World Bank Document

ReportNo. 4057-MAG FILE' Madagascar f TransportSector Memorandum Public Disclosure Authorized

February4, 1983 EasternAfrica Projects Department Transportation I FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank

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 disclosedwithout World Bank authorization. MADAGASCAR

TRANSPORTSECTOR MEMORANDUM

CURRENCYEQUIVALENTS

Currency Unit Malagasy Franc (FMG) US$0.0033 FMG 1 January 1982 US$0.0029 = FMG 1 June 1982 (used in report) US$0.0027 = FMG 1 July 1982 US$1.00 = FMG 375 July 1982

ABBREVIATIONS

CCCE - Caisse Centrale de Cooperation Economique (France) CIMACOREM - Confgrence Internationale Malgache, Comores, Reunion et Maurice CMM - Compagnie Malgache de Manutention CMN - Compagnie Malgache de Navigation DGP - Directorate General of the Plan EPIC - Entreprise Publique a Caractare Industriel et Commercial FAC - Fonds d'Aide et Cooperation (France) FIBATA - Fitateram Bahoakan Antananarivo FIMA - Fitaterana Malagasy ICAO - International Civil Aviation Organization IFAD - International Fund for Agricultural Development IMF - International Monetary Fund INSRE - Institut National de Statistiques et de Recherche Economique MIC - Ministry of Industry and Commerce MPW - Ministry of Public Works MTRT - Ministry of Transport Supplies and Tourism RNCFM - Reseau National des Chemins de Fer Malgache SCR - Supreme Council of the Revolution SEPT - Socifte d'Exploitation du Port de Tamatave SINPA - Societe d'Interet National pour la Production Agricole SINTP - Societe d'Interet National pour les Travaux Publics SMTM - Socifte Malgache des Transports Maritimes SOLIMA - Socifte Petroliere Malgache TASCAF - Taxe sur le Chiffre d'Affaires

.4 FOR OFFICIAL USE ONLY MADAGASCAR

TRANSPORTr SECTOR MEMORANDUM

Table of Contents

Page NDo:

SUMMARYAND CONCLUSIONS ...... 1

General Recommendations ...... 1

A. Financial Shortcomings ...... 1 B. The Degree of State Control in the Transport Sector ..... 2 C. The Lack of Adequate Pricing Policy . . . 2 D. Transport as a Bottleneck in the Economy ...... 3 E. Transport Planning and Coordination...... 3 F. Manpower Training and Technical Assistance . . . 4 G. The Use and Price of Energy in Transport ...... 4

Sub-SectoralIssues ...... 4

A. Road Transport ...... 4 B. Passenger Transport .... 5 C. Road User Charges .... 5 D. Railway ...... 6 E. Ports and Shipping ...... 7 F. Aviation ...... 7

I. SECTOR OBJECTIVES, PLANS AND RESOURCES ...... 9

- Objectives ...... 9 - Planning and Resources ...... ,11 - Transport Coordination.... 15 - Intermodal Coordination . . .17 - Manpower Resources ...... 17

II. THE PRESENT SITUATION .19

Transport Infrastructure .19

A. Roads ... 19 B. Ports and Shipping . . .19 C. Rail Transport a n s p o rt...... 20 D. Air Transport .... 21

This report was written by Messrs. M. Le Blanc and S. Rahim, following a mission to Madagascar in February 1982. Other mission members who contributed on specific topics include Messrs. B. Chatelin, C. Delvoie, J.-C. Crochet and Ms. E. Bolenge-Bongeli.

This document has a restricteddistribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwise be disclosed without World Bank authorization. (Table of Contents - Cont'd)

Transport Equipment ...... 22

A. Road...... 22 B. Rail ...... 22 C. Ports and Coastal Shippin . g...... 23 D. Air Transport ...... 23

Organization and Management ...... 24

A. Road Transport ...... 24 B. Road Passenger TransportIndustry . . 25 C. Road Maintenance ...... * 26 D. Railway ...... 27 E. Ports and Shipping ...... *.....*...... 28 F. Air Transport...... 30

Transport Tariffs ...... 32

A. Road Transport ...... 32 B. Railway ...... 32 C. Maritime and Air Transport ..... 33

III. THE ECONOMICS OF THE TRANSPORT SYSTEM ...... 35

- Rising Costs ...... 35 - Economic Consequences ...... 37

IV. RECOMMENDATIONS FOR A RECOVERY PROGRAM ...... 40

A. Sector RehabilitationStrategy ...... 40 B. ConsultativeMechanisms ...... 43

(i) Governmental ...... 43 (ii) Aid Coordination ...... 44

V. PAST BANK GROUP INVOLVEfMENTIN THE SECTOR ...... 45

- Past projects in Sector and Strategy for the future.. 45 ANNEX I - Tables

1. Freight Traffic - All .orts 2. Classement Escales par Activite 1980 3. Indicateur de Trafic Aerien sur le Reseau International (Air Madagascar) 4. Indicateur de Trafic Aerien sur le Reseau Interieur (Air Madagascar) 5. Vehicle Fleet (1977-1980) 6. Situation Actuelle de la Flotte Aerienne Commerciale de la Compagnie Air-Madagascar 7. Road Maintenance Budget 8. Rail Traffic General 9. Madagascar Railway - Balance Sheets 10. Madagascar Railway - Income Statement 11. Importations - 1981: Repartition du Trafic pour les Principaux Pays Desservis par la CIMACOREM 12. Exportations - 1981: Repartition du Trafic pour les Principaux Pays Desservis par la CIMACOREM 13. Air Madagascar: Profits ou Pertes

ANNEX II - MiscellaneousData on the Transport Sector

1. Air Traffic - Antananarivo 2. Air Traffic - Tamatave 3. Air Traffic - Mahajanga 4. Trafic a4rien r4alise sur l'enseubledes services offerts par Air Madagascar 5. MadagascarRailway CoBmercial Freight Traffic 6. Vehicle Fleet - 1979 7. Registration Fees & Taxes on CommercialVehicles - Trucks 8. Registration Fees & Taxes on Commercial Vehicles - Pick-ups 9. Road User Taxes 10. Selected Road Transport Users/Operators 11. Docking Statistics- Port of Mahajanga 12. Port of Toamasina General Traffic 13. Port of Toamasina GenetralFreight and Petroleum Products Traffic 14. SOLIMAMarket Consumption 15. Price Trends of Petroleum Products

TRANSPORTSECTOR MEMORANDUM

SUMMARY AND CONCLUSIONS

1. The main problems affecting the transport sector in Madagascar have been identified in Chapters II, III and IV. In some cases Government has begun taking steps to study the problems and adopt corrective measures. However, the measures required to rehabilitate the sector will need a coordination of efforts across all modes and in some cases require the assistance of authorities normally considered outside the transport field. It is to help the Government in orienting its efforts at redressing the problems of the transport sector that the following recommendations are proposed.

General Recommndations

A. Financial Shortcomings

2. The most serious issue facing the sector in the immediate future is of a financial nature. Two aspects are involved: (i) the overall lack of financing for normal operating purposes, and (ii) the critical shortage of foreign exchange. The sit:uation in the transport sector has become critical and all sub-sectors are facing severe deficits in operations. The shortage of foreign exchange has resulted in a virtual cut-off of spare parts and imported inputs necessary for the day-to-day operations of the transport system. In the road sub-sector, this has resulted in about 50% of the fleet being unserviceable; those trucks and buses in service are only kept operational by cannibalizing parts from idle vehicles. The problem is repeated in shipping, railway and air transport and constitutes a very serious threat to the already precarious economic situation prevailing in the country.

3. Given this situation, it is recommended that the Government carefully review procedures for allocating foreign exchange and give due priority to transport. It is estimated that about FMG 4.5 billion in foreign exchange (US$13 million equivalent) would be required annually by the transport industry for the puLrchase of spare parts without which the transport sector cannot operate effectively. Because of the serious backlog of maintenance, it can be anticipated that this amount would be somewhat higher in the first couple of years of a recovery program.

4. It is also recommiended that Government prepare a financial re- dressment program for the transport sector including the elimination of arrears and a program of how to deal with the services which require a subsidy or rationalization. - 2-

B. The Degree of State Control in the Transport Sector

5. The state has progressively increased its control in the transport sector with very poor results. In addition, primary responsibility for collection of agricultural crops and distribution of basic necessities to towns and villages, which were previously handled by small local truck operators, has been allocated to state enterprises operating their own truck fleets. Private truck operators and coastal shippers are slowly being squeezed out of business through shortages of spare parts and because state controlled enterprises operating on subsidies have taken over their businesses. There appears to have been an overall decline in effectiveness as a result.

6. Because of the lack of any significant economies of scale particularly in road transport and the overall failure of the Government's attempt to gain more control over the sector, it is recommended that Government acknowledges a role and takes steps to encourage the private sector. This is particularly important in road transport and coastal shipping where the most efficient operations are currently in the hands of private operators. To achieve this objective would likely require a tran- sition period in which some degree of flexibility would be needed since the present system could not easily be dismantled in the very short term.

C. The Lack of Adequate Pricing Policy

7. The lack of adequate pricing policies is placing serious strains on the transport industry in Madagascar. This is evident from the deficits being incurred by the transport entities which operate in each mode. Because tariffs do not accurately reflect costs, distortions have been introduced into the system in terms of modal choice and are resulting in very poor resource allocation for the sector. The components of vehicle operating costs for trucks severely underestimate, among other items, maintenance costs, thus rendering the tariff structure unable to cover costs adequately and having a severe impact on the supply of road transport services. Simi- larly for other modes, operators are incurring heavy losses and are only able to continue operations by consuming capital. As replacement of old equipment becomes necessary, neither funds nor new vehicles are available and many services have been curtailed.

8. While the ideal situation may be that of completely deregulated systems, this assumes that transport functions in a perfectly competitive environment. This is not the case in Madagascar since tariff policy has been subordinated to overall pricing policy and any departure from the current practice is likely to have disruptive effects. It is therefore recommended that the Government undertake in the short term cost studies for each mode and provide some automaticity of tariff increases in the interim. The need for tariff adjustments is immediate, particularly for road and rail transport. - 3 -

D. Transport:as a Bottleneckin the Economy

9. The magnitude of the physical deterioration of the transport system has reached such proportions that it is creating bottlenecks that, ii not resolved, will have serious negative effects on the economy as a whole. These bottlenecks are the result of network gaps in the road subsector, poor maintenance, and a severe shortage of spare parts for all modes which has seriously reduced transport capacity.

10. It is recommended that a moratorium be placed on new investment in the transport sector for the next 3 years so that Government's efforts to rehabilitate the existing priority infrastructure can be concentrated to help remove some of the critical bottlenecks. This will require rationalization and abandonment of some less important links (see specific modal recommendations).

E. Transport Planning and Coordination

11. It is recognized that the lack of adequate sectoral management and coordination have been in part responsible for many of the ills pla- guing the sector. The need for greater transport planning and coordination of projects was acknowledged by Government which has already taken steps to increase the role of the Directorate of Planning by placing it directly within the Presidency. Nevertheless, insufficient attention has been given to inter-modal considerations and projects like the Pangalanes Canal are still outside the Government's planning and coordination structure and their impact on the use of investment funds and supply of transport capacity must be taken into consideration in the overall transport coordination function. One of the reasons for the difficulty in adequately carrying out the planning function is the weak data base and the poor timeliness of the information which is availabLe. This is particularly important concerning the information basis for real (economic) costs of services throughout the sector, which is very weak, and which has a significant impact on intermodal competition.

12. It is recommended that a high level transport planning and coordination unit be set up in the Ministry of Transport responsible for all modes and working closely with the Directorate of Planning on overall policy issues. In addition, to carry out its function, the Ministry of Trans- port should set up an inter-modal coordination committee with representa- tion from all interested ministries and transport modes to review budget and investment proposals for the transport sector in light of transport needs and capacity. This committee should have the role of reviewing all the policy implications of the recommendations contained in this document including the need to collect and analyse basic transport data, the preparation of the recommended recovery program and the review and action upon the studies recommended. It is further recommended that a high level task force be created under the General Directorate of Planning in close collaboration with the INSRE (Insl:itutNational de la Statistique et de la Re- cherche Economique) to identify the data needs required to carry out the transport planning function and set up a program to collect and publish the data in a timely fashion. - 4 -

F. Manpower Training and TechnicalAssistance

13. Part of the problems now being encountered in the transport sector are due to the lack of sufficiently experienced and qualified personnel. While the problem is being addressed to some extent in the highway subsector, the overall approach is too peacemeal and "ad hoc" to be really effective in filling the manpower needs for the sector.

14. It is recommended that as part of an overall long term strategy to improve sector management and performance, Government undertake a comprehensive study of training needs at both technical and managerial levels to identify needs, set priorities and establish the training programs needed to provide the required personnel. As this program is expected to be carried out over a number of years, the study should also identify critical areas to be filled by technical assistants in the interim.

G. The Use and Price of Energy in Transport

15. Madagascar has been slow to react to recent world trends in fuel consumption. There is no clear-cut energy policy or energy conservation program. While current prices of gasoline and diesel fuel are above their opportunity costs, there is a 100% differential between the two fuels which may lead to a shift from gasoline to diesel oil, in particular for private passenger cars. In addition to the higher initial cost of diesel vehicles, continuation of such a differential could have an impact on location of industry resulting from a distorted transport cost perspective.

16. It is recommended that Government initiate a national energy program and review its pricing policy with respect to motor vehicle fuels in order to place a larger share of the road construction and maintenance costs on the heavy vehicles concomitant with their use of the infrastructure.

Sub-SectoralIssues

A. Road Transport

17. Among the most critical areas identified as having a serious effect on the transport sector and the economy as a whole is the inadequacy of road transport. Four problematic areas were identified. First, the industry is suffering from a critical lack of spare parts resulting in very low fleet availability; secondly, Government's attempts to give the state a greater control of road transport has had disastrous and costly results; thirdly, the system operates under a totally inadequate tariff structure; and finally, the state of road transport infrastructure has reached a critical level (see further discussion below).

18. Given these serious problems and those identified elsewhere in this report, it is recommended that:

(i) The six large provincial trucking companies be abolished. The Government could either create smaller public companies (each with 10 to 15 trucks) or, better, sell the trucks to enterprises that could operate them efficiently, including the private sector. (ii) The existing tariff for the category of trucks of 10 tons and above be immediately increased by at least 50%. This will allow the owners of the largest population of trucks to cover their costs. In addition, two to three man-months of technical assistance to the Ministry of Transport are required to develop appropriate expertise in computing vehicle operating costs.

(iii) The Government authorize the truck dealers to import spare parts, since the trucks owned by the private sector represent a large capital that the Government cannot afford to lose. The annual needs are estimated at FMG 2 billion (US$5.7 million equivalent). (In the future the government should also give greater attention to vehicle maintenance facilities, while importing new trucks).

(iv) Government should be encouraged to abandon its project of making mandatory the use of planned freight terminals.

B. Passenger Transport

19. Road passenger transport is faced with the same problems as freight transport. The private sector is being squeezed out of business and tariffs are set much too low to cover operating costs.

20. In order to improve the situation, it is recommended that the Government:

(i) Raise the tariffs for urban transport, particularly in Antanana- rivo.

(ii) Authorize bus and car dealers to import an appropriate amount of spare parts.

(iii) Carry out comprehensive analysis of the road passenger transport industry (both urban and inter-city) in order to define the relative role of the large bus companies and rural suburban traffic, and of the existingr cooperatives.

C,. Road User Charges

21. Revenues from taxes on gasoline and diesel oil (US$0.23 per liter for gasoline and US$0.12 per liter for diesel oil) constitute the main sources of revenue from road user charges. Estimated consumption in 1981 of gasoline was about 100,000 m3 and consumption of diesel oil about 160,000 m 3, of which at least 80% was consumed by the transport sector. Revenues from these taxes reached about FMG 13.9 billion (US$39.7 million). Import duties and saLes tax on transport equipment and spare parts (about FMG 8.40 billion in 1980, or US$24.0 million), yearly licence fees, vehicle inspection fees, etc. (about FMG 1.5 billion, US$4.2 million) should also be added. Total revenues from road user charges are estimated at FMG 20 billion in 1981 (US$57.0 million). This exceeds what was spent on roads for maintenance and construction and is far above what should be correctly allocated for a normal road maintenance. Both light and heavy vehicles seem therefore to cover far above their short run marginal cost of using the road networks. -6-

22. Despite the adequate resource base, there is an urgent need to rehabilitate the road network. Funds allocated by the Government from the general budget for this purpose are insufficient. It is recommended that a special road fund be set up for routine and periodic maintenance. Part of the revenue from taxes on gasoline and diesel oil could then be automati- cally earmarked for this fund. Care should be taken that the earmarked funds would be exclusively used for maintenance, excluding any major road construction. IHowever, in the short run, this fund could be used for urgently needed road rehabilitation works.

D. Railway

23. The railway has suffered from particularly severe technical problems in the last couple of years. Identification of specific problems, e.g. locomotive maintenance, track, and specific recommendations were provided by short term technical assistance under an emergency program financed by the French Caisse Centrale in 1981. Although this program was useful, it may not be sufficient to sustain a recovery in the long term. Also technical problems may soon reappear if they are not addressed in a more global context of reinstating adequate operational, maintenance and financial procedures.

24. To help reduce the incidence of these problems, it is recommended that the railway prepare a program whereby technical assistance would be hired for a specified time period, coupled with a comprehensive training, to reorganize operational procedures and establish a "program contract" between the Government and the railway to deal with these matters.

25. Financial problems are serious and the railway is near bankruptcy. Under the ongoing Second Railway Project (Cr6dit 903-MAG) a complete financial recovery program is being studied by the Government, including a change in the railway's financial management. Such a program is an absolute condition if the railway is to function normally in the future; it is also a condition of any additional involvement by the Bank Group in this subsector, including the continuation of the Second Railway Project. One additional problem which will need to be tackled is the allocation of sufficient foreign exchange for normal operating purposes.

26. Operational problems have developed in the last few years. All productivity indicators show a downward trend. Although this is partly due to the two problems mentioned previously the Association believes that the overall operational organization of the railway needs to be strengthened, particularly (i) all maintenance procedures (locomotives,, rolling stock and track); (ii) planning of operations; and (iii) procurement procedures.

27. It is recommended that the Government be required to prepare an action program to deal with the above mentioned problems. This will likely involve a fundamental change in the management philosophy of the railway towards a more modern approach based on productivity objectives and commer- cially oriented operations. It is further recommended that an improvement in railway operations be a prerequisite to any major injection of additional hardware in the railway. -7-

28. The long term viability of the railway also needs to be studied before new investments are undertaken. This relates to specific services and low density lines for which less costly alternatives need to be studied. Construction of the road between Toamasina and Antananarivo also rLeeds to be speeded up to decrease the dependence of the whole economy on the railway; this involves a need to prepare basic reorganization measures in the railway to enable it: to compete efficiently with road traffic as soon as the road is completed.

29. It is recommended that before any further investments are undertaken, the railway should undertake (i) an action program in all areas, and (ii) a comprehensive technical assistance/training program. It is also recommended that as a condition of continued Bank assistance the railway be required to carry out the feasibility studies of the Fianarantsoa-Manakara and Antananarivo-Antsirabe lines which were included under the second project but not yet carried out.

E, Ports and Shipping

30. Because of poor internal connections in the past, Madagascar developed a dense network of coastal ports. However as air and road connections developed, some of the smaller ports may no longer be justified. It is more critical now that: the strategy to be adopted for coastal ports and shipping be complementary to the development of other transport modes so that the least-cost solution prevails. A study of secondary ports and coastal shipping is about to begin and will deal with the needs and proposed strategy in the subsector.

31. It is recommended that until the secondary ports and coastal shipping study is completed Tend 1982) no investments in the subsector be undertaken except for routine maintenance. This recommendation applies especially to the Pangalanes Canal where major investments are about to begin. Further investments in this subsector should be made only on strict economic grounds and would likely involve a rationalization of traffic and ports system.

32. It is recommended that Government encourage the return of secondary ports administration to the private sector where it has been demons- trated (Mahajanga) that productivity is up to five times greater than that other state run ports. This should of course follow the results of the study which is currently underway.

F. Aviation

33. Air transport plays an important role in the transport system of Madagascar. However, as withL the development of coastal ports, the country has been provided with many airports more or less equipped and maintained which now must compete with other modes for traffic and resources. In the past many of the facilities were not suited to the type of aircraft utilized and because of lack of maintenance, certain runways no longer provide the strength and length required to provide an economic service with present equipment. -8-

34. In view of the limited resources available and the financial difficultiesunder which Air Madagascar has had to operate, it is recommended that investments in air transport infrastructure be limited to those which are needed to ensure a minimum level of safe operations and allow certain critical airstrips to be rehabilitated to allow the airline to fully exploit its potential.

35. Following the colonial period and before the first fuel price crisis, receipts from internationalservices of Air Madagascar were sufficient to compensate for the losses on domestic services and the general rise of internationalprices. Recent changes in internationaltraffic demand no longer provide the revenues from these services to subsidize the domestic system.

36. It is recommendedthat to allow Air Madagascar to operate efficiently, the Government should establish a policy of sharing the deficits on an initial 50-50 basis with an incentiveprogram for the airline to improve efficiency over time as the Governmenttakes on a greater share of the deficits. I-naddition, it is further recommendedthat, as and when other transportalternatives become available,continued air service should be self supportingor the service abandoned.

37. The financial situation of Air Madagascar has deteriorated markedly over the past few years and it is no longer a generator but a drain on foreign exchange. The general decline of load factors and the heavy debt burden are partly to blame. Load factors, particularly on internationalservices, have been steadily falling from a level of 59% in 1977 to a low of 36% in 1981.

38. Since the Governmenthas already considered and rejected the option of selling Air Madagascar'sB-747 it is recommendedthat Government, with the assistanceof Air Madagascar,take all measures possible to develop and encourage tourism in order to increase load factors and thereby improve the financial performanceof Air Madagascar. - 9 -

I. SECTOR OBJECTIVES, PLANS, AND RESOURCES

Objectives

1.1 The Government has had three main objectives in the transport sector. First, it wished to create an integrated transport infrastructure, notably paved highways, thal: linked the main regions of the country. Second, it wished to play a more significant role in international transport by bringing a part of Madagascar's transport links with other countries under Malagasy control. Third, it wished to extend the State's control over the sector as a whLole. That these have been the Government's main objectives is apparent from a multitude of actions, expenditures, and statements, but nowhere are they clearly and explicitly formulated. Other objectives, such as proper maintenance of existing infrastructure and reconstruction of the road linking Antananarivo to Toamasina, receive at least equal mention in official documents but have been neglected in practice. The Government appears to have been torn between political and economic objectives and the political objectives have prevailed. They are un- derstandable in the context of the country's political evolution, but the excessive emphasis on them at the expense of economic objectives has led to the disintegration of much of the existing transport system and has been ultimately self-defeating. It is now unlikely that Madagascar can make much progress towards its original plan of constructing its integrated road system during this decade and, though it has acquired aircraft and ships for its external communications, it has become more dependent on financial and technical assistance for their operation. A great extension of state control has been achieved, but: at the expense of an alarming deterioration of the transport system, which can be partly remedied in the short term only by restoring the private sector.

1.2 The main feature of the Government's objective regarding infrastructure has been the dream of the authorities since 1890, of building a system of paved highways radiating from the central plateau and going around thecoast. The road system that evolved, however, responded mainly to immediate economic needs. As late as 1972, the short length of highway network that was not on the central plateau consisted of isolated stretches adjoining some ports. Some regions had, and still have, no overland connections with the rest of the country, as, for instance, the provincial capitals of Toliara and Antseranana, which still depend almost entirely on the sea for merchandise transport. The main link between the port of Toa- masina and the central plateau area - the country's lifeline - is the inadequate railway system, maintenance of the old road having been neglected through the 1960s to ensure demand for the railway. Areas with crops to market were relatively well endowed with earth and gravel roads to the ports and the main transport axes, but the rest of the country was neglected and difficult to reach. The lack of overland communications explains why Madagascar has developed an air transport network that is denser than in most comparable countries, and the Government has been anxious to extend this network. On the other hand, its interest in improving port infrastructure has been limited, at least partly, because it has hoped roads would replace coastal shipping. - 10-

1.3 The Government's desire to increase its control over Madagascar's external transport links stemmed from apprehensions over their cost and security. The overall freight costs (excluding insurance) of imports and exports are high, equivalent to 16 percent of exports in 1979. It was be- lieved that the international shipping conference, the CIMACOREM, held a near monopoly of the country's external merchandise transport and set its tariffs accordingly. At the same time the feeling of security was low; the two ocean going ships under Malagasy flag carried a very small part of the country's cargoes. The Government, therefore, purchased two new vessels in 1980 and 1981. However, recent data show that the CIMACOREM carries only 20 percent of these cargoes and that the SMTM, the Malagasy shipping line belonging to the conference, carried the largest share of all the members. Malagasy negotiators have also shown that they can limit the conference's tariff increases. The situation with air transport seemed satisfactory since Air Madagascar made a small profit in 1978 with a B707 flying to Paris and two B737s able to reach neighboring countries. However, it replaced the B707 with a B747 and added some small aircraft to its domestic services. Since then it has been in financial difficulties that jeopardize both its domestic and international services. These difficulties have also been aggravated by the 1979 fuel crisis. The costs to the country of the two new ships and the B747 are probably much above the economic benefit.

1.4 The motivation behind the Government's desire to extend its control over the transport sector was primarily a desire to take the distribution system out of the hands of the non-Malagasy minority that dominated it and secondly its socialist ideology. The trading enterprises that collected and marketed crops, or those with the largest import/export and wholesale businesses, were nearly all owned by non-Malagasies. As the experience of other countries shows, a strong political reaction against this state of affairs was inevitable; in fact most of the takeovers of enterprises engaged in rural areas occurred under the conservative government preceding the present one. It was encouraged by the widespread but mis- taken belief, also shared by other countries, that the intermediaries ex- ploited both peasant and consumer by charging excessive prices for services that the State could provide better and cheaper. After 1972 the State took over all the large trading houses, created some new ones, and excluded the private sector from all large scale commerce with the rural sector or from any dealings in rice except at retail. With this, the State role in road transport became a major one. The present Government took over the SMTM; the coastal shipping company, the CMN; and the three petroleum companies, which had their own distribution systems. One result was to give it the greatest share in Malagasy shipping. Despite its socialist organization, the present government has taken over very little else in the transport sector, though it has neglected the needs of the private sector.

1.5 In addition to having acquired greater direct control over economic activities, the Government now fixes most consumer, producer, and export prices. Several motives lie behind this policy: protecting consumers, encouraging some producers, and augmenting Government revenues from exports. The rules governing the determination of prices are not precisely - 11-

laid down, but generally prices are calculated from estimates of costs. Since transport enters into nearly all activities, the Government has fixed road transport tariffs for the various types of vehicle in Madagascar according to estimates of the costs of efficient firms. These tariffs are supposed to apply to all transporters, but being based on assumptions that are excessively optimistic, particularly under the present difficult circumstances, they are well below actual costs and private transporters re- fuse to abide by them. The authorities seem resigned to allowing the private sector to charge according to the market, even when working for the public sector, but state controlled enterprises must still accept the official tariffs for their transport operations.

Planning and Resources

1.6 Having set itself these ambitious, non-economic objectives, the Government has failed to develop coordinated and practicable policies for achieving them. This was particularly marked with its investment planning. The first development plans came out in 1978, comprising a long term plan, 1978-2000, (LTP) and a medium term plan, 1978-80, (MTP), but they were too unrealistic to be of practical value and there was not enough institutional support for their implementation. In the transport sector the absence of clear, authoritative statements of the objectives and their non- economic nature made it harder to devise planning criteria. Not answering to economic needs, the Government's objectives became ends in themselves, and transport planning lost its connection with the rest of the economy. This may be why there is scarcely any mention of transport in the LTP. The MTP contains lists of transport projects, but without indications of priorities or economic justification. They broadly correspond to the objectives described above, though compiled with little modification from lists submitted by the Ministries of Public Works and of Transport, and, as was the case with other sectors, the total estimated cost of the projects is much above any realistic estimate of financing possibilities. The actual outcome for 1978-80 bore little relation to the MTP; ministries and other government agencies introduced new projects according to their own choice or following directives from the political leadership. The data available do not permit precise comparisons of intersectoral allocations of resources. The only comparison possible at present is a rough estimate of overall investment in transpDrt with total gross fixed capital formation in the economy for 1980.

Investment in 1980 (FMG billions)

Infrastructare 80 of which transport 7 (use 1980 Travaux Publics budget) Machinery and equipment 80 of which transport 27

Thus transport took up 21% of gross fixed capital formation, which does not accurately reflect the importance of the sector to Madagascar. - 12-

1.7 The MTP was far beyond the resources available to Madagascar. The country had extremely limited domestic resources and it lacked the institutional arrangementsand the political inclination to prepare a medium term external borrowing strategy. Prolonged economic stagnation since 1972, rapidly increasing social expenditures, and the contraction of the private sector, had made even recurrent expenditures difficult to finance from domestic resources. Up to 1978 the Government'sbudgetary and balance of payments policies had remained cautious and external borrowing had been kept low; but the disorganizationcaused by the wave of reforms and takeovers combined with the departure of expatriate technical personnelon whom Madagascar depended had greatly reduced the economy's capacity for implementing projects. In 1978 the Government tried to break out of the impasse by obtaining from abroad the necessary financing for a high rate of investment and, being in a hurry and lacking experience in preparing external borrowing programs, it did this by giving certain ministries and other agencies freedom to contract commercial loans without any coordination. This is illustrated in Table I below.

Table 1 Debt Incurred for Transport Sector 1972-80 (Commitmentsin US$ million)

1972 1973 1974 1975 1976 1977 1978 1979 1980

9.5 31.81/ 9.1 5.6 29.3 24.7 90.3 116.0 36.6

Source: World Bank 1/ All IDA/IBRD

In 1979 an investment boom took place in all sectors of the economy, which has left Madagascar with an unmanageable debt burden. The transport sector took a large share of the investments. Road projects were financed on the whole on concessionalterms, but ships, aircraft, vehicles, were financed on commercial terms with suppliers' credits and bank loans. Few of these investments yield commensurateeconomic or financial benefits, many having been undertaken with little technical preparation and no calculation of economic returns. Consequentlyas a whole their benefits are far below the costs of their debt servicing. - 1-

Table 2 Servicing on TransportSector External Debt, 1978-85 (US$ million)

1978 1979 1980 1981 1982 1983 1984 1985

Transport Sector debt up to 1980 7.4 1.5.2 23.4 36.1 40.0 39.7 37.2 31.4 Transport sector debt 1978-80 - 7.4 16.1 27.9 31.6 31.5 31.0 25.1 All official debt up to 1980 19.0 34.3 59.4 171.0 214.6 211.1 189.7 145.5

Source: World Bank

1.8 The excessive emphasis on new investments greatly aggravated Madagascar's longstanding inability to maintain its existing capital stock. This was particularlytrue of the transport sector. The budgetary allocations for road maintenance dropped sharply after 1972 and have remained insufficientfor even the most urgent needs.

Table 3 Expendituresfrom RecurrentBudget on Transport Sector by Ministry of Public Works 1972-82 (FMG millions)

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 (budg.)

550 158 81 275 405 n/a n/a 832 608 296 880 1/

Source: Ministry of Public Works and First Plan 1978-80. 1/ Includes FMG 383 million in capital budgets for road repair.

It is true that the Ministry of Public Works' submissions to the budget included much larger allocationsfor road maintenance than were accorded, but they were accompanied by enormous submissions for the constructionof new infrastructure. Since the Directorate of the Budget in the Ministry of Finance and Planning received equally unrealistic submissions from other ministries, the budget could only accommodate a fraction of the requests and even then they involved a high degree of borrowing from the Central Bank. The problem was aggravated by the policy of the Ministry of Public Works of including in its submissionsa large number of projects in order to secure for each a budget entry that would imply a commitment that could be used in the future, although it was clear that the resources would be unavailable for a long time. Thus the Directorate of the Budget was placed in the difficult position of having to decide on how much to allocate for each budget entry, a task for which the MTP, because of its lack of real- ism, was no useful guide. Although the final outcomes were generally determined by discussions of the Directorate of the Budget with the Ministry 14- of Public Works and the political leadership, the final results indicate that the general procedure was to leave externally financed projects more or less as requested by the Ministry of Public Works and to reduce other items in roughly equal proportions. Thus for the national budget of 1982, amounting to FMG 134 billion for recurrent expenditures and FMG 50 billion for the capital budget, the Ministry of Public Works submitted requests for FMG 5.9 billion for road maintenance,whereas the budget only allocated FMG 0.9 billion.

Table 4 BudgetaryRequests for Recurrent Costs on Transport Sector by Ministry of Public Works 1979-81 (FMG billions)

1979 1980 1981 1982

7.9 7.1 4.8 5.9

Source: Ministry of Public Works

1.9 A similar pattern emerged with regard to the foreign exchange allocations for spare parts. The imports of ships, aircraft, buses, and trucks since 1978 amounted to US$ 228 million, as compared to total exports in 1981 of roughly US$336 million and debt servicing in 1981 of US$171 million.l/ Once again projects financed externally went ahead while raw materials and spare parts essential for operating and maintaining the existing capital stock were in short supply. Consequently the vehicle fleet, as well as the airline and the coastal shipping fleet, which is mostly old, are desperatelyshort of spare parts.

Table 5 Major Equipment Imports c.i.f. 1977-80 (US$ millions)

1977 1978 1979 1980

Buses 7.1 1.8 7.5 5.6 Trucks and vans 11.8 11.8 23.5 43.3 Vehicle parts and components 6.1 6.6 9.6 10.7 Ships (civilian) - - - 55.5 Aircraft (civilian) - 52.6 - -

Total 25.0 72.8 40.6 115.1

Sources: Ministry of Transport, Supplies and Tourism; World Bank

1/ Debt servicing for the period January 1981 to June 1982 is being rescheduledby an agreement reached with the Paris Club in April 1981. The figures here are not adjusted for that. - 15-

Transport Coordination

1.10 Another obstacle to fulfilling the plan was insufficient inter- ministerial coordination and consequently a lack of commitment to the plan. The MTP had been drawn up by the Directorate General of the Plan (DGP) from lists of projects submitted to it by the various ministries. Being part of the Ministry of Finance and Planning, the DGP itself had no authority over other ministries, but the MTP derived authority from being part of a law on socialist planning and having been endorsed by the National Assembly. This rather formal obligation on the implementing ministries that the plan represented did not compensate for a lack of dia- logue between DGP and ministries in preparing the plan and the absence of a process for reaching a consensus on it. Moreover the authority of the plan was undermined by the existence of a number of commissions in the Joint Council of the Government consisting of the Supreme Council of the Revolution (SCR) and the mlnisters. A Commission for Infrastructure and Transport was in fact the highest policy making authority for the transport sector, responsible for coordinating the work of different ministries. It could introduce new projects as well as intervene in the day to day management of the sector, but it is not clear how far its members acted in their individual capacities, as opposed to acting on decisions agreed on in meetings of the commission.

1.11 Coordination within the transport sector is complicated by the fact that the sector depends equally on three different ministries. The Ministry of Transport Supplies and Tourism (MTST) is responsible for road transport, the railway, air transport, shipping, and ports. However its actual degree of control is in practice limited. Only a small part of the state owned road transport system is under its control, and consists of enterprises that are supposed to enjoy some autonomy in their management, while the construction and maintenance of roads, airports and ports are the responsibilities of the Ministry of Public Works. Similarly the railway, Air Madagascar, the shipping companies, and the Port of Toamasina are autonomous enterprises. The other ports are under the direct control of the Ministry. It is the Ministry's responsibility for supplies that gives it some authority to direct transport movements, though here again this authority is mainly restricted to the railways and shipping. In both these sub- sectors, but especially with the railway from Antananarivo to Toamasina, one of the principal bottlenecks of the economy, the Ministry, of its own accord or at the request of the political leadership, routinely determines priorities. But even with the railway, its authority has been limited. Before May 1982 the accountaLnt of the railways company came under the authority of the Ministry of Finance and the railway budget- and tariffs were determined jointly by the two ministries. Reorganization of financial and management functions of the railway are conditions for reinstating the second railway credit which was suspended on June 23, 1982.

1.12 The importance of the Ministry of Industry and Commerce (MIC) arises from its control over a large proportion of the road transport system; its responsibility, jointly with the Central Bank, for determining imports; and its control over most prices. All the enterprises responsible for the collection and marketing of crops, with the exception of SINPA, (Soci6t4 d'Int4r6t National pour la Production Agricole) which comes under the Ministry of Agricultural Production and Agrarian Reform, are under the MIC's authority and they, with the private sector, account for the majority - 16- of road transport. They too enjoy autonomy in principle but are frequently directed by the Ministry to carry out priority tasks. The MIC's control over imports is vital to the transport sector because of the scarcity of spare parts and, to a lesser extent, of vehicles. Imports are obtained through a tedious process of obtaining import licenses from the Ministry and foreign exchange allocations from the Central Bank. With the current acute balance of payments problems only a fraction of licenses actually result in imports and decisions are made from day to day by the Central Bank in consultationwith the MIC. The local vehicle assembly plants come under the MIC's control both because they are industries and because they import all components. Very few CKD parts for assembly have been imported since 1980 and so these plants are mostly idle. The main additions to the vehicle fleet recently have been Government imports of 1,000 East German IFA trucks, being distributed to various users, and 400 Spanish EBRO trucks for the army's transport enterprise, the "Regiment du Train". The private sector has been unable to import vehicles since 1979. These imports of trucks were decided on in 1979 by the political leadership, apparentlywi- thout consulting the enterprises. The MIC's responsibilitiesfor commerce include the greater part of administeringprice controls, though most decisions on prices of essentials and export crops are political decisions in which the MIC has a technical advisory role.

1.13 The Ministry of Public Works (MPW) is responsible for the construction and maintenance of most infrastructure,the greatest part belonging to the transport system. It is meant to be a ministry that responds to the requirements of others, but in practice its construction programs reflect mainly the long term objectives of the political leadership. Though the determination of its priorities is obscure, it appears that, where the Ministry does not itself decide its activities, it responds to the Commis- sion on Infrastructureand Transport. There is little trace among its lists of highway projects of responses to the requirementsof other ministries, especially the MTST and the MIC. Nevertheless these are the lists that had been accepted with little modificationby the DGP.

1.14 In principle, these ministries are concernedwith infrastructure and regulatory functions, while the rest of the transport system functions through enterprises. The theory behind this is that the dominance of state controlled enterprises safeguards the public interest while ensuring the autonomy required for efficiency. In practice, however, neither this Government nor its predecessors have been successful in reconciling the desire to allow autonomy with their choices of priorities that are not reflected in prices or in any other signalling mechanism that an enterprise can directly read. For example, the government attaches great importance to avoiding local shortages of commoditiesclassified as "essential",including rice, gasoline and cooking oil, whose prices are fixed. It therefore must instruct enterprises to make the required collections and deliveries. For reasons such as this the search for autonomy has never been wholehearted and the various pieces of legislation enacted since independence have only resulted in several categories of enterprises. each with its special features, but no real autonomy. The transport sector spans all these categories. For instance, up to May 1982 the railway was an "Entre- prise Publique a Caractare Industrielet Commercial" (EPIC) based on legis- - 17-

lation of 1968 while the port of Toamasina is a Socialist Enterprise as provided for in the Charter of Socialist Enterprises of 1978. But even if legislation had been more successful and less heterogeneous,a great deal would still depend on attitudes. The authoritiesare too conscious of immediate priorities such as delivering rice quickly to where it is in short supply, to be willing to trust to a system that is more automatic, like the market, even though they are fully aware of the importance of efficient management. Moreover, as the economic situation deteriorates, scarcities grow worse and the apparent need for interventionincreases. The only way out of this vicious cycle is to permit the private sector to engage in at least some of the collection and distributionactivities they are excluded from, while adjusting price poLicies.

IntermodalCoordination

1.15 In the past, intermodal coordinationwas not a considerationas the transport systems operated independentlywith only limited interfereat modal connection points. Coastal shipping provided service where no roads existed and the railway was protected in a monopoly situation on its main axis from Toamasina to Antananarivoby Government regulation which limited trucks to five tons gross weight on the very poor road which was intention- ally not maintained. Air transport mainly provided passenger service to isolated areas not easily accessibleby other modes. However, domestic air transportof freight has been increasingand in 1980 it accounted for 23% of capacity available on domestic services.

1.16 However, as each of the sub-sectors developped, the Association tried to get the Government to give more importance to intermodal planning since it was obvious that resourceswere limited and a lack of proper coordination could result in bad resource allocation. An attempt to remedy the situation by including a "TransportPlanning and Coordination Study" under the First Railway Credit was not successful due to Government'sreluctance to accept technical assistance and the fact that the Ministry of Transport and the Ministry of Public Works were reorganized as separate units. In addition, these Ministries lacked the sufficient numbers of qualified staff to be assigned as counterparts to the consultants carrying out the study. As a result, the study produced little other than voluminous reports on the transport situation in Madagascar.

[.17 During the 1970's the Government continued to invest heavily in the expansion of its transport system by adding to the road network, ex- panding air transport facilities,purchasing new ships and aircraft without any thought of transport demand and intermodal considerations. As a result, Ministries and transportagencies operated in a vacuum without really knowing or caring about other ports of the system. The result now is a system with overcapacity in soireareas (i.e. coastal, shipping ports) and undercapacity in others (i.e. railways). The costs to the economy of this mismanagementis tremendous particularlyin lost time and reduced output.

Manpower Resources

1.18 From independence up to 1972, Madagascar benefitted from ample foreign technical assistance, mostly french, to help it operate its institutions including those involved in the transport sector. From 1972 on- wards, the Government'sobjective of "Malgachisation"saw their numbers reduced to the absolute minimum. The exodus of technical experts along with - 18- the lack of a cohesive plan to replace them through training led to a marked deterioration of the services provided by the institutions and parastatals operating in the transport sector. This combined with policies which concentrated on new investments rather than maintenance resulted in seriously deteriorated levels of service for all but particularly surface modes over a period of time.

1.19 The need to improve the capabilities of the local staff was recognized by the Association in the mid 70's and to this effect a transport planning and coordinating team was financed under the first railway credit to help the Government in its transport planning function and train local staff. However due to the Government's unresponsiveness to this need and because the consultant's team arrived in Madagascar just at the time when the Ministries of Transport and Public Works were split, the study did not achieve the results sought. Because of its indifference to the objectives of the study the Government did not appoint sufficient motivated candidates as counterparts and the training results desired did not materialize. How- ever the Government has now recognized the need for careful planning and coordination and has recruited suitable candidates in the Ministry of Transport, Supplies, and Tourism who, if given the task, can assist the planning efforts.

1.20 With respect to the training needs of the Public Works Ministry the Association through its ongoing projects is helping finance the construction of training facilities and is providing technical assistance and equipment to help the Ministry fill its need for qualified staff. With respect to the road transport industry there is not a training program since drivers and mechanics are usually formed on the job. There is a definite need however in providing operators with management training, cost accounting and operations planning.

1.21 The major shortcomings in human resources in railways, ports and aviation center mainly on managerial and planning capabilities. Informa- tion is lacking on the training needs of operational personnel in these sub-sectors. A 1980 study of civil aviation carried out by ICAO (Interna- tional Civil Aviation Organization) pointed out the deficiencies in training which could be met by overseas training. In the case of the railways there is not an established training program beyond the apprenticeship stage except for "ad hoc" scholarships financed by foreign grants. For ports, there is no established program to identify training needs and provide a program to improve staff skills and any action will depend on the strategy to be adopted following the. study on ports and coastal shipping expected to start by mid-September 1982. As part of its overall planning and coordination function, the Ministry of Transport should, with the assistance of a training specialist, identify the shortcomings for each sub-sector and prepare a program as part of an overall rehabilitation program for the sector in close collaboration with the local university so that programs which are responsive to identified needs can be established. - 19-

II, THE PRESENT SITUATION

Transport Infrastructure

A. Roads

2.1 A comparison of a road map of Madagascar in 1972 with one giving the present situation would show no great change. The paved highways of the central plateau have been extended a little; the stretches around the coastal towns of Mahajanga and Manakara are now joined to the plateau system, and new stretches exist in the North and East. The total length of paved road has increased from 3502 km to 3957 km. However the road link between Antananarivo and Toamasina, which was neglected since the early 1960's and has been undergoing reconstruction with Chinese assistance since 1978, is still far from complete. Approximately 80 km going South from Toamasina are ready, but the stretch of about 150 km from there to noramanga, from where the paved road to Antananarivo is in fair condition, remains scarcely passable, even in the dry season. The unpaved road system of 10,170 km has scarcely ch.anged. There is still no year round road link between the plateau area and the northern and southern ends of the country and within these areas, especially across the South, communications remain poor.

2.2 What a map now would not show would be the marked deterioration of most roads. Among the paved roads the greatest problem arises with the road from Antananarivo to Mahajanga, since it is one of the most important in the country. A truck was able to perform the journey in eight hours when the connection was completed, but now requires three days, and heavily laden trucks frequently have to be unloaded in order to pass some bad spots and to be reloaded after that. The condition of earth and gravel roads is alarming since these are the roads used for collecting crops and many have reached the point of being impassable to almost any vehicle in the dry season. An inventory of the most important such roads that need urgent repair is estimated to exceed 2000 km. The main reason for this serious deterioration of the road system is, as already mentioned, the lack of maintenance over the last ten years. But a contributing factor has been the excessively heavy loads that are continually carried over them. In some places the road will be further damaged since the only way of transporting vitally important export crops along them is by four wheel drive vehicles, with loads of 1-2-2tons, that tear up road surfaces.

B. Ports and Shipping

2.3 In addition to its obvious dependence on international shipping, Madagascar also depends on coastal shipping to circumvent its difficult overland communications. The primary international port is Toamasina, which handled 667,000 tons of general cargo and 763,000 tons of petroleum products in 1980, but there are three secondary international ports, Mahajanga, Antseranana, and Toliara, which respectively handled 160,000 tons, 180,000 tons, and 85,000 tons in 1980 (ANNEX I, Table 1). Besides these ports, the 5,000 mile coastline is dotted with about 20 primary and secondary coasting ports, of which only two handled more than 50,000 tons in 1980, others handling 5,000 to 20,000 tons. - 20-

2.4 Even a small port may be vital in its area, but most of the ports are hampered by inadequate connectionswith the areas they serve. The central highlands are mainly served by Toamasina via the railway to Antananarivo,though, since the railway is often unable to handle all the traffic, recourse must be had to the old road, which is all but impassable. Mahajanga's role as an alternative port for the highlands is at present also restricted by the condition of the road to Antananarivo. None of the other ports serves beyond its neighboring areas, and in many cases, such as Antseranana,Toliara, Maintirano,and Vohemar, the ports may be the only practicableway for merchandisetraffic to reach these areas.

2.5 The ports often operate in difficult conditions, though the infrastructure would be in general adequate if properly maintained. Silting and shallow draft are common problems, while on the east coast winds and waves can be high and cyclones occur during December to February. Toamasina has adequate berth and storage facilities for the foreseeable needs of the medium term. Antseranana,once a French naval base, has an excellent deep water port and dry dock facilities that give it the potential of becoming a ship repair center for the western Indian Ocean if its management problems can be overcome. The other ports rely mainly on light- ers and LCTs, but the levels of traffic do not seem to warrant any exten- sive construction.

2.6 Along the East Coast, going from the Toamasina harbor 600 km to the South, almost in a straight line, is the Pangalanes Canal, the only important waterway in the country. This canal has fallen into disuse but is being rehabilitatedand could become a valuable means of transport, especially for the cash crops of the south east region. However no study has yet been done to demonstrateits economic viability.

C. Rail Transport

2.7 Madagascar's railway consists of two unconnected single track systems totalling 860 route-km. The northern system (about 700 km) includes: (i) the TCE, a 376 km section from the port of Toamasina to Antananarivo, in which corridor the railway constitutes the only surface transportmeans, (ii) the TA, a 154 km section from Antananarivosouth to Antsirabe, industrial town and center of a densely populated area, and (iii) the MLA, a 167 km section north from Moramanga to the agricultural region of Lake Alaotra and the chromite mines. The southern system (FCE) connects the regional center of Fianarantsoaand the agriculturalareas in the southern plateau region to the port of Manakara.

2.8 In general, the railway'snetwork is in poor condition due to the lack of regular maintenance;speed restrictionscaused by the deterioration of the track are numerous; and most of the major civil works need to be re- habilitatedfor safety reasons. The railway is undertakinga track rehabilitation program, but implementationis slow due principally to its limited absorptive capacity. - 21-

2.9 Any operating problem on the railway affects directly the whole economy since the major part of Madagascar's international traffic moves on the TCE line. This monopoly will however cease as soon as the road between Antananarivo and Toamasina is complete. Traffic on the TA line has been traditionally very low, but could increase drastically in the future when the major Government projects under implementation are completed; (flour mill, soja and cement plants in Antsirabe and fertilizer plant in Toamasina) although the rail line is paralleled by a paved road, it is expected that most of traffic generated by these projects would be carried more economically by rail than by road in view of their bulk nature. The FCE line is in very poor condition and carries little traffic; any rehabilitation of this line shouLd be carefully weighted against alternative transport means. An econornic study to be carried out under the second railway project on the FCE and TA lines has yet to be started in spite of Bank pressure to do so; any investments should await the results of this study.

D. Air Transport

2.10 Because the Republic of Madagascar is a large island with difficult terrain, widely dispersed communities and a relatively poor surface transport system, air transport has played a significant role as a means of communication both internally and internationally (ANNEX I, Table 2). The domestic air transport system serves no less than 52 regular points which is the densest of any country in Africa.

2.11 Agreements for international services have been negotiated at both inter-governmental and inter-company levels. International services now operated link Madagascar with France, Russia, Tanzania, Kenya, Mauri- tius and Djibouti. Agreements not yet operated are those between Madagas- car and Seychelles, Swaziland, Poland, North Korea, Romania, Cuba, Algeria and inter-company agreements with Air Afrique, Swissair and British Air- ways. These together with other agreements that may be arranged from time to time as well as inter-company agreements will ensure that adequate service can be provided on regional and international routes. Traffic on the international and regional routes is relatively small. The primary objectives would be to focus on the operating efficiency of the international airport of Antananarivo and the financial viability of each international and regional route operated by Air Madagascar, particularly in view of the low overall load factors (ANNEX I, Table 3).

2.12 Air Madagascar is the sole operator on the domestic routes, a dense network linking the capital city with towns in the interior and on the coast. The longest direct flight is about 800 km from Antananarivo to Antseranana while a number of towns on the network are less than 150 km apart. This can present problems with respect to efficient (least cost) aircraft operation particularly as the traffic is low (from 1,200 to 10,000 passengers per annum) for the majority of airports. A few major centers such as Tolanara, Nossy Be, Mahajanga, Antsiranana and Toamasina have a significantly higher utilization but even so, the level is so low that the system is unlikely to be self-supporting (ANNEX I, Table 4). - 22-

TransportEquipment

A. Road

2.13 As with the road infrastructure, the Government has allowed the existing stock of vehicles to deteriorate while concentrating on new ones (ANNEX I, Table 5). Moreover its choice of vehicles, especially trucks, is poorly suited to the conditions of the country. There are estimated to be roughly 5000 trucks of all categories in use in Madagascar. Of these about 1500 arrived after 1979, while, half of the older vehicles are out of commission for lack of spare parts. Enterprises place a heavy premium on solidly built trucks that can operate on bad roads, notably Mercedes, Berliet, and Saviem, which constitute almost the entire stock of older trucks. In addition, they are now forced to use 4-wheel drive Unimogs where other trucks will not pass, though these have high operating costs. The more recently purchased vehicles were chosen largely because they were less costly, a false economy since they are unable to operate off the better roads. Furthermore the trucks purchased since 1979 have generally been too large for the smaller roads and are responsible for a great part of the damage to them. As a consequence, tnere is an excess supply of vehicles on good roads and an extreme shortage everywhere else. Even this excess supply however is not likely to last since the new trucks have the same problems of spare parts as the old ones.

B. Rail

2.14 RNCFM is fully dieselized and has adequate traction with a fleet of 36 line locomotives, 22 shunters and 11 motorized railcars. During the last few years, the railway has undertaken a major renewal program of its rolling stock and locomotive fleet: 7 line locomotives were acquired in the mid 1970's, 7 are new and 2 more will arrive soon. The total fleet of freight wagons, passenger coaches and railcars consists of 975, 21 and 56 units respectively. 95 freight wagons and 15 passenger coaches were acquired in the last five years and 7 passenger coaches are still to come. In addition, the railway operates about 100 relatively new tank wagons for transport of petroleum products. Although about 250 units are more than 35 years old, the wagon fleet is in good condition.

2.15 Although the present rolling stock and locomotive fleet should in theory be largely sufficient to carry the present traffic, the railway has experienced major technical problems during the last few years; as a result it has not been able to carry the traffic offered, particularly in 1980 when the railway become a major bottleneck in international traffic, affecting the whole economy (ANNEX I, Table 6).. Although these problems are being resolved, the railway still needs to regain its past productivity levels. Substantial strengthening of operations planning, maintenance procedures and procurement is needed if normal utilization of equipment is to be regained and maintained; these should constitute the major objectives of the railway in the short to medium term. - 23-

C. Ports and Coastal Shipping

2.16 Coastal shipping is handled primarily by the Compagnie Malgache de Navigation (CMN) which was created in 1960 and is now 92% owned by the state. Its total shipping capacity is 13,900 tons in 9 ships ranging for 150 tons to 5,000 tons. The Compagnie Malgache de Manutention (CMM), a private operator in Mahajanga, has eight small barges ranging between 100 and 150 tons. In addition, there are 150 schooners and other traditional sailboats operating on the west coast.

2.17 The CMN operates a relatively modern fleet but is plagued by shortages of spare parts and difficult operating conditions and a low level of productivity among its labcurers. CMM manages through an incentive system to achieve higher levels of productivity than all other ports in the country but is also fighting a losing battle because of lack of spare parts.

2.18 The port of ToamasiLna is adequately equipped to handle its present traffic. On the other hand, the equipment of secondary ports (tugs, barges and cargo handling equ1ipment) is generally old and in precarious condition and the productivity is very low (about 100/150 tons/day). Under German financing (DM 5 million) Madagascar will soon receive some high priority equipment. Indications are, however, that this will not fill the needs and the Ministry of Transport has drawn up a list amounting to about US$3 million of additional necessary equipment. It is important that available resources not be too thinly spread over the large number of ports, but that new equipment be given to the highest priority ports.

2.19 Madagascar's aging shipping fleet was considerably expanded during 1979-81 by the acquisil:ion of four cargo boats and three LCTs. The two ships of 14,000 and 15,00D tons belonging to the Socigtg Malgache des Transports Maritimes (SMTM)2/, the state-controlled international shipping line, have been joined by two new Spanish built sister ships of 16,000 tons each. The remaining vessels were transferred to the Compagnie Malgache de Navigation (CMN), the state owned coasting company, which now has a fleet of nine boats ranging from a 5,300 ton cargo boat to a 250 ton LCT. The rest of the Malagasy merchant fleet consists of 11 privately owned vessels, all smaller than 2,000 tons, and five small tankers owned by the state oil coimpany, SOLIMA. These vessels are all used for coastal traffic, though occasionally some visit nearby countries.

IX. Air Transport

2.20 The national carrier, Air Madagascar (Soci6te Nationale Malgache de Transports Aeriens), formed in 1961, provides all of the domestic service and international service to Nairobi, Mauritius, Reunion, Seychelles, Paris, Marseilles and Djibouti. The company operates one B747-200, two HS748 and five DHC6-300 Twin Otters on its regional and domestic services.

2/ One of these, the Manakara is chartered. - 24-

In addition five Aztecs, two Navajo and one Cherokee are available for air taxi/charter service but are not used in regular service (ANNEX I, Table 7). The Governmentholds about 80% of the shares outstanding,Air France about 18%, Compagnie Generale Maritime (France) about 2% and private holdings 0.01%.

Organization and Management

A. Road Transport

2.21 Road transport is the most variegated sub-sectorof the transport system in its organization,both because it comprises state and private enterprises and because for most of the state enterprises transportationis only one, albeit essential, part of their activities. In principle,there is free entry into the freight transport industry, after payment of appropriate fees, taxes and insurance. However, in practice, there have been no new entrants into the industry over the last five years due to the unavailability of new vehicles, a general lack of spare parts and Government's policy of greater state control in the transport sector. Until recently the public sector did not include any enterprisesthat were exclusively devoted to the road transport of goods, but entrusted the task to a number of large trading firms and some parastatals,like regional development agencies. However, at the end of 1980 the Govrnment created a trucking enterprise in each Faritany, to each of which it is transferring100-150 of the recently acquired IFA trucks. Moreover the army has set up its own trucking operation,the "Regiment du Train". The private sector, which includes numerous small owner operators and a few cooperatives, is relegated to a marginal role.

2.22 State enterprises dominate in the transport of commodities by road. Some are specialized by region or commodity. SINPA, for instance, is responsible only for rice in certain designated regions, including the collection, processing and distribution. Others, such as the enterprises responsible for exports, COROI, ROSO, SICE, and SOMACODIS, are trading firms and undertake the movement of a variety of commodities, including rice in certain areas. In some cases they have reluctantlyhad to increase their transport activities to satisfy the authoritiesor to compensate for the general decline of the private sector's activities. There has been a growing tendency for them to collect export crops, particularly coffee, cloves, and vanilla, directly from local traders, instead of awaiting delivery from the traders. These traders, mostly Indian and Chinese, have to some extent escaped displacement by the State's takeover of rural commerce and growers still bring to them at any moment as much of their crops as they wish to market, but, because of the condition of the roads, the traders are growing increasingly reluctant to transport,as they used to, to the warehouses of the state trading firms. Both the state trading firms and several parastatals undertake the collection and delivery of products they are concerned with. For example, regional development agencies perform these activities for the crops grown in their areas, in addition to their other responsibilities,such as managing irrigationworks, collecting dues, providing credit and inputs to farmers in their areas, and even running schools and training facilities. Similarly, industrial enterprises often assure the delivery of their products to the trading houses or even to retailers. -25-

2.23 The decision by the Government to create Faritany trucking enterprises seems to have been sudden, prompted by the need to find suitable or- ganizations to operate the 1,000 IFA trucks it had acquired. These enterprises were set up in haste and none of them has the trained personnel and the facilities for this kind of operation. Some have tackled the problem with ingenuity by creating enterprisesin which potential users have shares and the management consists of people with transport and commercial experience, but even they face difficulty in becoming viable entities. Very wisely, some of them refrain from using their trucks on the worse roads. Others have responded less effectively;one for instance, has put the enterprise under the control of a former university official who had been obliged to leave his university post. Because of insufficientpreparation, all these enterprises lack the facilities to store trucks and spare parts. In Antananarivoan old slaughterhouseis being used for the trucks, and spare parts are held by an Air Madagascar subsidiary. According to the purchase agreement for the IFAs, maintenance facilities will be provided and they will be distributed to the Faritany, but, since problems of debt repayment for these trucks have arisen, it is not clear when the remaining deliveries from East Germany will take place. Nor is there any specific plan as to how the Faritany will pay for their vehicles. Little is known of the army's "Regiment du rrain",which owns the 400 Ebro trucks recently :importedfrom Spain, except that, state enterprises that have used it complained of its high tariffs and of its unwillingness to travel on bad roads.

B. Road PassengerTransport Industry

2.24 The passenger transportationsystem seems to be heterogenous,de- pending on location,and entry into the industry is relatively easy. Regu- ]Lationsand urban fares are fixed by the Ministry of Transportation,and inter-urban fares are based on an officialminimum-maximum rate system.

Owner-operatorsand Cooperatives

2.25 There are three types of passenger transportation: owner- operators, cooperativesand bus companies. After purchasing a bus, a private operator obtains a license and works independently for one year, after which he is required to join a cooperative. If there is none on the line on which he wishes to operate, he can establish a cooperative by addressing the bureau professionnel,an advisory group under the Ministry of Transpor- tation, to obtain a permit to operate in a given zone.

Bus companies

2.26 In addition to owner-operatorsand cooperatives,there are a number of bus companies. In Antananarivo, there are two bus systems -- one urban and one inter-urban. The Malagasy transport company, Fitaterana Ma- lagasy (FIMA), a semi-publicenterprise with stockholders,offers urban and - 26- inter-urban transportation in and between Antananarivo, Fianarantsoa, Maha- janga and Toliara. The Antananarivo urban transport company, Fitaterana Banlieue d'Antananarivo (FIBATA), previously a public enterprise but designated for conversion to a socialist enterprise, was created to serve the capital alone. Both companies are trying to branch out of urban passenger transport to include the more profitable inter-city lines which are subject to less control. In Tamatave, the bus service is operated by the Societg d'Exploitation du Port de Tamatave (SEPT), set up as a subsidiary corpora- tion. It is not however a profitable operation. In other parts of the country, urban passenger transport operations, are entirely private.

2.27 Passenger transporters are burdened with many of the same problems encountered by the freight transporters, namely poor road conditions, lack of spare parts, varied fleets and scarcity of fuel and lubricants. The major problem of the two bus companies, FIMA and FIBATA, are the fares: more political than economic, they are too low to cover operating expenses. In 1979, the bus fare in Antananarivo was 10 FMG (US$0.03); in 1980, 20 FMG (US$0.06); and from 1981 to the present, 25 FMG (US$0.07). In provinces with fewer roads and area to serve, the fares are substantially higher: Mahajanga and Toliara, 30 FMG; Fianarantsoa, 40 FMG; and Toamasina, 50 FMG.

2.28 A second problem has been the fierce competition for profitable lines between the two companies. FIBATA became so desperate to minimize its losses in 1981 that it unilaterally abandoned service in parts of the city and began competing with FIMA for the latter's most profitable routes.

2.29 Because of the low fares and the difficulty of policing fare collection, operators are incurring losses and are often forced to curtail services resulting in shortages of public transportation, particularly in Antananarivo. The operating problem and especially the tariff situation need immediate attention to avoid further losses and continued deterioration of service.

C. Road Maintenance

2.30 Road maintenance is the responsibility of the Ministry of Public Works which has six regional district offices responsible for about 15,000 km of primary and secondary roads. In principle, at the beginning of each year, the proposed program for primary roads is submitted by the regional engineers to the Programming Directorate in the MPW for approval and coordination with other regions. The program of the secondary network is submitted by the regional engineers to the political regional authority only for their approval. Maintenance funds in theory are distributed to the regional district offices in proportion to the length of roads they must maintain. Tertiary roads and tracks are supposed to be maintained by villagers using hand labour but in fact there is no maintenance carried out in part due to the scarcity of funds available to the local communities and the lack of staff experienced to supervise the operations. - 27-

2.31 The most critica. problems currently affecting road maintenance are the lack of funds and a poorly organized maintenance operation. T.- Government's policy of decentralization has resulted in no overall planning of maintenance operations since the local decentralized collectivities d- cide on their own programs which because of political motivation are oriented towards new constriction. In addition the funds given to theem from the central government for maintenance are grossly inadequate and the- do not have any possibilities of raising revenues themselves (ANNEX Is Table 8). However, these problems were preceded by a government policy that shunned maintenance in favour of new construction as far back as 1972; as a result the network has deteriorated badly. The resulting backlog of aaintenance and rehabilitation is now so great that only a concerted effort to set up a program covering the remainder of this decade will be able to restore the most critical links of the network.

D. Railway

2.32 The Malagasy Railway (RNCFM) is operated as a state enterprise attached to the Ministry of Transport and Supplies. It employs about 4,500 people, which is an optimum number for a railway of this size. An exten- sive review of the railway organization and management was carried out in l974-75 by external consultants financed under the Bank's First Railway Project. However, their most important recommendations, mainly concerning t:he financial planning, accounting, and information systems have not been implemented, pending a modification of the railways statutes to grant it a real autonomy especially on financial matters. This modification has just been enacted.

2.33 The major organizational problems are the following: On the operating side, there are major weaknesses in transport planning, and in overall maintenance procedures. These problems are exacerbated by Govern- ment's continuous interventions in day-to-day operations and in the esta- blishment of transport priorities. As a result, productivity indicators for the locomotive and wagcon fleet have substantially and continuously dLeclined. Strong action including some technical assistance is thus required to install a proper planning process and reestablish transport operations on a more normal and systematic basis.

2.34 On the financial side, the Railway finances have deteriorated very rapidly and the railway has reached a state of bankruptcy (ANNEX I, T'ables 9 and 10). Despite twvorecent increases, the tariffs have not kept up with costs and operating losses reached FMG 1 billion (USF2.9 million) in both 1980 and 1981. In addition, the railways accounts receivable and payable have accumulated very rapidly leading to severe cash flow problems. The root of the problem is in the absence of a unified system of financial management. Accounting and budgeting functions are still shared by an "agent comptable" who is a civil servant reporting to the Ministry of Finance and the railway's own chief of financial services, with no one having real and overall responsibility or accountability over the railway's financial management. This situation led the Bank to suspend disbursements with the Second Railway Project on June 23, 1982. - 28-

2.35 The railway has so far been basically seen by the Government as a "technical support service". Its performancewas judged by its ability to provide the transport services required,but with little regard to productivity, costs and tariff setting and financial performance. This policy has led to a progressive neglect of existing assets and deteriorationof overall operations. A basic change in the management philosophy of the railway is thus required to use more modern management techniques oriented towards productivity objectives and commercial operations--the most important being appropriatebudget, control and planning procedures.

E. Ports and Shipping

(a) Ports

2.36 With the exception of Toamasina, the ports are administeredby the MTST, under legislation dating from the 1960s, and their budgets are annexed to the Government budget. Again excepting Toamasina, the handling of cargo within the port is done by several state owned companies,most of which were private firms in financial difficulties before being taken over. In the larger ports, storage facilitiesare owned by the chambers of commerce, though actual storage may be the responsibilityof a cargo hand- ler. Toamasina has enjoyed a special position; the Societ6 d'exploitation du Port de Tamatave (SEPT) became autonomous, in 1970 under legislation creating a category of autonomous ports and became a socialist enterprise in 1978. As a socialist enterprise SEPT is managed by a Director appointed by the Government and a board with representativesof the MTST, the Minis- try of Finance, the SMTM, the Faritany and the dockers. The port handles the merchandiseand the dockers are its employees.

2.37 Discipline and security have become matters of major concern in several ports. Toamasina has been plagued with labour problems for a long time and more recently thefts have become serious. Because of the labor problem, productivityhas been low, despite generally adequate equipment. The usual rate of cargo handling by a gang of 20 dockers is about 50 tons per day, as compared to about 250 tons per day in Mahajanga where the Com- pagnie Malgache de Manutention provides financial incentives to its employees. Labor relations in Toamasina are complex, since in addition to in- fluencing the management board through the workers' representatives,dockers act on Faritany representativesthrough local politicians. The level of theft has become alarming, despite the existence of three security forces to guard the port3 /. Theft from the port is clearly well organized and is a major source of scarce imports for the parallel market. Some other ports have serious security problems too; in one a ship was sunk while entering the harbour in what was deemed to be a security related problem.

3/ The Gendarmerie du Port, part of the Gendarmerie nationale; a detachment of the local police force; and the port's own security force. - 29-

(b) Shipping

2.38 Madagascar still controls only a small part of its maritime transport connections with other countries, but coastal shipping is largely done by Malagasy ships. The SMTM, which operates the country's four ocean- going vessels, carried only 7 percent of the 1.3 million tons of externally traded merchandise in 1981, while the CMN, some of whose coasting vessels visit nearby countries, carried another 3 percent. Nevertheless, within the CIMACOREM, the shipping conference for Madagascar, the Comoros, la Reunion, and Mauritius, to which it belongs4 / the SMTM carried more of Madagascar's merchandise trade than any other conference line. Ships operating under the conference carried 20 percent of Madagascar's merchandise trade, i.e. roughly one-third of non-oil cargo, in 1981. But they carried 83 percent of the cargo going to or froa the main European ports served by the conference (ANNEX I, Tables 11 and 12). Similar information is not available yet for coastal shipping. A study financed by the FAC is under way to examine the economics of coastal shipping and to plan its development as part of the overall development of the transport sector.

2.39 The SMTM, though a Malagasy limited liability company, is still heavily dependent on the conference's members, who own the 40 percent of its shares not owned by the Malagasy state. There nave been three basic reasons for this dependence. Firstly the predominant partner of the conference, La Havraise, which. was originally the main founder of the SMTM and now owns 20 percent of its shares, has played a major part in providing the officers of the SMTM. A few of the officers are French, but most are Malagasies who have gone through the standard French maritime training and promotion process under the auspices of La Havraise. Second, the SMTM has depended on the agencies of other conference members, especially of La Havraise, for business, though it has now began to set up its own. As long as the SMTM was the subsidiary of La Havraise, the parent company ensured that it carried adequate cargoes. However, having become a competitor and having more than doubled its capacity, its capacity utilization has dropped considerably while its import cargo includes a larger share of low value mierchandise than with the other conference members. It does better on exports because, although companies are under no formal obligation to use the SMTM, the Government can bring pressure to bear. The SMTM also tends to lose business because it has not managed to establish a reputation of regularity equal to that of the other conference members. A third source of dependence of the SMTM on the conference arises from the several technical services in ports, such as supplies and maintenance, that the other lines help it obtain.

2.40 In coastal shipping the state controlled companies, the CMN and SOLIMA, account for almost 90 percent of Malagasy tonnage, but the private sector still remains active. The CMN, 92 percent of whose shares are owned by the State, was also originally set up by La Havraise. It has had greater personnel problems than the SMTM because its officers are less highly qualified and experienced. SOLIMA is the state owned oil company, with a

4/ The other members are the French lines SNCHP (La Havraise), CGM, SNC; the German line Hapag Lloyd; and the Norwegian SEAL. - 30- complete monopoly of oil imports, refining, and distribution. All its ships are tankers. In addition to the state owned companies there are four private Malagasy coasting companiesstill operating. One or two small companies have ceased to operate in the recent past and at least one company is trying to enter into the business with chartered vessels. There are two other forms of shipping that should be associated with the coasting by larger vessels already discussed. One is the dhow traffic, predominantly along the west coast, though it may also be active between Madagascar and the Comoros. Little is known of this form of shipping in Madagascar. Dhows are common all along the Indian Ocean coast and are often an efficient form of transport. The other is the river traffic where wooden barges owned by state trading companies are drawn by tugs to deliver cargo at the river mouth to small coasting vessels. This traffic has been sur- prisingly neglected probably because of its rather unsophisticatednature, even though its costs are low and the barges locally made.

F. Air Transport

(i) Civil Aviation

2.41 The Ministry of Transport is the agency responsible for administration of civil aviation airports and the government policies relating to Air Madagascar, the national airline. The civil aviation branch of the Ministry is charged with the responsibilityof operating and maintaining a safe system for the airline operations. After reviewing air transport needs, the civil aviation branch in consultationwith Air Madagascar, pre- pares plans for submission to Government for the necessary funding to operate the civil aviation system. Because of Government budgetary considerations, annual funds received fall short of needs and as a result a considerable maintenance backlog has been created. Many landing strips, particularly those that are unpaved, have severe operating restrictionswhich is forcingAir Madagascar to operate sub-optimally.

2.42 With respect to airports, ICAO has established a requirement,for better communicationand navigation facilities plus the ability to operate and maintain the equipment in an adequate manner. The ICAO study estimated an investment requirementin the order of US$10.5 million to completely rehabilitate the system including training and purchase of spare parts. As there are inadequate personnel to exploit such a system, a modest phased program of training and technicalassistance would be appropriateuntil the staff is brought up to the necessary standards.

2.43 Airport investment should be concentratedon the airports where the B737 is or should be serving i.e., airports with stage lengths of 200 nautical miles or more and with more than 8-10 thousand passengers per annum. Investment should be limited to the work necessary to allow the B737 to operate without restrictions. In order to optimize benefits the - 31- priority would be to improve first those airports where the traffic is heaviest, followed by airports that show strong growth potential. Consi- deration should be given to deferringinvestments such as radar, search and rescue aircraft,a new airport at Tamatave,etc.

2.44 For an island, national communicationsare a paramount necessity for development,and total dependence on foreign airlines would be politi- cally inacceptablehence the need for an effective national carrier. Simi- larly, with respect to domestic lines of communication, a reliable, regular air service for low traffic levels must be weighed against the cost of constructing,operating and maintainingan equivalent road network. It would therefore be useful for the Government to examine and evaluate the air route structure so that clear and rational policy decisions, reflecting a cost effective system, can be made and implemented.

(ii) Air Madagascar

2.45 The overall performance of Air Madagascar may be summarized as follows. With respect to domestic flights the carrier has since 1978 maintained an average load factor of over 60% (65% is generally considered to be at capacity). However, onithe regional and long-haul routes the average load factor has been low, particularlysince the introduction of the more efficient B747. Although a.B747 can operate profitably at a lower load factor than many other aircraft, the low load factors now experienced (between 30-40%) indicates that serious considerationmust be given to a ra- tionalizationof the internationalroute structure. The operating cost per ton-km increased 50% on the long-haul routes between 1973 and 1981 while the cost on the regional routes, including the cost of fuel rose by 126% in the same period. Excluding the cost of fuel, the increases were 8% and 41% respectively. The 8% indicates the effect of changing from the B707 to the B747 whereas the 41% reflects the B737 operating cost increase over the period. Fares, on the other hand, have doubled in the same period. Thus Air Madagascar has been reasonably efficient in operating its overseas fleet but has not been able to offset the low load factors.

2.46 On the domestic routes the domestic price of fuel varies considerably at the different points of call, up to 139% over the 1974 prices at the same respective airports. The operating costs for the B737 (including fuel) increased 158% from 1973 to 1981 and for the Twin Otter, 55% over the same period. Excluding fuel costs the increase in operating cost was 50% and 15% respectively. The general domestic fares have increased over 200% over the same period indicating that the carrier has relatively well managed its operations if fuel costs are excluded, since they are a factor over which it has no control.

2.47 Overall, the carrier would appear to be in a reasonably good position. The B747 is a very effective aircraft with the capacity to meet growth. It can be can be very effective on both regional and domestic routes in view of its low seat/ton/kmoperating costs. From the informa- - 32- tion at hand the use on regional routes should be carefully evaluated. On the domestic routes the aircraft is constrained. A program to make marginal improvements to airports where the 737 can be utilized (i.e. those with a sizeable established and proven market) should be undertaken in order to take advantage of the cost effectiveness of the aircraft. There is no point in having an efficient aircraft that is used inefficiently.

2.48 Although the airline has incurred losses in the past few years (ANNEX I, Table 13), it should be in a position to be profitable if the country economy is stable. With improvements in services, the airline will fill a definite transport need. The possibility for improvement is, to some degree, related to improvements in airport infrastructure.

Transport Tariffs

A. Road Transport

2.49 The Government has fixed tariffs for all road transport. The tariffs for goods transport are calculated on unduly optimistic assumptions, and in the case of export crops, estimated average transport costs are included in the margins the trading firms may retain. Since transport tariffs are part of the general price controls for goods and since enterprises may have different functions with respect to the marketing and distribution of the same goods, the tariff system is quite complex. Broadly speaking, export crops are profitable to collect and to export provided the conditions of roads and vehicles are not very bad. How- ever, road transport activities of passengers and freight carriers are mostly unprofitable. The assumptions used to calculate the tariffs are overly optimistic in several respects. First, it is assumed that repairs and maintenance come to only 30 percent of fuel costs, whereas they are actually over 100 percent under present conditions. Second, it is assumed that trucks operate at 70 percent of capacity, though half that figure would be more realistic for those that are in operation. A higher proportion of the trucks are out of commission because of the unavailability of parts than is allowed for in the tariff calculation. There are also some minor errors in the calculations such as, assuming fewer wheels on some larger trucks than is the case. The public sector has to abide by these tariffs, but the private sector generally ignores them, even when transporting for the public sector.

B. Railway

2.50 The railway operates at a deficit; although expenses could be reduced to some extent through better financial and budget procedures, the main reason for the deterioration in the railway's finances has been the absence of adjustment in tariffs to keep up with inflation during the last ten years. In addition tariffs are not linked to the cost of services. Transport of priority products, passengers and low density lines are heavily subsidized, because they are seen as social services; however, because of the inadequacy of the tariff structure the Government does not know the real cost of the subsidies involved by the low tariffs. - 33-

2.51 A recent costing exercise was carried out by an external consultant with the help of the railway's costing team. The preliminaryresults show that the overall passenger traffic is heavily subsidized, but that while the tariffs for second class passengers cover the full costs of transport, first class passengers pay less than half their marginal transport costs and about a third of the related total transport costs. This clearly shows that the soc.ial goals of the Government may not be achieved through the granting of a general subsidy. Likewise, tariffs for suburban passenger traffic cover less than 20% of the related transport costs, indicating the need to carefully review all alternatives to satisfy this transport demand.

2.52 The present railway project financed by CCCE and IDA provides for the setting up of a costing system and economic studies of the low density lines. These will help the Government in defining an appropriate level of tariffs and possible transportalternatives and the Railway's management in defining where basic reorganization of the present operations is needed. These studies and the implementationof a permanent costing system should serve as a basic management tool to define an appropriate tariff structure and to continuouslymonitor the costs of services. These systems, however, operated satisfactorilybefore the overall financial and budget procedures of the railway were reorganizedand integrated,and some degree of autonomy in tariff setting has been granted to the railway.

C. Maritime and Air Transport

2.53 Tariffs for shipping and air transport can be broken down into two categories. For internationalservices, tariffs set by conferencesor competitionare the rule and Malagasy carriers have little flexibility in the matter. In the case of domestic transport,Government tariffs are set at levels which are unremunerative. In many cases coastal shipping or air services to small communitieasare the only reliable means of transport. If the state wishes to maintain these services,a direct subsidy should be paid to the carriers involved rather than attempting to force carriers to maintain low tariffs and absorb the loss. Such a policy cannot be pursued over a period of time since it forces carriers to consume their capital to continue operatingand in time they will be forced out of business. Even- tually the economy as a whoLe will have to absorb a greater loss of replacing equipment or having to do without transport services.

2.54 Although Madagascar has little control over tariffs of international shipping, it has managed to influence the CIMACOREM's tariff decisions. The island's geographicallocation makes it costly for shipping and most of the consignmentsit receives are quite small which increases transport costs. Further, its bargaining position is weak. Nonetheless the Go- vernment has recently been able to postpone tariff increases of the conference which the Comoros, La R£union, and Mauritius have had to accept. The main reason is that, with the SMTM in the conference, the Government is better informed of the tariff calculationsdone periodicallyby the U.K. firm of McClintock for the conference and hence able to present a stronger case. - 34-

2.55 Tariffs for coastal shipping suffer from the same problems as tariffs for road transport. The Government fixes all categories of tariff for coastal traffic usually below actual cost. The system of calculating tariffs is to use the average cost from the previous year and to make increases for the various categories of costs to allow for anticipated inflation. This method has resulted in losses before depreciation for the CMN for each year since 1979. - 35-

III. THE ECONOMICSOF THE TRANSPORT SYSTEM

3.1 At present few transport services in Madagascar are financially viable. At the same time the demands for the system's services are urgent. This peculiar situation in which much needed services cannot be supplied without financial losses is the outcome of a long period during which the Government suppressed or ignored market signals, without paying attention to the requests of its own agencies using these services. Indeed, since 1972 there are very few instances where the actions of successive Governments have reduced real transport costs, mainly through the construction of new paved highways of low priority, which have not deterioratedyet. Instead there has been a steep increase in real costs in almost every part of the transport system. The effects of the deterioration of infrastructure and transport equipment have been aggravated by a decrease in the efficiency of the sector's organization and mnanagement, which has created serious financial difficulties for transport enterprises and caused severe dislocations in the rest of the economy.

Rising Costs

3.2 In examining the rise in the costs of road transport, the additional cost of restoring the roads over and above normal maintenance must be considered as well as the costs of operating and maintaining transport equipment. The estimated cost of restoring and maintaining the road system at present is about FMG 100 billion (US$285 million), as compared to a total expenditure by the Ministry of Public Works in 1981 of FMG 4.8 billion (US$14 million), whereas normal maintenanceon the road network should amount to about FMG 6.5 billion (US$19 million). Restoration of the road system will clearly take several years. This represents a considerable cost to the state, but it would also generate sizeable savings to enterprises users and shippers and would directly or indirectly benefit the entire economy. Because of the lack of reliable data, an idea of the magnitude of the savings can be had from the time needed for trips. It is common for a trip that once took an hour to take now a day or more. Labor, fuel costs, and wear and tear on vehicles increase correspondingly,and often additional labour,delays and damage to crops are unavoidable because of the need to unload and reload trucks to enable them to cross difficult spots. The marketing enterprises have also complained of having to maintain roads themselves and at their own expense with their own equipment and of having to repair the trucks of the Regiment du Train, whose services they were purchasing. But, with the pressure from the Government on them to collect crops, they had no choice.

3.3 The increased wear and tear on trucks and the shortages of spare parts are leading to a rapid attritionof the vehicle fleet. Transporten- terprises made very plain their preferences for the makes of trucks that constituted their older veh:iclefleet and complained that it had been a false economy to buy other less expensive makes, since they could not operate on many of the roads the older trucks passed on, and deteriorated faster5/. Moreover, spare parts will soon be in short supply for the new

5/ Two enterprisescomplained that the Romanian DAG trucks the Government had purchased had to be scrapped within a year. Some enterpriseshad slightly better luck with the Ebro trucks, but balked when asked to buy them. - 36- trucks too. With fewer and fewer vehicles at their disposal it becomes more difficult for enterprises to use the appropriate vehicle for each job. Hence several small trucks might be providing transport more cheaply than a larger one, or converselylarge trucks may be running partly empty. Alternatively the enterprises might prefer not to perform a job, to avoid the risk of using new trucks on bad roads. All this means that a large capital investment of the economy is both underutilized and depreciating unnecessarilyfast.

3.4 At the same time that the physical conditions of the road transport system have deteriorated,management of the sector has worsened. The Governmenttsown actions have frustrated its intentions of achieving efficiency through its system of state enterprises. Since rigid price controls, for the essentially political purpose of shielding urban consumers from inflation, are incompatiblewith the autonomy of enterprises required for efficient management, the Governmentopted for the former. Price controls compel the authorities to issue instructions to enterprises when priority tasks, such as transportingrice or collecting crops from difficult areas, are to be performed. Otherwise the enterprises tend to concentrate on activities that do not cause them losses. The authorities,however, usually disregard the costs to the enterprises,and ultimately to the economy, because the situations they have to deal with are haphazard and mostly urgent. But even if they were careful in choosing the least cost way of meeting the needs of the moment, this trouble-shootingis unpredic- table and disruptive of any programmingof operations that enterprisesmay have in mind; and it results frequently in empty trucks passing each other in opposite directions. Under such circumstances assessment of the efficiency of the enterprises indicates wide differences between them, while the consistency between sources of such assessments (mainly clients and suppliers) indicates that the assessmentsare fairly reliable. Generally the older enterprises,which were formerly in the private sector, are more efficient, having all the advantages of trained and experienced staff and well established procedures. But, even the most efficient enterprise cannot be expected to remain efficient indefinitelywhen it is no longer able to make profits, and to properly compensateits personnel.

3.5 Similar to road transport,the impact of rising costs is also serious for railways, shipping and air transport where increased costs are associated with reduced productivity. Productivity losses are in many cases due to capacity restrictionsimposed by a deteriorating infrastructure whose maintenance costs have been increasing faster than user charges or tariffs accruing to government. The deteriorationof the railway system has reached a point where it will require curtailed levels of service since the country is unlikely to mobilize the necessary funds to rehabilitatethe system and to maintain previous standards at the same time.

3.6 In shipping and air transport there have also been rises in costs, due mainly to the acquisition of new equipment which remains underutilized. Neither the SMTM nor the CMN utilized their capacity in 1979/80, - 37- when merchandise flows were larger, enough to justify the new investments, with the possible exception of vessels for special purposes such as the small LCTs. As explained above, Air Madagascar had high levels of capacity utilization until it replaced its B707 by a B747. Now with the country's economic crisis and considerable declines in all kinds of traffic, capacity utilization has fallen still lower. The SMTM ships operate at roughly 40% of capacity, while the rate for CMN ships is probably lower since it was niot much higher in 1979-80. Air Madagascar's B747 operates at roughly 36% of capacity, whereas other aircraft, especially the B737s on domestic routes, are being used close to their limits.

Economic Consequences

3.7 The economic consequences of the decline in efficiency and the rising costs in the transpori: system cannot all be quantified, but they are serious. The most conspicuous effect of the decline in efficiency is the dLisruption of supplies, especially to the central plateau and isolated ports, but there are other effects, such as the discouragement to farmers w-hose crops are collected late or not at all and the loss to consumers who must spend a large part of their time waiting for conveyance. As explained in the previous section, the rising costs of the transport sector are not properly reflected in the controlled tariffs, which, apart from failing to guide managers and planners, cause serious financial losses to enterprises. In the present stringent financial situation these losses, especially the foreign exchange costs of debt servicing, constitute a major problem. The price distortions also have perverse effects on efficiency since some enterprises expect, because of their important role in moving vital goods, that the Government will cover their losses, while others that operate at lower costs are driven out of business, if they have not already stopped functioning because of the lack of spare parts.

3.8 The difficulties of transporting goods to the central plateau area and to some of the isolated ports are one of the most striking features of the economy. The railway from Toamasina to Antananarivo carries a little over 1,000 tons per day, of which nearly half is rice and most of the rest consists of petroleum products. Disruptions, such as the priority given to transporting materials for the Regional University Centers in 1979-80 or the landslides caused by rains in January 1982, can paralyze most of the non-agricultural economy. The effects may also spread beyond the central plateau since goods for other areas often transit that area. An extreme, even bizarre, case is that of goods that are sent from Toamasina to Antananarivo, where they are cleared through the customs to be sent to Mahajanga for shipping to Antseranana, something no rational pricing system would permit. The agricultural sector can also be affected, as illustrated by the amount of fertilizers that waited as long as two years at the docks in Toamasina because of lack of railway wagons. Farmers who were willing to pay the full costs of fertilizers were still unable to get them. This is a major consideration in the proposed IFAD Highland Rice Project recently appraised by the Bank. Some isolated ports also have pro- b:Lems obtaining supplies, as, is the case in Toalagnara, which has at times had to wait three months between ships' calls. In food deficit areas, or where crops for export are produced, such irregular service has high costs. - 38-

3.9 The serious difficulties in collecting crops aggravate the balance of payments problems since they result in smaller exports or the need to import more rice. There are large quantities of coffee, cloves, pepper, and other exports uncollected from the last and preceding seasons, though the exact amounts are unknown. The condition of the roads and scarcity of vehicles have slowed down transport to the point that it cannot meet the demand, even though export crops, which used to be collected from August to October, are now being collected through the rainy season up to April. Beginning in March rice collection takes priority until August/ September. Enterprises that had to transport both types of crops complained that they got no respite to overhaul vehicles. Crops that remain uncollected are frequently damaged because of poor storage facilities, especially during the rains, but the efforts of enterprises to construct storage sheds have been frustrated by the difficulty of the logistics. To the physical difficultiesmust be added the financial problems already mentioned of enterprises,which could become critical if the Government res- tricts credit without making special compensating arrangements. Moreover the prices do not indicate when crop collection becomes uneconomical. The Government's policy is to collect wherever there is a surplus although transportcosts alone may exceed the earnings.

3.10 Transport problems are also among the reasons for the disturbing trend, already discerned by Bank economic missions some years ago, of farmers turning away from the markets to subsistence cultivation. One cannot separate out the relative importance of transport on the one hand and inadequate producer prices and scarcities of goods for farmers to buy on the other, but the trading enterprises with long experience in the field re- garded the delays in collecting crops as a major reason. Moreover, there seems to be some correlation between the quality of transport connections and the tendency to abandon cash crops. For instance, the journey from the port of Mananjara to Ampasinomba via Sahavata, which used to take less than two hours, now takes two days and it is advisable to use a 4-wheel drive after Sahavata because most of the 70 bridges are broken. The area around Ampasinombaused to produce 7-8,000 tons of coffee but only 2,500 could be evacuated (at a loss to the enterprises)and growers are reported to be up- rooting the coffee bushes. At Midongy du Sud 500 tons of Arabica coffee used to be produced, whereas none is produced now. In the especially fer- tile areas along the Farafangana-Manakara road and to the North, annual coffee production used to be 25-29,000 tons, but only 12,500 tons were expected during the last season. Around Tsaretanana groundnut production was 1,000 tons but it too has ceased. A similar phenomenon occurs with rice, as illustrated by the 28% increase of the output of manioc, essentially a subsistence crop, during 1970-80, whereas the country's rice output increased by only 11 percent. Reversing this trend will require restoring the confidence of farmers through more remunerative prices, but this will not be effective unless the transport system can also ensure prompt collection of crops and the delivery of goods for farmers to buy. - 39-

3.11 It is not possible with the available data to put a figure on the losses incurred by the transport system,but they are certainly substantial and are borne to a considerable extent by the state in different ways. Some road transport enterpr:Lseslike SINPA received regular subsidies from the budget, though the recent price increases for several commodities,especially rice, may permit these enterprises to earn larger margins that may cover costs. The Regiment du Train is subsidised through the military budget. The ports, other than Toamasina,are also financed out of the budget. The railway has been receiving Treasury advances and considerable external assistance. The state also covers the depreciationcosts of the new capacity of its shippirLglines and Air Madagascar. The new ships do not appear in the available balance sheets of the SMTM and CMN, so the state presumably bears their cost. The debt servicing on the SMTM's new ships would have come to $5.5 million in 1982, if it had not been re- scheduled,which would have been close to the gross revenues to be expected from them so that they would probably incur a net loss in foreign exchange. It will require repeated reschedulingto avoid heavy foreign exchange losses in the future. SimilarlyAir Madagascar'sB747 incurred debt servicing of nearly $1 million per month in 1981, though the figure will be roughly $0.6 million per month in 1982, both figures, however, the foreign exchange earned by its operations, especially with the present reductions in traffic. - 40-

IV, RECOMMENDATIONSFOR A RECOVERYPROGRAM

A. Sector RehabilitationStrategy

4.1 In view of the extent of the transport sector's problems and their effects on the rest of the economy, it is vital that a program for the sector be prepared. Government is currently working on a recovery program to be presented to a proposed Consultative Group meeting scheduled for early 1983. The definition of such a program escapes the purpose of this sector memorandum, but a number of suggestions and recommendations as to how an appropriate one might look are offered. Firstly, it must be recognized that the sector's rehabilitation will take a number of years (a medium-term program is necessary) and that it would probably demand most of the sector's resources. Hence new investments, other than on-going projects, should be few if any. Secondly a short-term program for immediate implementation needs to be prepared quickly and then adapted to the medium term program when the latter is ready. The transport sector has become a bottleneck to the rest of the economy and a number of activities might produce quick results in alleviating the transport problems and helping revitalize the economy. Third, a major part of the program would consist of policy and institutional reforms. It is clear from the foregoing analysis that it was the response to the resource constraints, rather than the constraints themselves that brought about the present situation. These reforms would cover questions of inter-ministerial coordination, including planning and budgeting procedures; changes in some ministerial responsibilities; more favorable policies towards the private sector; more autonomy for enterprises; and a number of specific subsectoral reforms.

4.2 A medium-term transport program would form part of a broader program for the whole economy. In particular resources available to it would be constrained by the needs for financial stabilization of the economy and the medium-term public investment program. The Government has prepared a program of economic stabilization, for which it has received IME Stand-by assistance (SDR 72.8 million). It has also prepared a public investment program, covering the 1981-83 period. These would help Madagascar enlarge its program of external assistance, for which it needs to have sound policies and well prepared projects that donors can finance, things that have been conspicuously lacking in the transport sector in the past. Special attention would need to be paid to building the country's own capacities for design and implementation of transport projects and for maintenance, both because these have been serious constraints in the past and because they are likely to be more attractive to donors than new construction projects so long as the conditions of the existing infrastructure and equipment are uiisatisfactory.

4.3 The short-term program would consist of measures that could be started on straight away and would result in quick improvements or the pre- vention of impending difficulties. The need for one is dictated by the ur- gency of the situation and by the fact that a number of such measures could be quickly listed. Especially important would be the rehabilitation of a number of roads necessary for collecting crops, especially exports. Along with this goes the import of spare parts for the vehicle fleets of the older established enterprises, notably the state owned trading firms and private transporters. - 41-

4.4 The choice of pric,rityroads should not be difficult. As already mentioned carriers and shippers have already identified a list of such roads and it would be a simple matter to gather representativesof the concerned enterprisesand ministries to agree on where to start work within a tentativebudget.

4.5 Similarly the firms representingthe main makes of vehicles in Madagascar have estimated ithe requirements of spare parts and it would again be a relatively simple matter to agree on a list of imports within a tentative budget. The Government would then have to devise criteria for distributionto the enterprises,giving the private sector its fair share.

4.6 The limitationsof resourcesare severe, but granting priority to these measures would be just:ifiedsince they address the worst bottlenecks and would yield large benefits within the short term.

4.7 Another measure should be to relieve some of the financialdiffi- culties that enterprises are facing and which may soon lead to their col- lapse or a cessation of theiLractivities. This would have to be part of a program of stabilization,which itself would be essentially short term, and would require immediate study of what the most urgent needs are and how they can be met. Part of the answer would be for the Government to catch up on its arrears to enterpriseswhich would form part of any stabilization program. It might also be necessary to facilitate bank credit to certain transport enterprises. The sectoral specialization of banks has in the past been a hindrance to an effectivepolicy of credit allocation since the banks' resources were determined by past history and not by sectoral needs. The Government might therefore have to consider a modificationof its banking practices by encouragingbanks to lend outside their sectors of specialization,or to lend to one another.

4.8 An increase of tariffs for road transport of goods is urgently needed. Ideally the long-term goal of Government should allow the market to 'determinetariffs. Such a measure should be accompaniedby a removal or substantial reduction of restrictionson where enterprises may operate, to engender competition, and increases of producer prices and prices paid to enterprises for delivery of goods. If the Government is not going to take such a step immediately, the simplest alternative would be to devise a pro- visional set of tariffs road by road for as many of the routes essential for crop collection as poss:iblein consultation with the state owned and private transporters. These tariffs should ensure that the more efficient enterprises do not operate al: losses and offer incentives to private transporters. Alternatively private transporters should be allowed to continue to set their own tariffs independently. Here again zonal restrictions should be reduced or dropped. The next step would be to devise a mechanism for ensuring that transport tariffs cover the costs of transport. The task would be extremely difficult since, as long as many roads are in poor condition, which will last for several years, special allowanceswould have to be made, for which the only effectivemechanism would be repeated consulta- tions with the transportersto obtain their estimates of costs. However, until tariffs do represent the real costs of transporting, it will be im- possible to devise a satisfactory long-term policy for the development of the transport sector and situations such as the present one, in which the costs of crop collection exceed the benefits,may persist. - 42-

4.9 In the case of the railways a recovery program should be based on establishmentof a financial and operationalrehabilitation program. Since the RNCFM is for all intents and purposes bankrupt, an immediate financial recovery program needs to be establishedincluding a cost study and a rail feasibility study for the Fianarantsoa-Manakaraand Antananarivo-Antsirabe lines. Crucial to this recovery is the elimination of arrears both from the Government to the railway and from the railway to its suppliers. The cost study should provide data to allow costing on a commodity by commodity basis so that tariffs can be adjusted to reflect the true cost of transporting these goods. This will be particularlycritical when the new road from Antananarivoto Tamatave is completedand competitionfrom road transport will be an important factor. In the interim an adjustment to railway tariffs is critical.

4.10 Over the years, Madagascar'ssecondary port infrastructurehas deterioratedas traffic has shifted to other modes. However, the Govern- ment still does not have a policy to deal with the port system which now obviously needs rationalization. A study dealing with all of the ports except Toamasina is expected to get underway soon with French financing. The study will among other things look at traffic and development in other modes to come up with a forecast of needs and a program for rationalization of the ports system. Until this study is completed, no investmentsin port infrastructure should be undertaken outside of strictly routine maintenance.

4.11 Coastal shipping is an important form of transport in Madagascar but its effectivenesshas been diminishedby poor management and inadequate finances as a result of government take-over of all but one of the operators in the country. This is compounded by a general lack of spare parts and tariffs which do not reflect costs so that the general level of service has steadily deteriorated over the last few years. Economies of scale in this type of operation are relatively limited and as such it is the type of service which can be operated by small independent businessmen. Coastal shipping should be returned to the private sector where it can operate more efficiently. In so doing, however, the Government should allow operators access to foreign exchange for the purchase of spare parts and only set rates where carriers operate in a monopoly; otherwise rates should be determined by competition.

4.12 The recovery program for air transport should concentrate on ensuring safety of flight operations and improving the productivity of Air Madagascar. In many cases, the airport infrastructureis not suited to the type of aircraft operated by Air Madagascar and this imposes capacity limi- tations on the carrier thereby increasing its costs. Safety is of paramount importance to air transport and the standards at many of the country's airports do not always meet ICAO standards for the type of aircraft used. Any-investmentsin air transportinfrastructure should be geared to, first, improving safety standards and secondly, to allow Air Madagascar to efficientlyoperate its fleet. - 43-

4.13 As far as internationalair transport services are concerned,it is questionable whether or not Air Madagascar should continue long haul (i.e. European flights) given its low load factors, currently about 30%. From a strictly economic standpoint it would be better to concentrate on regional services (i.e. Nairobi, Mauritius, Reunion and Tanzania)using the carriers B-737 and leave long haul service to foreign carriers, preferably at least two or three carriers to reduce dependency among any single one and encourage competition. The debt-service supported by the Government and Air Madagascar for the B-747 is altogether out of proportion with the financial resources of the carrier in spite of relatively high tariffs which are set by internationalcompetition.

4. 14 Improvement of planning and budgeting for the transport sector must be part of the overall improvement of planning and budgeting procedures of the central Government. The first steps are being taken with the recent change in the status oE the DGP placing it directly under the Presi- dency and the new emphasis on the maintenanceand better utilizationof the existing capital stock. Institutionalmechanisms are being set up to obtain the consensus among ministries necessary for the coordinationimplicit in planning and their regular use will help establish the working procedures for the Ministries to function effectively. They should also be re- gularly used to consult users through bodies such as those suggested above. Budget preparationwould then reflect the agreed priorities,which would mean cutting out of the budget all those projects and programs for which adequate resourceswill not be available. A foreign exchange budget would form part of the budget process, though for the short term it might have to be merely indicative because of the difficulties being experienced in predicting the foreign exchange available from month to month.

4.15 To ensure that certain vital recurrent expendituresare at least partially provided for, earmarking of some revenues gives an automatic and predictable mechanism. This used to be considered incompatible with the principles of public finances in Madagascar, but the Government has already shown its willingness to change this by its proposal to use the revenues of the turnover tax (TASCAF) for the National Investment Fund, which was to provide equity capital for enterprises. The greatest need is to ensure funds are available for road maintenance,which could be achieved by earmarking revenues from taxes on gasoline and diesel fuels. The Government could also levy tolls on certain roads. Enterprises interviewed welcomed the idea of tolls, notably on the road between Antananarivoand Mahajanga, provided revenues from the tolls are devoted to maintaining and improving the roads on which they are levied. It is not certain that this is practicable without complicatedcontrols, but it is a possibility to be considered.

B. CXonsultative Mechanisms

(i) Governmental

4.16 The foregoing brings out clearly the urgent need to create effective consultationmechanisms for the transport sector. An example is the recently created shippers' committee which has already begun to yield - 44- fruit in negotiationswith CIMACOREM. A similar body for the road transport sector is essential to advise the Governmenton infrastructure,equipment, organization,and prices. Its membership should include representatives of the main state and private transportingenterprises and the Gov- ernment should, within its resource constraints, feel bound by its recommendations. Had such a body existed before, the country would have been saved a number of costly mistakes in its purchases of new vehicles and road con-struction. In the case of the railway and Air Madagascar, the problem is one of establishing proper planning procedures within these agencies. The shippers' committee has concentrated on international shipping problems, but it could extend its activities to coastal shipping or be aided by a body for that purpose. All these bodies would require substantial technicalassistance at the start, perhaps substantialamounts, in order to establishprocedures and to address technical problems. The Government has revised its policy of not seeking technical assistance as demonstratedby recent technical assistance to the railway and to the shipping sectors. Requests for technical assistance to the Ministry of Public Works has also recently been made.

(ii) Aid Coordination

4.17. The consultativemechanisms mentioned above need also to be established in the case of external assistance. There are many aid agencies involved in Madagascar in addition to the Bank Group. While many of these agencies have different goals and objectivesin providing assistanceto the country, there is a definite lack of informationamong these agencies as to the policies and programs they intend to pursue in Madagascar. This would be most useful to each agency in tailoring its program to specific needs while being fully aware of other donors intentions. In this respect the Government should consider establishingformal consultativemechanisms for aid coordination in the transport sector so that from time to time an exchange of information with other donors on their proposals for assistance could be made. The proposed ConsultativeGroup Meeting to be held in early 1983 could provide a first forum for this review and exchange of views to take place.

4.18 The role that donors and aid agencies can play in rehabilitating the transport sector in Madagascar is a very important one. No single agency however has the resources to carry out a meaningful project on its own. It is necessary that efforts be coordinated to yield the maximum results in the sector and ensure that consistent and compatible policies are developpedand implemented. The coordinationmechanism among donors can be greatly assisted through a sector specific donors conferencewhich could be organized following the proposed Consultative Group Meeting to be held in early 1983. For this, Government should be asked to prepare a specific overall sector recovery program so that proposals and documentation could be sent to conference participantsin time for a meeting to be held before the summer of 1983. To be successful,such a conference would, in addition to considering the costs of the different components agree on the broader sector objectives to be pursued so that viable projects can be identified for financing. - 45-

V. PAST BANKGROUP INVOLVEKENT IN THE SECTOR

5.1 The Bank Group has assisted the Government in restoring and improving transport infrastructure and institutions, in training staff, and in planning for the future development of the sector. To date, Bank Group lending to the transport sector has amounted to some US$117 million, about 76% of which has been for the! highway sector.

5.2 Bank Group involvenent in Madagascar's transport sector began in 1966 when the First Highway E'roject (Credit 90-MAG, US$10 million) provided for construction to paved standards of two sections of the Antananarivo- Mahajanga road, totalling 145 km. A Project Performance Audit Report (PPAR, No. 1409) dated January 3, 1977 found that the cost of the road construction was far below original estimates and the recalculated rate of return was greater than estimtated at appraisal. Surplus funds were used to finance supplementary works and studies, which necessitated a delay in project completion.

5.3 The Second Highway Project (Credit 134-MAG/Loan 570-MAG, US$8 million, 1968) helped finance construction of 146 km of two major trunk roads and construction of three bridges. The project did not completely meet its objectives, and completion was delayed by about one year due to difficulties of the contractors who carried out the project. Actual project cost was US$15.2 million in contrast to the appraisal estimate of US$11.5 million, including contingencies. This represents an overrun of some 30%, of which about half was due to price increases and half to increased quantities. The cost overrun was financed in large part by Government, but savings under the First Highway Project also contributed to financing. PPAR No. 811, dated July 18, 1975, found that the economic justification of one of the project roads, Ambilobe-Ambanja (91 km), was doubtful in view of its low rate of return (8%), primarily caused by higher construction costs than foreseen at appraisal.

5.4 The Third Highway Project (Credit 351-MAG/Loan 876-MAG, US$30 million, 1973) provided for construction of 417 km of primary roads, detailed engineering of the Ant sohihy-Ambanja road and a review of the traffic counting system. In 1975 the project had to be modified due to substantial cost increases as a result of price and quantity increases not an- t:icipated at appraisal, as well as the devaluation of the US dollar. A supplementary credit of US$5.6 million was therefore provided while construction was reduced by 67 km. PPAR No. 2143, dated July 27, 1978, found that while the overall recalculated rate of return of 14% was acceptable and in line with appraisal estimates, two road sections had individual rates of return of 10% or less, since expected agricultural benefits failed to materialize due to the deteriorating political and economic situation of the country. The PPAR further outlines the project's deficiencies, including an insufficient provision. of funds for road maintenance and a failure to train Malagasy nationals and thereby contribute to institution build- inig. These problems have been addressed under the ongoing Fourth and the proposed Fifth Highway Projects. - 46-

5.5 The Fourth Highway Project (Credit 641-MAG, US$22 million, 1976) helped finance constructionof 370 km of secondary roads between Tsiroano- mandidy and Maintirano and the 67 km of primary roads from Arivonimamo to Analavory deleted from the Third Highway Project. A road maintenance component provided for a study to evaluate maintenance needs, including procurement of equipment and technical assistance for training of local staff in road maintenance. The project's road construction component is partially completed but the largest section, the Tsiroanomandidy- Main- tirano section encountered major difficulties due to poor management and organization of works by the state owned (SINTP) construction company. Bridges have been completed but earthworks and approaches have yet to be finished. The maintenance study is finished; however, implementation of the recommendedtraining program has been delayed. Since training of local staff is essential to improving maintenance operations under the proposed Fifth Highway Project, agreementwas reached that Government would take the measures necessary to allow an early start of training.

5.6 The Fifth Highway Project (Credit 938-MAG, US$24 million, 1979 plus US$10 million, EEC Special Action Credit) is helping finance urgently needed resurfacingon about 250 km on the RN-4 between Mahajanga and Anta- nanarivo; constructionof bridges for the Antsohihy-Ambanjaroad; continuation of the improvement of maintenance operations begun under the Fourth Highway Project; a feasibility and detailed engineering study; and training of MTP staff by technical assistance. The project is about two years behind schedule due to mismanagement and lengthy Government procurement procedures. However, since early 1982 implementationhas greatly improved with all major componentsunderway or about to begin.

5.7 Bank Group assistance has also helped finance the constructionof feeder roads under agricultural and rural development projects. A 1974 project for Village Livestock and Rural Development (Credit 506-MAG) financed the constructionof about 170 km of secondary roads in Mahajanga province and maintenanceof about 280 km of roads. Under the Mangoro Forestry Project (Credit 525-MAG, 1974) provision was made for construction and maintenance of 56 km of gravelled service roads, 840 km of plantation truck roads and 910 km of tracks. The Morondava Irrigation and Rural Development Project (Credit 322-MAG, 1972) included the improvement of 24 km of existing secondary rural roads and constructionof about 90 km of feeder roads. Finally, constructionof farm roads was included in the Lake Alaotra Irri- gation Project (Credit 214-MAG, 1970).

5.8 Other transport projects include a port project (Credit 200-MAG, US$9.6 million, 1970) which provided for the extension of Toamasina Port, creation of the Toamasina Port Authority, and technical assistance for management personnel and training; in 1973 the Credit was increased by US$1.8 million to cover a shortage of funds resulting from a currency realign- ment. PPAR No. 2299, dated December 22, 1978, concluded that: (a) the physical objectives of the project were satisfactorily carried out; (b) a lower revised economic return at 7.0% was due to lack of traffic growth resulting from adverse local and internationalpolitical and economic condi- - 47- tions that could not have been foreseen at the time of appraisal; and (c) although the technical assistance towards institutionbuilding purposes did not achieve satisfactory results initially because of the low calibre of expatriate experts, progress in achieving autonomy and better management is now being made by the port authority. The Bank Group also helped to finance a railway project (Cr. 488-MAG, US$6 million, 1974) to assist RNCFM in replacing outdated equipment and provide a modest increase in transport capacity, improve the railway's managerial and operational efficiency and set up a framework for transport planning. The project had to be reduced in scope due to cost overruns and was completedwith a three-year delay. A transport planning and coordinationteam to the Ministry of Transport did not succeed in setting up a general framework for transport policies mainly because of the Government'slack of identificationof this team in the decision process. The recalculatedrate of return on this project amounts to less than 10%. A second railway project, Credit 903-MAG was approved in 1979 and includes replacement of outdated equipment, a track renewal program and improvementsin telecommunicationsand workshops. In view of non compliancewith a number of covenantsand the seriousy deterioratedfinan- cial position of the railway, the credit was suspended on June 23, 1982.

5.9 The first four Bank Group projects in the highway subsector helped Government to pursue its objective of providing better road access to regional capitals. However, some roads financed under previous projects aLready show signs of deteriorationdue to inadequate maintenanceand, to a lesser extent, a failure to enforce vehicle weight regulations. Both problems were addressed under the Fourth Highway Project which provided for (a) purchase and installationof weighbridges to monitor vehicle weights and (b) a road maintenance study and implementationof some of the study's recommendations. Governmenthas agreed that a greater effort will have to be made to improve road maintenance;assistance toward this goal is being provided under the Fifth Highway Project. - 48 - ANNEX I Table I A TRANSFORTSECtOR MW2DRAHLX)M

FREIGHT TRAFFIC - ALL tORIS/TRAFIC ?RITI4 E LJADIEC & UNIfLADDV/EMBARWff & DEBARQM4M (in tons)/(en tomes)

1977 1978 1979 1980 1981 Freight/ Freight/ Freight/ Freight/ Freight/ March Gen. Hydrocarb. March Gen. Hydrocarb. March Gen. Hydrocarb. March Gen. Hydrocarb. March Gen. Hydrocarb.

Ocean-goivg 787,249 661,073 866,300 570,620 894,480 546,831 951,219 577,247 747,668 557,769 long-cours

Coastal 494,886 348,039 504,221 349,689 585,958 302,076 526,016 405,950 544,312 313,592 Cabotage

TY1AL 1,282,135 1,009,112 1,370,521 920,309 1,480,438 848,907 1,477,235 983,197 1,291,980 871,361 TOTAL

March Gen = Marchandises C&i6rales Hydrocarb = Hydrocarbures = Petroleum Products

Source: Service des Douanes ANNEX I - 49 - Table 2

CLASSEMENT ESCALES PAR ACTIVITE 1980 TOTAL EMBARQUANT+ DEBARQUANT

P A S S A G E R S F R E T P O S T E

1. ANTANANARIVO 289955 1. ANTANANARIVO 6847,2 1. ANTANANARIVO 468,9 2. TAMATAVE 115573 2. TAMATAVE 1753,4 2. PARIS 129,8 3. DIEGO SUAREZ 62272 3. PARIS 1689,4 3. TAMATAVE 113,0 4. MAJUNGA 59561 4. DIEGO SUAREZ 1562,5 4. MAJUNGA 86,8 5. TULEAR 37212 5. SAMBAVA 1334,5 5. DIEGO SUAREZ 65,5 6. NOSSY BE 36112 6. REUNION 786,9 6. TULEAR 48,2 7. SAMBAVA 30338 7. NOSSY BE 748,7 7. NOSSY BE 31,7 8. MORONDAVA 20020 8. MAJUNGA 666,7 8. FORT-DAUPHIN 30,3 9. PARIS 17753 9. NAIROBI 452,0 9. SAMBAVA 30,3 10. REUNION 16628 10. TULEAR 282,8 10. ANTALAHA 19,1 11. FORT-DAUPHIN 16410 11. MARSEILLE 231,7 11. NAIROBI 18,7 12. MAROANTSETRA 14922 12. MAROANTSETRA 169,2 12. MORONDAVA 17,8 13. MAINTIRANO 13569 13. FORT-DAUPHIN 167,7 13. ANTSORIHY 15,8 14. ANTSOHIHY 10098 14. MORONDAVA 131,1 14. MANANJARY 15,7 15. SAINTE MARIE 8758 15. ANTALAHA 127,0 15. FARAFANGANA 12,0 16. AMBATONDRAZAKA 8125 16. MAURICE 101,1 16. MANAKARA 12,0 17. ANTALAHA 8020 17. MANAKARA 97,0 17. MAROANTSETRA 11,9 18. AMBANJA 7615 18. MANANJARY 94,5 18. MAURICE 11,1 19. MANANARA 7304 19. SAINTE MARIE 91,4 19. MAINTIRANO 10,9 20. NAIROBI 7055 20. MAINTIRANO 82,8 20. DJIBOUTI 10,8 21. MANDRITSARA 6037 21. AMBANJA 70,4 21. VOHEMAR 8,4 22. MANANJARY 5962 22. FARAFANGANA 68,5 22. AMBANJA 7,7 23. FARAFANGANA 5630 23. AMBILOBE 59,6 23. REUNION 7,5 24. BEALANANA 4989 24. DOANY 52,0 24. MANDRITSARA 7,2 25. MAU:RICE 4966 25. VOHEMAR 51,2 25. MAHANORO 7,0 26. VOHEMAR 4553 26. AMBATOMAINTY 43,0 26. VATOMANDRY 6,9 27. MARSEILLE 4132 27. MOROMBE 39,9 27. MOROMBE 6,8 28. TSIROANOMANDIDY 4014 28. MANANARA 38,4 28. ANALALAVA 5,5 29. BESALAMPY 3847 29. MANDRITSARA 37,7 29. FIANARANTSOA 4,9 30. MANAKARA 3480 30. ANTSOHIHY 32,0 30. AMBILOBE 4,7 31. ANTSALOVA 3429 31. BEALANANA 28,6 31. ANDAPA 4,5 32. VATOMANDRY 3422 32. ANDAPA 26,7 32. MANANARA 4,4 :33. ANALALAVA 3332 33. TSARATANANA 22,4 33. BEALANANA 3,9 :34. MOROMBE 3082 34. ANTSALOVA 16,5 34. SAINTE MARIE 3,7 35. MARANORO 3019 35. BESALAMPY 13,7 35. AMBATONDRAZAKA 3,7 :36. ANKAVANDRA 3013 36. AMBATONDRAZAKA 13,7 36. BELO 3,3 37. TSARATANANA 2783 37. FIANARANTSOA 13,6 37. MAINDRIVAZO 3,2 38. BELO 2770 38. MAHANORO 13,1 38. TSARATANANA 2,9 39. FIANARANTSOA 2719 39. VATOMANDRY 12,2 39. AMPANIHY 2,6 40. DAR-ES-SALAAM 2613 40. ANKAVANDRA 11,8 40. MANJA 2,6 41. MORAFENOBE 2566 41. BELO 11,5 41. BESALAMPY 2,6 42. AMBATOMAINTY 2461 42. MORAFENOBE 11,0 42. BEFANDRINA 2,5 63. MIANDRIVAZO 2117 43. TSIROANOMANDIDY 9,7 43. TSIROANOMANDIDY 2,5 44. SOALALA 1998 44. ANKAZOABO 8,6 44. ANTSALOVA 2,3 45. TAMBOHORANO 1830 45. DJIBOUTI 8,1 45. ANKAZOABO 2,2 - 50 -

46. AMBILOBE 1480 46. ANALALAVA 6,7 46. ANKAVANDRA 2,1 47. ANDRIAMENA 1476 47. DAR-ES-SALAAM 6,1 47. MORAFENOBE 2,1 48. ANDAPA 1437 48. MANJA 4,1 48. BEKILY 1,8 49. DJIBOUTI 1334 49. TAMBOHORANO 3,5 49. DAR-ES-SALAAM 1,7 50. MANJA 1260 50. SEYCHELLES 3,4 50. AMBATOMAINTY 1,6 51. DOANY 1184 51. ANDRIAMENA 3,4 51. BETIOKY 1,6 52. SEYCHELLES 1068 52. SOALALA 3,2 52. BEROROHA 1,6 53. BEROROHA 986 53. MIANDRIVAZO 2,8 53. SOALALA 1,5 54. ANKAZOABO 967 54. BEROROHA 2,2 54. PORT-BERGE 1,3 55. BEKILY 426 55. AMPANIHY 1,8 55. TAMBOHORANO 1,3 56. MANDABE 380 56. BEKILY 1,8 56. MANDABE 1,2 57. AMPANIHY 324 57. MANDABE 1,5 57. SOALALA 1,1 58. BEFANDRIANA 245 58. BEFANDRIANA 1,3 58. IHOSY 0,8 59. PORT-BERGE 234 59. PORT-BERGE 1,3 59. MARSEILLE 0,7 60. IHOSY 216 60. MALAIMBANDY 0,9 60. MALAIMBANDY 0,5 61. MALAIMBANDY 125 61. IHOSY 0,5 61. DOANY 0,3 62. BETIOKY 54 62. BETIOKY 0,4 62. SEYCHELLES 0,1

Source: AIR MADAGASCAR. INDICATEUR DE TRAFIC AERIEN SUR LE RESEAU INTERNATIONAL (AIR MADAGASCAR)

Coefficient Siages kilometres Passagers Coefficient de Tonnes Tonnes kilometres de Offerts kilometres remplissage kilometres Totales remplissage (1000) Transportes passagers Offertes Transportees total (%) (1000) (1000) (x)

1973 422.783 193.509 45,77 44.578 26.274 58,94

1974 413.326 207.118 50,11 43.398 26.537 61.15

1975 366.284 189.762 51,81 41.362 23.830 57,61

1976 390.274 201.248 51,47 41.970 23.411 55,78

1977 368,609 193.005 52,36 38.645 22.794 58,98

1978 392,560 193.228 49,90 39.865 22.366 56,00 1 UL 1979 500,837 220.537 43,80 101.378 36.390 35,90 l

1980 515,610 225.913 43,80 119.172 38.733 32,50

1981* 118.733 39.913 33,60 28.056 7.932 28,20

* Janvier a Mars (periode creuse) Source: STA

X >1 (DXZ U. H INDICATEUR DE TRAFIC AERIEN SUR LE RESEAU INTERIEUR (AIR MADAGASCAR)

1973 121.276 61.717 50,89 13,378 7.067 52,83

1974 133.337 64.508 48,42 14,526 7.722 53,16

1975 130.338 56.858 43,60 14,627 6.904 47,20

1976 144.212 75.179 52,13 15,201 8.429 55,45

1977 160.654 86.839 54,05 15,827 9.333 58,97 Ul 1978 177.822 102.887 58,00 17,073 10,660 62,00

1979 288.274 152.884 58,10 24,072 12,835 61,17

1980 263.080 152.884 58,10 24,072 15,420 64,05

1981* 63.907 34.171 53,90 5,483 3,409 62,01

* Janvier a Mars Source: STA

(D h 4 H ANNEX I MADAGASCAR Table 5 TRANSPORT SECTOR MEMORANDUM

VEHICLE FLEET / PARC AUTOMOBILE (1977- 1980)

Private cars/ Vans & Pick-ups!/ Trk/ B Tractors & others/ Description Voitures Fourgonettes t Trucks Autoa Motocycles/ Tracteurs et TOTAL privies Camionettes - amions Autocars Moto aurepenginLon

1 9 7 7 1 9 7_7 Vehicles taxed 30,492 9,869 3,544 1 941 -492 46,338 Sounis a la v5f-lLue Vehicles exempt from tax 1,397 1,451 1,056 189 _ 741 4,834 Exoneres

TOTAL 1977 31,88 11,320 4,600 2 - 1,233 51 72 TOTAL 1977

1 9 7 8 1_9_7_8

Vehicles taxed 26,963 11, 645 4,055 2,042 1,591 160 46,456 Soumis a la vignette Vehicles exempt from tax 1,281 1,401 841 134 35 707 4,399 Exoneres TOTAL 1978 28,244 13,046 4 896 2 176 1,626 867 50,855 TOTAL 1978

1 9 7 9 1 9 7 9 Vehicles taxed 26,859 12,748 4, 240 2,206 2, 176 390 48,619 Soumis a la vignette Vehicles exempt from tax 1,683 1,194 880 139 51 715 4,662 Exoneres TOTAL 1979 28, 542 13,942 5,120 2,345 2,-27 1,105 53,281 TOTAL 1979

1980 1980

Vehicles taxed 27,351 13,494 4,544 2,221 3,372 511 51,493 Soumis a la vignette Vehicles exempt frcm tax 1,271 1,327 866 151 76 759 4,450 Exoneres TOTAL 1980 28,622 14,821 5,410 2,372 3,448 1,270 55,943 TOTAL 1980

Source: Office de l'Enregistrement et du Tourisme. ANNEX I Table 6 - 54 - MADAGASCARRAILWAY

Rail Traffic General

I. Total Traffic 1976 1977 1978 1979 1980 1981

Traffic Actual Actual Actual Actual Actual Preliminary'/

Passenger ('000) 4,420 3,975 4,115 4,042 3,506 3,544 Freight (I000 T) 861 840 790 711 729 650

General 676 705 716 626 646 --- Chromite 185 135 75 85 83 ---

Traffic km

Passengerskm (mill.) 292.6 276.5 296.4 303.5 273.9 279 Freight (mill. T km) 282.1 273.0 248.9 231.9 22T.8

General 209.5 220.2 219.4 198.3 191.0 Chromite 72.6 52.8 29.5 33.6 32.8 22.0

II. % of SAR* Forecast

Freight tons 100 103 88 76 75 65 TKM 100 101 85 77 71 -- PassengersNo. 100 101 90 84 70 67 PKM 100 102 97 98 88 88

III. Monthly Freight Traffic ('OOOT)

Yearly Average 1981 1982

1976 71.75 Jan. 59.3 July 53.4 Jan. 47.8 1977 70.00 Feb. 42.0 Aug. 55.8 Feb. 39.4 1978 66.00 March 48.3 Sept. 54.7 March 45.0 1979 59.25 April 45.4 Oct. 53.7 1980 60.75 May 53.5 Nov. 54.7 1981 54.17 June 46.7 Dec. 50.8

I/ Traffic estimates for 1981 vary between 650,000 and 730,000 tons in various documents given by the railway. Data are very tentative due to computer problems.

* Appraisal Report - Second Railway Credit. ANNEX I 55 Table 7

SITUATION ACTUELLE DE LA FLOTTE AERIENNE COMMERCIALE DE LA COMPAGNIE AIR-MADAGASCAR

CAPACITE ET POIDS

Date de ______TYPES D'AERONEFS Nombre mise en Charge moyenne Nombre de Poids maximal service offerte sieges- au decollage (tonnes) passagers (tonnes)

Boeing 747 200B 1 1979 74 281 362,800

Boeing 737 F B F.A. 2 1969 12 125 52,4 46,9

HS 748 2 Fin Dec 4,5 44-48-52 21,090 1979

DHC 6-300 5 1971 1,5 16 5,670

Piper Navajo PA-31 2 1965 0,5 6 2,948

Piper Aztec PA-23-250 5 0,4 5 2,350

Piper Cherokee 2 0,4 5 1,540

Source: STA. N.B.:- Les avions legers (Piper Aztec, Cherokee) ont ete retires du reseau commercial, intgrieur en 1976 dans le cadre de l'augmentation de l'offre et de la promotion des vols non reguliers, pour 6tre remplacgs par des Piper Navajo. Les lignes Piper Navajo ont ete remplac6es par des lignes r£guliares Twin Otter en 1979. D6but 1979, le B 707 328B a 6te retire du reseau long courrier pour atre remplac6 par le B 747 Combi. Le HS 758 a ete introduit sur le reseau intgrieur commercial vers la fin du mois de Dcerabre 1979. MADAGASCAR TRANSPORT SECTOR MEMORANDUM ROAD MAINTENANCEBUDGET/ MOYENSBUDGETAIRES A LA DISPOSITION DE L'ENTRETIEN ROUTIER

(FMG '000)

1975 1976 1977 1978 1979 1980 1981 1982

General Budget 570,764 830,451 1,115,677 1,310,095 1,653,400 653,900 375,054 500,000 Budget G6n6ral

National Development Fund - - - - - 1,000,000 637,000 593,000 FNDE (Programme d'investissement) (Investment program)

Paved road resurfacing - - - - - 5,488,000 1,778,362 - Couche d'usure

1/ In 1979 FMG 1,057 million was allocated for road resurfacing of 62 km of paved roads. En 1979 un montant de FMG 1.057 millions a ete consacre aux couches d'usure r'parties sur 62 km de routes bitumEes. 2/ Tn 1980, FMG 5,488 million was assigned to the 6 provinces and in particular to the following roads: Antalaviana - Manandona - Ambilobe - Antsiranana; and the Tsaramandroso dike. En 1980 les 5.488 millions de FMG ont et6 destinbs aux 6 Faritany et plus particulierement aux axes suivants: Antalaviana - Manandona - Ambilobe - Antsiranana; digue de Tsaramandroso. ANNEX I -57 - Table 9

MADAGASCAR RAILWAY

Balance Sheets (FMG Million)

1977 1978 1979 1980 1981

Assets Preliminary 16,508 16,263 17,237 20,199 21,586 Net Fixed Assets

Inventories 1,199 1,273 1,325 1,468 1,840

Account Receivable 1,309 1,583 2,294 2,478 4,969

Clients 440 391 526 1,030 1,362 Government and Public Agencies 561 722 990 836 1,491 Suspense Accounts 143 235 369 199) ( Other 165 235 409 413) (2,116

Cash 236 368 338 775 79

Total 19,252 19,487 21,194 24,920 28,474

Liabilities

Equityl! 15,048 14,342 13,987 12,875 11,938

L.T.Debt 2,670 2,921 4,165 7,334 9,139

Account Payable 1,534 2,224 3,042 4,711 7,397

Supplies 410 424 736 1,143 2,589 S.T. Debt2! 535 734 932 1,591 2,910 Social Security 224 456 693 1,046 1,513 Suspense Account 322 188 127 135) Other 43 422 554 796) 385

Total 19,252 19,487 21,194 24,920 28,474

IT Capital, reserves, provisions-and results. 2/ Includes unpaid portion of long term debt due and treasury advance.

May 1982. MADAGASCAR RAILWAY

Income Statement (FMG million)

1978 1979 1980 1981 SAR* SAR* SAR* SAR* Actual Forecastl/ Actual Forecastl/ Actual Forecastl/ Preliminary Forecast

Operating Revenue

Freight 2,450 2,770 2,653 3,575 2,861 4,053 3,772 4,526 Passenger 975 1,030 1,155 1,350 1,177 1,542 1,270 1,739 Miscellaneous 397 225 435 232 445 239 449 244 3,822 4,025 4,243 5,157 4,483 5,834 5,491 6,509

Operating Expenses

Personnel 2,424 2,500 2,396 2,720 2,752 2,964 2,951 3,223 Material and I Supplies 1,181 1,000 887 1,112 1,305 1,236 1,7702/ 1,372 m Miscellaneous 202 220 235 248 278 280 194 315 3,807 3,720 3,518 4,080 4,335 4,480 4,915 4,910 Amortization 746 800 705 840 731 920 821 1,049 4,553 4,520 4,223 T,920 5,066 5,400 5,736 5,959

Net Operating Income (731) (495) ( 20) 237 (583) 434 (245) 550

Non Operating Items

Interest 213 171 197 190 220 312 509 489 Provisions - - 45 50 50 50 38 50 Other net (revenues) (355) - (124) (400) 217 -- 185 --

Net Income (609) (666) (346) 392 (1,070) 72 (977) 11 H

1/ Including 8% annual inflation and tariff increase 2! The large increase is due partly to a 65% increase in petroleum prices 0

* Appraisal Report - Second Railway Project. IMPORTATIONS - ANNEE 1981: REPARTITION DU TRAFIC POUR LES PRINCIPAUX PAYS DESSERVIS PAR LA CIMACOREM (en Tonnes)

PARTICIPATION DES ARMEMENTS

Partenaire P A Y S Tonnage Madagascar Commercial 1/3 Conference 1/3 Outsider TOTAL

RFA (Hambourg, 18939 6639 (35%) 495 (2,6%) 10277 (54,2%) 1548 (8,2%) 100% Breme) 9977 9975 (99,9%) 2 100%

Pays-Bas (Rotterdam) 10741 1617 (15,1%) 7189 (66,9%) 1935 (18%) 100%

Belgique (Anvers) 31610 1956 (6,2) 19795 (62,6%) 9859 (31,2%) 100%

France Atlantique (Dunkerque, Le Havre Rouen, Nantes, La Pallice, Bordeaux) 51096 8677 (17%) 30185 (59%) 5508 (10,8%) 6726 (13,2%) 100%

TOTAL 122383 28864 (23,6%)

France Mediterranie (Marseille) 20766 8725 (42,1%) 7792 (37,5%) 966 (4,6%) 3283 (15,8%) 100%

Italie (Genes, Livourne) 10350 4889 (47,2%) 2749 (26,6%) 2712 (26,2%) 100%

TOTAL 31116 13614 (43,8%)

TOTAL: DEUX SECTEURS 153499 42478 (27,7%)

(DX EXPORTATIONS - ANNEE 1981: REPARTITION DU TRAFIC POUR LES PRINCIPAUX PAYS DESSERVIS PAR LA CIMACOREM (en Tonnes) (1-3)

PARTICIPATION DES ARMEMENTS

Partenaire P A Y S Tonnage Madagascar Commercial 1/3 Conference 1/3 Outsider TOTAL

RFA (Hambourg, Brame) 19529 2764 (14,1%) 543 (2,8%) 12148 (62,2%) 4974 (20,9%) 100%

Pays-Bas (Rotterdam) 6321 1198 (19%) _ 5067 (80,1%) 56 (0,9%) 100%

Belgique (Anvers) 2050 638 (31,1%) _ 1412 (68,9%) _ 100%

France Atlantique (Dunkerque, Le Havre Rouen, Nantes, Bordeaux) 37950 4774 (12,6%) 17786 (46,9%) 3813 (10%) 11576 (30,5%) 100% o

TOTAL 65850 9374 (14,2%)

France Mediterran6e (Caronte, Marseille) 54371 34133 (62,8%) 10243 (18,8%) 8040 (14,8%) 1955 (3,6%) 100%

Italie

(Ganes, Trieste) (3) 2411 674 (27,9%) _ 1737 (72,1%) - 100%

TOTAL 56782 34807 (61,3%)

TOTAL: DEUX SECTEURS 122632 44181 (36%)

(1) Les tonnages transbordes vers les Etats-Unis ou l'Europe du Nord via les ports indiqu6s ne sont pas | inclus. 8 (2) Pour les produits exportgs en option, le premier port manifeste a 6t6 pris en compte dans l1'tablissement du tableau. (3) Dont 451T de cafe transport6es par la SMTM a Trieste. AIR MADAGASCAR

PROFITS OU PERTES

M n N T A N T (en FMG) E L E M E N T S

1975 1976 1977 ) 1978 1979 1980

1. PROFITS ou PERTES (1) Avant deduction des imp6ts sur le revenu + 93.875.299 2.643.790 21.174.321 -370.966.632 -1.018.124.573 -1.534.301.000

2. Imp6ts sur le revenu 33.044.333 925.326 8.311.674 + 27.360 745.280 + 14.599.000

3. PROFITS ou PERTES (-) Apres deduction des imp8ts sur le revenu + 60.830.966 1.718.464 12.862.647 -370.993.992 -1.018.869.853 -1.548.900.000

Source: AIR MADAGASCAR.

lD M A D A G A S C A R

Air Traffic

ANTANANARIVO

PASSENGERS FREIGHT

Passengers Freight Post Traffic Domestic A & D1/ Tonnes Tonnes Units 2 / Domestic Africa Europe Other Import Export In out

1964 119,926 3,447 726 162 1965 117,913 3,980 835 166 1966 143,277 4,282 923 195 1967 143,747 4,548 882 198 1968 142,959 5,125 705 201 1969 163,601 5,740 754 228 1970 174,332 6,911 676 250 1971 188,126 7,244 735 268 1972 176,731 7,554 729 260 1973 183,081 8,637 646 286 1974 191,622 8,833 592 286 107,529 48,339 34,969 785 1,699 4,111 966 2,057 1975 157,871 7,235 524 235 95,229 31,174 31,327 141 1,414 2,979 804 2,038 1976 193,344 7,004 554 269 121,834 38,729 32,783 - 1,603 2,366 975 2,061 1977 225,017 7,801 572 309 1978 258,829 7,654 635 342 174,586 42,830 39,340 2,073 2,008 2,369 1,139 2,133 1979 314,571 8,684 585 407 218,375 48,332 47,832 31 3,163 2,262 1,096 2,163 1980 359,243 10,717 595 472 253,962 51,030 54,159 199 3,904 2,476 1,422 2,916

1/ Passengers Arrival & Departure - Transits not counted. 2/ Traffic Unit U = P(A & D) + Freight (A & D) + Post (A & D) 1000 100

Source: ASECNA

-4B x- 63- - ANNEX II 2 M A D A G A S C A R

AIR TRAFFIC

TAMATAVE

Passengers Freight Post Traffic A & D _Tonnes Tonnes Units

1974 51,263 1,281 67 65

1975 51,161 1,188 89 64

1976 67,434 1,243 102 81

1977 78,955 1,184 97 92

1978 92,309 1,402 106 107

1979 107,663 1,328 107 122

1980 111,888 1,781 98

Source: ASECNA ANNEX II

- 64- M A D A G A S C A R

AIR TRAFFIC

MAHAJANGA

Passengers Freight Post Traffic A & D Tonnes Tonnes Units

1964 24,488 564 86 31

1965 23,616 555 101 30

1966 28,748 588 87 36

1967 26,702 510 84 33

1968 27,150 677 84 35

1969 26,777 614 84 34

1970 26,626 600 83 33

1971 22,287 485 79 28

1972 28,989 558 84 35

1973 33,423 595 87 40

1974 34,149 592 86 41

1975 28,246 603 89 35

1976 35,762 554 78 42

1977 48,309 518 74 54

1978 49,837 570 71 56

1979 60,389 592 68 67

1980 57,368 642 69

Source: ASECNA TRAFIC AERIEN REALISE SUR L'ENSEMBLE DES SERVICES OFFERTS PAR AIR-MADAGASCAR: DE 1975 A 1981

I. RESEAU INTERIEUR

(a) Transport aerien regulier commercial: 1975 A 1981

Unite 1975 1976 1977 1978 1979 1980 1981 *

- Nombre de vols N 15.010 18.640 21.304 22.434 22.590 23.397 5.077 * - Heures de vols H 10.016 12.460 14.639 14.773 15.688 16.250 3.458 * - Distance parcourue 000 2.747 3.391 3.949 4.036 4.430 4.620 997 *

Passagers

- Nombre de passagers transportes N 156.217 199.385 230.111 269.935 341.513 434.253 68.066 * - Passagers - km realises 000 56.858 75.179 86.839 102.887 127.541 152.884 34.171 * Coefficient de remplissage passagers % 43,62 52,13 54,05 58 55,9 58,1 53,9 * Fret

7 Tonnage brut tonnes 4.362 4.284 4.135 4.156 4.668 5.698 1.179 * - Tonnes - km realisees 000 2.064 2.073 2.021 2.035 2.178 2.667 551 *

Poste

- Tonnes - km realisees 000 191 192 190 190 199 216 56 * Coefficient de remplissage global en poids (pax, fret, poste) 47,20 55,45 58,97 62 61,1 64,05 62,1

* Donnees pour les trois premiers mois seulement.

X x (b) Transport aerien non-rggulier commercial: 1975-1981

Unitg 1975 1976 1977 1978 1979 1980 1981 *

- Nombre de vols N 38 23 10 32 65 16 - - Heures de vols H 131 57 26 96 130 39 - - Distance parcourue 000 88 36 7 67 70 21 -

- Nombre de passagers transportgs N - - 16 355 382 55 - - Passagers - km realises 000 5.951 1.690 22 1.480 1.224 383 -

- Tonnes de fret transportees tonnes - - - 27 2 - - - Tonnes-km r6alisees (passagers, fret et poste) 000 _ . 3 154 102 64 -

Coefficient de remplissage global en poids (pax, fret, poste) % _ 16,4 18,5 51,6 _ aN

* Donnees pour les trois premiers mois seulement. II. RESEAU INTERNATIONAL (LONG COURRIER + REGIONAL)

(a) Transport aerien rggulier commercial:1975 a 1981

Unit6 1975 1976 1977 1978 1979 1980 1981 *

- Nombre de vols N 2.633 2.838 2.753 1.839 1.349 1.105 238 - Heures de vols H 3.760 4.044 3.778 4.135 3.392 3.087 688 - Distance parcourue 000 2.747 2.884 2.688 2.872 2.389 2.228 492

Passagers

- Nombre de passagers tlransportffls N4.890 62).59 62.0c75 a.91065 62.96 89- .730 i n0.70 - Passagers - km realis6s 000 189.762 201.248 193.005 193.220 220.537 225.913 39.913 - Coefficient de remplissage passagers % 51,81 51,47 52,36 49 44,03 43,80 33,60

Fr8t

- Tonnage brut tonnes 1.980 1.334 1.443 1.510 2.552 2.962 772 - Tonnes - km realisees 000 5.530 4.633 4.554 17.229 15.535 17.181 4.060 Poste

- Tonnes - km r6alis6es 000 1.299 23.411 981 959 1.170 1.161 301 Coefficientde remplissage global en poids (pax, fret, poste) X 57,61 55,78 58,78 56 35,9 32,5 28,2

* Donnges pour les trois premiers mois seulement. (b) Transport aerien non-rggulier commercial

Unite 1975 1976 1977 1978 1979 1980 1981 *

- Nombre de vols N 1.096 867 717 870 1.211 1.905 492 * - Heures de vols H 1.239 954 830 1.083 1.480 2.405 597 * - Distance parcourue 000 299 243 227 275 371 592 125 *

- Nombre de passagers transportes N _ - 1.503 786 1.080 1.917 217 * - Passagers - km realises 000 265 762 791 239 395 707

- Tonnes de fret transport6es tonnes - - 555 463 172 1.213 209 * - Tonnes-km realisees (passagers, fret et poste) 000 - _ 437 255 98 240 127 *

Coefficient de remplissage global en poids (pax, fret, poste) % - - 16,4 31,3 x: 35 57 *

* pourcoes trois premiers mois seulement. Ionn~es *Donnees pour les trois premiers mois seulement. ANNEX II - 69 - 5

MADAGASCAR RAILWAY

Commarcial Freight Traffic

I. Breakdown of Freight Traffic

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981/ Imports

General 193 207 129 128 172 132 128 155 152 88 135 --- Petroleum 116 131 138 138 138 130 131 127 153 168 165 141

Total 309 338 267 266 306 262 261 294 305 256 300. ---

Exports

General 42 41 22 11 15 11 25 24 20 18 14 --- Chromite 136 131 110 118 158 183 185 135 75 85 83 =

Total 178 172 132 129 173 195 210 159 96 103 97

Local 344 378 357 375 333_ 374 347 343 349 322 301 --

Totial Commercial 831 888 759 770 812 831 818 796 750 681 698 618

Service 66 61 51 48 32 37 43 43 36 29 31 32

Total Freight 897 949 810 818 844 868 861 839 786 710 729 650

1/ preliminary

II. Breakdown of Freight Traffic by linel/

70 76 77 78 79 80 81

TCE 540 473 525 535 490 500 476 MLA 250 288 212 147 139 150 88 TA 49 50 50 51 31 35 18 FCE 58 55 53 56 53 46 36 897 866 E340 789 713 731 182

1/ Small differences due to Rounding 2/ Excluding service traffic MADAGASCAR TRANSPORT SECTOR MEMORANDUM

1979 VEHICLE FLEET (SUMMARY)/ PARC AUTOMOBILEEXISTANT EN 1979 (RECAPITULATION) (unit: 1 vehicle / unit6: 1 vehicule)

Provinces

TOAMASINA TOLIARY MAHAJANGA FIANARANTSOA ANTSIRANANA ANTANANARIVO TOTAL

PASSENGER VEHICLES VEHICULES POUR VOYAGEURS

Regional Regional Urban 7 - 6 4 11 170 198 Urbain Station wagon, 9 places 45 32 18 90 176 272 633 Taxi-be Minibus, 20-25 places 183 156 61 190 166 628 1,384 Taxi-Brousse Bus, 30-50 places 5 - 7 3 - 7 22 Autocar Suburban 1 2 2 - 2 30 37 Suburbain 336 1/ 523 National National ----- 187 2/ ____0

FREIGHT VEHICLES VEHICULES POUR MARCHANDISES

Less than 3.5 T 615 415 355 562 410 2,673 5,030 Moins de 3,5 T From 3.5 T to 7 T 113 70 52 151 78 348 812 De 3,5 T a 7 T 7 T and over 245 242 197 210 172 887 1,953 7 T et plus Tractors 67 6 12 5 23 35 148 Tracteurs Trailers & semi-trailers 78 12 19 7 3 75 194 Remorques et semi-remorques

PRIVATE TRANSPORT VEHICLES VEHICULES POUR TRANSPORTS PRIVES

Taxis 176 208 265 295 165 2,137 3,246 Taxis Passenger transportation 15 14 13 10 48 135 235 Passagers Driving school cars 5 5 9 4 10 49 82 Auto-ecole Private cars 986 470 686 1,449 862 11,205 15,658 Voitures particulidres

TOTAL ______TOTAL

1/ Station-wagon, 9 places / Taxi-be 2/ Bus, 30-50 places / Autocar - 71 -

MADAGASCAR TRANSPORT SECTOR MEMORANDUM ANNEX II REGI]STRATION FEES & TAXES ON COMMF.RCIAL VEHICLES/ DROIT DE TIMBRE ET TAXE SUR VEHICULES (VIGNETTE) PERCUS SUR LES VEHICULES UTILITAIRES TRUCKS/CAMIONS

!!~r s~epowe1978 1979 1980 Puissance NT Tax/ N Tax/ N Tax C.V. -Vignette - Vignette - Vignette (FMG '000) (FMG '000) (FMG '000)

7 - _ _ _

8 28 112 33 132 26 104 9 183 823 166 747 161 724 10 207 1,036 188 940 188 941 11 338 1,859 340 1,870 366 2,013 12 231 1,386 218 1,308 243 1,458 13 255 1,657 276 1,794 289 1,878 14 297 2,079 309 2,163 311 2)177 15 1,592 11,940 1,720 12,900 1,929 14,467 16 70 560 80 640 74 593 17 114 969 99 841 107 909 18 11 99 19 171 10 90 19 20 190 18 172 26 247 20 60 600 55 550 50 500 21 219 2,299 217 2,278 217 2,278 22 45 496 46 506 46 507 23 21 241 19 218 18 207 24 4 48 6 73 4 48 25 360 4,500 431 5,387 479 5,987

Sub-total 4,055 30,894 4,240 32,690 4,544 35,128

Fees/Droits 1/ 18 1 de timbre 1,755 - 15,280 1,8851- 11,830 1,844 ______1,844 - ~~~16,330

TOTAL 46,174 44,520 51458

1/ This figure is part of the total and should not be added to it. Ne s'ajoute pas au nombre au-dessus, ca-r compris dans ce nombre. Source: Service de 1'Enregistrement et du Timbre - 72 -

MADAGASCAR TRANSPORT SECTOR MEHDRANDUM REGISTRATION FEES & TAXES ON CONMERCIAL vEHICLES/ DROIT DE TIMBRE ET TAXE SUR VEHICULES (VIGNETTE) PERCUS SUR LES VEHICULES UTILITAIRES PICK-UPS /CAMIONNETTES

Horsepower! 1978 1979 1980 Puissance NOTax N Tax N Tax/ C.V. - Vignette - Vignette - Vignette (FXG '000) (FMG '000) (FMG'000) 7 676 2,366 769 2,692 938 3,283

8 1,807 7,228 1,852 7,408 1,847 7,388 9 4,025 18,113 4,486 20,187 5,008 22,536 10 221 1 105 248 1,240 251 1,255

11 101 555 - 105 577 89 490 12 89 534 123 738 121 726 13 589 3,828 608 3,952 573 3,724 14 31 217 65 455 89 623 15 41 308 100 750 35 263 16 5 40 3 24 5 40 17 5 43 7 59 2 17 18 3 27 6 54 5 45 19 5 47 4 38 438 5 ~~~~~~~~~~~~~~~~~~~~~~~30 20 2 20 3 30 3 21 8 84 10 106 5 52 22 8 88 10 110 8 88 23 2 23 2 23 1 12 24 4 48 9 108 19 228

25 6 75 5 62 10 125

Sub-total: 7,628 34,749 8,415 38,613 9,013 40,963

Fees/Droits 1/ 1/ 1/ de timbre 1,278 8,200 1,751 10,390 1,776 10,850

TOTAL 42,949 49,003 51,813

1/ This figure is part of the total and should not be added to it. Ne s'ajoute pas au nombre au-dessus, car compris dans ce nombre. Source: Service de l'Enregistrement et du Timbre. MADAGASCAR TRANSPORTSECTOR MEMORANDUMS ROAD USES_ TAXES TAXES SITS IMPORTATIONS RELATIVES AUX TRANSPORT' ROllTIERS 9579_I980

(FMG)

1 9 7 9 1 9 8 0

).D. T.I. T.C. T.P.T D.0T. T. I. T.C. T.G1.T.

Tires >70 kg 16,494,110 202,520,150 - 44,710,270 16,247,005 19,934,788 - 44,114,950 peces >70 kg Tires 15 to 70 kg i-l-si 81,022,805 1,009,213,734. - 220,113,208 97,847,605 1,209,229,644 - 265,172,663 Peces de 15 I 70 kg i-lsSe Tires 2 -o 15 kg inclneiv_ 62,775,330 389,207,046 88,526,068 - 82,401,730 511,940,250 - 110,405,860 Poses de 2 a 15 kg i-les GsoelOci- - 824.370,500 17,311,787 - 709,835,298 14,803,780 - Essence do t-ouine- Con oilO 0 - 1,961,530,226 101,595,768 - 2,622,111,102 122,304,066 - One-oil FPeelcOD _ - - - - - PenS-olE Lekrbi-ting oil and engino nil - 180,833,164 - 19,099,372 - 157,639,R94 2,120 33,402,448 HRil do graissago et lbsrifiant Biru=cr, pctroir. o-dl:c.Ad Bit.ers de p!trole, coke de p6tinle Sther or petirolsem riduer t auetree rtskide de: huiles de bit.lnonos- msinrels - 14.806,816 9,994,550 87,104,064 - 62,041.050 petrole o- ds minerals bitummux Nat-ral bita.e. ond osphklt, Bitomes otores i t ospholtes eaterels, sehisiet oil shaes and soed. aspkalt trok - - - - st sakbes gbitnmes, rorkes sspksktikqes Bitomee sixture (atural asp-halt MEangetkirneos 3 kase ot d'asp1.lt oa de bit-se bitueeo bhsed), etc. - 2,972,170 - 1,992,300 - - - - neteol, do bituen de pdircls,nto. Auomohbile and motorcycle engiEes 9,414,460 58,369,652 - 132,764,030 9,538,872 67,291,266 - 15,303,000 Meters. poor setemotiles et mot-cycies PTrte fto automobile and Pigoos detachkee peer meteors -otoroy]eengie.. 54,538,332 338,005,426 - 76,785,997 61,475,450 381,011,218 - 86,705,790 d'automobileE ot do mot-oyEles Crones 2.838,735 3,352,506 - 6,128,910 9,544,780 11,475,794 - 19,333,250 Genes EGc_vators - - 9.435 11,322 - 20,370 Pellt-eses- Other Siftisg or hkisting equipmemt 9,787,700 11,659,086 - 21,051,260 27.865,700 19,681,130 - 58,708,997 Antros sppareilE do looge (palse. 1 MS ilo or statinnaryt minig excavatien Machines ot appareils fiees no mobile_ d'extracties, enrtbtho-ig or drilling eqnipmee.. dteooovetioo, de torrasoement 00 de ftrage, bklldo-ers, grad-st, ctc 39,979,960 50,924,040 - 86,368,739 73,481,910 08,245,724 -158,735,684 bulldorer, nivelnnsos. tt.. Phblie trtaspertati. -ehiOl-s 272.721,340 2,012,102,224 - 263,323,265 84,754,638 264,511,766 - 78,203,935 Vehcleeso do transpoct emcommun Fr-ight tr--sport_ti- onehcl-s Vkhicssem pnr le ti.ansport of A 4 tons de 155,906,970 757,006,576 - 203,105,847 173,828,560 806,167,964 - 231,519,420 marchandisos 0.4 tonn_s F-eight tranepertatiEn -ehcle_.. V6hic-les pet of > le tsransport de 4tons 213,792,205 1.054,797.672 - 788,135.115 567,679,918 853,009,576 675,012,445 r-rehasdi-es 4 tonnes Vehicls chRssis _ - - - - oChssis de vficuh lee VehiEle bodios 2,704,490 16,767,838 - 3,813,300 1,637,100 10,150,020 - 2,308,230 Cartosserios do vAhnicule Vehisicl parti 159,956,489 995,999,3441 225,273,510 200,014,230 1,240,416,826 - 281,770,281 Pi'ces detackohe do vnOTi-1les -ton.o.bils

TgTA L 2 2 01 9=12l 0 2 9,384,430,170 207,432,623 leQ2k2A2M73 1,Žk6)328,933 9oP0T17 7,?828 137,109,966 a12§Awa~1 2 IT=== A=L

D.D. c-tGs... do,ti- roe i D.S.D.1. - CuspomiI-Smei tee 0.D. - DroDtn donanie... r_i DI. - Droits d'importetrln Toese tr.e..ci-n T..T - T.. - Tome de cennorleo T.Il.T. - Tacoe noiqu- .. transactioms Di.r.tly imported oil prodIots. etdi Pctrnlsnm prndnst_ der_rod item crdo oild tnfieiog aro net includod in throe tnb. Lee ptedclrs petrnliers sus ds

poe ie-l- d-r sonests, MIADAGASCAR

TRANSPORT SECTOR MEMORANDUM

SELECTED ROAD TRANSPORT USERS/OPERATORS

Name Date Established; No. Vehicles in Fleet Geographical Major Problems Main Ac tivities (of which presertly operating) Distribution

ANTANANARIVO

merchandise FANEVA 1/81; state enterprise which 132 trucks allocated Antananarivo; also -nieed space to load/unload collects & distributes 72 received interprovince travel. -trucks carry only 50% capacity, due to ,mostly) agricultural (70) insufficient freight in one direction commodities in province of -independent transporters attract much Antananarivo. of FANEVA's clientele

malt and sugar STAR 9/53; breweries & soft 200 trucks 5 breweries, 5 soft drink -often difficult to obtain drink factories factories, 22 distribution -lack of spare parts for fleet maintenance agencies throughout countrv. -no construction materials for new garage -poor road conditions -breakage of hottles -cannot supply some parts of country due to prohibitive transport costs -parallel market for spare parts -insufficient diesel fuel and lubricants

EXTRAMAD 1955; private transporter 43 trucks office in Antananarivo -poor road conditions of merchandise and branch in Mahajanga i -lack of spare parts for fleet Antananarivo-Mahajanga -insufficient diesel fuel and lubricants axis -official rate/kg of transport is too low to cover expenses -8-hir trip to Mahajanga now takes 15 houirs

for maintenance Air-Routes 1973 becamo subsidiary of 50 trucks on order will serve Antananarivo- -no construction materials Services Air Madagascar; plans to (no vehicles operating) Mahajanga axis. garage transport essential -no experience in road transport commodities

SOMAFITA 3/78; state enterprise 82 members office in Antananarivo; -lack of spare parts for members' trucks (similar to a cooperative) 110 trucks Antananarivo- Mahajanga and -often must overload truck one-way to which transports (mostly) (100) Antananarivo- Antseranana break even ag commodities; group axes. -official rate/kg of transport is too low serves state enterprises to cover expenses -lack of across to new vehicles -parallel market for spare parts -constrained by official rate since group is serving state enterprises; cannot work for private companies.

SOMACODIS 3/72; state enterprise 156 trucks office in Antananarivo; -road network is insufficient which collects & dis- 16 branches, 5 sub-branches, -lack of spare parts for fleet tribuites local ag & 14 stations; nationwide -official rate/kg of transport is too low commodities and imports service to cover expenses; (when available) -insufficient fleet to operate and meet distribution needs; must rely on outside transporters and negotiate prices, usually pay "going" rate. -inisifficient diesel fudel and lubricants -fleet is too varied -poor road conditions -lack of equipment sod tools for repairs SINPA 1973; state enrerprise 80 trucks 26 offices throughout -poor road conditions which collects and (20) country; nationwide -lack of access to new vehicles distributes mostly service. -lack of spare parts for fleet rice, somie other ag -official rate/kg of transport is too low commodities to cover expenses; independents can charge higher rates -insufficient fleet to operate and meet distribution needs; must rely on outside transporters -insufficient freight in onie direction -collection is seasonal -difficulties transferring goods from truck to boat to truck again -insuifficient diesel fuel and lubricants -difficulty finding manual labor

KOFMAD 1962; cooperative for 256 members Antananarivo office; serves -lack of spare parts for fleet transport of passengers, (80 cars + buses) Antananarivo-Mahajanga and -in sufficient diesel fuel and lubricants mostly rural clients Antananarivo-Antseranana -lack of members' access to new vehicles axes. -theft of passenger baggage/goods

SOCOTRA 1953; cooperative for 20 members Antananarivo; serves -lack of spare parts for fleet transport of passengers, (20 buses) suburban areas of city. -lack of members' access to new vehicles mostly urban clients -insufficient diesel fuel and lubricants -city bus fare too low to cover expenses

FIBATA 12/76; bus company 200 buses Antananativo urban & -lack of spare parts for fleet (was public - now (68) suburban; recently added -fleet is too varied socialist enterprise) service to Antsirabe, -city bus fare too low to cover expenses; for urban transport Manjakandriana and strategy is to minimize losses in Antananarivo Anjozorobe -"taxis clandestins" (private citizens with cars) steal some business -potholes and poor city road conditions L -lack of equipment & tools for repairs -lack of organization in infrastructure

FIMA 7/79; Malagasy bus 270 buses + trucks Antananarivo urban and -lack of spare parts for fleet company (semi-public (219) suburban; plus service to -bus fares are more political than economic enterprise)created to Fianarantsoa, and Mahajanga. -potholes and poor road conditions serve the district FIMA operates urban lines -lack of equipment and tooling equipment of Antananarivo; carries in these 2 cities and Toliary. -no construction materials for garage 10% merchandise & 90% -personnel problems: after receiving passengers training, personnel leave company -bvs fares too low to cover expenses

TOAMASINA:

TRANS-7 2/79; transit company 15 agencies throughouit -lack of equpment (elevators & cranes) (socialist enterprise): country -delays in receiving payments from customs, loading/unloading, State enterprises for past work transport arrangements; also travel agency, car rental, shipchandler.

SEPT-TRANSPORT 1/81; state enterprise which 128 trucks allocated Toamasina-Fenerive; -some (10 ton) trucks are too heavy for roads collects and distributes 56 received & operating also, Lravel within province. -poor road conditions; too much traffic on main (mostly) agricultural conmmo- roads and not enough traffic on small roads dities in province of -official rate/kg of transport is too low to Toamasina. cover expenses -(IFA truck) spare parts kept in Antananarivo -competition with trucks from state enterprises (FANEVA, SOMACODIS, SINPA) -difficulty making use of all trucks ROGER BERNY 1957; private transporter 12 trucks Toliary-Taolanaro axis. -poor road conditions (9) sometimes Toliary- -lack of spare parts for fleet Antananarivo. -lack of access to new vehicles -parallel market for spare parts -delays in receiving payments for past work -must carry water (for battery), oil and diesel fuel for round trip -insufficient freight in one direction -insufficient diesel fuel and lubricants

KOFITO 1/81; state enterprise which 140 trucks allocated Toliary-Taolanaro, -no construction materials for garage collects and distributes (mostly) 107 received Toliary-Fianarantsoa via -delays in receiving payments from agricultural commodities Antananarivo, and Toliary- State enterprises for past work in province of Toliary. Morondava axes. Travel -poor road conditions within province. -(IFA truck) spare parts kept in Antananarivo) -official rate/kg of transport is too low to cover expenses; independents can charge higher rates -independent transporters attract much of KOFITO's clientele; when their small fleet is insufficient, independents act as middlemen and hire KOFITO -insufficient diesel fuel and lubricants

3/25/82 MADAGASCAR 11RANSEORTSECIDR NMDR~VANDUM

UXXXINGSrSTISlCS / STATISIQWESACMNAGE PORTOF MAHAJAM&A (in tons) / (en toes)

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

LIGHIERAGE RADE

Unloaling 69,527 66,987 59,718 50,113 58,860 43,003 81,620 123,035 149,036 148,141 115,973 Drebarquaint Transhilmnt 15,261 15,261 16,953 17,809 8,951 5,180 7,176 3,754 2,803 573 602 Transbordement 84,788 82,608 76,671 67,922 67,811 48,183 88,796 126,789 ,839 1S8,71 116,575 loading 36,429 41,385 34,965 27,531 25,974 18,871 23,925 22,999 14,668 12,904 11,911 Embarquement _, Transhipment 8,281 4,694 7,220 8,042 3,244 3,086 2,452 2,459 2,081 258 669 Transbordement 44,710 46,079 42,185 35,573 29,218 21,957 26,377 25,458 16,749 13,162 12,580

TOTALLIGHTERAGE 129,498 128,687 118,856 103,495 97,029 70,140 115,173 152,247 168,588 161,876 129,155 Total RADE

DDCK 71,386 72,012 66,824 75,575 71,507 71,538 74,654 78,044 63,802 45,718 32,963 QUAI

GRANDIITAL 200,884 200,699 185,680 179,070 168,536 141,678 189,827 230,291 232,390 207,594 162,118 TOTALGENERAL

Source: CompagnieMalgache de Manutention (C.M.D.M.), Mhajanga

-: - 78 - ANNEX I1 MADAGASCAR 2 TRANSPORT SECTOR MEMORANDUM

PORT OF TOAMASINA GENERAL TRAFFIC/ T"AFIC GENERAL DU PORT DE TOAMASINA

.FREIGHT . MARCHANDISESGENERALES 1979 1980 1981 Tonnage unloaded ------tons/tonnes------Tonnages debarqu6s

Ocean-going (imports) 332,100 373,657 289,533 Long-courriers (Imports) Coastal 49,476 49,027 61,987 Cabotage

TOTAL 381,576 422,684 351,520 TOTAL

Tonnage loaded Tonnages embarques

Ocean-going (imports) 193,887 175,140 150,465 Long-courriers (Imports)

Coastal 47,352 69,049 67,804 Cabotage

TOTAL 241,239 244,189 218,269 TOTAL

TOTAL F'REIGHT 622,815 666,873 569,789 TOTAL DES MARCHANDISES GENERALES

PETROLEUM PRODUCTS . HYDROCARBURES

Tonnage unloaded Tonnages debarques

Crude products (imports) 322,578 444,310 373,779 Produits bruts (Imports)

Refined products 86,189 69,420 16,321 Produits raffines

Butane gas - 583 - Gaz butane

TOTAL 408,767 514.313 390,100 TOTAL

Tonnage loaded Tonnages embarques

Refined products (exports) 93,893 130.658 87,030 Produits raffines (Exports)

Refined products (coastal) 127,223 118,024 122,636 Produits raffines (Cabotage)

TOTAL 221,116 248,682 209,666 TOTAL,

TOTAL PETROLEUM PRODUCTS 629,883 762,995 599,766 TOTAL DES HYDROCARBURES

S-SHIPTRAFFIC . TOUCHEES DES NAVIRES (en nombre) 1979 1980 1981 Freight ships in numbers/en heTouchees navires marchandises gen6rales

Ocean-going 222 196 177 Long-courriers

Coastal 140 157 150 Caboteurs

TOTAL 362 353 327 TOTAL

Petroleum ships 56 66 63 Navires petroliers

of which petroleum gas - (1) - Dont butanier gaz

Malagasy warship 10 - 2 Bateau de guerre malgache

Tourist ship - 1 - Navire touristique

Hospital ship - 1 - Navire H8pital

Small craft including sailboats 32 32 65 Petits bateaux y compris les voiliers

TOTAL SHIP TRAFFIC 460 453 457 NOMBRE TOTAL DE TOUCHEES DE NAVIRES

Source: S.E.P.T (Societe d'Exploitation du Port de Toamasina), Exploitation statistique. MADAGASCAR TRANSPORT SECTOR MEMORANDUM PORT OF TOAMASINA

GENERAL FREIGHT AND PETROLEUM PRODUCTS TRAFFIC, 1971-81/ TRAFIC DES MARCHANDISES CENERALES ET DES HYDROCARBURES, 1971-81

(in tons / en tonnes)

1971 1972 1973 1971,= 1975 1976 1977 1978 1979 98an 198_

GENERAL FREIGHT 650,839 532,530 567,644 656,911 602,041 572,670 567,852 536,366 622,815 666,873 569,789 MARCHANDISES GENERALES

of which: dont: Imports 291,714 332,100 373,657 289,533 Importations Exports 175,310 193,887 175,140 150,465 Exoortations Unloading 25,918 49,476 49,027 61,987 Debarquement Loading 43,424 47,352 69,049 67,804 Embarquement

PETROLEUM PRODUCTS 841,747 902,449 1,048,187 1,009,665 1,146,622 947,126 792,261 612,168 629,883 762,995 599,766 HYDROCARBURES

of which: Unloading 449,842 408,767 514,313 390,101 dont- Loading 162,326 221,116 248,682 209,665 Debarquement Embarquement z

TOTAL 1,492,586 1,434,979 1,615,831 1,666,576 1,748,663 1,519,796 1,360,113 1,148,534 1,252,698 1,429,868 1,169,555 TOTAL

Source: S.E.P.T (SociRt! d'Exploitation du Port de Toamasina), Exploitation statistique. MADAGASCAR TRANSPORTSECTOR MEM3RANJM EN 1978 ET JANVIER-JUIN 1981 SOI.. - DISTRIBUTION IN 1978 AND 'ANUARY-JUNE 1981/ACTIVITES DE DISTRIBUTION M `T 0DNSUMPYION/ONSOMMAION PAR MARCHE (Volume: m3)

PRODUCTS/ P_DIXJITS Gasol i, . t.:gular/ Kerosene/ Perti Gasoline, Super/ Eusu--e Petrole Diesel Fuel/ 11D Fuel Oil TOTAL Marches Markets Terin Butane Supercarburant Ordi nire Lmpa,nt Jet Gasoil

- - 199,940 REseau Netwrk 1978 3,570 4,031 74,453 6,729 - 31,157 _ 57,780 Jan-Jun 1,856 959 34,531 5,840 - 14,588 6

74,369 1,718 27,783 115,796 Consamateurs Consuns & workshops 1978 1,650 717 7,509 1,753 297 70,611 et chantiers Jarrn-Tri 732 212 3,452 923 184 44,408 126 20,574 229 1,003 39,165 Administration Acministration 1978 202 88 15,837 - 43 21,763 15,925 Jan-Juit 169 66 5,349 157 - 1]0,050 - 134

13,954 18 1,283 68,300 Revendeurs c Retailers 1978 2,807 268 13,368 36,599 3 15,323 Jan-Jun 81 648 2 1,955 10,212 - 2,282 6 208

3,483 32,834 54,782 Soutes locales Local Storage 1978 33 1 230 11 1 18,189 - 8,010 16,108 Jan-Jun 81 19 - 109 28 - 7,942

- 52 108 165 Soutes inter- International Storage 1978 - - - 5 - 1,006 nationales Jan-Jun 81 4 2 31 4 5 960 - -

937 - - 18,659 Aviation locale LocalAviation 1978 - - 47 _ 17,673 - 13,751 Jan-Jun 81 - 1 61 253 11,735 1,701 -

6,613 2 - 867 7,482 Aviation International Aviation 1978 ------2,359 internationale Jan-Jun F' - - - - 2,359 -

3,966 - 97,773 123,963 Exportations Exports 1978 - - 19,074 441 2,709 - - - 51,382 51,382 Jar-Ju, - - - -

164,337 5,500 161,681 548,252 TOTAL > TOTAL 1978 8,264 5,105 130,818 45,538 27,339 Jan-Jur. 3,438 1,242 45,488 17,417 14,283 81,931 138 80,308 244,245

Source' )UIMA(National Petroleun Canpny) - 81 -

IfADAGASCAR TRANSPORT SECTOR MEMORANDUM

PRICE TRENDS OF PETROLEUM PRODUCTS /EVOLUTION PRIX PRODUITS PETROLIERS (GRANDS PRODUITS)

WHOLES,LE PRICES / PRIX VRAC SORTIE DEPOT (PRIX DE GROS)

Products/ Bottled gas/ Gasline, super! Gasoline, regular/ Kerosene/ Diesel fuel/ Produits (Gas) Supercarburant Essence ordinaire Pftrole Gasoil 12 kg 95R 87R

(Unite) Bottle/ FMG/Litre FMG/Litre ------FKG ------FMG/Litre------ThC/Litre

1972 1/ 1,225 52.95 48.60 29.80 32.70 13/5

1974 1/ 1,370 85.50 56.60 35.35 37.65 2772

1975 1/ 1,370 85.50 74.60 37.35 39.65 1/5

1977 1,370 99.0Q 86.00 45.55 48.65 2871-

1979 2,350 154.00 139.00 67.00 71.00 12/7

1980 a) 4/8 2,650 172.00 155.00 77.00 83.00 b) 14/11 3,250 182.00 165.00 79.00 85.00

1981 4,700 278.00 263.00 105.00 122.00 23/3

Source: SOLINA (National Petroleum Compan2y)

1/ Until 1975, prices varied according to location, except for kerosene. The above-mentioned figures relate to prices in the capital, Antananarivo. Jusqu'en 1975, les prix variaient selon les localites, sauf pour le petrole. Les chiffres sus-indiques se rapportent aux prix d'Antananarivo, la capitale.

IBRD14098R1 42 44- 46 48 MAY 1979 12-' 12t- ,.>Anmboka MADACGASCAR TRANSPORTSYSTEM

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