Report No. 668a-LA Some Findings Relative to the R Co Reconstruction and Economic

Public Disclosure Authorized Development of (In Four Volumes) Volume IIl: Transportation April 4, 1975 East Asia & Pacific Region Not for Public Use Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

Document of the International Bank for Reconstruction and Development International Development Association

This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. C U R R E N C Y E Q U_I V A L E N T S

Currency Unit - Kip

Official rate applicable to exports, some commodity imports and most government transactions up to March 27, 1975 :

US$ 1.00 = Kip 600

Kip 1 = US$ .0016

Kip 1 million = US$ 1,666

Tax inclusive official rate applicable to all other transactions until July 1974, and to limited transactions until March 27, 1975:

US$ 1.00 = Kip 840

Kip 1 = US$ .0012

Kip 1 million = US$ 1,190

Betwjeen July 1974 - March 1975, many consumer goods imports, and services, and capital remittances were excluded from official market, but allowed on the parallel market. Parallel market rate as of February 15, 1975

US$ 1.00 = about Kip 1400

Kip 1 = US$ .0007

Kip 1 million = US$ 714

Since the devaluation of March 27 1975, the official exchange rate applicable to exports, some commodity imports, most government transactions and limited transfers

US$ 1.00 = Kip 750

Kip 1 = US$ .0013

Kip 1 million = US$ 1,333

And the tax inclusive official rate applicable to merchandise exports and to all other commodity imports :

US.$ 1.00 = Kip 1200

Kip 1 = US$ .0008

Kip 1 million = US$ 833 TABLE OF CONTENTS

Page

A. SUMMARY 1

B. GENERAL 2

C. PRESENT TRANSPORT ORIENTATION 2

D. REVISED TRANSPORT ORIENTATION 2

E. TRANSPORT FACILITIES 3

(i) River Transport 3

(ii) Roads and Road Transport 4

(iii) Road Construction and Maintenance 6

(iv) Railways 8

(v) Air Transport 9

F. GOVERNMENT PROPOSALS 9

G. CONCLUSIONS AND RECOMMENDATIONS 11

TABLE ANNEX

TRANSPORTATION IN LAOS

A. SITJ24ARY

(i) The transport situation of Laos is complicated, because the country is landlocked, mountainous and only sparsely populated. Presently, due to the internal division and the unstable political conditions in some neighbouring countries, internal traffic is restricted and only a few access routes to the sea can be used. It is expected, however, that in the near future internal traffic will become more important. In time, access to sea ports should also become more diversified. Already, new agreements have been concluded with which will lower transit costs from the Port of to from their erstwhile level of $20 per ton.

(ii) The Mlekong River plays an important role in Laos's transport system, but is still used for the transport of only small volumes of goods and passengers. Laos has no railways. Internal air transport is well developed and there are frequent flights between the most important centers of the Vientiane zone.

(iii) The main highway system in both the NLHS and Vientiane zones is almost completed. Traffic volumes on rural highwavs are generally very low. Roads in the Vientiane zone are adequately maintained. The Highways Department has a shortage of engineers and there still is a considerable American technical assistance input. In addition, about 90 percent of the operating budget for road maintenance is American financed. Since the American input will be gradually reduced, it is of vital importance that more Lao engineers be engaged and that funds for road maintenance be allocated from the national budget.

(iv) The mission concluded that in the Vientiane zone transport facilities are adequate for present needs. Although traffic charge seems to be fairly high (40 to 75 kipsper ton kilometer by road, 35 to 50 kips by river) this seems to be due more to the country's still unsettled conditions and low traffic volume than to road conditions. Increasing traffic can be accommodated, but additional trucks may be required for this. Once traffic starts to grow significantly, investments will be required to upgrade the transport infrastructure. A road improvement program may be consiclered for, say 1978. Such a program should concentrate on raising flood prone road sections, replacing war-weekened bridges, straightening and widening some roads, and paving selected sections. Some new bridges may be required. New roads should be built only in connection with agri- cultural projects. Road maintenance equipment is sufficient for present needs, but the situation should be reviewed once the organization starts to maintain roads in both zones. Any project preparation work should be kept -2-

to a minimum and can only start when traffic has developed. In the longer term, some airport improvements will be needed.

B. GENERAL

1. The transport situation of Laos is dominated by two major factors: (a) the country is landlocked; and (b) it is mountanous and only sparsely populated. The first problem is complicated by the fluid political situation, which makes it difficult to predict which transit routes to the sea will be used. The second problem is aggravated by the fact that production in excess of subsistence requirements is only very small, resulting in a feable demand for transport, and indirectly in difficulties in raising sufficient funds for the maintenance of the system.

2. The historical development of Laos' transport system has been fully described in the "Economic Report on the Kingdom of Laos" of June 1974, by the Asian Development Bank. Before the second World War the entire transport orientation of Laos was towards Vietnam, with most towns connected with the Vietnamese transport system, but internal connections between Provincial centres within Laos sometimes quite neglected. The transit route via Thailand, which before the war was not used, has become the only oulet for large parts of Laos during the last two decades.

C. PRESENT TRANSPORT ORIENTATION

3. Practically all transport to and from the NLHS zone passes through or North Vietnam, but no statistics are available on the volumes. Up to just recently almost all transport to and from the Vientiane zone went via Thailand. Some goods have been transported to and from ports in Cam- bodia and reportedly small volumes of rice are still exported to Cambodia. In February, 1975, shipments of goods from or through North Vietnam started to reach the Vientiane zone via and Paksane. It is expected that imports via this route will amount to about 50,000 tons in 1975. Transit goods to the Vientiane zone transported via Thailand were estimated at about 400,000 tons per year, but this volume will probably decline once other routes are available. Transport to and from and possibly through Thailand is stimulated by the fact that in Laos the main highway passes through NLIS territory between Thakhek and Paksane and is presently closed for through traffic. Any transport between Vientiane and the Southern part of Laos therefore has to pass through Thailand or go by river or air. In addition it appears that the multiple exchange rates encourage the sale of surplus rice in southern Laos to Thailand at the free rate of + 1350 Kip per US$, while rice is imported for the Vientiane region at the official rate of 840 Kip per US$.

D. REVISED TRANSPORT ORIENTATION

4. It is hoped that in the near future the free flow of goods and persons within Laos, and between Laos and its neighbouring countries, will be re-established. This will have consequences which are difficult to foresee. The opening of the section of road between Thakhek and Paksane will probably divert some traffic from water and air transport to road transport. If no special transit fees are charged it will continue to be cheaper, however, to transport goods and passengers between Southern Laos and the Vientiane area by road through Thailand, because it is at least 100 km shorter over much better roads. Some traffic will also start to flow between the NLH zone and the Vientiane zone.

5. As long as the unsettled political conditions in South Vietnam and the Khmer Republic pertain, international trade of Laos will have to be with or through Thailand, North Vietnam and China. The transit facilities through North Vietnam to the Vientiane zone are already in use. No information is available on the transport cost via this route, but the opening of a compet- ing route has contributed to the Government of Thailand agreeing on lower rates and more liberal arrangements for transit through Thailand. Up to now the transit of goods through Thailand has been very costly at almost US$20 per ton.

6. Once all hostilities have ceased in neighbouring countries it will become physically possible that various parts of Laos would orientate towards different sea ports: Southern Laos could use 1/ or Da Nang (about 500 km); the Paksane and Thakhek areas would use Vinh (about 300 km); the Vientiane plain area would use Bangkok (630 km) or Vinh (470 km); while the entire Northern part of the country would be closest to the port of Haiphong. The above mentioned possibilities for reorientation of external trade will create the need for repair and improvement of a number of roads leading to Laos' borders, while they may weaken the demand for internal transport.

E. TRANSPORT FACILITIES

7. Internal takes place by river, road or air.

(i) River transport

8. River transport is concentrated on the river, but certain tributaries are also used. During the dry season river transport :Ls handi- capped by rapids; there is also a restriction on draughts during that period. The part of the Mekong most commonly used for naviaation is between and Ban . The Khemmarat rapids between Savannakhet and Pakse, which extend over a distance of about 40 km, make navigation along that section all but impossible during six months of the year, whiLe the Khone Falls near the Cambodia border have discouraged use of the southern portion of the Mekong in Laos.

9. The main traffic pattern consists of sailings from Vientiane to Thakhek and Savannakhet, and from Vientiane to Sayaburi (Thadeua) and

1/ Little is known on the facilities available at Vinh, but it appears likely that goods will have to be lightered. - 4 -

Luang Prabang. The river fleet in use consists of self-propelled boats of up to 100 tons and a few towed barges of about 70 tons. The available boats are mostly old and not very well designed. Motors are too weak for the season rapids north-west of Vientiane, where sometimes about 70 men are required to pull the boats through. Most boats are owner operated, but there are three small companies, which have somewhat more modern equipment at about 3 boats each.

10. The only statistics available indicate that in 1973, about 40,000 tons were transported between Vientiane and Savannakhet with a total of 6.3 million ton-km and about 50,000 passengers with a total of 4.1 million passenger-km. The above statistics, if correct, would indicate that river transport would be very vulnerable to competition from the road, which runs almost parallel to the river, since average transport distances now are only 160 km per ton of goods and 80 km per passenger. Similar statistics for 1974 for traffic between Vientiane and indicate that about 20,000 tons of goods and 35,000 passengers were transported witli a total of 4.1 million ton-km and 3.7 million passenger km. The average ton was transported over 200 km and the average passenger over 100 km. This traffic will also undergo serious competition from road transport, once road travel in the area becomes safer. The road between Vientiane and Luang Prabang, however, is not parallel to the river and traverses mountanous terrain, resulting in high vehicle operating costs, and periods that the road is closed, due to landslides.

11. River port facilities are quite primitive. Only in some cases is a warehouse available on top of the river bank with a concrete ramp down to the low water level. Unloading and loading is mostly done manually via planks to and from the muddy or sandy river bank. Goods transported by boat consist of construction materials, oil products, foodstuffs and general consumer goods. Some additional ramps are under construction and bouys will be ins- talled at several points where navigation is particularly difficult. The studies on navigation improvement, carried out by the Mekong Committee, have not considered the economic justification of the various measures, nor have they tried to predict traffic growth and possible diversion to road traffic.

(ii) Roads & Road Transport

12. Information on the roads system for the country as a whole is incomplete. Apparently the main road system of Laos, linking all Provincial capitals to each other, is almost finished. An agreement with the Peoples Republic of China has been signed recently for theconstruction of the missing portion between Luang Prabang and Nam Ba, some 150 km to the North, which road will be asphalted. Most other roads are surfaced with laterite or crushed stone, but some sections are asphalted. There are very few secondary and feeder roads in Laos. The total road kilometrage in the Vientiane zone, which is presently under maintenance and reportedly passable in all seasons, consists of 2,070 km of primary and secondary highway, about 600 km of which are asphalted, and 1,460 km of laterite surfaced feeder and village access roads. Details on the road system in the NLHS zone are not available. - 5 -

13. The roads in the Vientiane zone are usually at least 8 m wide. Asphalt surfaces are mostly 4-4.5 m wide, but on some sections the width is 6-7 m. In the areas visited by the mission the roads were in adequate to good condition and quite satisfactory for the present light traffic volumes. In the long term, if traffic increases, however, considerable improvements will be required to provide more road capacity, allow for heavier axle loads, reduce transport costs, and make road service more reliable during the wet season. On some sections the asphalt is very old and in need of resurfacing which, however, will be difficult to justify with the present verv light traffic volumes.

14. There is a large number of bridges, all of which are singLe lane. This does not pose any problems to present traffic volumes, but a number of them will need replacement because of war damage. This damage is usually restricted to the superstructure and has been temporarily repaired. A few bridges are still down, but these are mostly in areas where for political reasons the roads are not in use. It is not clear whether the available Bailey 1/ bridge materials will be sufficient for the immediate needs. Ferry services are maintained at about 12 river crossings. More than half of these are to cross the Mlekong river, the rest crossing smaller rivers. The ferries are rather small (2 trucks capacity) and not very efficient. It may be worth examining the desirability of bridges for the crossing of the Nam Cadingh (330 m) on route RIG 13 and the Nam Ngum on routes RN 10 (210 m) and route RIG 13 (210 m). The Indian Government is assisting with a pre- liminary engineering study for the latter bridge.

15. Traffic counts have been made by the Laos Highways Department. They indicate that traffic volumes on rural highway sections are usually below 200 veh. per day. The mission therefore concluded that the capacity and the condition of the road system, together with the available river transport capacity are fully adequate to meet the existing transport demand. Improvement of the infrastructure is unlikely to result in in- creased production and the available road and river transport equipment can handle the present transport volumes. No suitable explanation has been found for the high charges for road transport, which seem to range from 40-75 kip per ton km. It appears, however, that the small volumes to be transported, security problems over the years and unofficial "taxes" at military checkpoints would be more responsiLle for the situation than the road conditions. According to limited information obtained by the mission, charges for river transport range from 35 to 50 kip per ton km.

16. The total number of motor vehicles is estimated at about 20,000. In addition there are about 15,000 motor bicycles. Data, however, are

1/ Metal bridge sections which have the advantage that they can be assembled quickly to form a bridge superstructure. Sometimes they are also used for bridge foundation work. - 6 -

inaccurate, because the number of vehicles taken out of service is not recorded properly. Annual vehicle taxes are paid to Provincial authorities and no central records are available. Out of the total number there are some 14,000 private cars; the remaining 6,000 are taxis, pick-up trucks and heavy trucks (about 2,400). The pick-up trucks are used for goods transport, and as minibuses. No large transport companies exist, but there is an association of transporters with about 50 trucks which looks after transport between Tannaleng (the main entry point for goods from Thailand) and Vientiane. This group is trying to get more monopolies on transport, which appears undesirable. In the Vientiane zone there are no special regulations hampering the development of road transport and owners of commercial vehicles can operate in whatever part of the country they wishl. The mission expects that when internal traffic can flow without major restrictions and international traffic with Vietnam assumes important pro- portions, the existing capacity of transport equipment would no longer be sufficient. In that case additional trucks and possibly buses would have to be acquired. A rough guess would point at an investment require- ment for this purpose amounting to some US$5-8 million over the next 3-5 years. Not too much value can be attached to the above estimate, since the increases in transport demand are completely unpredictable at this stage and also information on the condition of the motor vehicle park is lacking.

(iii) Road Construction and Maintenance

17. After independence many of the French and Vietnamese staff of the Public Works Department left. The Lao staff was insufficient to cope with the task. This problem, plus the lack of security in many regions, led to such a neglect of road maintenance, that by 1960 many roads had become impassable.

18. In the NLHS zone main highways have been rebuilt and new high- ways have been constructed by the Chinese (mostly in the North-West) and by the North Vietnamese (in the North-East). NLHS forces themselves report- edly also constructed a substantial kilometrage of roads. Some American built or improved roads are now also in the NLHS zone. The mission has been unable to obtain any information on the road maintenance organization and financing in this zone.

19. In the early 1960's the Vientiane zone continued to get French assistance for roads and also received some Australian help. During that period the American aid program for roads was organized and resulted in the present situation where about 90% of the funds for roads are from American sources and in addition there is still a substantial technical assistance imput. French aid continues for a training school for public works personnel below engineering level.

20. The American involvement consisted of two parts. The part, which is still continuing, involves direct assistance to the Lao Highway Depart- ment. As many as 30 American engineers, now down to about 15, contracted -7- from a branch of the American Government in Washington, advise the Lao staff and look after much of the procurement. In effect they formed practically a parallel roads department. The operating budget,' also financed by USAID, covers all foreign procurement, which is done direct, as well as local procurement and about two-thirds of salary and office expenses for the Lao staff. Under this arrangement the Lao Highways Department maintained the road system in the Vientiane zone, repaired war damaged bridges and built a small number of access roads.

21. The other part of American involvement consisted of construction work. Within USAID in Vientiane a Public Works Department has been created to look after horizontal and vertical construction. This Department rebuilt some highways and constructed new roads into strategic areas or for refugee resettlement. It also constructed irrigation works, wells, schools, hospitals, etc. As a result of the above, little work has been done by contractor in Laos.

22. The USAID Public Works Department is now ceasing its construction activities. Part of the construction machinery has been scrapped, while the remainder has been transferred to the Ministry of Public Works and Transport. In total 310 units of equipment have been transferred (s,ee Annex 1). This equipment is in fair to good condition and a supply of spare parts is available. The main problem will be to secure the necessary operating funds. There is a possibility that some equipment will be used to increase the level of the dikes along the Mekong River near VientLane. According to USAID officials the equipment can be used in any part of Laos. The availability of this equipment should be kept in mind in the planning of irrigation, land clearing or construction projects. All equipment operators and most of the surveyors, foremen, mechanics etc., who were laid off, were Lao nationals. USAID officials estimated that most of them have returned to farming and some may be working in Thailand or in other jobs in Laos; they could probably be re-recruited.

23. The present status of the Highways Department, which covers; only work in the Vientizane zone, is as follows. The professional staff consists of 21 engineers covering the headoffice and 12 sub-divisions. American technical assistance consists of 15 American engineers plus 15 third country engineering and other staff. By June 30, 1977, the American staff will be reduced to 4 and will probably be continued at that number for some years. By the end of 1977 all third country staff will have left. The Highways Department is also assisted by 4 young Japanese engineers. It is nol: clear how much longer this form of assistance will continue. Outside the engineering staff about 2,000 persons are employed. According to the Director of the Highways Department there are no staff shortages in these categories, but often the level of skills is insufficient.

24. The USAID budget for the operating expenses of the Lao Higlhways Department was about US$1.9 million in 1974, while the Lao contribution is US$185,000 or 9%. From this budget road maintenance is financed as well as some minor construction and betterment work. It does not include the cost of the American and other advisors, nor equipment replacement. The 1975 budget is about the same. According to present plans the American involvement will be phased out over a five year period, even though no official commitments can be made for more than two years.

25. The phasing out of American aid for road maintenance appears reasonable in view of the reduced role of the US in Laos. It is, however, a very serious problem, because it will be difficult to allocate sufficient funds from the Lao budget and the financing of routine road maintenance is not very attrative for bilateral or multilateral assistance. If no further betterment and construction work were to be done by force account and some roads, which were built only for strategic purposes, would be abandoned, the operating budget could be somewhat reduced (in terms of constant dollars), but it would still seem that in a few years time at least an annual budget of US$1.5 million would have to be found, to replace the American contributions.

26. Staff shortages will also pose a problem. Almost all the mainte- nance work in the divisions is carried out by Lao staff. Administration of spare parts is also in the hands of local staff, but procurement of all parts and fuel is done directly by American staff. To take over these functions, additional staff will be needed and without continued technical assistance there will be a risk of disruption of supplies. The Depart- ment has one mechanical engineer and a second is now studying in Thailand.

27. Road maintenance equipment now available to each Division is sufficient and usually allows for a small construction capability. Equip- ment maintenance is satisfactory according to the American engineers who claim that availability is 85-90%. Local engineers estimated equipment availability much lower and figures of 60% were mentioned. Some of the equipment is fairly old, but its replacement does not seem desperately urgent. In this context it should be noted that the equipment, which was transferred from the USAID Public Works Department, can also be used to replace worn out road maintenance equipment. The Royal Laotian Army is reported to have practically no road construction or maintenance equipment.

(iv) Railways

28. At present there are no railways in Laos. Before World War II construction was started on a line from Vietnam to Thakhek via the Mu Gia pass. Part of the earthworks and structures and a number of station build- ings had been completed. In view of the limited traffic potential, there appears no justification for resumption of work on this project. Plans exist for a road-cum-railway bridge across the Mekong near Vientiane. According to one of the proposals the bridge would be built about 25 km downstream from Vientiane and the Thai railway system would be extended across the bridge to Vientiane. It seems unlikely that the implementation of this project will be justified in the near future. Construction of a railway linking up either with the Thai or the Vietnamese railway system could become of importance, however, as an integral part of a mining project, if iron ore deposits in the Plain des Jarres were to be developed. -9-

(v) Air transport

29. Air transport plays an important role in Laos, specially for passengers, but also for freight. Reasons for this are, and have often been even more pronounced in the past, the lack of security, disrupted roads, the lack of comfort of road travel and generally the rather large distances to be covered. Up to the peace agreement air services were provided by the national airline, "Royal Air Lao", a number of very small local airlines and the American Government financed "Air America". The latter company has ceased operations and "Royal Air Lao" is absorbing the smaller companies. Royal Air Lao has one Caravelle for international traffic, 3 DC4's which are used for international and internal flights and 3 DC3's wh:Lch are only for internal use. In addition two freight planes have been rented and are used to supply a few isolated parts of the Vientiane zone in Northern Laos. In 1973 a total of 186,000 passengers and 3 million tons of freight arrived on scheduled domestic flights.

30. The airport of Vientiane has been expanded recently and can now handle up to Boeing 707's. The runways at Houayxay, Luang Prabang, Savannakhet and Pakse are paved, while Sayaburi and Thakhek have laterite landing strips. Scheduled domestic flights are maintained to these towns. There are some other laterite landing strips in the country. With the ex- ception of Vientiane's airport all navigational aids are primitive ox non- existent. Nevertheless, it appears that air services are adequate and that no immediate investments are needed, specially where reopening of roads will divert some traffic away from air transport.

F. GOVERNMENT PROPOSALS

31. No comprehensive transport plan exists for Laos. Preparation of such a plan would not be possible under the prevailing conditions, but it also appears less urgent, since the basic requirements can still be determined without putting much effort into planning studies.

32. The Government has prepared an official document outlining its requirements for outside financing. This document was presented to all the potential donor countries, which were visited by two separate goyern- ment teams, during the second half of 1974. The proposed transport projects were prepared by the Planning Ministry, with the assistance of American Consultants. The proposals made were the following:

(a) Construction and reconstruction of about 140 km of highway between Paksane and the North Vietnamese border at the Keo Neua pass. This road would provide the most direct link between the Vientiane area and the port of Vinh. The road is located entirely in the NLHS zone and little information is available. The need for the road will largely depend on development of traffic between North Vietnam and the Vientiane area which is now making a detour via Thakhek. - 10 -

(b) Rehabilitation of the road between Savannakhet and Lao Bao. This road would link the Savannakhet region with the port of Danang in South Vietnam. It passes through part of the NLHS zone and through an area still affected by the unsettled political conditions in South Vietnam.

(c) Reconstruction of the main highway between Luang Prabang and the Cambodia border. This road is now passable and traffic volumes are very light. Most of the road is through the Vientiane zone.

(d) Construction of about 150 km of highway between Luang Prabang and Nam Ba. An agreement for the construction of this road was recently signed with the Government of the People's Republic of China.

(e) Completion of the road between Xieng Khouang and Paksane, (about 70 km). This road passes mostly through the NLHS zone. In the long term it could be useful to provide better access to the Plaine des Jarres.

(f) Secondary and Feeder road construction in the following areas:

(i) The Plateau de Bolenvens,

(ii) The Plaine des Jarres.

Both areas fall almost entirely in the NLHS zone. They have good agricultural potentials and during the French period several agricultural schemes were started. Additional road construction will be desirable, but should be carried out only in connection with the resettlement of displaced persons and agricultural projects.

(iii) The Thakhek region,

(iv) The Savannakhet region.

Little is known about the needs of these regions, but it appears that additional roads should only be built as part of agricultural development schemes.

(v) The Vientiane Plain.

Several feeder and access roads have already been built and the Mission's impression is that a further concentration of resources in this region would be undesir- able. In any event a thorough review should be made of the needs, after all the refugees have decided where they wish to settle. - 11 -

(g) Studies for construction or reconstruction of the road Sam Neua-Xieng Khouang - Phoung Houng and Sam Neua - North Vietnam. These roads are located in the NLHS zone and the mission was unable to obtain details on the projects.

(h) Road maintenance and training study and equipment purchase. The mission concluded that there are no immediate needs in this sector, but that a review will be required as soon as the Highways Department is to assume responsibility for all roads in both zones.

(i) Various activities related to Mekong river transport. The mission concluded that the future development of water transport is uncertain and that there are no urgent needs in addition to work already underway under the auspices of the Mekong Committee.

(j) Airport improvements. The mission concluded that, at least in the Vientiane zone, these were not of the greatest urgency.

G. CONCLUSIONS AND RECOMMENDATIONS

33. The mission's conclusion for the Vientiane zone is that the transport network is adequate for the present requirements. Production is not handicapped by the lack of transport equipment or infrastructure. There- fore the immediate needs are for investments in the productive sectors and measures to facilitate transport. The latter should specially concentrate on the reopening of existing national and international road links, to encourage the interchange of products, and on the elimination of additional transport costs, which result from insecurity and substantial "taxes" levied at military checkpoints. It is further urgent that the Government find additional staff for the Highways Department and the necessary funds for road maintenance when American Constributions are being reduced.

34. The mission is in no position to make recommendations on the most urgent transport needs of the NLHS zone. Completion of the main highway system seems to be underway, but possibly some upgrading and/or paving may be required in the near future. It appears, however, that in connection with new agricultural developments there will be a need for feeder roads, specially in areas where refugees are being resettled. Whenever netw roads are planned, however, it should be kept in mind that this would als0 pose an additional burden on the maintenance organization and budget.

35. Even though it may be desirable to spend all available investment funds during a period of about the next two years on productive activities in the two zones (subject to the above mentioned reservations), after that there will be substantial needs for investment in transport. In the immediate future the Government should monitor the changes in transport needs. Assuming that a partial integration of the two zones will be - 12 -

achieved, these changes would consist of increased internal traffic, increased traffic with North Vietnam and possibly a shift from water to road transport. As a result the importance of certain road sections may be greatly enhanced.

36. The role of the Highways Department should be reviewed as soon as it starts to cover a much larger part of the country. In any event in about 2 years a careful review of the road maintenance needs will be desirable; these should be considered in the light of available manpower and funds. A possibility which should be specially kept in mind is that certain roads which were built for strategic reasons or into temporary refugee resettlement areas may by then no longer be in use and could be abandoned to save on scarce resourceso

37. In the longer term, when traffic volumes increase, investment needs will be considerable. The mission therefore recommends that a road improvement program be considered, starting around 1978. This program should be concentrated on repair and betterment of the main road system including replacement of war damaged bridges, which have already been tempo- rarily repaired; the raising of certain flood prone sections; straightening and widening of road sections; and probably 4 minor paving program (single surface treatment, when traffic reaches 300-400 vehicles per day). At that time, it will also be desirable to review the requirements for highway maintenance equipment, and the need for improved ferry services, while some important feeder roads may have to be considered for improvement, to make them passable during the wet season. Studies for the above work should be kept down to a minimum, because the type of improvement work under consideration would not require very elaborate studies, large groups of foreign consultants may not be acceptable to the Government, and because traffic developments will still be uncertain.

38. Complete reconstruction needs can be determined when a road im- provement program is under preparation, but for the Vientiane zone the mis- sion estimates that these works would not be required for the next 5-8 years. Only a few bridges might be needed earlier. These could be the bridges across the Nam Ngum river east of Vientiane (route RIG 13) and North of Vientiane (Route RN 10) and across the Nam Cading River near Paksane (Route RIG 13).

39. In view of the very small transport volumes using the Mekong river, it appears that there will be no economic justification for major investment in channel improvements. Due to the Government's decision to transport goods arriving from North Vietnam by river from Paksane to Vientiane, the capacity of river craft could become inadequate. It seems, however, that this will only be a temporary demand. - 13 -

40. The mission gained the impression that airport improvements did not have the highest priority and could be postponed for a number of years without any serious effects on air transport.

41. The proposals for railway construction should only be considered as part of the possible long range needs of the country or as part of a specific high-volume mineral export project.

ANNEX 1 Page 1

LAO NATIONAL ROADS EQUIPMENT TRANSFERRED FROM USAID TO PGNU/TP

USAID has presented, to the PGNU, a list of 342 pieces of equipment for turnover to the Ministry of Public Works and Transportation. An inspec- tion team consisting of representatives of USAID/PWD, T. P. and FHWA inspec- ted the listed equipment and the Ministry has accepted and received 310 pieces of equipment, classified as follows.

Item Description Qty: ACQS'N Cost

1. Pick Up 11 Units $ 30,703.00 2. Dump Truck 17 " 96,645.00 3. Stake Truck 17 " 112,276.00 4. Truck Tractor 5 " 38,823.00 5. Wreker Truck 2 " 7,600.00 6. Bus 1 " 3,824.00 7. A.C. Tractor HD-6 15 " 377,655.00 8. A.C. Tractor HD-16 13 " 433,824.00 9. Front End Loader 8 " 125,322.00 10. Grader A.C. 20 " 387,320.00 11. Scraper 15 " 805,200.00 12. Roller all Type 37 " 236,858.00 13. Crane Crawler 1 " 5,880.00 14. Crane Trk MTD 3 " 20,700.00 15. Crusher & Screening Plant 5 " 97,800.00 16. Ditcher 1 3,931.00 17. Welding Machine 9 " 13,650.00 18. Air Compression 11 " 10,000.00 19. Generator 27 " 90,800.00 20. Trailer 11 " 35,466.00 21. Cement Vibrator 2 " 1,060.00 22. Water Tank 8 " 10,400.00 23. Cement Mixer 5 " 6,800.00 24. Forklift 2 " 10,000.00 25. Chip Spreader 1 " 1,000.00 26. Farm Tractor 12 " 76,648.00 27. Asphalt Kettle 2 " 900.00 28. Water Pump 2", 3" & 4" 21 " 11,633.00 29. Saw Mill 6 " 54,600.00 30. Chain Saw 5 " 1,825.00 31. Backhoe Loader 3 " 44,600.00

32. Tamper 2 " 1,505.00

Grand Total: 310 U1nits $3,155,248.00 ANNEX 1 Page 2

ExcludinR shop property:

The average age of the PWD equipment is from 5 to 7 years.

Equipment was in fair to good condition when received.

All equipment required repair when received. Some required major repair but on most units only minor repairs were needed.

The transfer of in country spare parts, related to the above equipment from USAID/SMD warehouse and USAID/PWD warehouse to PGNU/FHWA warehouse at PK-7 was begun on December 9, 1974.

As of December 31, close of report period, a total of 4642 line items valued at $535,258.65 had been transferred to PGNU/FHWA control at PK-7.

Approximately 9,000 line items remain to be transferred.