REGIONAL INTEGRATION AND DEVELOPMENT CORRIDORS IN EAST AND SOUTHERN AFRICA

Martin Humphreys Lead Transport Economist Transport & Digital Development Global Practice The World Bank June 6 2018 INTRODUCTION

1. The case for regional integration

2. The challenges facing regional integration

3. The Integrated Corridor Development Initiative in the East Africa Community 1. THE CASE FOR REGIONAL INTEGRATION

• 88-90 percent of Africa’s exports go to countries EXPORTS AND IMPORTS OF GOODS AND SERVICES (current US$ b), 2015 * outside the region, with intra-regional trade 7,000 remaining low;

6,000 EXPORTS IMPORTS • The share of intra-regional goods in total goods

imports is around 5 percent in the COMESA 5,000 countries, compared to 60 percent in the EU;

4,000 • There are 960m people in Africa, of which 350m represent a growing middle-class (yet < 2% of 3,000 world total approximately 48 percent remain extremely

poor); 2,000 • With rising incomes, there are emerging 1,000 opportunities for cross-border trade in basic manufactures that are costly to import from the - global market; and SSA MENA SAR ECA LAC EAP

• The labor endowment is trained, relatively * IDA and IBRD countries only inexpensive and well-positioned to compete globally. 1. THE CASE FOR REGIONAL INTEGRATION

There is also a continued need to focus on the challenges of Landlocked Developing Countries

LLDCs face a The level of mark up of GDP per development in 70% in ad capita is on an LLDC, on Firms in LLDCs valorem average a average, is 20% hold on equivalent in third of the lower than it average 29 the cost of GDP per would be if it days of trade – not just capita of was not inventory of due to the transit landlocked main inputs distance, but countries (30% for some also logistics African LLDCs) performance

Source: World Bank/UN-OHRLLS (2014) Improving Trade and Transport for LLDCs 2. THE CHALLENGES FACING REGIONAL INTEGRATION

It is very costly to cross San Francisco to Oakland would cost $1,200 for one TEU prorated by cost to borders in travel a similar distance in Africa (e.g., Africa – Kinshasa-to-Brazzaville) borders are thick 2. THE CHALLENGES FACING REGIONAL INTEGRATION

Transport costs contribute up to Transport prices and costs are high 40 percent of compared to global standards – as a the cost of goods result, African farmers typically pay 3- traded in the 4 times as much for fertilizers region 2. THE CHALLENGES FACING REGIONAL INTEGRATION

Road transport on regional corridors The is little inter-modality, an over- reliance on road transport, the regulatory carries over 80 framework is antiquated (and not percent of all enforced), there are numerous NTBs, and traded goods in little vertical integration in the logistical the region chain. 2. THE CHALLENGES FACING REGIONAL INTEGRATION

In terms of logistics, whilst SSA overall saw the most improvement in the LPI ranking over the 2010-2016 period - it remains the region with the lowest LPI in the world. 2. THE CHALLENGES FACING REGIONAL INTEGRATION

Transport demand is going to increase markedly over the next ten years

9 3. THE REGIONAL CORRIDORS IN ESA 11 international corridors in East and Southern Africa

1. Northern 2. Central 3. Dar es Salaam 4. North-South 5. Nacala 6. Beira 7. Maputo 8. Lobito-Benguela 9. Trans-Cunene 10. Trans-Kalahari 11. Ethiopia-Djibouti 4. THE INTEGRATED CORRIDOR DEVELOPMENT INITIATIVE

Pillar 3 : Building Pillar 1 : Pillar 2 : The Stakeholder Connecting Firms Assessment of Consensus for and Communities Wider Economic Integrated to Markets Effects Corridor Development

Pillar 4 : Poverty Assessment, Risk Assessment and Impact Evaluation PILLAR 1 : CONNECTING FIRMS AND COMMUNITIES TO MARKETS

2. An 3. An assessment of assessment of 1. A review of infrastructure forecast the institutional 4. An Action and services demand on framework for Plan for the the corridors each mode movement of over a 30 year freight horizon IN TERMS OF THE INSTITUTIONAL FRAMEWORK:

There is a • road transport licensing is complex, incomplete and inefficient policy vacuum in the • The single carrier regime is still not being implemented regulation of road transport • The regulatory systems remains based on the old quantitative system of regulation.

Reform in the Maritime sector is slow, • The countries have amended their legislation to the landlord sporadic and model, but implementation remains spotty selective

• The Tripartite Agreement on Inland Water Transport was signed by , In the IWT and in 2002 – still not fully implemented; sector, there is a lack of • The Transport Act was enacted by the East African Legislative Assembly (EALA) in September 2007, to address marine transport safety and implementation security on the lake – still not fully implemented. of agreements Pillar 1: Transport costs are high (er)

Cost per ton-km (US$ cents)

North-South Corridor (Rail) 0.05

North-South Corridor (Road) 0.06

Central Corridor (Rail/Lake) 0.08

Central Corridor (Rail) 0.12

Central Corridor (Road) 0.10

Northern Corridor (Rail) 0.09

Northern Corridor (Road) 0.11

14 Pillar 1: operational speeds are slow (er)… and unreliable

Operational Speed (km/hr) Reliability (%)

North-South Corridor (Rail) 25 North-South Corridor (Rail) 50

North-South Corridor (Road) 25 North-South Corridor (Road) 50

Central Corridor (Rail/Lake) 5 Central Corridor (Rail/Lake) 185

Central Corridor (Rail) 5 Central Corridor (Rail) 190

Central Corridor (Road) 13 Central Corridor (Road) 170

Northern Corridor (Rail) 5 Northern Corridor (Rail) 138

Northern Corridor (Road) 15 Northern Corridor (Road) 194

15 Pillar 1: The infrastructure is in poor condition

• Rail and infrastructure generally dilapidated; • Access to the ports is a generic problem; • Severe pinch points in infrastructure capacity; • Road safety is a major public health challenge; • Maritime safety is non-existent on the inland lakes; • Border crossing times, whilst better, remain a work in progress; and • There is little practical integration between the modes.

16 PILLAR 2: THE ASSESSMENT OF WIDER ECONOMIC EFFECTS

• Objective Transport cost to port ($/ton) • Assess the potential direct and indirect impacts of the regional intermodal corridor development

• Spatial analysis • Focused sectors: Agriculture, industry and service, and mining • Mapping of regional infrastructures (road, rail, inland water, port, border point, station) • Analyzing local, domestic and regional connectivity • Examining growth potential associated with improved transport connectivity PILLAR 2: ASSESSMENT OF WIDER ECONOMIC EFFECTS

Agriculture production areas (all crops) Agro-ecological production (US$ million) potential (all crops) (US$ million)

• One of the key findings was significant untapped agricultural potential in the EAC Countries; • Current production does not seem to fully exploit agro-ecological potential, particularly in Kenya and Tanzania; • In Burundi, Rwanda and Uganda, the potential production areas are by and large cultivated, here the benefits would come from greater intensification; PILLAR 2 : ASSESSMENT OF THE WIDER ECONOMIC EFFECTS

• Agriculture Coffee yield and transport cost to port • Market accessibility is crucial to stimulate agricultural growth • port connectivity, especially, is crucial for export crops • 10% increase in port connectivity can increase the production of tea, coffee, cotton and tobacco by between 5- 15% Average firm inventory level • Industry & Service • High transport costs constrain firm productivity • 10% lower transport costs can increase firm sales by 0.4% • Significant inventory costs because of unreliable transport services The Resulting Strategy

• Strengthen the institutional framework for the sector; • Strengthen the management and operation of the transport sector; • Improve the safety, security and resilience of the transport sector; and • Address the priority gaps in the infrastructure – primary, secondary and tertiary levels (across sectors).

20 THE DAR ES SALAAM MARITIME GATEWAY PROGRAM – PHASE 1

Transport and ICT Global Practice Smart Connections for All THE REGIONAL IMPORTANCE OF DAR PORT The port of Dar es Salaam serves as the ‘anchor’ connecting the landlocked countries of the interior via the Central and Dar Corridors to global markets;

• Port volumes have been growing by 9 percent per year - Liquid bulk and container volumes had been increasing even faster;

• Latest forecasts suggest that the volumes could increase to 38 million tons by 2030;

• Transit trade through the port accounted for as much as 35 percent of total volume in 2015 or just over 5.1 million tons - a • segment growing at 16.5 percent annually. THE REGIONAL IMPORTANCE OF DAR PORT

This growth was placing considerable strain on the port of Dar es Salaam - All the indicators of port performance and utilization were deteriorating:

• Waiting time for ships at anchorage- Container vessels were queuing for 10 days on average (up to a maximum of 25 days in some cases; • Berth occupancy (49 percent for the dry bulk and general cargo berths and 65 percent at the container terminal); • Cargo dwell time compared poorly to the ‘best’ ports in the region; and • Draught and access restrictions (maritime and landside). The Dar es Salaam Maritime Gateway Program – Phase 1 The first phase has two main components:

Component 1: Improving the Physical Infrastructure • Deepening and strengthening of existing Berths 1 to 11 to 14.5 m below CD • Constructing a new multipurpose berth at Gerezani Creek; • Improving the rail linkages and platform in the port; and • Deepening and widening the entrance channel and turning basin in the port to the end of Berth 11 to 15.5 m below CD. Component 2: Institutional Strengthening and Implementation Assistance. THE LAKE VICTORIA TRANSPORT PROGRAM – SERIES OF PROJECTS

Transport and ICT Global Practice Smart Connections for All HISTORICALLY, LAKE TRANSPORT PLAYED AN IMPORTANT ROLE TO CONNECT COUNTRIES AND PEOPLE, BUT PRACTICALLY SPEAKING, AS A TRANSIT MODE IT IS MORIBUND… Total traffic at Port Bell (tons) Significant transit traffic before the collapse of the old rail wagon system in 2004 along the Central Corridor . Since then the Lake ports have not been maintained . The public vessels have become increasing decrepit – Old, unsafe and unclassed (e.g., MV Victoria 180 pass. 850t; MV Pearl, 200 pass. 125t) International transit traffic at Mwanza, Tanzania . Rail services by TRL between Mwanza and Dar es Salaam – interrupted and now sporadic . Major safety issues – MV Bukoba in 1996; MV Kaawa and Kabalega in 2005 – no navigation charts . The road network has developed providing a robust alternative on many routes

LVTP SOP2 Uganda 26 BUT SIGNIFICANT ECONOMIC POTENTIAL EXISTS

Poverty incidence around Lake Victoria . Total population around the lake (within 100km): 35 million . Generating US$30 billion or 40% of GDP of EAC countries . High agricultural potential, estimated at US$63 billion - but currently, producing US$5 billion of crops . 50% of the population live under the poverty line – fish forms a key part of the diet, and approx. 1 mill tons of fish per year is taken out . Significant growth in private service providers, informal vessels, acting as ferries, formal and informal, and the conveyors of bulk point to point

LVTP SOP2 Uganda 27 The Lake Victoria Transport Program

• The Approach: Regional approach involving a Series of three Projects (SOPs) – Rwanda, Tanzania and Uganda

• The Program Development Objective: • The program development objective is to facilitate the sustainable movement of goods and people in the Lake Victoria region, whilst strengthening the institutional framework for transport safety.

• The Available Financing: Total envelope is US$475 million • (i) Rwanda US$81.0 million, and parallel finance from JICA in the amount of US$65 million; • (ii) Uganda US$125 million, including a possible US$25 million in grant finance from the European Union; • (iii) Tanzania US$200 million ; and • (iv) IDA regional grant to EAC/LVBC US$5 million

28 THE LAKE VICTORIA TRANSPORT PROGRAM

Technical assistance at the EAC Level: TechnicaI assistance at the Lake Level:

• Support for regulatory harmonization of • Preparation of a Transport Policy and the trucking sector and the Masterplan for the development of the Lake implementation of cabotage. Victoria Transport System; • Implementation of a harmonized axle • Technical Assistance to strengthen the load regime: regulatory framework for vessel operation and implementation of the Lake Victoria Transport • Improving road safety at a regional level Act, 2017: • Review and amendment of Regional Oil Spill Contingency Plan for Lake Victoria:

29 The Lake Victoria Transport Program - Rwanda

PRESENTATION TITLE 30 The Lake Victoria Transport Program - Uganda

Western Jinja Port Access Road Upgrade (US$7.0 mio)

Western Jinja Port Access Road Upgrade (US$5.0 mio)

Port Bell – Road Upgrade (US$10.0 mio)

Jinja Port Rehabilitation (US$12.0 Port Bell Rehabilitation (US$7.0 mio) mio)

Community Jetty Rehabilitations

Old Port Bell/Spring Road Upgrade (US$5.0 mio)

Community Jetty Rehabilitations The Lake Victoria Transport Program - Tanzania

Bukoba Port Rehabilitation (US$7.0 mio)

Bukoba Port Access Road Upgrade (US$3.7mio) Kinesi-Kuruya Road Upgrade (est. US$16.24 mio)

Kemondo Bay Port Rehabilitation (US$4.0 mio)

Kemondo Bay Access Road Ukerewe Island Roads Upgrade Upgrade (US$1.6mio) (US$26.7mio) Community Jetty Rehabilitations Bunda- Bulamba Road Upgrade (US$24.8 mio)

Mwanza South Port Nyanguge Mara Border Road Upgrade Rehabilitation (US$12.0mio) (US$68.4 mio) Mwanza North and South Port Mwanza North Port Rehabilitation (US$ Access Roads Upgrades (US$0.5 10.0mio) mio)

Community Jetty Rehabilitations THE LAKE TANGANYIKA TRANSPORT PROGRAM – SERIES OF PROJECTS

Transport and ICT Global Practice Smart Connections for All Bujumbura

Uvira

Kigoma Kalemie

Mpulungu SIMILAR PROBLEMS TO LAKE VICTORIA AND SIMILAR POTENTIAL . No up-to-date navigational charts, no .Total population around the lake (within functioning aids to navigation, or 100km): 12 million landing lights, no search and rescue services, limited information on current .50% of the population live under the poverty and forecast weather conditions, and line – protein from fish forms a key part of the no modern efficient vessels; and diet, and approx. 200,000 tons of fish per year is taken out; . Of the 16 formal vessels currently operating on the lake, 11 are over 30 .significant growth in informal vessels, acting as years old, 9 are over 50 years old, and 1 ferries, formal and informal, and the conveyors over 100 years old. of bulk point to point

LVTP SOP2 Uganda 35 The Lake Tanganyika Transport Program

• The Development Objective: • To facilitate the sustainable movement of goods and people across Lake Tanganyika, whilst supporting improvement in navigation and safety.

• The Lending Instrument: • IDA Regional Operation • Investment Project Financing (IPF) – Series of Three/Four National Projects (SOPs)

• The Available Financing: • Provisionally US$ 500 million from the WB for the transport program (further US$150million for LTEMP)

36 The Lake Tanganyika Transport Program Technical Assistance at the Regional level: • the development and adoption of an Integrated Transport Policy for Lake Tanganyika;

• the development of a regional Safe and Rescue Plan for the Lake, and the establishment of a search and rescue service;

• strengthening the regulatory framework for vessel operation, vessel safety, ship design, operation and manning on the lake;

• the development of a common approach to port state inspection across the countries, as part of an ISPS initiative; and

• The development of a harmonized Oil Spill contingency Plan in the Partner States.

37 Lake Tanganyika Transport Program in TZ and Burundi

Bujumbura Port Rehabilitation (US$8 mio)

Bujumbura Port access road rehabilitation (US$3 mio) Unpaved trunk road Nkwaza - Malagasari

RN3 sections rehabilitation Sections of regional road between (US$30 mio) Kigoma and Kalya

Kigoma Port rehabilitation Unpaved regional road Kagwila - (US$20.0 mio) Karema

Karema Port rehabilitation (US$ 10.0mio)

Unpaved trunk road Lyazumbi

Unpaved trunk road Chala - Paramawe

Unpaved trunk road Matai - Kasesya THANK YOU FOR YOUR ATTENTION

HAPPY TO ANSWER ANY QUESTIONS

Martin Humphreys Lead Transport Economist Transport & Digital Development Global Practice The World Bank June 6 2018