Document of The World Bank

Public Disclosure Authorized Report No: ICR00001299

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-38880)

ON A

CREDIT Public Disclosure Authorized

IN THE AMOUNT OF SDR81.6 MILLION (US$122 MILLION EQUIVALENT)

TO THE

UNITED REPUBLIC OF TANZANIA

FOR THE

CENTRAL TRANSPORT CORRIDOR PROJECT Public Disclosure Authorized

June 29, 2010

Transport Sector Country Department AFCE1 Africa Region

Public Disclosure Authorized CURRENCY EQUIVALENTS

Exchange Rate Effective – December 31, 2009 Currency Unit = Tanzanian Shillings (TZS) US$1.00 = TZS 1,339.50 US$1.00 =SDR 0.64

FISCAL YEAR July 1 – June 30

ABBREVIATIONS AND ACRONYMS

ADSL Asymmetrical Digital Subscriber Line AfDB African Development Bank BRT Bus Rapid Transport CAS Country Assistance Strategy CODAP Coordination of Donor Aided Project CTCP Central Transport Corridor Project DCA Development Credit Agreement DP Development Partners DRC Democratic Republic of Congo EA/SA Environmental Assessment/Social Assessment EIA Environment Impact Assessment/Social Impact Assessment EMP Environment Management Plan EIRR Economic Internal Rate of Return ERR Economic Rate of Return FMR Financial Monitoring Reports GOT Government of Tanzania ICR Implementation Completion Report ICT Information Communication Technology IDA International Development Association IFC International Finance Corporation IRP-II Integrated Roads Project II HDM Highway Development and Management Model JICA Japan International Cooperation Agency KPH Kilometers per hour LAN Local Access Network LOC Letter of Credit M&E Monitoring and Evaluation MCC Millennium Challenge Corporation MOCT Ministry of Communication and Transport, Zanzibar MS Moderately Satisfactory NDF Norwegian Development Fund NPV Net Present Value O&M Organization and Management PCU Project Coordination Unit PDO Project Development Objectives PMMR Performance Maintenance Management Roads PMO-RALG Prime Minister’s Office, Regional Administration and Local Government PPIAF Public-Private Infrastructure Advisory Facility PRG Partial Risk Guarantee RAHCO Reli Assets Holding Company RAP Resettlement Action Plan RF Road Fund RRP Railway Restructuring Project TA Technical Assistance TANROADS Tanzania National Roads Agency TAZARA Tanzania Zambia Railway Authority TEMESA Tanzania Electrical, Mechanical and Electronics Services Agency TR Tanzania Railways TRC Tanzania Railway Corporation TRL Tanzania Railway Limited TSSP Transport Sector Support Project TTCL Tanzania Telecommunications Company Limited WAN Wide Area Network VOC Vehicle Operating Costs VPD Vehicles per day

Vice President: Obiageli K. Ezekweli Country Director: John Murray McIntire Sector Manager: C. Sanjivi Rajasingham Project Team Leader: Dieter E. Schelling ICR Primary Author: Fang Xu

TANZANIA Central Transport Corridor Project

CONTENTS

Data Sheet ...... i A. Basic Information...... i B. Key Dates ...... i C. Ratings Summary ...... i D. Sector and Theme Codes...... ii E. Bank Staff...... ii F. Results Framework Analysis ...... ii G. Ratings of Project Performance in ISRs ...... v H. Restructuring (if any)...... vi I. Disbursement Profile ...... vi

1. Project Context, Development Objectives and Design...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 7 3. Assessment of Outcomes ...... 14 4. Assessment of Risk to Development Outcome...... 20 5. Assessment of Bank and Borrower Performance ...... 20 6. Lessons Learned...... 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...... 25

Annex 1. Project Costs and Financing...... 26 Annex 2. Outputs by Component...... 27 Annex 3. Economic and Financial Analysis ...... 34 Annex 4. Bank Lending and Implementation Support/Supervision Processes...... 42 Annex 5. Beneficiary Survey Results ...... 44 Annex 6. Stakeholder Workshop Report and Results...... 45 Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR ...... 46 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders...... 72 Annex 9. List of Supporting Documents ...... 73 MAP A. Basic Information Central Transport Country: Tanzania Project Name: Corridor Project Project ID: P078387 L/C/TF Number(s): IDA-38880 ICR Date: 06/29/2010 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: TANZANIA Original Total XDR 81.6M Disbursed Amount: XDR 80.1M Commitment: Revised Amount: XDR 80.1M Environmental Category: A Implementing Agencies: TANROADS MOCT, Zanzibar TRC RAHCO Cofinanciers and Other External Partners: Nordic Development Fund (NDF)

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 05/21/2003 Effectiveness: 08/27/2004 08/27/2004 Appraisal: 03/02/2004 Restructuring(s): Approval: 04/29/2004 Mid-term Review: 05/31/2006 05/15/2006 Closing: 12/31/2009 12/31/2009

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance:

i

C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status:

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 12 5 Railways 45 22 Roads and highways 43 73

Theme Code (as % of total Bank financing) Export development and competitiveness 11 25 Infrastructure services for private sector development 23 25 Regulation and competition policy 22 10 State enterprise/bank restructuring and privatization 22 15 Trade facilitation and market access 22 25

E. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E. Madavo Country Director: John McIntire Judy M. O'Connor Sector Manager: C. Sanjivi Rajasingham C. Sanjivi Rajasingham Project Team Leader: Dieter E. Schelling Dieter E. Schelling ICR Team Leader: Dieter E. Schelling ICR Primary Author: Fang Xu

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The project's development objective is to(i) upgrade strategic road links; (ii) enhance road management capacity; and (iii) improve operations of Tanzanian railways.

ii

Revised Project Development Objectives (as approved by original approving authority)

(a) PDO Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Traffic increases on improved roads at least by 10% per annum on average Indicator 1 : between 2004 and 2009 Singida - Shelui in Singida - Shelui in 2009: 322 vpd 2009: 759 vpd Singida - Shelui Road Mkwajuni - Mkwajuni - 200 vpd Nungwe : 294 Nungwe : Value Mkwajuni - Nungwe vpd 1665 vpd quantitative or 183 vpd Mkwajuni - Mkwajuni - Qualitative) Matemwe - Pongwe Pongwe: 142 Pongwe: 374 88 vpd vpd vpd Paje - Pingwe 231 vpd Paje - Pingwe Paje - Pingwe 372 vpd 915 vpd Date achieved 06/01/2001 12/31/2009 12/31/2009 Comments (incl. % On average, this indicator is achieved 130% above target achievement) Reduction of poor condition of road network that is under TanRoads' Indicator 2 : responsibility 30% of the Value 49% of the network in 15% of the network network in poor quantitative or poor condition (14,000 in poor condition condition (8,500 Qualitative) km) (4,250km) km) Date achieved 06/01/2003 12/31/2009 12/31/2009 Comments The proportion of road network in poor condition under TANROADS# (incl. % responsibility reduced by 50% more than the target value. 150% achieved. achievement) Indicator 3 : Total freight traffic level on TRC Value 1.45 million tons of 2.0 million tons of 0.41 million tons of quantitative or traffic traffic traffic Qualitative) Date achieved 06/01/2005 12/31/2009 12/31/2009 Comments Target not achieved. Instead of increasing by 38%, the freight traffic on TRC (incl. % decreased by 72%. achievement) Indicator 4 : Transit traffic level on TRC increase by 20% Value 560,000 tons of transit 672,000 tons of 140,000 tons of quantitative or traffic transit traffic transit traffic

iii Qualitative) Date achieved 06/01/2005 12/31/2009 12/31/2009 Comments Target not achieved. Instead of increasing by 19.7%, the transit traffic on TRC (incl. % decreased by 76.4%. achievement) Indicator 5 : Railway tracks under temporary speed restriction in % of the network 2% under 4.2% under Value 10% of tracks under temporary speed temporary speed quantitative or temporary speed restriction of restriction of below Qualitative) restriction of 25 kph below 25 kph 25 kph Date achieved 06/01/2005 12/31/2009 12/31/2009 Comments The target of limiting temporary speed restriction to 2% of track length was not (incl. % achieved mainly due to grossly inadequate investments in track and achievement) infrastructure during the prolonged concessioning period.

(b) Intermediate Outcome Indicator(s)

Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : 169 Kms of roads upgraded to paved standards and five ferries rehabilitated 115.4 km Singida Shelui Road and 3.3 km at Singida urban 169 km which completed. includes Singida- 56 km in Zanzibar Shelui Rd and 3 completed. Value Strategic roads in 0 km upgraded and no 2 Ferries (quantitative Zanzibar, three ferry rehabilitated rehabilitated (MV or Qualitative) ferries Kigamboni and , rehabilitated and MV Sengerema 3 two new ones ferries procured procured (MV Kilombero, MV Pangani and MV Rufiji) Date achieved 08/01/2004 12/31/2009 12/31/2009 Comments a) 103% achieved (175 km of road completed) (incl. % b) 100% achieved (Ferries rehabilitated/procured) achievement) Feasibility, detailed design and documentation for rehabilitation and upgrading Indicator 2 : of trunk roads for 713 km of trunk roads completed Bidding Design and bidding Value no feasibility study of documents documents for (quantitative design available for above available for 713 1,320 km or Qualitative) roads km of roads completed Date achieved 08/01/2004 12/31/2009 12/31/2009 Comments 185% achieved (incl. %

iv achievement) TANROADS and MOCT Zanzibar capacity enhanced and key studies for Indicator 3 : improved road management executed All the above executed, implemented and TA for operational, except TANROADS and TANROADS HQ MOCT Zanzibar building is not built. Value implemented; No studies or O&M study was (quantitative TANROADS HQ enhancement executed not done since or Qualitative) building occupied; TANROADS felt LAN/WAN that it is not needed. operational; All More studies were studies completed. added during the implementation and were completed. Date achieved 08/01/2004 12/31/2009 12/31/2009 Comments Almost 100% achieved. The TANROADS HQ building is not built because the (incl. % client changed the original location of the proposed building. The O&M study achievement) was not done because TANROADS felt it is not needed. Indicator 4 : TRC Concessioned to a private operator Concession Concession agreement signed agreement signed Value Bidding documents by November on Sept. 03, 2007 (quantitative issued to prequalified 2004 and and TRC operations or Qualitative) bidders commencement of handed over to TRL concession by on October 01, June 2005 2007 Date achieved 08/01/2004 06/30/2005 12/31/2009 The concession became operational more than two years behind schedule. The Comments concession performed poorly ; the government and the Concessionaire are in (incl. % discussion to terminate the concession and to transfer the concessionaire#s equity achievement) to the government.

G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/15/2004 Satisfactory Satisfactory 0.00 2 11/10/2004 Satisfactory Satisfactory 6.00 3 05/03/2005 Satisfactory Satisfactory 6.00 4 10/19/2005 Satisfactory Satisfactory 12.76 5 05/21/2006 Satisfactory Satisfactory 21.38 6 12/17/2006 Satisfactory Satisfactory 35.48 7 04/05/2007 Satisfactory Satisfactory 45.93 8 09/24/2007 Satisfactory Satisfactory 55.45

v 9 04/22/2008 Satisfactory Satisfactory 83.32 10 11/10/2008 Satisfactory Satisfactory 96.73 11 06/05/2009 Satisfactory Satisfactory 109.97 12 11/24/2009 Moderately Satisfactory Satisfactory 120.05

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

vi 1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. Tanzania is a poor country with 85 percent population working in the agriculture sector and its economy relies a lot on the exports of agriculture and mining products. Better transport infrastructure and service will reduce the transport costs of those exports, provide the poor with better access to economic and social services and enhance the integration of the national economy, and will therefore, contribute to poverty reduction and growth.

2. The Bank’s Country Assistance Strategy (CAS) of Tanzania in 2000 proposed to focus Bank’s interventions in four strategic areas: (a) private sector and infrastructure development; (b) sustainable rural development; (c) improved social infrastructure; and, (d) public sector reform and institution building.

3. The government of Tanzania’s (GOT) strategy for the transport sector at appraisal was to reduce costs and increase service standard. For the road sub-sector, the government’s policy was to provide a core network of about 45,000 km of roads in good and fair condition by 2015. For the railway sector, the introduction of private sector management and finance through long-term concession arrangement was central to the strategy.

4. The World Bank transport team has been engaged in improving Tanzania transport system in a systematic and continuous manner aiming at supporting economic growth and poverty reduction through a more efficient transport system. The engagement covers all subsectors including road, railway, aviation and port. Consistently, the focus was on the central transport corridor (both railways and roads) which is an important link to a large part of the country’s economic activities and provides access to the landlocked neighboring countries, Burundi, Rwanda, Uganda and Eastern Democratic Republic of Congo (DRC).

5. The Central Transport Corridor Project (CTCP) was supporting the CAS and GOT’s transport sector strategy. For the road sector, the government has already put a good amount of resources in addition to donors’ funding on core road network development. Most sections of the Central Corridor were already improved to paved condition and the paving of some of the remaining sections was ongoing through government and other Development Partners (DPs) financing. The project financed the remaining bottleneck which included the Sekenke escarpment (the worst trouble spot of the entire corridor).

6. Tanzania Railways Corporation (TRC), by the time of appraisal in March 2004, was able to maintain the record level of traffic achieved in 2002. However, there were distinct signs of performance decline in the coming years, the main ones being the following: (a) the inventory of spare parts left over from the Railways Restructuring

1 Project (RRP), which closed on December 31, 2002, was fast depleting and the government had made no budgetary allocation for support to TRC; (b) TRC’s financial performance, as distinct from operational performance, continued to be poor in spite of increased revenue due to overstaffing and high fixed costs and it was in no position to finance the critical repairs needed; (c) the possibility of substantial retrenchment of staff, deteriorating infrastructure and negligible financial support from the government were resulting in a sharp decline in staff morale and productivity; (d) The departure of key RRP-financed expatriate personnel after the closure of RRP negatively impacted TRC’s management capacity; and (e) competition from road for small loads and short hauls was accelerating and TRC was finding it difficult to maintain its traffic level in these areas. In the face of these signs, the government’s strategy for TRC was three-fold: (a) concession the railways as soon as possible in the expectation that the concessionaire will take all needed actions to improve performance; (b) fund part of the infrastructure rehabilitation needs to make the concession attractive; and (c) permit the concessionaire to decide on the optimal staff strength and finance the retrenchment of the staff rendered surplus.

7. For Tanzania Zambia Railway Authority (TAZARA), the governments of Tanzania and Zambia, the two joint owners of TAZARA, after prolonged discussions between themselves and the Bank, had decided in principle to concession TAZARA in order to reverse its precipitous decline. A grant under the Public-Private Infrastructure Advisory Facility (PPIAF) had been arranged to finance a study to evaluate various concessioning options and make recommendations. At the time of appraisal, the study was due to commence soon. The two governments had requested for support towards decision-making and subsequently implementing the selected option.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

8. The original PDO was to: (a) upgrade strategic road links; (b) enhance road management capacity; and (c) improve operations of Tanzania railways.

9. Key performance indicators are:

Road component (a) traffic increases by at least 10 percent per annum on average between 2004 and 2009 on improved roads; (b) the network under Tanzania National Roads Agency (TANROADS) responsibility (28,900 km of trunk and regional roads) in poor condition reduced from 49 percent in 2003 to 30 percent in 2009. Rail component (a) total freight traffic tonnage carried (on TRC network) increases from 1.45 million tons in 2002 to 2.0 million tons by 2009; (b) level of transit traffic increases by 20 percent from the 560,000 tons in 2003 to 672,000 tons in 2009; and (c) kilometers of track under speed restriction as a percentage of the total will decrease from 10 percent to 2 percent in 2009.

2 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

10. There was no revision to PDO and key indicators.

1.4 Main Beneficiaries (original and revised)

11. The main beneficiaries comprised all users of the central corridor (road and railway corridors) and the regions linked by the central corridor namely: (a) users of the central roads and railway systems; (b) agriculture, mining and tourism industries along the central corridor; (c) large number of people in vast rural areas and inland regions connected through urban centers, ports and border points to the central corridor; and, (d) neighboring countries like Burundi, Rwanda, Zambia, Uganda and the Democratic Republic of Congo.

12. Other project beneficiaries included: (a) TANROADS and the Ministry of Communications and Transport (MOCT) of Zanzibar, whose capacity was improved through capacity building and training; (b) GOT would gain from increased revenue in relation to lease payment and taxes on concessionaire’s profits; (c) the railway concessionaire (including the government which had 49 percent share in the total equity of the concessionaire) would accrue higher profits increased railway traffic due to improved physical infrastructure and increased efficiency of operations.

1.5 Original Components (as approved)

13. Component A: Upgrading of strategic road links in mainland Tanzania and in Zanzibar (original cost: US$70.71 million, actual cost: US$88.49 million) aimed at providing better access to isolated rural areas, promote tourism industry and reduce export costs.

(a) Rehabilitation and upgrading of the Singida-Shelui section (110 km) of the central transport corridor, including preparing an Environmental Management Plan (EMP) and Resettlement Action Plan (RAP); (b) Rehabilitation and upgrading of the Mkwajuni-Nungwi, Matemwe-Pongwe and Paje-Pingwe-Michamvi roads in Zanzibar (56 km), including preparing EMP and RAP; (c) Carrying out and updating feasibility studies, detailed design and bidding documents for 713 kilometers (four sections) of high priority trunk roads to be rehabilitated and/or upgraded under a proposed follow-on project. Nordic Development Fund (NDF) financed three sections (US$6.05 million) namely Singida-Babati-Minjingu, Dodoma-Babati and Tanga-Horohoro; (d) Rehabilitation of the MV Kigamboni, Pangani, Sengerema, Kilombero and Rufiji ferries.

3 14. Component B: Enhancing road management capacity specifically for TANROADS and MOCT Zanzibar (original cost: US$14.83 million, actual cost: US$6.49 million).

(a) Design and construction of a new TANROADS headquarters building; (b) Setting up of a Wide Area Network and Local Access Network (WAN and LAN) for TANROADS to improve communication between headquarters, its regional offices and MOCT Zanzibar; (c) Carrying out of a study for the enhancement of the organization and management of TANROADS; (d) Carrying out of studies to identify road investment priorities, such as traffic counts and an update of the ten-year investment plan; (e) Conduct of a local government road inventory and condition survey; (f) Carrying out other transport related studies, including a Dar-es-Salaam Bus Rapid Transit (BRT) and traffic management study; (g) Provision of technical advisory services and training for improved management and operational capacity of TANROADS and MOCT Zanzibar.

15. Component C: Improved Performance of Tanzanian Railways (original cost US$36.46 million, actual cost US$27.32 million) aimed to improving the performance of Tanzania railway by engaging private sector into the operations and financing of the rail sector.

(a) Provision of urgently needed rails, sleepers and other material for TRC, for the replacement of the track between Itigi and Tabora (immediate requirement); (b) Provision of other rails, sleepers and materials for TRC for the replacement of the balance of the tracks of TRC between Itigi and Tabora. (to be supplied after concession of rail operations) (c) Preparation of an Environmental Assessment, a Social Assessment and EMPs and RAP for TRC; (d) Financing of clean-up costs based on the Environmental Assessment and EMP, and of resettlement costs based on the Social Assessment and RAP; (e) provision of technical advisory services and training for (i) the handing over of TRC assets and operation of the Railway Operator; (ii) the winding up of TRC; and (c) the building up of the management and operational capacity of the Reli Assets Holding Company (RAHCO); (f) provision of technical advisory services for the future private sector participation in TAZARA, including: (i) the restructuring of TAZARA; (ii) the establishment of the regulatory and legal framework governing the operations of TAZARA; and (iii) preparation of Environmental and Social Assessments (EA/SA), EMP and RAP.

4 1.6 Revised Components

16. Although the project was not officially restructured, the following changes were made some of which necessitated Development Credit Agreement (DCA) amendment.

(a) Component A

(i) Three variations were added to the Singida-Shelui road rehabilitation works contract: a. 3.32 km of roads in Singida Municipality; b. installation of the Njuki weighbridge at km 6.18; and c. construction of Iguguno box culvert. (ii) Pothole repair on the Zanzibar Airport to keep it from falling apart until rehabilitation works financed under CTCP-2 would commence. (iii) The coverage of detailed design and bidding documents of high priority trunk roads was expanded from the planned 713 km to 1,430 km. Four more road sections were added: Dodoma-Iringa, Nzega-Tabora, Arusha-Minjingu and Tunduma-Sumbawanga. Designs for Tabora – Nzega road (116 km) could not be completed under the project after TANROADS terminated the contract. The final length hence became 1,314 km.

17. A new activity, Performance-based Management and Maintenance of Road (PMMR) pilot projects in Mwanza, Rukwa and Tanga was added after the mid-term review with contracts commencing in August 2007 through September 2008. The PMMR engineering and bidding documents were prepared through a trust fund. The original plan was to tender these in 2005 and finance them under the Transport Sector Support Project (TSSP) under preparation at the time. TSSP preparation and presentation to Board were rescheduled and alternative financing had to be sought, and it was decided to finance the PMMR contracts through CTCP.

(b) Component B

(i) The design and construction of TANROADS building did not materialize because of the change of the original location and the resulting need to change the design of the proposed building. Redesigning and securing a new lot took more time than envisaged, therefore TANROADS headquarters was not constructed by the end of the project. (ii) The Organization and Management (O&M) study for TANROADS was cancelled following restructuring of TANROADS organization, and the perception at TANROADS that the study was not needed. (iii) The following studies were added:

• Baseline traffic count on the mainland road network; • Road maintenance concession study in mainland Tanzania; • Zanzibar master-plan and transport policy; • Zanzibar International Airport master-plan;

5 • Baseline survey of user (dis-) satisfaction at Zanzibar Airport; • Feasibility study and detailed engineering design for seven airports; • Road fund leakage study.

(c) Component C

(i) The technical advisory services to TAZARA were cancelled for the following reasons: a. The Tanzania and Zambia governments were undecided on whether or not to go for concession; and b. The preference of the two governments was to award the concession to a Chinese firm if going for concession without going through an internationally competitive process. The reasons advanced by the governments for not deciding in favor of a competitively procured concession were: i. huge outstanding liabilities to Chinese government (close to US$500 million at current prices); and ii. high estimated cost of staff retrenchment (approximately US$25 million) This sub-component was therefore cancelled. (ii) The supply of 197 km sleepers was reduced to 127 km due to the increased cost of steel.

1.7 Other significant changes

18. Amendments to the DCA. There were four reallocations of credit proceeds in April 2007, October 2008, April 2009, and November 2009. The first amendment in April 2007 was to: (a) include an additional activity – a pilot PMMR component; (b) reallocate the amount for the procurement of ferries from Category (1) – Works to Category (2) – Goods; (c) retrofit the financing parameters to increase the percentages of financing for expenditure under category (3) Consultants services, training and audits from 93 percent to 100 percent.

19. The second amendment was in October 2008. The remaining balances were insufficient to cover the commitments in Category (1) – Civil works under part (a) – Reconstruction of Zanzibar roads; and part (d) – Upgrading of Singida-Shelui road. Therefore, a reallocation of funds from Category 5 – Unallocated to the above categories was deemed necessary.

20. The third amendment in April 2009: Some more additional resources were required to meet the expenditures mentioned in the second amendment in Category 1, parts (a) and (d), and Category 2 (c) - Rehabilitation of ferries respectively.

21. The fourth and last amendment in November 2009 was to: (a) fine-tune the remaining activities and increase funds for Category (2) – Goods (part b) by SDR5.12 million; and (b) accelerate the activation of the Letter of Credit (LOC) which delayed the contract for the supply of rails and sleepers due to lack of IDA resources.

6 2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

22. The CTCP had two major components: road and railway. Both components were aligned with the government transport strategy and incorporated the lessons learned from previous projects in the sector.

23. In the road component, the project focused on the central transport corridor which connects North Western Tanzania as well as Burundi, Rwanda, Uganda and DRC to the port of Dar es Salaam. The government and other DPs financed rehabilitation and paving of the corridor and as part of this initiative CTCP financed the paving of the Singida – Shelui section which included the challenging Sekenke escarpment The road component also put a lot of effort into the enhancement of institutional capacity including providing training; conducting various studies and installing WAN and LAN systems at TANROADS to improve the communication, etc. The project was also successful in having the majority of designs and bidding documents completed before Board presentation of the CTCP-2 and TSSP to avoid the delays and cost increases encountered in the first Integrated Road Project.

24. The concessioning of TRC was firstly considered as an independent project as a follow on of RRP. However, it was then decided to combine this railway component with the road component under one project to reduce the Bank transaction costs. Also, since the two components are closely linked as part of the Central Transport Corridor, it made sense to combine them in view of their complimentary role in regional trade and transport facilitation. The preparation of this component took into account the lessons from the RRP and reflected those lessons in project design as follows.

25. First, RRP had concluded that in spite of substantial investment and technical assistance (TA) support, TRC’s overall performance, particularly the financial performance, as well the railways’ management capacity remained below expectation. Therefore the railway component was made contingent on the government fully committing to concession the railways. Second, the first concession bid launched by the government in 2000 had failed because the qualification criteria were too demanding and risk allocation was too unfavorable for the private sector. Therefore, CTCP included investment support for track renewal and for addressing environmental and social liabilities to make the concession more attractive to potential bidders. Third, an IDA Partial Risk Guarantee (PRG) of a maximum of US$40 million was proposed to be made available to the successful concessionaire, if requested.

26. However, the project, underestimated the risks for the railway due to concessioning delay, underfunding of track and asset rehabilitation, optimistic forecasting of traffic, and inadequate addressing of social issues, and, consequently, the mitigation measures also proved to be insufficient for the reasons set out below.

7 27. First, railway concessioning is a complex process and time slippages are common. While making all efforts to maintain schedules, it would have been prudent to plan for the possibility of delay in the concession becoming operational and to ensure continued efficiency of operations of TRC during the concessioning process. The plan could have included some or all of the following: (a) a short-term management contract (with only a few key management personnel) for the railways with the explicit understanding that the contract will be terminated immediately after the concessionaire takes over; (b) engagement of one or two key experienced management personnel from the market or on secondment from an efficiently working railway; (c) retrenchment of surplus staff as early as possible to save on operating costs and make more funds available for critical spare parts; and (d) availability of enough funds to avoid adding to the backlog of maintenance during the concessioning process. A further contingency plan could have provided for: (a) use of IDA funds for rehabilitation even before the award of the concession, if it became clear that the concession would be delayed; (b) support by the government for rehabilitation of wagons and locomotives to prevent decline of freight handling capacity; and (c) granting temporary and limited-period exemptions for certain expenses and taxes.

28. Second, there was a clear need for huge funds for liquidating the backlog of maintenance and rehabilitation of railway infrastructure. As per the railway records, more than 2,000 km were estimated to be in need of rehabilitation in 2002 and, even at a conservative cost estimate of US$0.2 million per kilometer, the funds needed for rehabilitation would have amounted to US$400 million. The concessionaire was expected to bring in close to US$60 million in equity, directors’ personal loans, and commercial loans (IFC was under discussion as a potential lender) and that along with US$33 million to be provided through the credit would have enabled the concessionaire to commence rehabilitation of critical areas and then continue the process by ploughing back the surplus from operations (Traffic level in 2005 was still close to 1.2 million tons and revenue close to US$60 million equivalent. With expectations of traffic increase by more than 50 percent, staff reduction by 60 percent, and other cost reduction by 20 percent or so, a progressively increasing surplus could have been expected). It should have been clear at the design stage that the plan for rehabilitation of the infrastructure would not work if the key assumptions of traffic growth, cost reduction, and adequate surplus generation did not materialize. Subsequent events did create serious problems. The concession signing and takeover was delayed by two years (partly because one bidder launched a legal challenge), traffic declined by 50 percent instead of increasing (some of which could have been anticipated as the traffic had already shown a declining trend since 2002), and condition of infrastructure worsened further. Timely induction of funds for the rehabilitation of critical sections of track and rolling stock could have avoided the steep decline in performance.

29. Third, TRC carried a lot of small (wagon load) traffic, servicing many small customers, but did not have many large-volume customers. Even in 2002, when the railways carried close to 1.5 million tons, the top ten customers accounted for only 30 percent of the total traffic, whereas typically in other railways they would account for 60- 70 percent. TRC was able to do that probably because the roads were poor, competition

8 was restricted, and commodity trade was dominated by public institutions. However, “small load” freight is not the preferred segment of business for the railways being too expensive to handle. Small loads normally are better suited for road transport. In any future collaboration with the Government to revive the railways, the revitalization design should be based on realistic traffic projections recognizing the following: (a) TRC does not have an inherent comparative advantage over trucks with regard to small loads; (b) increase in average haul from 1082 km in 2002 to 1151 km in 2009, shows that small traffic is moving away from the railways; (c) main cargoes, i.e., cement, fertilizer, maize, salt, petroleum products, sugar, grains, cotton and tobacco will continue to be the main stay of the railways ; (d) focusing on provision of one-stop services by collaborating with truckers for logistics beyond the origin and end of the railway line could prove attractive; and (e) general and container cargo could grow at a much faster rate compared to others and the railways should develop appropriate strategies to attract this traffic. As far as TAZARA is concerned, agreement needs to be reached with the Zambia Railways concessionaire for Tazara to connect to the mines in Zambia directly.

30. Finally, both staff retrenchment and transfer of staff to the Concessionaire could have been managed more efficiently and sensitively. Even though the government eventually paid close to US$56 million to retrench about 3,500 staff (almost US$16,000 per person), the process of arriving at the package was contentious and took inordinately long to finalize. From the time the concession process commenced in 2002 and until it became operational in 2007, most staff remained uncertain about the terms of retrenchment and that adversely affected their morale and productivity. The final package was too liberal in comparison with average payments for similar retrenchments and the staff identified to be engaged by the concessionaire felt short-changed and envious with consequent impact on their morale and productivity. The staff joining the concessionaire also remained uncertain about the retrenchment and pension benefits pertaining to their service with TRC as TRC had legally wound up and there was no evidence of any alternative institutional or budgeting arrangements by the government. This heightened their anxiety and added to a decline in productivity.

31. In summary, TRL was facing serious problems including tremendous backlog of maintenance and rehabilitation, increasing competition from road, staff challenges, and changing customer requirements, and as such its financial turnaround was not achieved. The Project included best practice features in its design (concession, investment support, and PRG) but inadequate appreciation of the financing needs, social concerns, changing customer requirements, and the need for a contingency plan in case of slippage of the concessioning timeframe, seriously compromised the quality of the project/concession design and adversely affected the outcome.

2.2 Implementation

32. Disbursement: The Project closed on December 31, 2009, as originally planned, with almost full disbursement of the Credit amount. Initial rate of disbursement was slow, with only 21 percent disbursed by the mid-term review in May 2006. Effective disbursements only started by the end of 2007 after the equipment and personnel for road

9 works were mobilized and the railway was concessioned. The slow start is attributed to three reasons: (a) setbacks in the bidding process for road work, (b) delay in completing Environment Impact Assessment (EIA) and RAP by RAHCO which was a condition for the disbursement of 25 percent of the investment allocation for the railway component; and (c) delay in awarding the railway concession, which was a condition for the disbursement of the remaining 75 percent of the allocation for the railway component. However, appropriate action was taken to accelerate disbursement in the remaining period and ensure full disbursement without resorting to any extension of the closing date. Additionally, various activities for road management capacity enhancement (except the O&M Study discussed later) were implemented as planned and contributed a lot to road management capacity building.

33. Client Responsiveness: The Team was alerted to the changing requirements and acted proactively in making changes and adjustments where necessary in order to maximize the benefits of the project. More specifically: (a) adding the weighbridge to Singida-Shelui road work helped control axle loads, thus, reducing the road damage due to truck overload; (b) expansion of detailed design activity from 713 km to 1,430 km helped mobilize investments for a larger portion of the network in need of rehabilitation on the basis of completed design and thus helped accelerate the rate of road improvement with expanded benefits; (c) financing the first year implementation of PMMR projects amounting to US$5 million, thereafter the financing of the contracts was taken over by the Road Fund (RF); and (d) the O&M study consultancy contract was not processed as TANROADS decided that the study was not needed after change of management and restructuring of the organization and thus unnecessary expenditure was avoided.

34. Poor implementation of the railway component: The railway component did not move smoothly. The unanticipated challenges experienced by the railways during project implementation exacerbated the problems embedded in the project design (detailed discussion on design issues in section 2.1). The Project faced delay in both concessioning process and rehabilitation of rail infrastructure and lack of decision regarding TAZARA.

35. Delay in Railway Concessioning: The railway concessioning was delayed by more than two years for various reasons, two specific ones being beyond the government’s control. First, one of the bidders launched a legal challenge in a local court and even though the case was eventually dismissed, close to one year was lost. Second, the preferred bidder selected GAPCO as a local partner, but the same was not acceptable to IFC, a potential lender to the Concessionaire, due to GAPCO being in arrears with regard to IFC payment in another deal. That led to a contentious and time-consuming exchange of views between the various parties and the local partner was finally dropped, and GOT came in and became the minority shareholder holding 49 percent of the shares.

36. Views on the new joint venture structure differed widely. Many perceived it as a bad idea as it represents a conflict of interest with the government being on both sides of the deal: as shareholder of TRL and owner of the railway as RAHCO. Others consider this a good example of public-private partnership. In any event, although the selected

10 concessionaire was agreeable to the new structure, the new arrangement instead of resolving the matter created serious problems of coordination and caused further delay in the signing of the concession agreement.

37. Rehabilitation delay: Rehabilitation of the infrastructure also did not proceed satisfactorily. Disbursement of 25 percent of limited funds allocated under the Credit was tied to the satisfactory environment assessment and resettlement action plan and 75 percent to successful concessioning of TRC. Since concessioning was delayed by more than two years, the procurement of the materials for rehabilitation was also delayed by the same period. Rehabilitation of railway infrastructure after the concessioning agreement was signed was further delayed by an earthquake in China as the “rail” providers could not provide the materials on time.

38. TAZARA Indecision: Tanzania and Zambia governments could not decide whether to move ahead or not with the concession serves. Therefore, the planned TA sub-component became redundant and the amount allocated for this was utilized elsewhere.

39. In summary, in spite of almost 98 percent disbursement and closing on time, the project’s PDOs with regard to the railway component were not achieved. The overall outcome provides a mixed picture of satisfactory road related outcome and unsuccessful railway-related outcome.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

40. M&E Design: The M&E framework contained a set of outputs, intermediate and outcome indicators pertaining to various components which were appropriate and linked to PDOs. The framework outlined methods to keep track of the project progress and as a basis for any adjustments during implementation. However, the M&E design could have included more indicators to provide project and PDO-linked information to arrive at quick corrective actions, if needed. For example, additional targets such as wagon turnaround time, business offered by the railways’ main customers on a monthly basis, and time taken between request and supply of wagons, if specified, could have given a clearer idea of the railways’ declining trend and could have precipitated urgent action by the government. Also, more intermediate indicators could have been added to provide clearer ideas to achieve the outcome indicators. For example, customer surveys for railways and budgetary allocation by the government for road condition improvement to supplement the plans under the RF and the capital investment for road network should have been included to facilitate better monitoring.

41. Implementation and utilization: The M&E was implemented consistently with the agreed design. Data was collected from different sources to ensure the accuracy and sufficiency of the information. TANROADS, MOCT of Zanzibar, RAHCO were all responsible for providing the related information. In addition, data was collected from the RF, regional offices and the Tanzania Electrical, Mechanical and Electronics Services

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Agency (TEMESA). They were able to track regularly the evolution of indicators through supervision and quarterly reports.

42. Data generated through the M&E framework provided adequate information. Remedial action and the options were regularly discussed with the government and the government agencies. However, the seeming lack of corrective action in the railway sector was not due to any deficiency in the M&E design or the information generated by it but in seemingly difficult remedial actions such as financial inputs by the government which was difficult for the government to mobilize or compromising the terms of the concession considered important by the government. There was definitely a need for uncommon solutions. For example, the Bank Team and the government could agree on reallocating some funds for strengthening the management of TRC and rehabilitating the railway infrastructure which could have prevented the sharp decline in traffic and generated more funds for maintaining the infrastructure and other systems.

2.4 Safeguard and Fiduciary Compliance

43. Environment: The environment category of the project was rated as ‘A’ at project appraisal. Before appraisal, full EA/SA were carried out for all planned road works. However, the conclusion was that the EA/SA for the three Zanzibar roads, considered as second year sub-projects, be carried out during project implementation subject to Africa Safeguard Policies Enhancement’s (ASPEN’s) approval. Construction was supposed to begin after the full implementation of the RAP in early 2005. The project financed the construction of three Zanzibar roads therefore OP 4.01 and OP 4.12 were triggered. The environment impact of road works were well mitigated as a result of the standards and guidelines developed and included in all road contracts. In addition, a satisfactory EA/SA for the rail component was a condition of disbursement for part of the credit proceeds allocated to this component. TANROADS engaged a full-time social scientist to follow-up and monitor the environment and social impacts.

44. The environmental clean-up of main workshop facilities in Dar es Salaam, Morogoro and Tabora stations was completed by RAHCO and inspection was done by a TRL environmental expert. Cleaning-up for Mwanza and Kigoma was completed in December 2009 using project (IDA) funds after failure by GOT to provide the funds (about TShs 100 million) under FY2008/2009 budget for this activity.

45. Social issues: The Involuntary Resettlement Policy (OP 4.12) was triggered. Resettlement framework and resettlement action plans for roads were implemented based on procedures and guidelines outlined in the governing policies. Specifically the following have been carried out, assessment of: (a) the application of the legal framework and governing guidelines and policies; (b) the eligibility and compensation measures; (c) the valuation procedures applied; (d) the level of community participation and its impact; (e) the resettlement of community structures and sensitive areas; (f) the impact of borrow pits, quarries and camp site; (g) the grievances and appeal and their settlement; (h) the RAP institutional framework organization and its applicability; and (i) the RAP M&E.

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All compensation claims and grievances were settled accordingly based on the monitoring and evaluation plan.

Table 1: Number and Type of Affected Properties PERSON PERSON PERSON AFFECTED ON AFFECTED ON AFFECTED ON S/No ROAD SECTION RESIDENTIAL COMMERCIAL PLANTATION HOUSES PROPERTIES 1. Mkwajuni – Nungwi 158 433 591 2. Pongwe – Matemwe 7 240 247 3. Paje – Pingwe- 9 23 32 Michamvi Total 174 696 870

Table 2: Actual Compensation RESIDENTIAL & COMMERCIAL PLANTATION TOTAL S/NO ROAD SECTION AND BUILDING (TZS MILLION) (TZS MILLION) (TZS MILLION) 1 Mkwajuni – Nungwi 176.29 11.23 187.52 2 Pongwe – Matemwe 22.71 0.84 23.55 3 Paje – Pingwe- 38.16 0.97 39.13 Michamvi Total 237.16 13.04 250.20

46. TRC/RAHCO RAP: A RAP was prepared for the railway component. The RAP was approved by the Bank and disclosed in-country and at the Bank’s Info-shop. Resettlement concerned 145 project affected people (total compensation was estimated at about US$600,000) who were considered living on the right of way of Railway network, making it difficult for vehicles attempting to cross the rail line to see an on-coming train in time. The RAP was prepared with a view that through the concession train traffic and speed would increase. However, this did not materialize (actually the reverse happened) and eventually the RAP was not implemented.

47. Financial Management: Overall, the financial management is rated satisfactory. A dedicated unit established within TANROADS with qualified and experienced staff was responsible for financial management throughout the life of the project. The quarterly Financial Monitoring Reports (FMR) were received regularly. Audits were done annually and on-time; and were unqualified, except in 2007. The auditors issued a qualified opinion on project financial statements in 2007, due to the following: (a) limitation of scope of audit – financial statements submitted did not include balance sheet and cash follow statements; and (b) non compliance with regulations – (i) inconsistencies with Bank category allocations, (ii) non recognition of gain on exchange rate fluctuation, (iii) underreporting of counterpart funds, (iv) differences between opening and closing balances of general ledger and bank statements. TANROADS and the Bank’s Financial Management Specialist worked out an action plan to remedy the issues in the next audit

13 reporting period as per the auditors’ recommendations. Since then, all major issues have been resolved and Bank procedures were fully complied with.

48. Procurement. Although the project experienced delays at the start, procurement under the project was rated satisfactory. All procurement activities and post-reviews were satisfactory.

2.5 Post-completion Operation/Next Phase

49. Multiple activities under CTCP are followed up with operations to sustain and expand the project benefits. Most of the detailed design and bidding documents prepared under CTCP, have secured follow up investment. Two IDA projects, the Second Central Transport Corridor Project (CTCP-2, on-going) and TSSP (approved on May 27, 2010), are to finance: (a) the rehabilitation of two sections of trunk roads, Korogwe – Same and Arusha – Minjingu roads; (b) rehabilitation of selected airports, runways and terminals in three regional airports, Kigoma, Tabora and Bukoba; (c) infrastructure for the BRT system in Dar es Salaam. Other development partners like Millennium Challenge Corporation (MCC), the African Development Bank (AfDB) jointly with the Japan International Cooperation Agency (JICA) have committed investment on selected trunk roads. In addition, GOT is to finance re-design and construction of TANROADS headquarters which could not be done under CTCP.

50. The PMMR project, after the initial financing by CTCP up to September 2008, is since being financed by the RF and is progressing well. With RF revenue increased from around US$60 million to more than US$200 million during the last five years, the RF is able to provide sufficient resources for this activity.

51. For other studies completed under CTCP, many recommendations are already being implemented. For example, the traffic census methodology prepared for TANROADS has been put into use.

52. For the railway component, GOT is in the process of negotiating the termination of the concession agreement with the private partner and has decided to take over all the TRL shares. The Bank is considering support under a follow-on project for the rehabilitation of the railway, provided an appropriate investment and management program can be agreed upon, and GOT is ready to put in place a balanced regulatory framework for the fair competition between rail and road transport, including appropriate management arrangements. Other DPs have shown interest to assist as well.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

53. The objectives of CTCP, designed in 2004, remain highly relevant with the current priorities and in line with the CAS (2007-2010). The project also is closely related to Tanzania’s National Strategy for Growth and Reduction of Poverty

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(MKUKUTA, 2005-2010), particularly growth cluster I, growth of the economy and reduction of income poverty, which strives “to further improve prospects of growth, especially improvement of the investment climate, through better informed choices and better financed programs in agriculture, forestry, environment, and mining; reduced infrastructure bottlenecks, notably in transport and energy…”.

54. The design and implementation was relevant. The road component focused on improving road condition on key sections on the central transport corridor and road management capacity of key government institutions, the two key factors to increasing transport efficiency, reducing transport cost and improving access for isolated rural area. Indeed the expansion of the East African Community to include Rwanda and Burundi has made the Central Corridor even more important as a strategic regional highway.

55. For the railway component, the PDO “Improve Operations of Tanzania Railways” was highly relevant. Even in 2002 and 2003, when TRC carried close to 1.45 million tones of traffic, the financial performance was still poor. It was obvious that TRC had to do more in terms of increasing traffic and revenues or reduce costs or both. The Project rightly focused on improving railway infrastructure and management through concessioning as a means to achieve the PDO. The linking of investment to success in concessioning the railway was also aimed at ensuring continuing focus on concessioning, which was the main instrument to achieve the PDO. However, as noted earlier, the project could have been better designed by including a contingency plan for a possible delay of the concessioning process. These weaknesses eventually reduced the benefits that the project could have generated.

3.2 Achievement of Project Development Objectives

56. The project development objectives for the road sector were achieved. The traffic on related road sections increased by 20-50 percent annually, exceeding the target of 10 percent per annum. The portion of road in poor condition under TANROADS responsibility was fifteen percent in 2009 as compared with the target of 30 percent. Contributing to the improved condition of the road network of Tanzania is the fact that many of the roads for which design and bidding documents were prepared under the project (a total of more than 500 kilometers) are currently being rehabilitated by other development partners. In addition to achieving much higher-than-targeted traffic and road condition, the road component also generated economic and social benefits as detailed in 3.5(a). The road management capacity has been enhanced as detailed in 3.5(b) (instructional change and strengthening). It is assessed by the Implementation Completion Report (ICR) team that the outcome of Component A was highly satisfactory and outcome of Component B was satisfactory.

57. The highly satisfactory performance in the road sector resulted from: (a) the improved road network due to capital investment and enhanced road maintenance; the government’s capital budget plus donor’s funding invested in road sector during the period of 2008-2010 have added up to US$859.2 million, far more than the investments on the other transport sub-sectors. At the same time, the road network maintenance was

15 also enhanced. The RF revenue has increased from around US$60 million per annum to above US$200 million in 2009, one of the largest in Africa; and (b) the steady growth of Tanzania economy generated more traffic. From 2002-2008, the national economy grew at seven percent annually, though it declined to five percent in 2009 due to the international financial crisis in 2009.

58. While the road indicators are indicating remarkable performance vis-a-vis the targets, the railway indicators are indicating the opposite. The outcome of the railway component is being rated as highly unsatisfactory. The total freight traffic and transit traffic carried by TRL network in 2009 was only 0.408mt and 0.14mt as opposed to the target of 2mt and 0.67mt, respectively. The traffic on TRL declined to less than one-third of the level at project appraisal, despite gross domestic product growing steadily at about seven percent per annum during the five year project implementation period. The continuing decline of railways also meant more traffic on road and much faster deterioration of the roads leading to the need for more frequent rehabilitation and increased cost of maintenance. That in turn increased the overall cost of transport for the economy. On the bright side, however, the roads have been able to absorb this diverted traffic which has benefited the economy.

59. TRC’s poor performance could be attributed to the following factors: (a) the delayed concessioning process - TRC’s performance was already showing a downward trend and by 2005, freight traffic had already declined by about 20 percent. Had the concession become operational by 2005 as scheduled, the deterioration could possibly have been arrested. The two-year delay accompanied by absence of investments by the government and a sound safety net for the staff led to the deterioration of railway infrastructure, low staff morale, increased thefts and vandalism, increased strikes and other irresponsible acts; and (b) Lack of cooperation among the interested parties: Even after the concession agreement was signed, the government and the concessionaire did not work together to solve the problems and improve the railway operations. Instead, they engaged in blaming each other for the deteriorating performance resulting in complete paralysis of action on either side.

3.3 Efficiency

60. At project appraisal, economic analysis was conducted on three activities: (a) Rehabilitation of Singida-Shelui Road; (b) rehabilitation of three road sections in Zanzibar; and (c) concessioning and investing in TRC. At Implementation Completion Report (ICR) stage, Theeconomic analysis on the above three activities was updated. A consultant was also engaged to evaluate the performance of ferry activities and PMMR projects. The economic internal rate of returns (EIRRs) of the road sector at appraisal stage and at ICR stage will be summarized in Table 3.

Table 3: EIRR at Appraisal Stage and ICR Stage EIRR% Appraisal stage ICR stage Singida-Shelui 24.3 34.6 Three Roads in Zanzibar Paje – Pingwe- 14.1 16.1 Michamvi

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61. Regarding the road sector, the EIRR of roads at ICR stage is higher mainly due to the much higher than predicted traffic on the improved central corridor. The anticipated traffic increase was 10 percent per annum, and actual traffic increase was 20-50 percent per annum. Though, due to the heavy traffic, the maintenance cost on the central corridor will be higher, the marginal benefit brought about by the heavy traffic will far exceed the marginal cost due to more maintenance demand. If the railway sector could have performed as anticipated, some of the freight traffic will be shared by the railway, which will result in less damage to the road, therefore, less maintenance cost, the EIRR of road component should be even higher. The detailed analysis is in Annex 3.

62. Regarding PMMR pilots, a general improvement in terms of user comfort, average travel speed and passability has been achieved for the pilot PMMR project. Overall road conditions of the road network are being satisfactorily maintained at required levels. Before the onset of the pilot PMMR project, some roads were not fully passable but they are currently fully passable even during the rainy season, with an obvious increase in traffic levels. Average travel speeds have substantially increased on all roads. Before the project, the average travel speed was below 50 km/hour, after the project, around 70 percent of the traffic has travel speed above 50 km/hour. User comfort has significantly increased and set targets have been achieved in most of the project roads and are continually being sustained through the performance based concept.

63. The performance of two ferries, MV Kigmboni and MV Sengerema, was evaluated. The two ferries are better performing with significant increase in traffic trend i.e Mv Kigamboni- adults has increased from 571,512 daily, November 2003 to 1,168,920 in November 2009, an increase of 51 percent. Similarly to Mv Sengerema, adult traffic increased from 16,462 in March 2003 to 28,268, an increase of 41 percent. Though the traffic in November 2009 only represented the short term post-project performance of the new ferries which were put into use for less than five months, it is a good indication that the new/rehabilitated ferries in a long run will capture all estimated financial and social economic benefits.

64. Regarding the rail sector, the economic rate of return (ERR) and net present value (NPV) at appraisal were computed on the basis of the following key assumptions: • The analysis was estimated for twenty years from 2005, the expected starting year of the Project until the end of 2024; • The concessionaire is assumed to invest US$60 million from year three to eight; • The government (through IDA) invests US$33 million in the first two years; • Traffic is assumed to be 1,600 million NTKM in 2005 and grows at 10 percent for the first two years and then at three percent/year; • Cost difference in rail and road traffic is assumed as US$0.03cents/NTKM; • Fixed and variable costs decrease by 10 percent per year for the first two years; • Benefits include road avoidance costs and reduction of operating costs; • Repatriation by concessionaire is assumed at a maximum of 25 percent on equity assumed to be US$20 million.

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65. The ERR and NPV at ICR was computed keeping the same assumptions as above plus the following: • Actual figures considered for the first five years; • Alternative concession will be finalized in 2010; • Traffic increases after 2010 at 10 percent for seven years and then at three percent; • The new concessionaire will invest US$60 million in six years from 2011 to 2016.

66. Based on these assumptions, the ERR and NPV at appraisal and ICR are indicated as in Table 2.

Table 4: EIRR of Railway Component at Appraisal Stage and ICR Stage

Indicator Appraisal Stage ICR Stage ERR (%) 48 10 NPV (US$ Million) 200 (-) 15

67. Sensitivity: If the government fails to identify shareholders to continue the concession or takes more time, the ERR and NPV could drop further. Details in Annex 3.

3.4 Justification of Overall Outcome Rating

68. The overall rating is moderately satisfactory. The design was relevant and the effectiveness of the road component is good though the outcome of railway component is disappointing. The overall outcome of the project has to take into account the satisfactory rating of road component (including road management capacity building) and the unsatisfactory rating of railway component. Given that the road component is a much larger part of the IDA credit in this project, the overall outcome rating is weighted as moderately satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development

69. Though there was no specific survey or evaluation on the project’s impact on poverty, gender and social development, positive impacts on these aspects have been observed on site visits and recorded in related reports. The Singida to Shelui road construction removed a major obstacle (the Sekenke escarpment) from the central transport corridor. That obstacle could cut off the entire North West of the country from the rest and would lead to massively increased transport costs.

70. The intervention on three road sections in Zanzibar has boosted the tourism industry. The ICR team was informed that more hotels have been constructed and more tourists are coming to Zanzibar since the roads were rehabilitated. Previously, it would take almost one day to travel from Zanzibar airport to the hotels located along the seaside, now, it only takes one hour. Regular bus services, not existing before, were observed when the ICR team went to site visit. The local communities also benefited

18 from growing tourism resulting in more employment and business opportunities and more income.

(b) Institutional Change/Strengthening

71. The project has contributed to the strengthening of road institutions’ management capacity. 135 staff from TANROADS and six staff from MOCT Zanzibar attended training courses. The knowledge and skills of staff working for TANROADS and MOCT of Zanzibar are greatly enhanced through training and workshops.

72. The project also financed the studies to identify road investment priorities and an update of the ten-year investment plan, as well as technical advisory services for improving management and operational capacity of TANROADS and MOCT Zanzibar, all of which has helped the road institutions improve their capacity to strategically managing the road network.

73. The WAN-LAN installed in 38 centers helped cut communication costs, improve the communication between TANROADS’ headquarters, its regional offices and MOCT Zanzibar, thus enhancing the coordination and management among them.

74. The management capacity of Prime Minister’s Office Regional Administration and Local Government (PMO-RALG) of local roads has also been strengthened. Local governments are responsible for the management of about 66 percent of the total road network. With CTCP financing the local roads inventory survey and mapping, the road condition information is available and the bottlenecks have been identified, which has offered the basis for better local roads management. The local governments are increasingly performing better (the condition of local government roads has improved from 50 percent in good and fair condition in 2005 to 58.5 percent in 2009) and a strong private road construction industry has been created, which started from scratch and is now executing the entire road maintenance program funded by the RF. Though those achievements could not solely be attributed to the project, it contributed to it.

(c) Other Unintended Outcomes and Impacts (positive or negative)

75. There are two unintended impacts of the project: (a) the heavy truck and bus traffic on the central road corridor which now carries out 95 percent of total freight traffic in this region, is wearing out the road more quickly resulting in a shorter life span and higher road maintenance costs. (b) Subsequent to non-performing TRC after the concession and the collapse of the concession agreement, a marked resistance to concession has emerged. The government has no option but to take over TRC and no concessioning of TAZARA is envisioned for the time being.

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3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A

4. Assessment of Risk to Development Outcome Rating: Substantial

76. There are two major risks to the development outcome. The high cost of maintaining the highway carrying heavy trucks and bus traffic is a risk to the sustainability of the improved road condition. In FY2008/09, the routine maintenance needs of the national and local roads network were covered by 82 percent while periodic maintenance needs were fulfilled by 52 percent therefore total maintenance needs were covered by 67 percent. In the long-term the government needs to come up with a strategy on how to control heavy trucks either to impose tax or upgrade the standard of the road.

77. Improving the operation of Tanzania railways is still faced with great uncertainty. If, as is generally expected the government takes over TRC, the TRC performance could be improved with more appropriate institutional arrangements, preferably involving the private participation but with more pragmatic and balanced terms. However, there are still other issues which would need to be seriously considered include the following: (a) the investment strategy is needed to make the railway sector competitive. The rehabilitation cost has been variously estimated around US$400 million in the next ten years. It is still uncertain of mobilization of funds of this magnitude; (b) the railways must focus on traffic for which it has a cost advantage and should develop an aggressive marketing strategy; (c) the regulatory framework must be improved to ensure a level playing field for all transport modes.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory

78. The design of the project supported the strategic development of Tanzania’s transport sector. The project was designed to contribute to the further promotion of export, tourism and private sector development and eventually contribute to poverty reduction. During project preparation stage, senior Bank experts were involved, the government and stakeholders were also consulted and engaged. As detailed in section 1.2, the quality at entry for the road components was Satisfactory and that of the railway component was Moderately Satisfactory.

79. Even for the railways, the team’s willingness to taking the challenge of revitalizing a rundown, low-income generating Tanzania Railway has to be recognized. Concessioning of such a railway was a difficult and complex undertaking. However, as indicated in Section 1.2, a more detailed sensitivity analysis with regard to traffic forecast and timeframe for the concession could have improved the project’s quality at entry. Given that the various assumptions did not hold and the railway component design failed

20 to consider the fall back position in case of slippages in traffic level and concessioning targets, a rating of Moderately Satisfactory is justified.

(b) Quality of Supervision Rating: Moderately Satisfactory

80. The supervision was much more intensive than the regular one since the entire project team was in the field. The Bank team closely watched the progress of various components and assisted in making the necessary adjustment to maximize the project benefit. For example, the expansion of the coverage of detailed road design work from planned 713 km to 1,430 km, financing PMMR projects, etc. The team identified signs of serious decline of railway performance in the very first two years of project implementation and has been working especially hard together with the government expediting the concessioning and investment processes. However, any substantial interventions were restricted by the on-going concessioning process; at the same time, the team was optimistic and expected that once the concessionaire took over the decline will be reversed, which turned out to be an unrealistic expectation. Such optimism was also reflected by the “satisfactory” project ratings throughout the implementation except the last rating right before the project closure. In retrospect, the team could have pushed for more drastic measured earlier to turn the situation around, but its leverage was tenuous in a politically difficult situation.

81. Overall, the supervision was constructive. The poor outcome of the project (railway component), as discussed earlier, was due to many reasons including the absence of a backup plan to compensate for the setbacks, inadequate appreciation of the urgency of the concession by the government, delay in articulating the staff retrenchment plans even though the government finally allocated adequate funds for this, and less attention paid to the safety net of the staff joining the concessionaire. The supervision team’s efforts could not remedy the setbacks of the above-stated factors. While the supervision could be rated as “satisfactory”, given the disappointing outcome of the railway component, the supervision has been rated as Moderately Satisfactory.

(c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory

82. The overall Bank performance could be rated as satisfactory on the basis of the Bank team’s: (a) proactively supervising the project by making necessary adjustments and working closely with client to address the emerging issues in the road components, which accounted for more than 70 percent of the Project; (b) ensuring full disbursement without seeking any extension of the closing date; and, (c) working closely with the government to make the concessioning process a success though unfortunately the concession did not sustain. However, a rating of MS has been suggested due to the Team: (a) underestimating risks facing the railways leading to sharp decline in the railways’ performance; (b) inadequate intervention in the face of declining performance and delay in concessioning; and, (c) lack of harmonization of railway and road component at design stage.

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5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory

83. The government showed strong commitment at preparation stage by advancing the TRC railway concession with pre-qualification completed and agreeing to move TAZARA towards the direction of privatization. During implementation, the government carried out necessary policies to support the project including: (a) increasing the fuel levy to raise the RF revenue from around US$60 million in FY06/07 to US$167 million in FY08/09, an increase of 276 percent; (b) the Parliament to pass the Road Act which sets out clearer responsibilities of the various actors in the sector. These actions proved to be critical to improving the road network management and achieving the project development objectives.

84. However, After the government became the minor shareholder and the concessioning agreement was signed, the government did not actively worked with concessionaire to revive the deteriorated railway system including not taking timely action to fulfill the precondition to activate IFC’s loan for improving TRL performance.

85. The government did not handle the retirement benefit of the staff retrenchment most appropriately The retrenched staff had to agitate long for a satisfactory compensation package even though eventually the government allocated enough funds, close to US$50 million, for financing staff retrenchment. Staff apathy has been a significant contributory factor in the poor performance of the railways both in the period prior to concessioning and after concessioning. Frequent strikes and thefts contributed to the destabilization of the concession.

86. In light of the above shortcomings, the government performance is rated as Moderately Satisfactory. This rating is a weighted acknowledgement of government’s commitment during the project preparation, yet being less proactive during the implementation especially with railway concession.

(b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory

87. There were multiple implementation agencies under this project. For road activities, the implementation agencies were: (a) TANROADS; (b) MOCT, Zanzibar); (d) PMORALG; and (e) Road Fund Board; for ferry, it was TEMESA; for aviation, it was Tanzania Airports Authority (TAA). For railway activities, the implementation agency was TRC and later on RAHCO. TANROADS through its IDA Unit was responsible for the overall financial management and coordination of the project. TANROADS did a good job and RAHCO also did well after it has gone through the necessary learning curve subsequent of its establishment been established However, there was discrepancy of the performances among different implementation agencies and the weighted evaluation of implementation agencies performance is Moderately Satisfactory.

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88. The road agencies have completed multiple project activities (altogether 67 contracts) on time and the outcome is satisfactory. The road network has improved and has generated economic and social benefits for the communities and areas within its radius. The performance of road agencies is rated as Satisfactory.

89. The other agencies responsible for aviation, ferry and urban transport also completed the planned activities on time with satisfactory outcome. Five ferries were purchased or rehabilitated which greatly facilitated the daily commute of local people and the economic activities. The Dar es Salaam BRT and traffic management study was completed and is currently implemented under CTCP-2. All studies implemented by TAA were also completed with satisfactory quality.

90. TRC and later on RAHCO were mainly responsible for procurement of rails, sleepers and other track materials for the rehabilitation of railway. The procurement was delayed by two years; only 25 percent of the materials were procured by the end of 2007. Such delay could mainly be attributed to the condition that procurement was tied up with the signing of the concession agreement. However, TRC could have prepared and started the procurement process for the whole lot of materials earlier and finalized the contract soon after the signing of the concession agreement as that would have saved time as well as partially improve the condition of the track in time. Change over to RAHCO did not help as it was a completely new organization and took time to get into stride. TRC was also responsible for environmental cleaning and implementing RAP. The environmental cleanup was initially executed by TRC but delayed severely after retrenchment of staff but later this activity was completed in December 2009. Implementation of RAP was delayed and a Consultant was hired and completed the review of the resettlement cost in 2009, the actual implementation will be done later. The performance of TRC and RAHCO was therefore rated as moderately unsatisfactory though its performance was certainly limited by the arrangement.

91. In conclusion, the weighted rating for implantation agencies is moderately satisfactory acknowledging the good performance of road agencies, TAA and TEMESA.

(c) Justification of Rating for Overall Borrower Performance

Rating: Moderately Satisfactory

92. Based on the combination of two ratings above, the overall borrower performance is rated as moderately satisfactory.

6. Lessons Learned

(a) M&E Framework

93. The M&E framework should be comprehensive and indicative, showing the path to the project development objectives. The output and intermediate indicators should closely link and be fully reflective to outcome indicators so that the project progress

23 could be closely monitored, correct actions could be adopted when necessary, and why outcome has or hasn’t been achieved could be clearly identified. For example, various factors could contribute to road condition improvement including more maintenance resources, more capital investment on road and better road network management capacity, etc. All these factors should be part of M&E framework to reflect how outcome is to be achieved.

(b) Railway Component

94. The Main Lesson: a railway cannot compete with road transport for multiple small consignments. Such consignments were the core load of TRC prior to concessioning. During the two years of uncertainty between the bidding for the concession and the eventual signing of the concession agreement with the winning bidder the majority of the load was lost to road transport (down from 1.2 million tons to 0.5 million tons per annum) and the concessionaire had no chance to win the lost load share back for the railway. To be viable railways need a constant base load of recurring freight over a long distance. Such base loads normally are mining products (such as TAZARA has with its copper freight from Kapiri Mposhi to Dar es Salaam). A revival of TRL will therefore depend on the development of mines in the North West of Tanzania and in the neighboring countries Rwanda, Burundi and DRC. There are fairly developed mining projects, such as the Kabanga Nickel mine in the Kagera Region with a promised base load of about 200,000 tons per annum, which may warrant efforts for the revival of the railway.

95. Management arrangements leading up to concession. Concessioning a railway is a challenging and difficult task accompanied with serious social, safety, and environmental issues. It also remains a process with serious political overtones and building consensus among key stakeholders and maintaining transparency is critical for success. The process can also throw up many unforeseen hurdles such as legal challenges, parliamentary intervention, natural disasters, economic upheaval etc. which can sometimes delay the process for years. Also, since concessioning involves long-term commitment of both parties, extreme caution on both sides is natural and actually desirable. For all the above reasons, the concessioning process can take longer than the planned schedule, sometimes three to four years in all. It will be a good idea for the governments to make interim institutional arrangements such as short-term management contract, hiring of a few professional managers in key disciplines from outside the railways, twinning arrangement with some of the developed railway, etc. This will ensure continuity of operations and prevent undue pressure to expedite the concession.

96. Financing for rehabilitation. In the current concession designs, the potential concessionaire is faced with obligations to invest in liquidating the backlog of maintenance and subsequently maintaining the assets in workable conditions. When the infrastructure is in very poor condition and heavy investment is required to restore the infrastructure to standard condition, then the burden on the concessionaire becomes too heavy. In such a case, the concession becomes highly risky and unattractive to potential investors. It is no surprise that the concessions in Africa, where the railway infrastructure

24 is often in poor state and in need of substantial investment, the response has been very limited and not from the best of the lot. It would be better that the governments commit to offer the railways in a “standard” condition without any backlog of maintenance. That does not mean that the governments should first take years to rehabilitate poor railways but that they should commit to hand over fund equal to the estimated cost of rehabilitation to the concessionaire over an agreed time. Alternatively, the bidders should be allowed to estimate the cost of rehabilitation and include it in their respective bids with the winning bidder being offered the amount asked for. That would be fair as the responsibility for the backlog rests with the sole shareholders, i.e., the government and it should shoulder the responsibility of liquidating the backlog. While certainly increasing government commitment, this arrangement will attract the best operators in the world and ensure the best possible performance of the railways.

97. Sensitivity to staffing issues. In most concessions, as in the one for TR, the governments made adequate arrangements for the staff rendered surplus but did not ensure an appropriate safety net for the staff selected by and engaged by the concessionaire. The staff engaged by the concessionaire, instead of being lucky to have retained their employment, found themselves at risk of losing their retrenchment and retirement benefits, particularly for the period of their service with the parastatal railways. To ensure staff commitment to the concession and their productive contribution to the railway operations, the governments should make appropriate arrangements to safeguard the pension and retrenchment benefits either through an escrow account, their enrollment in government or government-approved pension schemes, or formal commitments to pay the dues when arising or should consider retrenchment of all the staff and clear their dues and require the concessionaires to engage staff from the market.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

98. The borrower has acknowledged that the outcome of the railway component was disappointing, but the outcome of the road component was satisfactory. So, the borrower assessed that even though there were many lapses, procurement delays, the overall outcome is generally satisfactory. However, given the outcome of railway component and the development objective was only partially achieved, the ICR team concluded that a satisfactory rating overall is not convincing.

(b) Cofinanciers

99. The cofinancier was NDF. They financed part of the update of feasibility study and design and preparation of bidding documents. The cofinancier did not raise any issues.

(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (US$ millions) Appraisal (US$ millions) Upgrading of Strategic Road 70.71 88.49 125.14 Links Enhanced Road Management 14.83 6.49 43.76 Capacity Improved Performance of 36.46 27.32 94.93 Tanzanian Railways Total Project Cost 122.00 233.30 100.25

(b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing Appraisal (US$ million) (US$ million) Borrower 10.02 6.21 61.98 International Development 122.00 122.30 100.25 Association (IDA) Nordic Development Fund (NDF) 6.05 5.13 84.75 International Finance Corporation 14.0 (IFC) Partial Risk Guarantee (PRG) 40.00 0.00

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Annex 2. Outputs by Component

The project has three components and the outputs of each component are listed below.

Component A: Upgrading of strategic road links in mainland Tanzania and in Zanzibar

1. Subcomponent 1: Rehabilitation and upgrading of the Singida-Shelui road (110 km) of the central transport corridor

2. The implementation of this subcomponent was divided into three sections, namely; Package 1: Singida – Iguguno (34 km), Package 2: Iguguno – Sekenke Diversion (42 km) and Package 3: Senkenke Diversion – Shelui (33 km). Upon closing of the project, all three sections have been completed with satisfactory quality. In addition, three new activities were added, construction of .32 km of Boma and Mandewa Urban roads, installation of the Njuki Weighbridge at km 6.18 and construction of Iguguno box culvert. The addition of three activities expanded the benefit to local community and helped control the axle load so that the road could be better protected from overloaded heavy trucks.

3. Subcomponent 2: Rehabilitation and upgrading of the Mkwajuni-Nungwi, Matemwe-Pongwe and Paje-Pingwe-Michamvi roads in Zanzibar (56 km). This subcomponent involved upgrading to bituminous standard of Pongwe – Matemwe (20.4 km), Mkwajuni – Nungwi (18.86 km) and Paje – Pingwe- Michamvi (16.6 km) roads.

4. Pongwe – Matemwe and Mkwajuni – Nungwi components were completed in May 2008 with satisfactory quality. The Paje – Pingwe- Michamvi (16.6 km) road was substantially completed in July 2007 and some defects were noticed and were presented to the contractor. A joint inspection by the Employer and the Consultant done in November 2008 on the completed road revealed that the defects such as road marking had not been exhaustively addressed to and hence the Employer was unable to release to the Contractor the second 50 percent retention money amounting to US$72,940.63 out of which US$70,023 was International Development Association’s (IDA’s) portion. The contractor submitted the claim to the International Court of Arbitration in June 2009 and the claim is yet to be adjudicated.

5. Subcomponent 3: Carrying out and updating of feasibility studies and detailed design, and preparation of bidding documents for 720 kilometers of high priority trunk roads to be rehabilitated and/or upgraded under a proposed follow-on project, including: (a) the Singida – Babati – Minjingu road (220 km), (b) the Dodoma – Babati road (263 km), (c) the Korogwe – Mkumbara – Same road (172 km) and (d) the Tanga – Horohoro road (65 km).

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6. The Feasibility Study and Detailed Engineering Design for all the sub-projects were completed within the credit period and for some of the projects implementation has started. The details of the status of the projects are as indicated in Table 1.

Table 1: Status of Implementation of Roads Projects

S/N Road section Planned Implementation status length (km)

1 Singida – Babati – 220 Feasibility Study and Detailed Minjingu Engineering Design on 220 km completed under NDF funding. Physical works are in progress and are jointly funded by ADB.

2. Dodoma – Babati 263 Feasibility Study and Detailed Engineering Design on 263 km were completed under NDF funding. Procurement of Contractor for the Physical works under GOT funding ongoing.

3. Tanga – Horohoro 65 Detailed Design on 65 km completed under NDF funding. Procurement of Contractor for the Physical works under MCC funding ongoing

4. Korogwe – 165 Detailed Engineering Design on 172 Mkumbara – Same km completed under IDA

Total 713 720 km

7. In addition, the following road sections were added and the completion status is listed in Table 2.

Table 2: The Implementation Status of Added Road Sections S/N Road section Planned Implementation status length (km)

1 Dodoma – Iringa 266 The Detailed Engineering Design and Preparation of Tender Documents under NDF were successfully completed in July 2009. The physical implementation of the project is earmarked for jointly financing 28

by ADF, JICA and GOT.

2 Nzega– Tabora 116 Feasibility study, environmental and social impact assessment, and detailed engineering design including preparation of Tender Documents could not be completed under the project after Tanzania National Roads Agency (TANROADS) terminated the contract. a new Contract was signed between TANROADS and COWI A/S for carrying out the remaining services for the project road. 3 Arusha – Minjingu 103 The detailed engineering design and Tender Documents were completed in October 2008. The physical implementation of the project is earmarked for financing by IDA 4 Tunduma– 225 The detailed engineering design was Sumbawanga completed in June 2009 under IDA financing. The physical works is earmarked for financing under MCC.

8. Subcomponent 4: Rehabilitation of the MV Kigamboni, Pangani, Sengerema, Kilombero and Rufiji ferries. The project involved rehabilitation of two ferries, namely, MV Kigamboni, and MV Sengerema and procurement of three ferries, namely; MV Kilombero, MV Rufiji and MV Pangani. During tendering the lowest evaluated bidder provided the same cost for either rehabilitation of the existing ferry or supply of a new one at the Rufiji crossing. The borrower opted for the supply of a new ferry.

9. The rehabilitation of MV Kigamboni and MV Sengerema were completed in November 2009 while the purchase of a new MV Kilombero was completed in March 2007. Procurement of Pangani was substantially completed by the end of the credit period.

Component B: Enhancing road management capacity specifically for TANROADS and MOCT Zanzibar

10. This component had eight subcomponents. Except for the construction of a new TANROADS headquarters building and Organization and Management (O&M) study of the TANROADS structure, the other subcomponent were completed within the credit period. The outputs of each subcomponent are listed below:

11. Subcomponent 1: Design and construction of a new TANROADS headquarters building. The design of the TANROADS Headquarters building at Plot No 9/1, Mabibo was completed in January 2007. However, the employer decided to change the original 29 location of the proposed building on grounds of, among others, being too far away from the parent Ministry and Development Partners. The subsequent time spent for acquiring the new plot and re-design to fit the new plot delayed the project such that it could not be implemented within the credit timeframe.

12. Subcomponent 2: Setting up of a Wide Area Network to improve communication between TANROADS’ headquarters, its regional offices and MOCT Zanzibar. This subcomponent involved installation of Local Area Networks in 38 centers and then connected to wide area network (WAN). The WAN and local access network (LAN) contract was signed in 2006 and substantially completed in April 2009. The installation of WAN was effected on 36 stations while the remaining two stations (Tunduma and Nyakahura) were not connected to WAN due to the absence of network from the WAN services provider, the Tanzania Telecommunications Company Limited (TTCL). After the network being set up, a Consulting firm will be engaged to carry out a technical audit and propose enhancement of the system as the system is not working as efficiently as expected.

13. Subcomponent 3: Carrying out of a study for the enhancement of the organization and management of TANROADS. The study was not carried out as TANROADS felt it was not needed following restructuring of the TANROADS Organization in August 2007.

14. Subcomponent 4: Carrying out of studies to identify road investment priorities, such as traffic counts and an update of the ten-year investment plan. This study was completed by TANROADS. The results formed an invaluable input in the preparation of TSIP.

15. Subcomponent 5: Preparation of a local government roads inventory and condition survey. This study was successfully completed within the Credit period. The output includes: (a) inventory of the District roads in mainland Tanzania; (b) classification of the District Roads and Community roads; (c) production of maps; (d) identification of location of resources e.g. water, gravel, sand, etc.; and, (e) location of social centers, e.g. schools, hospitals, etc.

16. Subcomponent 6: Carrying out other transport related studies, including a Dar- es-Salaam Bus Rapid Transit (BRT) and traffic management study. The contract for the study which comprised Conceptual Design and Detailed Design of Phase 1 was successfully completed. The physical work is implemented under CTCP-2. In addition, an Environmental and Social Impact Assessment (ESIA) Study for Jangwani Depot was completed under this subcomponent.

17. Subcomponent 7: Provision of technical advisory services and training for improved management and operational capacity of TANROADS and MOCT Zanzibar. A total of 135 TANROADS staff attended the training, out of whom 47 staff attended professional training outside the country and 88 staff attended tailor-made professional

30 seminars organized in the country. Six staff from MOCT Zanzibar attended training outside the country.

18. Subcomponent 8: Provision of technical advisory services, training and financing to the Project; Coordination Unit (PCU) and MOCT Coordination of Donor Aided Project (CODAP). Human Resources Specialist and a Transport Economist were engaged as technical assistants to TANROADS for one year each. Two Technical Assistants were engaged for two years contract to provide management assistance to the CODAP in the MOCT, Zanzibar.

19. The following activities were added during project implementation period and the outputs are listed below:

20. Emergency repair and maintenance of Zanzibar international airport. This activity became necessary and was added due to the deterioration of the runway. The contract was signed on June 2, 2008 and was completed on August 18, 2008. Works involved repair of the trenches, sealing of cracks and pothole patching. The rehabilitation of Zanzibar runway is currently financed under CTCP-2.

21. Zanzibar Transport Master Plan and Transport Policy Study. The study produced two documents, namely; “Zanzibar Transport Master Plan” and the “Transport Policy Paper”. The studies are important for the preparation of future Transport Development Program.

22. Zanzibar International Airport Master Plan Study. This included carrying out feasibility study and the design of a new passenger terminal at the Zanzibar airport. The study and design were successfully completed within the credit closure.

23. Baseline Survey for Zanzibar International Airport. The main purpose of the study was to determine how users currently rate the facilities and services offered at the Zanzibar Airport and to establish the framework to be used to monitor satisfaction during and after the proposed rehabilitation and extension of Airport runway. The survey was successfully executed and the final report was submitted in September 2008.

24. Design of Seven Airports. Feasibility study and detailed engineering design and tender documentation for seven commercial airports were carried out. These airports are Arusha, Bukoba, Tabora, Mafia, Shinyanga, Sumbawanga and Kigoma. Mafia Airport is earmarked for MCC financing while Bukoba, Tabora and Kigoma Airports are earmarked for IDA financing under the forthcoming Transport Sector Support Project (TSSP).

25. Road Fund Leakage Study. The purpose of this study is identifying sources of leakage of revenues intended for the RF and proposing mitigation measures. However, during execution of the assignment the consultant faced some hurdles and could not proceed due to inability to access relevant data. Subsequently, the Road Fund Board appointed a task force to finalize the study. The final report was successfully completed.

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Component C: Improved Performance of Tanzanian Railways.

26. Subcomponent 1: Provision of urgently needed rails, sleepers and other material for TRC, for the replacement of the track between Itigi and Tabora. The goods from the first two suppliers were delivered in November 2006 and the third supplier in May 2007. A total length of rail relayed was 47 km as planned including Kitinku and Makutopora (16 km), Itigi – Kitaraka (15 km) and Tura – Karangasi (16 km).

27. Subcomponent 2: Provision of other rails, sleepers and materials for TRC for the replacement of the balance of the tracks of TRC between Itigi and Tabora. The provision of the goods was supplied under two contracts. The first contract was with Chinese. The supplier had claimed that earthquake which took place in China destroyed his factory and could no longer produce the required materials. The dispute was subsequently resolved amicably and goods were supplied as planned. The second one procurement process was delayed because of counteroffer by the awarded supplier. Also due to the Letter of Credit issue, the supply of goods was delayed,steel prices raised up and only 50 percent of the required goods were able to be delivered before closure of credit. As a result, the total length of railway being relayed was reduced from 197 km to 127 km.

28. Subcomponent 3: Preparation of an Environmental Assessment, a Social Assessment and EMPs and RAP for TRC. The study was successfully completed within the credit closure.

29. Subcomponent 4: Financing of clean-up costs based on the Environmental Assessment and EMP, and of resettlement costs based on the Social Assessment and RAP. Following non-response to the tendering for Contractors to carry out the environmental clean-up works, it was decided to use TRC/RAHCO in-house capacity to carry out the assignment. The entity conducted the cleaning up works at Dar es Salaam, Morogoro and Tabora only. TRL were subsequently contracted under IDA financing, to clean up the remaining workshop facilities at Mwanza and Kigoma and the assignment was completed by the closure of the Credit.

30. Subcomponent 5: Provision of technical advisory services and training for: (a) the handing over of TRC assets and operation of the Railway Operator; (b) the winding up of TRC; and (c) the building up of the management and operational capacity of Reli Assets Holding Company (RAHCO). The outputs of this subcomponent were: (a) a Change Manager was engaged whose responsibility was to coordinate the process of the change from the current management to the concessionaire. However, due to delays in the takeover of the TRC operation by the Concessionaire, the services were suspended in November 2006 until the time for handing over of the TRC to the Concessionaire. The Contract of the Change Manager was concluded in December 2008 after submission of his Final report; (b) a Consultant was engaged between July 2005 and December 2005 as Assistant Director General – Operation to assist in the restructuring process; (c) the

32 signing of the Concession Agreement between M/s RITES of India and M/s Reli Assets Holding Company (RAHCO) of Tanzania took place on September 3, 2007. The effective date of the concession was October 1, 2007.

31. Subcomponent 6: Provision of technical advisory services for the future private sector participation in TAZARA, including: (a) the restructuring of TAZARA; (b) the establishment of the regulatory and legal framework governing the operations of TAZARA; and (c) preparation of EA, SA, EMP and RAP. This component was not commenced because of the management complications as it is owned by three partners (Tanzania, Zambia and China).

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Annex 3. Economic and Financial Analysis

Economic Analysis of Singida-Shelui Road

1. Upgrading of the Singida - Shelui road to bitumen standard covered three packages namely; Singida - Iguguno, Iguguno - Sekenke and Sekenke - Shelui. Works for the three packages were successfully completed around end 2008.

2. The Highway Development and Management model version 4 (HDM4) was used to evaluate the economic internal rate of return (EIRR) of rehabilitating Singida-Shelui Road. The Data needed for analysis of the economic impact were collected from the Tanzania National Roads Agency (TANROADS) through several reports. Baseline data were mainly sourced from: Black and Veatch Africa; Consultancy Services to finalize review of detailed engineering design report and tender documents for Singida - Shelui road, Final report. The ‘after’ project data were mainly sourced from final reports for the three upgrading project packages for Singida - Shelui road prepared by works supervision consultants.

3. The main factors affecting the EIRR are: traffic level, Construction Cost, unit maintenance cost, road roughness, vehicle operating costs (VOC) and travel time. The values of these factors are listed in the Table 1 below.

Table 1: Main Factors for EIRR At appraisal stage ICR stage Traffic (AADT) 220 759 Construction Cost (USDm) 47 45 road roughness Index 9 2.5 Travel time (minutes) 170 87 The current unit maintenance cost and VOC are not listed because there are multiple values related with these two factors depending on the difference maintenance and different vehicle types

4. The sharp increase of traffic could be attributed to the much better road condition post project. In addition, the non-performing railway sector also contributed to the traffic increase on road sector.

5. The main outcomes of economic analysis of Singida-Shelui road at ICR stage are listed in the Table 2 below.

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Table 2: Summary of Economic Evaluation of the Singida - Shelui Road Economic Parameter Unit Output Value Investment Cost (US$ m.) 45.6 Recurrent Cost (US$ m.) 3.8 Net Economic Benefits (NPV) (US$ m.) 47.5 NPV/Cost (%) 1.1 Savings in MT VOC (US$m.) 83.7 Savings in MT Travel Time Costs (US$ m.) 2.8 Reduction in Accident Costs (US$ m.) 0.00 Internal Rate of Return (IRR) (%) 19.7

Economic Analysis of Three Roads in Zanzibar

6. Upgrading of the Zanzibar 3-Roads to bitumen standard covered three, namely; Mkwajuni - Nungwi (19km), Matemwe - Pongwe (21km) and Paje - Pingwe (17km).Works for the three packages were successfully completed around December 2008.

7. The evaluation analysis was performed using HDM4 version 2.06 on a by project approach, at a discount rate of 12 percent for a design life of 20 years. Data needed for analysis of the economic impact were obtained from Ministry of Communication and Transport Zanzibar (MOCT) and TANROADS. Baseline data were mainly sourced from: Feasibility Study Report prepared by Data System Engineering & Research Corporation Ltd. (UK) in association with TECNIC Consulting Engineers

8. The main factors affecting the EIRR are: traffic level, Unit Construction Cost, unit maintenance cost, road roughness, VOC and travel time. The values of these factors are listed in the Table 3 below.

Table 3: Main Factors for EIRR At appraisal stage ICR stage Traffic (AADT) 43-162 518-2,625 Unit Construction Cost (USD1,000) 351 45 Road Roughness Index 12 2.05 Travel time (minutes) Varies from several Around one hour hours to one day The unit maintenance cost and VOC are not listed because there are multiple values related with these two factors depending on the difference maintenance and different vehicle types

9. Traffic figures reveal a sharp and abrupt increase of traffic well beyond levels predicted during appraisal stage. The higher traffic contributes to the higher EIRR at ICR stage.

10. The following is a summary of results of the economic evaluation of the Zanzibar 3-Roads, with all costs discounted to year 2006.

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Table 4: Summary of Economic Evaluation of Three Roads in Zanzibar Economic Parameter Unit Output Value Investment Cost (US$ m) 33.8 Recurrent Cost (US$ m) (1.86) Net Economic Benefits (NPV) (US$ m) 13.9 NPV/Cost (%) 0.4 Savings in MT VOC (US$ m) 38.6 Savings in MT Travel Time Costs (US$ m) 6.0 Internal Rate of Return (IRR) (%) 16.1

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Economic Analysis of Railway Component

Table 5: ERR "with" Project - as Estimated at Appraisal C1 and C2 are costs to economy B1 and B2 are benefits to the economy

38 Explanations Column 1: The analysis was estimated for twenty years from 2005, the expected starting year of the Project until the end of 2024 Column 2: indicates investments by the government (through IDA) in the first two years and by the concessionaire in the enxt 6 years. The investments pertain only to replacement of assets (rails, sleepers,wagons, signaling equipment etc) and do not include money spent on backlog maintenance which is assumed to have been ploughed back from increased revenues Column 3: Freight traffic projections in terms of net ton kilometers (NTKM) Column 4: expected gross revenue at the average rate of US cents 4.5 per NTKM. This is not used for computing ERR Column 5: The fixed operating cost assuming: (a) 10% reduction in the first two years and then remaining constant Column 6: Variable cost assuming: (a) 10% reduction in the first two years and (b) proportional to NTKM Column 7: Total benefit due to cost reduction for different years Column 8: Repatriation of funds by the concessionaire as dividend on equity assumed as 1/3rd of total investment, US$60 million, and a return of 25 percent increasing gradually Column 9: Road avoidance benefit assuming that the additional traffic caused as a result of the Project (reference to traffic in 2005) would have moved by road at an additional cost of US cents 3 per NTKM Column 10: Net economic benefits being the sum of columns 2, 7,8, and 9

Assumptions for the "Without" scenario: (a) there will be no investment; (b) traffic will decline by five percent every year; (c) there will be no improvement in fixed and variable costs; and (d) there will be no repatriation of funds

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Table 6: ERR "with" Project - as Revised at the Time of ICR

C1 and C2 are costs to economy B1 and B2 are benefits to the economy

40 Assumptions behind the revision of ERR • For years 2005 to 2009, actual figures if invest and traffic have been assumed for both the "With" and "Without" scenarios. • For year 10, investment has been considered zero and traffic has been assumed to increase by five percent, given the serious concern and investigation with regard to the railways • Form year 2011 onwards, it has been assumed that some durable institutional arrangements will be made (including a new concessionaire) and the traffic will go up at10 percent per year from 2011 to 2017 to recover the lost ground and then at three percent per year and investments will be made @ US$10 million per year for six years.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Nina Chee Sr Environmental Spec. MIGEP Environment Senior Social Development Yvette Laure Djachechi AFTCS Social Development Spec. Juan Gaviria Sector Leader AFTTR Transport Economics Nina M. Jones Program Assistant AFTTR Operations England Rogasian Program Assistant AFCE1 Operations Maasamba Jean-Francois Marteau Sr Transport. Spec. AFTTR Civil Engineering Farida Mazhar Lead Financial Officer FEUFG Industry & Trade Sr Financial Management Financial Mercy Mataro Sabai AFTFM Specialist Management Dieter E. Schelling Lead Transport Specialist AFTTR Civil Engineering Pascal Tegwa Senior Procurement Specialist AFTPC Procurement Solomon Muhuthu Sr Highway Engineer AFTTR Engineering Waithaka Michael D. Wong Sr Private Sector Development SASFP Private Sector Dev. Yash Pal Kedia Consultant, Railway Specialist AFTTR Railways Transport Yitzhak Kamhi Consultant, Highway Engineer AFTTR Management

Supervision/ICR Gisbert Joseph Kinyero Procurement Specialist AFTPC Procurement England Rogasian Program Assistant AFCE1 Operations Maasamba Grace Anselmo Mayala Team Assistant AFCE1 Operations Yonas Eliesikia Mchomvu Transport Specialist AFTTR Engineering Donald Paul Mneney Senior Procurement Specialist AFTPC Procurement Anne Muuna Team Assistant AFCE1 Operations Sr Financial Management Financial Mercy Mataro Sabai AFTFM Specialist Management Zena Ahmed Said Consultant AFTTR Gloria Sindano Program Assistant AFCE1 Operations Pascal Tegwa Senior Procurement Specialist AFTPC Procurement Solomon Muhuthu Sr Highway Engineer AFTTR Engineering Waithaka

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Fang Xu Transport Economist AFTTR Economics Felly Kaboyo Operations Analyst AFTTR Operations Nina Jones Program Assistant AFTTR Operations Transport Andreas Schliessler Senior Transport Economist AFTTR Economics Yash Pal Kedia Consultant, Railways Specialist AFTTR Railways

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands No. of staff weeks (including travel and consultant costs) Lending

FY03 13.21 80.64 FY04 67.02 283.28

Total: 80.23 363.92 Supervision/ICR FY05 49.65 151.60 FY06 48.24 174.38 FY07 38.86 106.47 FY08 53.78 144.11 FY09 28.69 72.82 FY10 15.18 79.34 Total: 314.63 728.72

Grand Total: 394.86 1,092.64 *FY10 to be adjusted to reflect the actual later.

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Annex 5. Beneficiary Survey Results N/A

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Annex 6. Stakeholder Workshop Report and Results N/A

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Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR

A. BACKGROUND

Project Origin

The classified road network in Tanzania is estimated to be 86,472 km based on the Road Act 2007. The Ministry of Infrastructure Development through TANROADS is managing a road network of about 29,847 km comprising 10,601 km and 19,246 km of Trunk and Regional roads respectively. The remaining network of about 56,625 km of Urban, District and Feeder Roads is under the responsibility of the Prime Minister’s Office Regional Administration and Local Government (PMO-RALG).

B. THE PROJECT DEVELOPMENT OBJECTIVES

Objective

The project supports the National Transport Policy (NTP), which was prepared in a participatory way and presented to the public in October 2003. Within the NTP the Central Transport Corridor Project (CTCP) focuses on improved performance of the Central Transport Corridor, both in respect of road and rail transport, improvement of key roads in Zanzibar, and on generally enhanced road management capacity. The development objective of the Central Transport Corridor is to: (a) upgrade strategic road links; (b) enhance road management capacity; and (c) improve operations of Tanzanian Railways i.e Tanzania Railway Corporation (TRC) and Tanzania and Zambia Railway Authority (TAZARA).

Key Performance Indicators

Following were the key performance indicators in respect of the roads component of the project: (a) traffic increases by at least 10 percent per annum on average between 2004 and 2009 on improved roads and (b) the network under TANROADS responsibility (28,900 km of trunk and regional roads) in poor condition reduced from 49 percent in 2003 to 30 percent in 2009.

In respect of the railways component of the project, following were the key performance indicators; (a) total freight tonnage carried (on TRC network) increased from the current level of 1.45 million tonnes to 2.0 million tonnes by 2009; (b) level of transit traffic carried increased by 20 percent in 2009 from the 560,000 tonnes in 2003 and (c) kilometers of track under speed restriction as a percentage of the total decreased from the current 10 percent to 2 percent in 2009. The performance indicators assume that the signing of the concession agreement with a private Concessionaire would have taken place in November 2004 and handover in June 2005 at most.

At appraisal the project comprised three main components and 18 related subcomponents. However 18 other sub-components were added during the project implementation. The

46 appraisal sub components are presented under part A – C and the additional sub- components are presented under Part D below.

1. Project Components

Part A: Upgrading of Strategic Road Links

In line with the government’s road sector development plan, the project was planned to support the following:

(a) Rehabilitation and upgrading to bituminous standard of the Singida – Shelui Road (110 km), including the costs of the Environmental Management Plan (EMP) and Resettlement Action Plan (RAP); (b) Rehabilitation and upgrading to bituminous standard of the Mkwajuni – Nungwi, Matemwe – Pongwe and Paje – Pingwe-Michamvi roads in Zanzibar (56 km), including the costs of the EMP and RAP (c) Carrying out updating of feasibility studies and detailed design, and preparation of bidding documents for 713 kilometers of high priority trunk roads to be rehabilitated and/or upgraded under a proposed follow-on project. The road projects include: (i) Singida – Babati – Minjingu (220 km), (ii) Dodoma – Babati (263 km), (iii) Korogwe – Mkumbara – Same (165 km) and (iv) Tanga – Horohoro (65 km); (d) The rehabilitation of the MVs Kigamboni, Sengerema, and Rufiji and supply of MVs Kilombero and Pangani ferries.

Part B: Enhanced Road Management Capacity

In order to enhance capacity for road management, both in mainland Tanzania and in Zanzibar, and in view of the preparation of a proposed follow-on project, the Project was planned to support the following:

(a) Design and construction of a new TANROADS headquarters building; (b) Setting up of a Wide Area Network to improve communication between TANROADS’ headquarters, its regional offices and Ministry of Communications and Transport (MOCT), Zanzibar; (c) Carrying out of a study for the enhancement of the Organization and Management (O & M) of TANROADS; (d) Carrying out of studies to identify road investment priorities, such as traffic counts and an update of the Ten-Year Investment Plan; (e) Preparation of a local government roads inventory and condition survey; (f) Carrying out other transport related studies, including a Dar es Salaam Bus Rapid Transit (BRT) and traffic management study; (g) Provision of technical advisory services and training for improved management and operational capacity of TANROADS and MOCT, Zanzibar; (h) Provision of technical advisory services, training and financing to IDA Project Coordination Unit (PCU) and MOCT Coordination of Donor Assisted Project (CODAP) for the day-to-day administration, financial management, procurement,

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monitoring and evaluation of Part A and B of the Project, and financing of the external financial audit of the Project.

Part C: Improved Performance of Tanzania Railways

In line with the government’s policy to engage the private sector into the operation and financing of the railways sector, the Project was planned to support the following:

(a) Provision of urgently needed rails, sleepers and other material for TRC, for the replacement of track between Itigi and Tabora; (b) Provision of other rails, sleepers and materials for TRC, including their installation. These were meant for replacement of the balance of the tracks of TRC between Itigi and Tabora. (The mode of placing of this material was to be discussed with the prequalified bidders for the concession and disbursement for this portion of the credit was tied to signing of the concession agreement or such other agreement satisfactory to the Association); (c) Preparation of an Environmental Assessment (EA), a Social Assessment (SA), EMPs and RAP for TRC; (d) Financing of clean-up costs based on the EA and EMP, and of resettlement costs based on the SA and RAP; (e) Provision of technical advisory services and training for: (i) the handing over of TRC assets and operation of the railways Operator; (ii) the winding up of TRC; and (iii) the building up of the management and operational capacity of Reli Assets Holding Company (RAHCO); (f) Provision of technical advisory services for the future private sector participation in TAZARA, including: (i) the re-structuring of TAZARA; (ii) the establishment of the regulatory and legal framework governing the operations of TAZARA; and (iii) preparation of EA, SA, EMP and RAP.

Part D: Additional Sub-components

The following additional sub-components were approved for implementation under the savings and unallocated resources of the Credit:

(a) Emergency repair and maintenance of Zanzibar Airport runway; (b) Partitioning of Dar Rapid Transit (DART) office; (c) Performance Based Maintenance and Management of Roads (PMMR); (d) Supply of office furniture and computer hardware to DART Agency; (e) Detailed Engineering Design for Tunduma – Sumbawanga road (220 km); (f) Supervision and facilitation of the PMMR project; (g) Baseline traffic count on the Mainland road network; (h) Road maintenance concession study in mainland Tanzania; (i) Zanzibar master-plan and Transport Policy; (j) Zanzibar International airport Master-plan; (k) Baseline Survey of Zanzibar Airport; (l) Pre-contract service for Zanzibar airport;

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(m) Supervision of Emergency Repairs of Zanzibar Airport; (n) Environmental and Social Impact Assessment for Jangwani Depot; (o) Feasibility Study and Detailed Engineering Design for Seven (7) Airports; (p) Re-scoping of Tabora and Kigoma Airport; (q) Road Fund Leakage Study and; (r) Splitting BRT works into seven (7) packages.

C. ACHIEVEMENTS OF OBJECTIVES

C.1 Upgrading of Strategic Road Links

C.1.1 Rehabilitation and upgrading to bituminous standard of the Singida – Shelui road (110 km), including the costs of the EMP and RAP

The implementation of this project was divided into three packages namely; Package 1: Singida – Iguguno (34 km), Package 2: Iguguno – Sekenke Diversion (42 km) and Package 3: Senkenke Diversion – Shelui (33 km). The packaging was necessary in order, to among others speed up the construction, taking into account that the project had already been delayed for about 3 years. Packages 1 was executed by M/s China Henan International Cooperation Group Co. Ltd at a Contract Price of US$ 19.87 million and supervised by M/s Roughton International (UK) at Contract Price of US$ 0.95 million; Package 2 was executed by M/s China Henan International Cooperation Group Co. Ltd at a Contract Price of US$ 13.27 million and supervised by M/s Dar al Handarsah Consultants (Egypt) at Contract Price of US$ 1.14 million and; Package 3 was also executed by the same Contractor M/s China Henan International Cooperation Group Co. Ltd at a Contract Price of US$ 18.35 million and supervised by M/s BCEOM (France) at Contract Price of US$ 1.43 million.

The following Addenda were awarded during the project implementation: Addendum No. 1: This was related to underestimated quantities and it applied to all the three packages. The cost of the addendum, which was USD 6.85 million, did not have time extension implication.

Addendum No. 2 was for additional works comprising 3.32 km of Boma and Mandewa Urban roads, installation of the Njuki Weighbridge at km 6.18 and construction of Iguguno box culvert. The addendum No. 2, which applied for Package 1 only, attracted additional cost of USD 2.39 million and an extension of time of 10.5 months.

The cost of the project at appraisal was estimated at USD 55.73 million and actual final cost was USD 55.01 million. All packages were implemented within planned time frame and costs.

The Supervision Contract for Package 1 was found to be null and void after noting that the firm, Ms Roughton, International was not eligible to enter into a contract due to its status of paying the mandatory taxes and registration with relevant authorities. However,

49 the Consultant appealed to the court of law whereby the parties were required to maintain the status quo. The firm therefore continued with its services to completion of the project. However, payment is pending decision by the Court. The balance of the monies earmarked for this sub-component was subsequently re-allocated to other categories.

C1.2 Rehabilitation and upgrading to bituminous standard of the Mkwajuni – Nungwi, Matemwe – Pongwe and Paje – Pingwe-Michamvi roads in Zanzibar (56 km), including the costs of the EMP and RAP

The project involved upgrading to bituminous standard of Pongwe – Matemwe (20.4 km), Mkwajuni – Nungwi (18.86 km) and Paje – Pingwe (19.8 km) roads.

The civil works contract for Lot 1: Pongwe – Matemwe (20.4 km), Mkwajuni Town – Mkwajuni Connection (1.056 km) & Mkwajuni – Nungwi (17.8 km) was signed on 25th August 2005, between Principal Secretary, Ministry of Communications and Transport Zanzibar and the contractor M/S Spencon Services Ltd, Dar es Salaam, at a price of TShs 11,558,251,856.70. The works commenced in November 2005 and were to be completed in May 2007.

Addendum No. 1 valued TShs 1,533,470,400 was approved by IDA on 6th March 2008 and Addendum No. 2 valued TShs 672,610,237 was approved by IDA on 21st May 2008.

The project was substantially completed on 27th May 2008 and the Defect Liability Period ended in May 2009.

The civil works contract for Lot 2: Paje – Pingwe (19.8 km) was signed on 21st August 2005, between Principal Secretary, Ministry of Communications and Transport (MOCT) Zanzibar and the contractor M/S Kundan Singh Construction Ltd, of Dar es Salaam at a price of TShs 3,670,202,341. Original planned completion date for the upgrading works was 14th October 2006. The project was substantially completed on 20th July 2007.

However, the final inspection and the subsequent handover of the Paje – Pingwe road project was not done until 27th November 2008, when a joint inspection by the Employer and the Consultant was done on the completed road. The inspection revealed that the defects listed on the snag list and other defects noted on Paje – Pingwe road during the Defects Liability Period had not been exhaustively addressed to and hence the Employer was unable to release to the Contractor the second 50 percent retention money amounting to USD 72,940.63 out of which USD 70,023 was IDA portion.

On February 7, 2009, the Contractor M/s Kundan Singh Construction Limited submitted a claim to the Adjudicator amounting to USD 9.08 million. On April 2, 2009 the Adjudicator dismissed the claim as baseless.

On June 30, 2009 the Contractor submitted the claim of US$9.08 million to the International Court of Arbitration (ICA). The Contractor was required to pay US$42,500

50 so that the court can adjudicate on the matter. The Contractor had not paid the said amount by the closure of the Credit.

This situation led to reallocation of the IDA portion to other categories due to impractical time to rectify the observed defects.

The cost of the project at appraisal was estimated at US$14.34 million and actual final cost was US$16.28 million. All packages were implemented within the credit time frame.

C.1.3 Performance Based Maintenance and Management of Roads (PMMR)

The PMMR Contracts were to run for five years commencing FY 2006/07. However, the CTCP financed PMMR project up to September 30, 2008 and the financing for the remaining period was transferred to Road Funds. By the end of the credit, the achievements were as follows:

Table 1: PMMR Contracts Packages Contractor Contract Price in Achievement (%) TShs Pkg 1 - Mwanza West Nyanza Road 6,007,089,808.34 91 (91 km) Works Pkg 2 - Mwanza East Katemayanga JV 4,211,478,811.39 80 (138 km) Pkg 3A - Rukwa South Sumry Enterprises 3,027,923,132.39 83 (189 km) Pkg 3 B - Rukwa North KMM 5,410,140,030.73 79 (173 km) Entrepreneurs Pkg 4 - Tanga West (228 S Y.N. Investment 7,805,418,671.71 0 km) & Lucky Construction Ltd JV Pkg 5 - Tanga East (116 LAC & FJM 3,590,421,270 21.5 km) Construction Ltd JV

The cost of the project by the closing date was US$15.9 million. All packages were progressing well.

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C.1.4 Carrying out and updating of feasibility studies and detailed design, and preparation of bidding documents for 713 kilometers of high priority trunk roads to be rehabilitated and/or upgraded under a proposed follow-on project, including: (i) the Singida – Babati – Minjingu road (220 km), (ii) the Dodoma – Babati road (263 km), (iii) the Korogwe – Mkumbara – Same road (165 km) and (iv) the Tanga – Horohoro road (65 km)

The Feasibility Study and Detailed Engineering Design for all the sub-projects were completed within the credit period and for some of the projects implementation has started. The details of the status of the projects are as indicated hereunder:

Singida – Babati – Minjingu Road (220 km)

The Contract for Feasibility Study, Detailed Engineering Design and Preparation of Tender Documents was signed between TANROADS and M/S Carlbro A/S (Denmark) in association with M/S Crown Tech Consult (Tanzania) on September 30, 2005 at a Contract Price of Euro 566,240 plus USD 125,000 plus TShs. 88,000,000 and duration of 10 months. This component was financed by the Nordic Development Fund (NDF). The design was completed in July 2007.

Physical works are in progress and are jointly funded by ADB and GOT.

Dodoma – Babati Road (263 km)

The Contract for the Feasibility Study, Detailed Engineering Design and Preparation of Tender Documents for the upgrading of Dodoma – Babati (263km) to bitumen standard was signed between TANROADS and M/S Carlbro A/S (Denmark) in association with M/S M-Konsult (Tanzania) in 30th September 2005 and duration of 18 months. This component was financed by the Nordic Development Fund (NDF). The design was completed August 2007.

The implementation of part of works for about 60 km is financed by the government of Tanzania.

Tanga – Horohoro Road (65 km)

The Contract for Detailed Engineering Design and Preparation of Tender Documents for the upgrading of Tanga – Horohoro road (65km) to bitumen standard was signed between TANROADS and M/S Norconsult AS (Norway) in association with M/S Norconsult (Tanzania) on 30th September, 2005 and duration is 10 months. This component was financed by the Nordic Development Fund (NDF). The design was completed in 2007.

The implementation of upgrading works is financed under the United States Millennium Challenge Corporation (MCC) program.

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Korogwe – Mkumbara – Same Road (172 km)

The Contract for design was signed on February 9, 2005 between TANROADS and SMEC International. The duration was 10 months plus an extension of two months due to delay in delivery of vehicles for the assignment. The final design report and Tender documents was submitted to TANROADS in April 2006.

Physical implementation will be financed by the World Bank through the Transport Sector Support Project (TSSP).

The total appraisal length was 713 km and actual length designed is 720 km.

C.1.5 The rehabilitation of the MVs Kigamboni, Sengerema & Rufiji and Supply of new Kilombero & Pangani Ferries

The project involved rehabilitation of three ferries, namely, MV Kigamboni, MV Rufiji and MV Sengerema and procurement of two ferries, namely; MV Kilombero and MV Pangani.

Rehabilitation of MV Kigamboni Ferry

The Contract for rehabilitation of Kigamboni ferry was signed on October 5, 2007 between TANROADS and M/S Neue Ruhrorter Schiffswerft GmbH of Germany. The Contract Price is Euro 2,567,000 and the duration of implementation was one year. The rehabilitation of this ferry was completed in November 2009

Rehabilitation of MV Sengerema Ferry

The Contract for rehabilitation of Sengerema ferry was signed on October 5, 2007 between TANROADS and M/S Neue Ruhrorter Schiffswerft GmbH of Germany. The duration of implementation is one year. The Contract Price for rehabilitation of MV Sengerema is Euro 1,231,600. The rehabilitation of this ferry was completed in December 2009.

Rehabilitation of MV Rufiji ferry

During tendering the lowest evaluated bidder provided the same cost for either rehabilitation of the existing ferry or supply of a new one at the Rufiji crossing. The Employer opted for the supply of a new ferry. Thus the award of the Contract for the supply of a new ferry for Rufiji River Crossing was signed on October 5, 2007 between TANROADS and M/S Dutchmed International B.V of the Netherlands. The contract price is Euro 995,000 and delivery period is one year. The new ferry was supplied in February 2009.

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Supply of a new MV Kilombero Ferry

The Contract for the Supply of Kilombero ferry was signed between TANROADS and M/S Dutchmed International B.V. from the Netherlands on July 19, 2006 at a Contract Price of Euro 830,500 and Delivery period of eight months. The new ferry for Kilombero river crossing was supplied in March 2007.

New ferry for Pangani River Crossing

The Contract for the Supply of Pangani Ferry was signed on May 27, 2008 between TANROADS and Johs Gram-Hanssen A/S from Denmark at a Contract Price of Euro 1,055,000. Delivery period is 12 months. The supply of MV Pangani was substantially completed by the end of the credit period. The implementation of this component was delayed to frequent power cuts.

The Supervision of rehabilitation of MVs Kigamboni, Sengerema and Pangani ferries was done by Ministry of Infrastructure Development Force Account Unit.

The cost of the project at appraisal was estimated at US$6.58 million and actual final cost was US$8.94 million.

C.2 Enhanced Road Management Capacity

In order to enhance the capacity for road management, both in mainland Tanzania and in Zanzibar, and in view of the preparation of a proposed follow-on project, the Project was planned to support 8 sub-projects. Except for the Construction of a new TANROADS headquarters building and Organization and Management (O&M) study of the TANROADS structure the other projects were completed within the credit period. The Construction of a new TANROADS headquarters building could not start during the credit period due to delayed design which was occasioned by the Employer’s change of the original plot for the construction of the building after the first design was completed. The O&M study was considered inappropriate following the restructuring of TANROADS in August 2007. The details of implementation for the various sub-projects are as shown below:

C.2.1: Design and construction of a new TANROADS headquarters building

The Contract for the design and supervision of the construction for the TANROADS Headquarters building at Plot No 9/1, Mabibo was signed on September 16, 2005 between TANROADS and M/S. Inter-Consult Ltd (Tanzania) in association with BILD Architects (South Africa) at an estimated cost of Tshs 286,080,000. The design was completed in January 2007.

The implementation of this component was cancelled because the credit was overcommitted and became impractical to be implemented within the remaining period to close the project i.e December 31, 2009. Implementation was delayed due to change of

54 the original location of the proposed building on grounds of, among others, being too far away from the parent Ministries and Development Partners. The subsequent time spent for acquiring the new plot and re-design to fit the new plot delayed the project such that it could not be implemented within the credit timeframe.

The cost of the project at appraisal was estimated at US$4.88 million and the balance of funds reallocated to other components.

C.2.2: Setting up of a Wide Area Network to improve communication between TANROADS’ headquarters, its regional offices and MOCT Zanzibar

The project involved installation of Local Area Networks in 38 centers and then connected to WAN (see Annex I).

The Contract for Design and Supervision of the installation of WAN and LAN for TANROADS was signed between TANROADS and PriceWaterHouseCoopers Ltd on February 9, 2005 at a Lump Contract Price of US$239,950 out of which US$151,250 were for design.

The Contract for the Supply and installation of the WAN and LAN equipment was signed with M/S Copy Cat (T) Ltd of Dar es Salaam on June 29, 2006. The Contract Price was US$1,292,649.46 out of which US$1,083,089.46 were for supply of goods and US$209,560 were for related services and duration of six months followed by a Warranty period of 12 months.

The WAN and LAN project was signed in 2006 and substantially completed in April 2009 compared to the appraisal plan of completion in July 2007 for Appraisal. The installation of WAN was effected on 36 stations while the remaining two stations (Tunduma and Nyakahura) were not connected to WAN due to the absence of network from the WAN services provider, the Tanzania Telecommunications Company Limited (TTCL).

The TTCL provided Asymmetrical Digital Subscriber Line (ADSL) and Wireless Local Loop (WLL) technologies in 30 and 6 centers respectively. ADSL technology supports both voice and data together, while WLL can support either data or voice but not both. Hence 30 stations utilize both voice and data while six stations can access data only.

The project suffered the following main shortfalls:

(a) Late completion of the project mainly due to delay in clearance of computers and other related devices at the Dar es Salaam port. Also, there was an ongoing renovation in some of the Regional Managers’ Offices which interrupted the progress of WAN and LAN installation.

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(b) The installation of WAN in two remote sites namely; Nyakahura and Tunduma, could not be possible as the services provider, TTCL does not have a network link in the above places.

(c) The service provider could not upgrade bandwidth to support both voice and data in six stations as requested by the Employer. The WLL technology that was installed in the above stations is limited to a maximum bandwidth of 64 kbps. It was found out that, data and voice communication can be supported at a minimum bandwidth of 128 kbps.

(d) There was a problem on the design of the project as some of the pre-existing digital telephone handsets are not compatible with Siemens technology that was installed during WAN and LAN project.

With respect to the pointed out shortfalls, TANROADS has decided to carry out a review of the system in view of enhancing its efficiency.

The cost of the project at appraisal was estimated at US$1.24 million and actual final cost was US$1.67 million.

C.2.3: Carrying out of a study for the enhancement of the Organization and Management of TANROADS

The study was considered to be no longer relevant and therefore not implemented following re-structuring of the TANROADS Organization in August 2007.

The funds for this study were reallocated to the other components.

C.2.4: Carrying out of studies to identify road investment priorities, such as traffic counts and an update of the ten-year investment plan

This study was done in house. The results formed an invaluable input in the preparation of a ten year Transport Sector Investment Program (TSIP) to be implemented in two phases

C.2.5: Preparation of a Local Government Roads inventory and condition survey

The Contract for this assignment was signed on July 13, 2005 between PMO-RALG and M/s SMEC International Pty Ltd of Australia in Association with AMBICON of Tanzania. The project was completed in June 2007. The original contract amount was AUD 337,900 and US$659,605. Addendum amount was AUD 79,100 and US$280,138. The revised contract price was AUD 417,000 and US$939,743. The amendments and printing of Road Maps was completed in July 2008.

The study was successfully completed within the Credit period. The output includes: • Inventory of the District roads in mainland Tanzania;

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• Classification of the District Roads and Community roads; • Production of maps; • Identification of location of resources e.g. water, gravel, sand, etc.; • Location of social centers, e.g. schools, hospitals, etc.

The cost of the project at appraisal was estimated at US$1.35 million and actual final cost was US$1.42 million.

C.2.6: Carrying out other transport related studies, including a Dar es Salaam Bus Rapid Transit and traffic management study

Dar es Salaam Bus way and Traffic Management Study The Contract for the study which comprised Conceptual Design and Detailed Design of Phase 1 was signed on March 31, 2005 and it was successfully completed in December 2007. The conceptual plan indicated that the project will be implemented in six phases, namely: • Phase 1: Morogoro road (20.9 km); • Phase 2: Kilwa road (19.3 km) • Phase 3: Nyerere road (23.6 km) • Phase 4: New Bagamoyo road, currently named; Ali Hassan Mwinyi road (15.1 km); • Phase 5: Mandela road (22.8 km ) • Phase 6: Old Bagamoyo road (27.6 km)

C.2.7: ESIA Study for Jangwani Depot The Contract for carrying out the ESIA Study for Jangwani Depot was signed between DART Agency and Prof. J. Katima on May 2, 2008 at a Contract Price of Tshs. 11,950,000 and the duration is five weeks. The report was completed in December 2009.

C.2.8: Provision of technical advisory services and training for improved management and operational capacity of TANROADS and MOCT Zanzibar

Training for TANROADS

TANROADS implemented the approved training program financed under the CTCP credit. The Programme was a combination of individual and group training both within and outside the country.

A total of 135members of staff attended the training, out of whom 47 staff attended professional training outside the country and 88 staff attended tailor-made professional seminars organized in the country.

Training for MOCT – Zanzibar Training involved two Engineers, two Planning Officers, one Policy Officer and one Director for Planning and Policy. All were trained outside the country.

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C.2.9: Provision of technical advisory services, training and financing to IDA PCU and MOCT CODAP for the day-to-day administration, financial management, procurement, monitoring and evaluation of Part A and B of the Project, and financing of the external financial audit of the Project

TA to TANROADS

Human Resources Specialist and a Transport Economist were engaged as technical assistants to TANROADS for one year each.

TA to MOCT Zanzibar

Two Technical Assistants were engaged for two years contract each. The contracts ended successfully in November 2008. The aim of the TA’s was to provide management assistance to the Coordination of Donor Assisted Projects (CODAP) in the MOCT, Zanzibar.

TA to PMOLAG

The Contract for DROMAS software expert was signed between Mr. Mostafa Ally and PMO-RALG on June 15, 2005. The contract amount was US$52,800. The assignment was completed.

C.3 Improved Performance of Tanzania Railways

In line with the government’s policy to engage the private sector into the operation and financing of the railways sector, the Project was planned to support activities geared at facilitating the privatization move as detailed below:

C.3.1 Provision of urgently needed rails, sleepers and other material for TRC, for the replacement of track between Itigi and Tabora

a) The Contract was signed between TRC and M/s Bethel Enterprises Tanzania for a contract sum of US$4,350,775 for supply of 71500 sleepers, 71500 shoulders, and 286000 Pandrols type clips The Supplier delivered the goods in November 2006.

b) The Contract for supply of 3,950 Metric tons of BS 80A rails for a Contract Price of EURO 3,033,600 was signed with M/S Lacchini Piambino of Italy on 19th October 2005. The goods were delivered to TRC in November 2006.

c) The contract for supply of 3,915 sets of steel fishplates for BS 80A rails for a contract price of US$104,922.00 was signed with M/S Johs Achelis& Sohne. The goods were delivered to TRC in May 2007. Three Contracts were signed on June 9, 2005, October 19, 2005 and November 3, 2006 with different suppliers for the provision of rails, sleepers and fittings.

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The supplied goods were used to relay rails by force account between Kitinku and Makutopora (16 km), Itigi – Kitaraka (15 km) and Tura – Karangasi (16 km). By the end of the credit a total length of rail relayed was 47 km as planned. The cost of the project at appraisal was estimated at US$8.5 million and actual final cost was US$8.18 million.

C.3.2 Provision of other rails, sleepers and materials for TRC, including their installation.

These were meant for replacement of the balance of the tracks of TRC between Itigi and Tabora.

Under this sub-component, the following goods were supplied under two Contracts, as follows:

Contract No. 1: The Contract was signed with Ms Pangang of China on 17th October 2007 and the goods were delivered on December 9, 2009. The implementation of the Contract was delayed due to a dispute related to force majeure. The supplier had claimed that earthquake which took place in China destroyed his factory and could no longer produce the required materials. The dispute was subsequently resolved amicably.

Contract No. 2: The Contract was signed between RAHCO and M/s VAE SA Pty on 1st September 2008 at a Contract Price of ZAR 113,468,000.00 (US$14.82 mil.). During the implementation of the Contract the Letter of Credit (LOC) was not activated due to the fact that there were no adequate funds to cover the entire LOC in any one of the two different accounts, namely Credit Account and Project account. This was subsequently resolved by amending the Contract such that the mode of payment was based on materials supplied. On account of the delay the Supplier was able to supply only 50 percent of the required goods by the closure of the credit. The cost of the project at appraisal was estimated at US$25.47 million and actual final cost was US$19.63 million. The balance of the Contracted goods amounting to US$5.2 million was to be financed by the government of Tanzania.

C.3.3: Preparation of an Environmental Assessment, a Social Assessment, EMPs and RAP for TRC

A Contract for carrying out the study was signed between TRC and M/s Scott Wilson on December 21, 2004. The Consultant submitted the Resettlement Action Plan report (RAP) in July 2005. However, a review of the RAP indicated deficiencies which were a result of incomplete TOR.

Based on the revised TOR, the Bank gave its No Objection for engaging another Consultant for undertaking the Review of the RAP. The Contract for provision of Consultancy Services for Review of Resettlement Cost was signed between RAHCO and

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M/S Majengo Estates Developers Ltd was signed on August 3, 2009 at Contract Price of Tsh.111,651,000. The contract was completed in December 2009.

C.3.4: Financing of clean-up costs based on the Environmental Assessment and EMP, and of resettlement costs based on the Social Assessment and RAP

Following non-response to the tendering for Contractors to carry out the environmental clean-up works, it was decided to use TRC/RAHCO in-house capacity to carry out the assignment. The entity conducted the cleaning up works at Dar es Salaam, Morogoro and Tabora only. TRL were subsequently contracted under IDA financing, to clean up the remaining stations of Mwanza and Kigoma and the assignment was completed by the closure of the Credit.

The cost was USD 0.06 million.

C.3.5: Provision of technical advisory services and training for: (i) the handing over of TRC assets and operation of the railways Operator; (ii) the winding up of TRC; and (iii) the building up of the management and operational capacity of RAHCO

Change Manager:

The Contract for the Change Manager was signed on June 2, 2005 between TRC and M/s SMEC of Australia. The Change Manager, whose responsibility was to coordinate the process of the change from the current management to the concessionaire, commenced his assignment on July 12, 2005. However, due to delays in the takeover of the TRC operation by the Concessionaire, the services were suspended in November 2006 until the time for handing over of the TRC to the Concessionaire. The Contract of the Change Manager was concluded in December 2008 after submission of his Final report.

Assistant to the Director General:

A Consultant was engaged between July 2005 and December 2005 as Assistant Director General – Operation to assist in the restructuring process.

Concession of TRC

The signing of the Concession Agreement between M/s RITES of India and M/s Reli Assets Holding Company (RAHCO) of Tanzania took place on September 3, 2007. The effective date of the concession was October 1, 2007.

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C.3.6: Provision of technical advisory services for the future private sector participation in TAZARA, including: (i) the re-structuring of TAZARA; (ii) the establishment of the regulatory and legal framework governing the operations of TAZARA; and (iii) preparation of EA, SA, EMP and RAP.

Concession of TAZARA Railway

This component never commenced because of the management complications as it is owned by three partners (Tanzania, Zambia and China) with different interests.

C.4 Additional sub-components

C.4.1 Dodoma – Iringa road upgrading project (266 km)

The Contract for carrying out the technical and economic feasibility study, environmental and social impact assessment, and detailed engineering design including preparation of Tender documents for the upgrading of the existing gravel road to bitumen standard was signed on August 22, 2007 between TANROADS and M/S COWI at a contract price of DKK 6,440,087 plus TShs. 240,268,200 and duration was 18 months. The component was financed by Nordic Development Fund (NDF).

The Final Feasibility Study Report was completed in August 2008 and the Detailed Engineering Design and Preparation of Tender Documents completed in July 2009.

The physical implementation of the project is earmarked for jointly financing by ADF, JICA and GOT.

C.4.2 Nzega – Tabora road (116 km)

The Contract for carrying out the technical and economic feasibility study, environmental and social impact assessment, and detailed engineering design including preparation of Tender documents for the upgrading of the existing gravel road to bitumen standard was signed on 24thSeptember 2007 between TANROADS and M/S NORCONSULT A/S at a contract price of Euro 803,200 and the duration was 16 months. The component was financed by Nordic Development Fund (NDF).

The Consultant commenced services in September 2007 and submitted the Final Feasibility Study Report on May 27, 2008. During commencement of Detailed Engineering Design, the Contract was declared null and void.

The Consultant commenced services in September 2007 and completed the Feasibility Study in May 2008. However, at commencement of the Detailed Engineering Design, the Contract was declared null and void by the Employer after noting that the firm was not paying mandatory taxes as well as its non-registration with relevant authorities.

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The assignment was finalized by another Consultant M/s COWI A/S. The Contract was signed on February 12, 2009 and was financed by GOT.

C.4.3 Arusha – Minjingu (103 km) The Contract for carrying out the detailed engineering design for the rehabilitation works and preparation of Tender documents including Environmental Assessment and Economic Analysis of the intervention for ascertaining the justification of the investment was signed on 22nd August 2007 between TANROADS and M/S COWI at a contract price of DKK 3,680,468 plus TShs. 111,227,500 and the duration was 10 months.

The Consultant commenced services in September 2007 and completed in December 2009.

The Physical Works will be financed by the World Bank through the Transport Sector Support Project (TSSP).

C.4.4 Tunduma – Sumbawanga Road (224.5 km)

Package 1: Tunduma – Laela Road (128 km) The Contract for the detailed Engineering Design was signed on 8th December 2005 between TANROADS and Dr. Ahmed Abdel-Warith Consulting Engineers from Egypt at Contract price of US$310,322.07 and duration of eight months. The assignment was completed in December 2009.

Physical implementation is being financed by the Millennium Challenge Corporation (MCC).

Package 2: Laela – Sumbawanga Road (96.5 km) TANROADS signed the contract with M/S Africon Ltd of South Africa on December 11, 2006. The contract period is eight months. The Contract Price is US$627,095.46. The Consultant completed the assignment and submitted the Final Report in June 2009. Physical implementation is being financed by the Millennium Challenge Corporation (MCC).

C.4.5 Emergency Repair and Maintenance of Zanzibar International Airport

The project for the emergency repair and maintenance of Zanzibar airport runway became necessary due to the deterioration which took place between the time when the original Contractor was terminated in April 2005 and start of the new Contract. The new Contract was signed on June 2, 2008 and was completed on August 18, 2008. Works involved repair of the trenches, sealing of cracks and pothole patching.

C.4.6 Supervision of Zanzibar Three Main Roads

The Supervision Contract which was signed on September 8, 2005 covered the supervision of the entire three roads namely Pongwe – Matemwe (20.4 km), Mkwajuni –

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Nungwi (18.86 km) and Paje – Pingwe (19.8 km). The Consultancy services Contract ended successfully in June 2009 and the Consultant was paid all his dues.

C.4.7 Zanzibar Transport Master Plan and Transport Policy Study

The Contract for carrying out study for Zanzibar Transport Master Plan and Transport Policy was signed on May 29, 2006 and completed in August 2007. The study produced two documents, namely; “Zanzibar Transport Master plan” and the “Transport Policy Paper”. The studies are important for the preparation of future Transport Development Programs.

C.4.8 Zanzibar International Airport Master Plan Study

The Contract for carrying out the Zanzibar International Airport Master Plan Study was signed on March 11, 2008. Addendum No. 1 for carrying out Feasibility Study of a new Passenger Terminal at the Zanzibar Airport and Addendum No. 2 for the Design of the same was also executed. The study and design were successfully completed within the credit closure.

C.4.9 Baseline Survey for Zanzibar International Airport The main purpose of the study was to determine how users currently rate the facilities and services offered at the Zanzibar Airport and to establish the framework to be used to monitor satisfaction during and after the proposed rehabilitation and extension of Airport runway.

The two months contract for the study, which was signed on January 21, 2008, was successfully executed and the Final Report was submitted in September 2008.

C.4.10 Pre-Contract Services for Zanzibar Airport The aim of the Consultancy Services was to prepare tender documents for the emergency repair works at the Airport.

The Contract was signed on March 19, 2008 and the assignment was successfully completed on March 31, 2008.

C.4.11 Supervision of emergency repair of Airport The Contract supervision was signed on June 13, 2008 the assignment was successfully completed on August 18, 2008.

C.4.12 Traffic Count on Unguja Roads

The aim of the study was to establish first year traffic on the newly constructed roads for future planning.

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The study was carried out by an in-house team from November 13-19, 2008. The Traffic Count Report was prepared and submitted to IDA with a copy to TANROADS on January 9, 2009.

C.4.13 Partitioning of DART Agency Office at Ubungo Plaza

The Contract for partitioning of DART office at Ubungo Plaza was signed on March 4, 2008 and successfully completed within the credit period. In addition to partitioning, the office was supplied with Air Conditioners, Electrical installations, new computer hardware and furniture. The DART staff moved to the offices in July 2008.

C.4.14 Road Fund Leakage Study

The Contract for identifying sources of leakage of revenues intended for the Road Fund and propose mitigation measures was signed on August 24, 2007 with duration of six months. However, during execution of the assignment the Consultant faced some hurdles and he submitted a letter dated May 29, 2008 to notify the Client that they could not progress with the assignment due to inability to access relevant data.

Subsequently, the Client (Road Fund Board) appointed a task force to finalize the study. The task force comprised members from the Ministry of Finance and Economic Affairs (Chair), Ministry of Infrastructure Development (MOID), Tanzania Revenue Authority (TRA), Energy, Water and Utilities Regulatory Authority (EWURA), Tanzania National Roads Agency (TANROADS), Tanzania Ports Authority (TPA), Tanzania Association of Oil Marketing Companies (TAOMC) and RFB as Secretariat. The final report was submitted in December 2009.

Among others, the report has established sources of leakages including: (a) false declarations of imported fuel; (b) the sale of tax-exempt fuel products; (c) the dumping of fuel in transit; (d) “localization” of transit fuel; and (e) the adulteration of diesel by kerosene, either at the depot, en route by the trucker or at the fuel filling station inland from Dar es Salaam port. It has also proposed some mitigation measures.

Following termination of the original Contract by the Consultant the outstanding fees amounting to US 180,000 was re-allocated to other components.

C.4.15 Design of Seven Airports

The Contract for carrying out the Feasibility Study and Detailed Engineering Design and Tender Documentation for seven out of the 13 high priority commercial airports was signed on November 7, 2007 with duration of 18 months. These airports are Arusha, Bukoba, Tabora, Mafia, Shinyanga, Sumbawanga and Kigoma. The Consultant completed the study and submitted the Final Reports including Tender Documents in June 2009.

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Mafia Airport is earmarked for MCC financing while Bukoba, Tabora and Kigoma Airports are earmarked for IDA financing under the forthcoming Transport Sector Support Project (TSSP).

C.4.16 Design Review and Re-scoping for Rehabilitation and Upgrading of Tabora and Kigoma Airports

Due to budget constraints, it was considered necessary to rescope the proposed Works on the Airport to match with the available funds. The scope of services to the two airports was as follows: Tabora Airport: Re-design drainage and review the Bill of Quantities (BOQ) such that the scope for upgrading Works is limited to the runway only; Kigoma Airport: to review the designs such that the rehabilitation works are limited to the 1,800 m of the existing runway. The Contract for re-scoping of airports was signed on 18th November 2009 with duration of four (4) weeks. The Consultant successfully completed the assignment and submitted the Bidding Documents in December 2009.

C.4.17 Kigamboni and Busisi Crowed and Access Control System

The two ferries are operated by the government through the Tanzania Electrical, Mechanical and Electronics Services Agency (TEMESA). MV Kigamboni is in Dar es Salaam across the Kigamboni creek while Busisi is in Mwanza region operating on Lake Victoria.

The purpose of this study was to assess the unloading and loading process and propose ways for improvement and thereafter assess suitability for Public Private Partnership (PPP) arrangement. Due to impractical time for completion under the CTCP, it has been earmarked for implementation under the forthcoming Transport Sector Support Project (TSSP).

C.5 FINANCIAL PERFORMANCE During appraisal, the project cost was estimated to be US$178.07 million equivalent to be provided by two Development Partners and the government’s own contribution in varying proportions towards attaining the project objectives. Implementation of the project commenced in 2004 and was completed in 2009 as scheduled.

The CTCP project ended up with total actual costs of about US$133.76 million. Most of the activities were implemented as originally planned but some additional activities which were within the original objective cropped up. The initial IDA credit amount was US$122 million and by the closing date on December 31, 2009, the Credit amount was US$127.3 million due to change of exchange rate of SDR to US$. The total payment made under the IDA credit is US$123.5 million equivalent to 97 percent of the IDA credit amount. The amount US$40 million was allocated for the partial risk guarantee for Railways Private Concessionaire was not disbursed during the credit period. Also the balance of the amount that could not be disbursed was for the 50 percent of price of the

65 supply of sleepers and other materials for TRC could not be supplied before the closure of the credit.

Furthermore, an amount of US$957.88 out of the contribution from NDF was cancelled after the Consultancy Contract for Nzega – Tabora road was declared by the Employer null and void.

The procurement plan for IDA and NDF components followed the appraisal framework. Table 2 provides details on the procurement plan as of the time of appraisal and the actual during the implementation.

Table 2: Procurement Plan at Appraisal versus Actual During Implementation.

Category Appraisal USD Million1 Total Actual USD Million Total ICB NCB Other2 N.D.F. Cost ICB NCB Other N.D.F. Cost 1. Works 68.38 6.00 0.0 0.0 74.38 74.12 0.00 0.52 0.0 74.64 (62.37) 94.57 (0.0) (0.0) (66.94) (68.91) (0.00) (0.48) (0.0) (67.39) 2. Goods 35.45 0.0 0.0 0.0 35.45 34.43 0.00 0.064 0.0 34.49 (34.00) (0.0) (0.0) (0.0) (34.00) (34.41) (0.00) (0.048) (0.0) (34.46) 3. Services 0.0 0.0 21.56 6.00 27.56 14.89 0.00 0.57 5.13 20.59 (0.0) (0.0) (20.01) (0.0) (20.01) (14.03) (0.00) (0.54) (0.0) (14.57)

Operating costs are not included in the table.

D MAJOR FACTORS AFFECTING THE PROJECT

There was slow, cancellation and termination of the implementation of some of the project components which had an impact on the timely and adequately fulfillment of the project objectives. These components include the Design and Construction of TANROADS HQ Building for which construction could not start, TRC Concessioning to Private Operator which was delayed for more than two years, WAN and LAN which was delayed for two years and inferior deliverable, Feasibility Studies and Detailed Engineering Design for a road project was declared null and thus not finalized within the Credit period.

The project components, delayed time and the impact to the fulfillment of the project objectives are as shown in the Table 3 below:

1 Figures in parentheses are the amounts to be financed by the IDA Credit. All costs include contingencies

2 Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the management office, training, technical assistance services and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

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Table 3: Delayed Components that had most impact on the Project

S/N Project Component Appraisal Actual Impact to Project Objectives 1. Design and July 2007 None Impact on effective Road Construction of Management TANROADS HQ Building 2. TRC concession to June 2005 October Rehabilitation of railway private Operator 2007 infrastructure not completed due to delayed supply of rails, sleepers and other material for RAHCO and thus remained in bad condition and continued to deteriorate 3. Wide Area Network July 2007 April Impact on effective Road (WAN) 2009 Management 4 Detailed Engineering January Not Invitation of bids delayed Design of Nzega – 2009 Finalized Tabora Road 5 Supply of new MV 2007 December Delayed due to frequent Pangani ferry 2009 power cut-off and nullification due failure to sign the Contract by the recommended bidder

E. PROJECT SUSTAINABILITY

The capacity for the maintenance of the road network has been rising steadily since the establishment of the Roads Fund in 1998. The Roads fund, which is ring-fenced for road maintenance has risen from 73.2 billion in 2004 to 255.56 billion in 2009. This means that the upgraded network shall receive the necessary maintenance and thus ensuring the sustainability of the investment.

The finalization of the Road Maintenance Management System (RMMS) in TANROADS has strengthened the capacity of TANROADS to plan and carry out the maintenance for the national road network. Through this system which contains the road network inventory data is capable to; among others make resourced plans for maintenance of the road network.

The continued on-the-job training of TANROADS staff both locally and internationally, contributes to the capacity building for management of projects.

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With regards to the District roads, a management system by the name District Roads Management System (DROMAS) has been established. Through this system which contains the road network inventory data, the Districts are able to make resourced plans for maintenance of the road network.

The sustainability of the project achievements is however threatened by the Backlog Maintenance accumulated over the years due to lack of sufficient maintenance funds. Despite of the increased Roads Fund the backlog accumulated over the years need special attention.

The backlog maintenance is a threat to the project sustainability and the government in consultation with the development partners (DP) is working on strategies to finance the paved road backlog. Among the key strategies are (a) increasing the fuel levy and (b) introducing maintenance concession (Public Private Partnership – PPP) for the highly trafficked roads.

F BANK PERFORMANCE

The performance of the Bank during project identification, preparation and appraisal was generally satisfactory. The Project Identification, Preparation and Appraisal was properly carried out by the World Bank on a Sector approach. Furthermore, the Bank Country Office in Tanzania facilitated timely implementation of the project.

G. BORROWERS PERFORMANCE

The implementation of the project was carried out by eight institutions namely; (a) the Tanzania National Roads Agency (TANROADS); (b) Ministry of Communications & Transport, Zanzibar (MOCT); (c) Dar Rapid Transit Agency (DART Agency); (d) Reli Assets Holding Company (RAHCO), formerly – Tanzania Railways Corporation; (e) Prime Minister’s Office – Regional Administration and Local Governments (PMO- RALG); (f) Road Fund Board (RFB); (g) Tanzania Airports Authority (TAA) and (h) Tanzania Electrical Mechanical and Electronic Services Agency (TEMESA). TANROADS through its IDA Unit was responsible for the overall financial management and coordination of the project.

The Borrower carried out procurement management of Contracts, financial and progress reporting in accordance with the set agreed requirement of the financing agreement and best practice.

On the provision of counterpart funds, the borrower was able to provide the counterpart funds throughout the period of the project. There has been no case whereby the borrower had failed to meet funding obligations under the project.

As a result of the above noted achievements, and the fact that the capacity of the borrower kept on improving during the entire period of the project, the performance of the borrower is rated satisfactory.

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H. PERFORMANCE OF CONSULTANTS AND CONTRACTORS

The studies and works for the roads components under the project were carried out by Consultants and Contractors. The performance of the Contractors and Consultants was satisfactory with the exception of a few who failed to adequately fulfill their obligations under their Contracts signed with the Borrower. The cases in hand include the contracts signed with M/s Dr. Ahmed Abdel-Warith Consulting Engineers from Egypt for carrying out the Detailed Engineering Design of Tunduma – Laela Road which took 48 months instead of 8 months to finalize the assignment. Surveying data were noted to lack required accuracy for most of the projects leading to delays and claims from Contractors implementing the projects.

I. ASSESSMENT OF OUTCOME

The implementation performance of the Project was generally satisfactory despite the time that was lost due to delays in procurement. On the overall most of the objectives were achieved.

J. POST IMPLEMENTATION ECONOMIC ANALYSIS

Post implementation evaluation was carried out for Singida – Shelui Road, Zanzibar three roads and PMMR roads which were programmed for rehabilitation or upgrading to bitumen standard. It was also carried out for five ferries which were programmed for rehabilitation. The economic evaluation was carried out using the HDM-4 whereby project - related capital and maintenance costs were compared with economic benefits resulting from vehicle operating cost reductions. For the PMMR Works and ferries, the qualitative analysis was used for economic analysis.

The results of the post evaluation are presented in Table 4 whereas Annex IV contains the detailed post evaluation analysis for the components. The outcome of the analysis show that all the roads indicate EIRR values were higher at ICR stage, indicating that the rehabilitation/upgrading of these roads has a positive impact on the socio-economic development of the country.

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Table 4: Summary of Economic Feasibility Results for Selected Roads

EIRR Donor Length Works EIRR at at S/N Project Name (km) performed Appraisal PCR NPV Singida – Shelui IDA 1 Road 110 Rehabilitation Zanzibar three IDA 2 roads 56 Rehabilitation IDA & 3 PMMR Upgrading GOT Five Ferrries IDA (MVs Kigamboni, Sengerema, Rufiji (Kome), Kilombero and Pangani) Note: Missing data in Table 5 will be provided before the end of May 2010.

K. FUTURE OPERATIONS

Following successful implementation of the CTCP, the government is now in the process of preparing the Transport Sector Support Program (TSSP) to be implemented as a Sector Wide Project (SWAP) in collaboration with other sector development partners. The TSSP whose objective is to support the government’s initiatives aimed at achieving the Millennium Development Goals will focus on the implementation of the Transport Sector Investment Program (TSIP) which has been developed on the framework of the Transport Sector Policy and the Ten Year Roads Sector Investment Study developed under the IRP II. The policy and institutional framework established under IRP has been instrumental in building confidence of Development Partners in adopting the SWAP approach.

L. KEY LESSONS LEARNED

(a) The decision of the World Bank that the Transport Team be based in Dar es Salaam and the establishment of the Procurement Hub in East Africa has substantially reduced the time it takes to procure various components. This is mainly due to minimized time for the review process and direct consultations between the Bank and the Executing Agency.

(b) Strive to ensure TOR for assignments are adequate for the desired output. Thus proper review by relevant experts should be emphasized.

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(c) During the Project implementation, the Bank issued no objections to new components without adequate consultation with the accounting officer. This trend has a potential of over-commitment of the Credit.

(d) Performance of TRC concessioning has completely disappointed project,

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

N/A

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Annex 9. List of Supporting Documents

1. Country Assistance Strategy (CAS), Report No. 20728-TA, June 30, 2000 2. Project Appraisal Document (March 31, 2004) 2. Development Credit Agreement 3. Mid-term Aide-memoire 4. Project Supervision Aide-memoires 5. Quarterly Progress Reports 6. National Strategy for Growth and Reduction of Poverty (MKUKUTA,2005-2010)

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TANZANIA CENTRAL TRANSPORT CORRIDOR PROJECT

UPGRADING OF STRATEGIC LINKS: IMPROVING OF TANZANIAN MAIN ROADS RAILWAYS PERFORMANCE: CIVIL WORKS AND SUPERVISION OF REHABILITATION AND RAILROADS UPGRADING TO BITUMEN STANDARDS ZANZIBAR TRANSPORT MASTER PLAN STUDY M REGION CAPITALS Singida-Shelui road (110 km) Three roads in Zanzibar (59 km) RELAY OF THE ITIGI-TABORA SECTION (200 km) NATIONAL CAPITAL

FEASIBILITY STUDIES AND DETAILED DESIGN OF REHABILITATION DAR-ES-SALAAM TRAFFIC MANAGEMENT REGION BOUNDARIES Singida-Babati-Minjingu (220 km) STUDY AND BUS WAY Dodoma-Babati (263 km) INTERNATIONAL BOUNDARIES Korogwe-Mkumbara-Same (172 km) CONCESSIONING OF TRC Tanga-Horohoro (65 km) Tunduma-Sumbawanga (224 km) Arusha-Minjingu (103 km) Dodoma-Iringa (266 km)

REHABILITATION OF TWO FERRIES AND SUPPLY OF THREE NEW FERRIES

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