityratios averaged nearly 60% and reach 75% on some sections. Thirty percent of all traffic recorded in the origin-destinationsurvey was through traffic. Without a bypass, traffic on the city streets will reach 75% of capacity throughout 16 hours per day in 1978-82in the city center, 1983-91 on the southern approach, 1987-91on the Tartous road and 1985 on the northern approach. Average daily traffic on the bypass in the opening year of 1982 is forecast to be 10,100 vehicles per day. - 34 -

4.11 Traffic likely to use a new highway between Aleppo and Tall Kojak has been estimated on the basis of traffic surveys carried out throughout northern Syria in January and February 1976 by consultants under the Second Highway Project. Seasonal factors to arrive at annual average traffic were derived from earlier counts by the MOC at selected locations. The main exist- ing flows identified by the traffic surveys as likely to use the Qantary-Tall Tamir section were Aleppo-Hassakeh trips (120 per day in 1976) and Aleppo- Qamishli and beyond (240). In forecasting future traffic, two basic catego- ries were identified: "normal" traffic, consisting of existing trips in the area that would be diverted to the new highway due to reduced trip distance, and agricultural traffic attributable to incremental agricultural output in the corridor of tlhenew highway made possible by improved access and trans- portation facilities. Alternative forecasts were made of traffic expected to use the Qantary-Tall Tamir section with or without the Qaraqozak-Ain Issa section. By 1982, assuming construction of both sections and 9% annual growth from 1976, traffic on the Qantary-Tall Tamir section will be 1,740 vehicles per day, divided into 71% normal and 29% agricultural traffic.

4.12 Traffic is expected to grow at an average rate of 7.3% per year through the year 2000, with a slight increase in the proportion of light vehicles and a decline in the share of agricultural traffic. International traffic to Iraq is not expected to be significant for the feasibility of the highway: for 1982 it is forecast at 35 vehicles per day, of which two vehicles out of three woulcd be trucks. In the absence of the Qaraqozak-Ain Issa sec- tion, the opening year ADT on the Qantary-Tall Tamir section would be 900, or 52% of the traffic with the Qaraqozak-Ain Issa section.

(c) Alternative Improvements Considered

4.13 For the pavement strengthening, two alternatives were examined, firstly, an overlay sufficient to take traffic expected in the five years 1979 through 1983, to be augmented by a second overlay for the following five years, and secondly, a single overlay for the ten years through 1988. For the pur- pose of economic evaluation, these two overlay schemes were compared with the application of minimum maintenance (patching) on a more or less continuous basis to keep the pavement from breaking up entirely, but which would imply a very uneven riding surface. The five-year overlay was found to have a very high ER like the 10-year overlay, though its net present value discounted at 10% was less than that of the 10-year; the incremental investment of the 10- year overlay over the five-year is therefore economically justified.

4.14 Two alternative alignments for bypassing Homs were examined, one to the east and one to the west of the city. The western was preferred by the Government for its greater beneficial impact on the overall development of Homs.

4.15 On the Aleppo-Tall Kojak highway an alternative alignment was studied to the north of that adopted. The traffic served would have been the same but lesser use would have been made of the existing network as an interim solution to facilitate stage construction. Both alternatives showed similar ERs, but the - 35 - southern alternativewas preferred because of its greater developmentalpoten- tial for the area.

(d) Competitionwith Railway

4.16 When open in the early or mid-1980's, the single-trackrailway line between Damascus and Aleppo is expected to have a capacity of 3 to 5 million net tons per year (or passenger equivalent). By 1981 traffic in the corridor is expected to be about 20 million tons of freight and 15 to 20 million pass- engers, averaged over the complete distance. Thus, even if the railway suc- ceeded in operating close to full capacity, it would not have a radical impact on highway traffic volumes. It has been assumed that by the end of the first five years of operation it will be carrying about 10% of traffic in the corridor.

4.17 The new railway line from Lattakia to Qamishli that was brought into operation in 1976 is viewed as a competitor to the proposed Aleppo-Tall Kojak highway only for long-distancetraffic between Qamishli, Hassakeh and Aleppo, because they follow divergent routes. The division of traffic between high- way and rail was estimated on the assumption that rail transportationwould be more suitable for the shipment of most agriculturalproducts, these generally being bulky, low unit-value commodities. In the absence of the railway, the ADT on the Qantary-TallTamir section would be 30-40% higher.

(e) Civil Works and MaintenanceCosts

4.18 The estimatedwithout-tax costs which were used for the economic analysis are shown below (in SL million):

Project Item Pavement Homs Qantary-TallTamir Strengthening Bypass Highway Section

Project preparation - 0.5 0.7 Construction 123.0 73.4 78.1 Right of way acquisition - 11.0 3.5 Construction supervision - 3.1 4.1

123.0 88.3 86.4

Routine annual maintenance (average) 3.3 0.3 0.5

Periodic maintenance after 10 and 15 years was also taken into account on the new constructionitems at a cost of SL 3.7 million and SL 5.4 million respec- tively on the Homs bypass and SL 6.2 million and SL 10.2 million respectively on the Qantary-TallTamir highway section. - 36 -

(f) Transportation Costs

4.19 Transportation costs are based on owning and operating typical vehicles, which were grouped into three categories: (a) light, comprising passenger cars, motorcycles and pickups; (b) medium, comprising 2-axle trucks and buses; and (c) heavy, comprising 3-axle trucks and truck-trailer combina- tions. The average costs for light vehicles assumed that 25% were taxis, the remainder private. The characteristics of each of these vehicles and their operating costs on a level, tangent, paved highway in good condition at free- flow speeds are shown below:

Tvpical Vehicle_ Average Characteristics Light Medium Heavy

Price of vehicle (s5) 16,000 81,000 165,000 Price of one tire (SE) 94 94 756 Number of tires 4 6 14 Vehicle life (years) 10 10 12 Tire life (km) 40,000 70,000 120,000 U'nitCost of Fuel per Liter (without tax) Annual distance driven (km) 25,000 60,000 60,000 Annual hours operated 450 1,250 1,250 Regular gasoline 0.31 Passenger vehicle: capacity (pass.) 5 30 - Super gasoline 0.36 Average occupancy (pass.) 4.5 24 Diesel 0.12 Truck load capacity (tons) - 10 20

Operating Costs (SL/000 k) Value of Working Passenger Time (SL per hour)

Fuel 35.1 25.7 37.1 Per person Car Bus Oil 3.0 5.0 11.0 _ Tires 10.4 68.7 93.7 Per person 4.1 2.4 Maintenance 26.7 135.8 154.4 Per vehicle (avg. of working 5.53 20.32 Depreciation and interest 70.1 172.0 302.1 and non-working time and Salaries 48.3 112.0 183.9 with avg. occupancy)

Average cost of road accidents: SL 10,000 lotal 193.6 519.2 782.2

(free flow speed - km/h 96 72 72

4.20 Vehicle wear and tear costs in relation to pavement condition were estimated by reference to Bank-assisted research in Kenya. On this basis, the average savings associated with going from a very poor surface to a very good one, for the traffic composition on the Damascus-Aleppo highway, are SL 121 per thousand vehicle-km. This is equivalent to a 24% saving on overall vehicle operating costs, similar to that found in going from a good gravel surface to good asphalt. Expressed another way, the average saving per vehicle per km is US$11 per year.

(g) Benefits

4.21 Total quantified benefits from the three civil works components are summarized below. Details are available in the project file. - 37 -

Pavement Homs Qantary- Strengthening Bypass Tall Tamir

Benefits, 1982 (SL million) 97 15 18 Benefits, 2000 (SL million) - 222 73 Average Growth Rate - 16% 8.1% Breakdown (%) k Vehicle Operating Costs 100 90 93 Accidents - 10 7

4.22 Benefits from the pavement strengthening derive from the difference between a very poor pavement surface throughout the ten-year evaluation period (1979-88) and an initially excellent surface that progressively deteriorates to the original condition. Half the total deterioration was assumed to occur in the last two years.

4.23 For the Homs bypass, savings were measured by comparing user costs, using the ratio of forecasted traffic to the capacity of each road section to estimate average speeds. The average journey time through the city from south to north is estimated to deteriorate from 25 minutes in 1982 to 36 minutes in 1990 and 97 minutes in 2000, while the time via the bypass would remain at 17 minutes. In view of the widespread shortage of vehicles relative to demand in Syria, it is fair to assume that time saved will be fully utilized in making additional trips.

4.24 Benefits to normal traffic diverted onto the new Aleppo-Tall Kojak road were calculated as the difference in total travel cost on the northern highway network with and without each new highway section constructed, over their expected 20 years economic life. The benefits to agricultural traffic generated by the new highway were also calculated on the basis of vehicle operating costs and time savings, for lack of adequate data on future agricul- tural production costs and selling prices; they account for 11% of total bene- fits.

4.25 The Homs bypass will provide substantial time savings for car and bus passengers, as will the Qantary-Tall Tamir highway section to a lesser extent. However, the value of such savings to the economy is difficult to assess. An estimate was made of the value of work-related time saved, as shown in para. 4.19, and rates of return were calculated for each road with and without such savings. For the sake of conservatism, the "best estimate" results shown below exclude passenger time savings.

(h) Results

4.26 Economic evaluation shows that all civil works are well justified and appropriately timed. The overall economic return of civil works, which account for 96% of total project costs, is estimated at 52%. The pavement strengthening, like many maintenance investments, has a very high ER, namely 76%; its benefit cost ratio is 3.9 (taking the opportunity cost of capital as 10%). The ER of the Homs bypass is 35% and the first-year benefit ratio (FYB) 15%. The Qantary-Tall Tamir highway section has an ER of 26% and an FYB of - 38 -

19%. The sensitivityof these results to underestimationof the costs or overestimationof the benefits is shown in the table below, together with the impact of includingpassenger time savings. The results show that even under the most pessimisticassumptions the civil works would still yield an ER of 32%. For the Homs bypass and the Qantary-TallTamir highway section, applying a shadow price for foreign exchange of 1.4 times the official rate will not significantlyaffect the ER's. The estimatedER of project items are shown below (in %):

Including Best Passenger +20% Costs, Estimate Time -25% Benefits

Pavement Strengthening ER (%) 76 - 45 BCR 3.9 - 2.4 Hom bypass ER (%) 35 43 28 FYB (%) 15 23 9 Qantary-TallTamir ER (%) 26 28 18 FYB (%) 19 21 12 All combined ER (%) 52 55 32 BCR 4.8 6.4 3.0

4.27 It is understood that the Government is discussingwith the Saudi Fund financingof the Qaraqozak-AinIssa highway section, which would be con- structed at about the same time as the Qantary-TallTamir section. The bridge over the Euphratesat Qaraqozak is also expected to be completedby the open- ing year of these road sections. If completionof the Qaraqozak-AinIssa sec- tion were delayed, reducing the volume of traffic using the Qantary-TallTamir section, the first-yearbenefits ratio of the latter would be 14%.

4.28 The central Government and local authoritieshave been examiningthe possibilityof building a direct highway from Raqqa to Hassakeh, to the south of the proposed Qantary-TallTamir alignment. This highway, whose construc- tion cost would be similar to the Qantary-TallTamir alignment,would dupli- cate the latter for Raqqa-Hassakehtraffic but not for long-distancetraffic between Aleppo and Jezireh. As an alternativeto the Qantary-TallTamir section, therefore,it would have a lower economic return;built in addition to the latter, it would detract from the economic return of this and other proposed sections of the Aleppo-TallKojak highway at no overalladvantage to the economy. Assuranceswere obtained from the Governmentat negotiations that constructionof a direct highway between Raqqa and Hassakeh would not be undertakenunless found to be economicallyjustified.

C. Other Project Elements

4.29 No attempt has been made to quantify the benefits expected to accrue from the other componentsof the projects,which account for 4% of total proj- ect cost. The technicalassistance and equipment for the MOC would help strengthen its planning and design capabilities. - 39 -

V. AGREEMENTS REACHED AND RECOMMENDATIONS

5.01 During loan negotiations, agreement was reached on various issues referred to in the report, including the following matters of particular sig- nificance:

(i) to provide all ministries and agencies of the Government the necessary time to define adequate enforceable dimension and axle-load regulations, adjust truck tariffs, and provide the necessary hardware and highway patrols, the Government has agreed that within two years from signing of the loan agree- ment, it will have set up a system, satisfactory to the Bank, to have these regulations duly enforced and observed (para. 2.21);

(ii) bidders to be qualified for award of contracts for civil works will be required to accept in carrying out their obligations under such contracts, normal supervision by the Government or consultants employed by it (para. 3.23); and

(iii) the Government will not undertake any highway construction which may conflict with the economic justification of the Qantary-Tall Tamir highway section unless such construction is economically justified by the study to be carried out under the Second Highway Project, as amended.

5.02 Agreement having been reached on the issues set forth in this report, the project is suitable for a Bank loan of US$58 million to the Government of the Syrian Arab Republic for a 17 year term, including a 3 1/2-year grace period.

March 1978 ANNEX

Related Documents and Data Available in the Project File

A. General Reports and Studies on the Transport Sector

1. Syrian Arab Republic--Development Prospects and Policies, IBRD, Draft October 1977; Annex: "The Transport Sector"

2. Syrian Arab Republic--Comprehensive Transport Study, Terms of Reference, Ministry of Transportation, August 1977

B. General Reports and Studies Relating to the Project

1. Feasibility Studies and Detailed Engineering of Homs, Hama and Aleppo Bypasses, Ministry of Communications, Syrian Arab Republic (1976-1978), Consultants: DAR AL HANDASAH NAZIB TALEB

2. Feasibility Study and Detailed Engineering of Aleppo-Tall Kojak Road, Ministry of Communications, Syrian Arab Republic (1975-1978), Consultants: DAR AL HANDASAH NAZIB TALEB

3. Economic and Technical Analysis of Pavement Strengthening on Sections of Damascus-Aleppo Highway, Ministry of Communications, Syrian Arab Republic, June 1977 and IBRD November 1977

C. Terms of Reference

1. Draft Terms of Reference. Preparation of a Highway Network Development Plan for northeastern Syria

2. Draft Terms of Reference for Traffic Analyst and Transportation Economist; Technical Assistance to the Department of Highways and Bridges SYRIAN ARAB REPUBLIC THIRD HIGHWAY PROJECT ORGANIZATION OF THE MINISTRY OF COMMUNICATIONS

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