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ReportNo. 9908-MAI Malawi TransportSector Review SelectedIssues (in Two Volumes) Volume Il: Working Papers Public Disclosure Authorized August10, 1992 InfrastructureOperations Division SouthernAfrica Department FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized r ~~ ~ ~ ~ .ti Public Disclosure Authorized - Xis-docun*nthias a restricteddistribution and may be wedi by reipi>ents &d. in-theperfomance ~,f their 6fficial duties.-Its contents may not otherwise <~ be e~without Worl Bankauthoizatin. CURRENCYEQUIVALENT (as of November 1. 1991) Currency Unit - Malavi Kwacha (NK) US$1.00 - MH 2.86 MR 1.00 - US$0.38 MH 1.00 - 100 Tambala GOVERNMENTOF HALAWIFISCAL YEAR April 1 to Harch 31 WEIGHTSAND MEASURES 1 kilogram (kg) - 2.2 lb 1 metric ton (mt) - 2,204.6 lb 1 liter (1) - 2.116 US pints I hectare (ha) - 2.471 acres 1 cubic meter (cm3) - 35.3 cubic feet 1 kilometer (km) - 0.621 miles GLOSSARYOF ABBREVIATIONS ABA - African Businessmen's Association ADMARC D Agriculture Development Marketing Board AFRAA - African Airlines Association AfDB - African Development Bank A"RAA - African Airlines Association BA * British Airways CPH-N - Caminho de Ferro-Norte, Mozambique DCA - Department of Civil Aviation DSS - Decision Support System DEHATT - Development of Halawi Traders Trust !>. - Directed Track Haintenance EPD - Economic Planning and Development Department GOM - Government of Malawi GSA - General Sales Agent IATA - International Air Transport Association INDEBANK - Investment and Development Bank of Malawi INDEFUND - Investment and Development Fund of Malawi RIA - Kamazu International Airport RLM - Royal Dutch Airlines LAM - Mozambique Airlines LFC - Leasing and Finance Company of Malawi LS - Lake Services MHS MMaterial Hanagement Systems MOP - Ministry of Finance MOTC - Ministry of Transport and Communications HOU - Memorandum of Understanding mOW - Ministry of Works MPF - Monthly Payment Factor MR - Malawi Railways HTIT - Ministry of Trade, Industry and Tourism NTC a Northern Transport Corridor NRZ - National Railways of Zimbabwe OAS - Operations Audit System OPC - Office of the President and Cabinet PCC - Petroleum Control Commission PR - Passenger Kilometers PRP - Prime Route Policy PVHO - Plant and Vehicle Hire Organization QAS - Quality Assurance System QM AAir Mlalvi RAP * Restructuring Action Plan ROC * Return on Capital Employed RSP - Road Service Permit UTA - Road Traffic Act RTC - Road Traffic Commission RTD - Road Traffic Department RTOA - Road Transport Operators Association SM - South African Airways TEU . Twenty Foot Equivalent Unit (containers) SM - Stagecoach Malawi. Ltd. tR - Tanzania Railways UNHCR * United Nations High Commissioner for Refugees ZR - Zambia Railways FOROmFCIL USE ONLY MALAWI TRANSPORT SECTOR REVIEW - SELECTED ISSUES VOLUME 2 Table of Contents WORKING PAPER NO. 1 MALAWI RAILWAYS Page No. I*INTRODUCTION . 1 A. Background . 1 B. Past Operating Environment and MR's Response . 5 C. Future Prospects and MR's Strategy . 8 D. Recommended Strategic Framework for Financial Viability . 9 II. ORGANIZATION AND RESOURCES .R.C.E................. 9 A. The Railway System . 9 B. Structure and Regulation ................ 10 C. Organization, Management and Staffing . 10 D. Physical Assets and Resources.. 13 III. FINANCIAL AND OPERATIONAL PERFORMANCE . 15 A. Financial Performance. ............. 15 B. Operational Performance . 18 C. Operational Efficiency . 21 IV. CORPORATE OBJECTIVES AND STRATEGY . 21 A. Corporate Objective . 21 B. Strategy . 22 V. RESTRUCTURING . 23 A. Business Portfolio . .. 23 B. Business Potential and Marketing Strategy..... 26 C. Operations Restructuring . 27 D. Organization Restructuring . 30 E. Staff Reduction . ... 31 F. Assets Restructuring and Investments . 32 G. Financial Restructuring.. ............. 33 H. Privatization . 34 I. Impact of Restructuring on MR Assets . 34 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Page No. VI. MANAGEENCTFECTIVENESS.. 34 A. Systes lmprovement ................... 34 B. Operations Improvementand EfficiencyTargets . 35 C. Staff Development and Motivation ... 36 VII. RAILWAY-GOVERNMNTUNDERSTANDING ............. 36 A. Obligationsof th Railwys .............. 36 B. Obligationsof th Government. ......... ... 37 C. Meorandum of Understanding (HOU) .......... .. 38 VIII. PROJECTIONSAND ACTION PLAN. .......... ... .. 39 A. Financial Proections.................. 39 B. RestructuringAction Plan . 45 C. ImplementationStratogy .............. 45 ANNEXES 1. Halawi Railways OrganizationStructure (1988189) 2. Basic Data and Key Performance Indicators for the Malawi and Some Neighboring Railways 3. Malawi Railways Staff Levels and Staff Productivity (1975-1990) 4. Malawi Railways Operational Performance and Productivity Indicators (1975-1990) 5. Freight and Passenger Traffic on Malawi Railways (1975-1990) 6. Malawi Railways OrganizationStructure (1990) 7. Malawi Railways Network - Alignment and Gradients 8. Halawi Railways Permanent Way Details 9. Malawi Railways Locomotives - Inventory and Main Specifications 10. Malawi Railways Rolling Stock Inventory 11 Malawi Railways Financial History and Key Financial Indicators 12. Current Estimates of Halawi Railways Assets and Depreciation 13. Malawi Railways Commodity-wiseLocal Freight Traffic for 1989/90 1A, Malawi Railways Sectional Traffic Density Analysis for FY 1989/90 15. Malawi Railways Sectional Traffic Density Analysis for FY 1995 16. Malawi Railways Freight Handled at Different Stations (1989/90) 17. Malawi Railways (includingLake Services) Cost Structure and Trend (1985186-1989/90) 18. Malawi Railways Operational Performance Targets 19. Malawi Railways Operations Analysis and Assessment of Locomotives and Rolling Malawi Railways Stock Requirement 20. Malawi Railways Traffic Forecast - 1995 21. Malawi Railways InternationalTraffic Forecast and Overseas & Nacala Share 22. Malawi Railways Overseas Traffic Forecast by Corridors - 1995 23. Malawi Railways Overseas Traffic Imbalance by Corridors and Wagon Types 24. Malawi Railways Recommended OrganizationStructure 25. Current Estimates of Malawi Railways' Usable Assets and Depreciation 26. Malawi Railways Operations Analysis -1985 High Case WORKINGPAPER NO. 2 AIR MALAWI Page No. I. INTRODUCTION . 82 II. CURRENT OPERATIONS ..................... 83 A. Overview . * . * * * . * * 83 B. Air Malavi'sInternational Air Passenger Market . 85 C. Air Malavi's Domestic Air PassengerMarket . 91 III. FINANCIALANALYSIS . 92 A. Revenues . 93 B. Operating Costs . * * * * . * . * . 96 C. Route Profitability . ... 99 IV. ORGANIZATIONAND STAFFINGD............. 102 A. Staffing and Functions by Department . 106 B. Interline Accounting . 108 V. CURRENT ISSUES . 110 A. Airline Autonomy .... .................. L1O B. Improved Viability of Existing Operations . 111 C. Aircraft Replacement . .111 VI. FINANCIAL FORECASTUNDER ALTERNATIVE SCENARIOS . 112 A. Traffic Forecast . ......... ......... 112 B. Aircraft Replacement Scenarios . 113 C. Financial Comparison of Alternative Scenarios . 116 VII. KAMUZU INTERNATIONALAIRPORT N..A..RPO................ .. 119 ANNEXES 1. Aircraft Replacement Scenarios - Forecast Assumptions 2. Financial Projections of Jet Aircraft Purchase Scenarios WORKINGPAPER NO. 3 ROADFREIGHT TRANSPORT Page No. I. INTRODUCTION . 130 II. TRAFFICNETWORK . 131 A. International . 131 D. Domestic . .... .....* . .. .. .. 132 III. INDUSTRY STRUCTUREI .................... 133 A. InstitutionalFramework. .. o . 133 B. Regulation .. ............. ............................. 134 C. FreightOperations . 137 IV. SUPPLY ......... .*. .*. 139 A. International . 142 B. Domestic . 145 V. DEMAND . .. .................. ... ..... ........ lS0 A. International . 150 B. Domestic . ... ........................ ........... ....... 150 VI. INDUSTRY SUPPORT NETWORK ................. 151 A. Road Transport OperatorsAssociation (RTOA) . 151 B. Goods Vehicles . 151 C. Vehicle Parts . 152 D. Tires . .. .... 153 E. Vehicle Repairs. .. ........ 153 F. PetroleumSupply .................... 154 G. Insurance Companies ...... .. 154 B. Credit Facilities ....... 155 VII. INDUSTRY PERFORMANCE .... .................. 156 A. InternationalOperators .. ................ 156 B. Domestic Operators . 166 VIII. ROAD TRANSPORT CONSTRAINTS . 170 A. Ministry of Transport and Comomnications . 170 B. InternationalTransport. * . 171 C. Domestic Transport . 172 IX* RECO*OlNDATIONS . .. .. ... .. ... 173 ANNEXES 1. Guidelines for Granting Exemptions for Foreign Haulage Vehicles to Ply Between Lilcngwe and Blantyre 2. Informal Own-Account Fleet Inventory 3. Calculationsof Dry Cargo Domestic Road Transport Capacity 4. Malawi Import and Export by Border Post 5. Retail Prices in 1990 Malawi Kwacha for 6X Tractor, Obtained in Malavi, United Kingdom and the United States 6. Leasing Terms and Exchange Rates WORKING PAPER NO. 4 ROAD PASSENGER TRANSPORT Paae No. I* INTRODUCTION . 187 A. Overview . 187 D. The Passenger Transport Sutkector . 187 TII STUCTURE . U C S . 188 A. Bus Industry Structure ....... ....... 188 III. FINANCIALSASPECTS..................... 195 A. Financial Performance (19P5-1989) . 195 IV. CONSTRAINTS . ... 197 A. Regulation . 197 B. Institutional Constraints . 203 V. POSSIBLE SOLUTIONS ................ ....... 205 A. Pollcy Issues . 205 VI. SUMARY AND RECO0MENDATIONS .......... 212 A. ..... 212 B. Recomnended Actions . 213 MALAWI TRANSPORT SECTOR REVIEW
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