ReportNo. 732-YDR FIL'ECopy Appraisalof a SecondHighway Project People'sDemocratic Republic of Yemen Public Disclosure Authorized

May 2, 1975 RegionalProjects Department Europe,Middle Eastand North Africa RegionalOffice Not for PublicUse Public Disclosure Authorized Public Disclosure Authorized

Document of the International Bankfor Reconstructionand Development

Public Disclosure Authorized InternationalDevelopment Association

This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without BankGroup authorization. The BankGroup does not accept responsibility for the accuracy or completeness of the report. CURRENCYEQUIVAL ENTS

Currency Unit = Yemeni Dinar (YD) US$1.00 = YD 0.315 US$2.90 a IYD1.000 US$2.9 million * ID 1 million

SYSTEM OF WEIGHTSAND MEASURES: METRIC

Metric System British/US System

1 meter (m) n 3.28 feet 1 kilometer (km)) = 0.62 miles 1 sq kilometer (a2) = 0.386 sq miles 1 hectare(ha) = 2.47 acres 1 metric ton (m ton) - 2,205pounds

ACRONYMS AND ABBREVIATIONS

Alyemda - DemocraticYemen Airlines CP - Cooperative Program CPC - Central Planning Commission dwt - deadweight tons FAO - Food and Agriculture Organization of the United Nations GDT - General Department of Transport ICAO - International Civil Aviation Organization ?MPW - Ministry of Public Works O-D - Origin-Destination PDRY - People's Democratic Republic of Yemen SF - Special Fund SIDA - Swedish International Development Agency UK - United Kingdom UNDP - United Nations Development Programme US - United States of America USSR - Union of Soviet Socialist Republics WFP - World Food Programme

PEOPLE'S DEMOCRATICREUBLIC OF YEMEN FISCALYEAR

April 1 to March 31

NOTE

Prices of petroleum products in this report are as of end November 1974. APPRAISAL OF

A SECOND HIGIIWAYPROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YE!EN1

CONTEN4TS

Page No.

SUM24ARYAND CONCLUSIONS ...... - u

I. INTRODUCTION ...... * ********...... *...... *. ... *.. * . 1

II, THE TRANSPORT SECTOR ...... 1

A. The Country and Its Economy ...... 1 B. The Modes ...... 2 C. Policy, Planning and Coordination .. *...... 4

III. HIGHlWAYS ...... 5

A. The Network ...... 5 B. Characteristics and Growth of Traffic ...... 5 C. Administration ...... 6 D. Planning * ' 7 E. Financing 8 F. Engineering ... 8 G. Construction ...... 8 H1. lighway Maintenance 9 I. Trainiing ...... 10

IV. THE PROJECT ...... 10

A. General ...... 10 B. Road Construction ...... 11 C. Engineering and Economic Studies of the Nagabah-Ataq-Beihan-Al Ayn Road ...... 12 D. Technical Assistance to the Ministry of Public Wotks..... 12 E. Purchases of Equipment and Related Spare Parts for Highway Maintenance ...... 12 F. Refinancingof Highway EngineeringCredit S-12 YDR ...... , 12

This report was prepared by Messrs. Snorri Hallgrimsson,Kalevi Myllylooma (Engineers),Niels Krogh-Poulsen (Economist)and lIs.Joan Chernock (Editor). It was revised by Messrs. Robert Mulligan (Engineer)and lienriBeenhakker (Economist). TABLE OF CONTENTS (Continued) Page No.

G. Cost Estimates and Foreign Exchange Component. 13 H. Execution ...... 15 I. Procurement ...... 16 J. Financing ...... *... 16 K. Disbursements ...... 17

V. ECONOMIC EVALUATION ...... s...... 17

A. Main Benefits and Beneficiaries ...... 17 B. Economic Evaluation ...... 19 C. Road Studies and Technical Assistance ...... 22

VI. RECO1I1ENDATIONS...... 22

TABLES

1. Activities in the Port of Aden, 1966-73 2. Revenues and Expenditures of Yemen Ports Corporation 1966-73 3. Aden Airport Traffic, 1965-72 4. Planned Public Investments During Fiscal Periods 1972-74 and 1975-79 5. Length and Distribution of Road Network, 1973 6. Registered Vehicles by Governorate, 1971 7. Highway Revenues and Expenditures, 1968-73 8. Design Standards for Project Roads 9. 1973 Fifth Governorate Population Statistics 10. 1974 Production and Consumption Estimates for Wadi Hadramawt and Coastal Area of Fifth Governorate (metric tons) 11. Public Investments in Fifth Governorate 1974-1979 12. Annual Through Traffic Between Wadi Hadramawt and the Coast 1968-1974 13. 1971 and 1974 Local Traffic (ADT) 14. Normal Traffic 1979 Before Opening of Al M4ukalla-SaywunRoad (ADT) 15. Normal Traffic 1979 After Opening of Al Hlukalla-SaywunRoad (ADT) 16. Vehicle Operating Costs of Typical Vehicles by Type of Road (YD/1,000 km; exclusive of taxes) 17. Average Characteristics of Typical Vehicles by Type of Road 18. Conistruction and Ilaintenance Costs (YD) 19. Rates of Traffic Growth and Return on Sections of the Al Mukalla-Saywun Road 20. Results of Sensitivity Analyses

ANNEXES

A. Previous Transport Projects B. Summary of Project Financing C. Estimated Schedule of Disbursements D. Probability Analysis CiART

Organization of the ,iinistry of Public IJorks

MAPS

IBRI) 11045R - Transport Infrastructure IBRD 11046 - Project Area

APPRAISAL OF

A SECOND IIIGHWAYPROJECT

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN

SUIMARY AND CONCLUSIONS i. The present transport network of the People's Democratic Republic of Yemen reflects its historical, economic and political development. Aden, capital and economic center, is isolated from most of the hinterland, former- ly a number of small feudal states which discourageddevelopment of an ade- quate transport system. Consequently,at the time of independencein 1967, the transport network consisted of a few good roads around the capital and a well-developedport in Aden, with limited air connectionsand coastal ship- ping. ii. At present, the total length of the network of roads and main motor- able tracks is about 5,500 km of which about 4,800 km are rough tracks pas- sable only by light trucks and four-wheel-drivevehicles, 475 km are asphalted, 200 km are cobbled, 1/ and a negligible length gravel-surfaced. Both in terms of extent and quality the road network is insufficientto meet the present demand of freight and passenger traffic. iii. The Government aims to change the traditionalservice economy, based on trade and bunkering in Aden, into a mixed service and commodity-producing economy. To achieve this aim, considerable investments in agriculture and fisheries have been made and are planned as well as development of a good road network linking the agriculturalareas with market centers and with Aden. The proposed project supports this policy. iv. The Government'sFive-Year Development Plan 1975-79 envisages a total investment of YD 19.1 million in the communicationsand transport sec- tor, or about 25% of the total proposed public investment over the Plan period. Of this amount, YD 16.3 million is allocated to the highway sector. The need for coordinatingthe transport investmentsproposed is recognized and is im- plicit in the Plan. v. The main component of the proposed project is constructionwith supervisionof 358 km of road between Al Mukalla and Saywun, with a branch to Ash Shihr. This road would connect and serve two currently isolated re- gions with major potential for agricultureand fisheries development. The project also includes the procurementof road maintenance equipment and spares, technical assistance to and training of personnel of the Ministry of Public Works, and engineeringand economic studies of the Nagabah-Ataq-Beihan- Al Ayn Road. The proposed road constructionwould support the agricultural and fisheriesprojects, either being implementedor planned in the Fifth Governorate.

1/ Constructedfrom natural cobblestones10-25 cm diameter, loosely embed- ded in a 30 cm sand layer. - ii - vi. During negotiationsfor the Highway EngineeringCredit S-12 YDR the Governmentand the Associationagreed that the Credit might be refinanced under any subsequenthighway project. The outstandingbalance of US$530,000 under Credit S-12 YDR will thereforebe refinancedfrom the proceeds of the proposed credit. vii. The Ministry of Public Works will be responsiblefor executing the project which is expected to be completedby early 1979. viii. The total project cost is estimatedat US$31.8 million equivalent, with a foreign exchange componentof US$20.8 million or about 66%. The Asso- ciationwould finance US$10.39 million (50%) of the foreign cost and US$5.11 million (46%) of the local cost on the usual terms; the Governmentwould financeUS$1.0 million (9%) of the local cost, and the Kuwait Fund which has agreed to also participatein the projectwould finance the balance, being US$10.4 million (50%) of foreign cost and US$4.89 million (46%) of local cost. US$60,000would be financed retroactivelyto meet the costs of exploring for water for road construction. In the absence of any serious response to the internationaltendering of the road constructioncontracts the UK Crown Agents will provide the technicalexpertise and managerial skills, presently in short supply in the Ministry of Public Works, needed to operate a special construc- tion unit to build the project roads. The Crown Agents' estimated cost of constructionis based on current prices in PDRY. The cost of the supervision, detailed engineeringand technical assistancewas estimatedon the basis of the cost of recent servicesof a similar nature in PDRY. ix. The economic return on the investmentsin road constructionis es- timatedat about 15%, with a first-yearreturn of about 12%, indicatingthe road constructionto be well justified and appropriatelytimed. Most of the benefits are expected to accrue to producers and consumers in the area. Bene- fits accruing from the technical assistance,and the engineeringand economic studies have not been quantified. These elements are justifiedon the basis of increased efficiencyof investmentsand operationsin the transportsector as a whole, as well as assistance to the Government in the necessary improve- ment, expansion and maintenanceof its highway network. x. The project provides a suitable basis for an IDA credit of US$15.5 million equivalentto the People's Democratic Republic of Yemen. I. INTRODUCTION

1.01 The Governmentof the People's Democratic Republic of Yemen (PDRY) has requested the Association'sassistance in financing a highway project comprising: constructionwith supervisionof 358 km of road between Al Mukalla and Saywun, with a branch to Ash Shihr; procurementof road maintenanceequip- ment and spare parts; technical assistanceto and training of personnelof the Ministry of Public Works; engineeringand economic studies of the Nagaba-Ataq- Beihan-Al Ayn Road; and refinancingof Engineering Credit S-12 YDR. The project cost is estimated at US$31.8 million, of which US$15.5 million would be financedby the Association under the proposed credit and US$1.0 million by the Government. The Kuwait Fund has agreed to participatein the project financing and would contributeUS$15.3 million also. Technical assistance and training are suitable for UNDP financing;however, the Governmenthas already committed its UNDP 1972-76 allocationand it therefore requestedthat the Association include these items under the proposed project. This would be the third credit in the transportsector, a $1.6 million highway credit of 1971 (Credit 240-YDR and a $0.6 million highway engineeringcredit of 1972 (Credit S-12 YDR) provided for improvementof the administrationand operation of highway-relatedactivities under the Ministry of Public Works (MPW), and for preparationof high priority road constructionprojects. The implementa- tion of these projects, details of which are given in Annex A, has been satisfactory.

1.02 This report is based on proposals and informationreceived from the Planning Ministry, the MPW, and the Ministry of Communications(MOC); economic and engineeringstudies carried out in 1972-73 by the Lebanese consulting firm Dar Al-Handasah;the findings of an FAO/IBRD CooperativeProgram agricultural appraisalmission to the PDRY in December 1973; the findingsof a Bank ap- praisal mission to the PDRY in November-December1973 consistingof Messrs. Mehdi Ali (Economist),Snorri Hallgrimsson(Engineer), Niels Erik Krogh- Poulsen (Economist),and Kalevi Myllyluoma (Engineer);a supplementaryap- praisal mission by Robert Mulligan (Engineer)in August 1974 and Henri Beenhakker (Economist)in November/December1974.

II. THE TRANSPORT SECTOR

A. The Country and Its Economy

2.01 The PDRY is located on the southern part of the Arabian Peninsula (Map IBRD 11045), and covers an area of about 290,000 km2. The country is mountainouswith the exceptionof the coastal plain ranging from 5 km to 65 km in width. The land is arid and over half is completelybarren. Arable land constitutesless than 1% of the total area and is limited by the short- age of rainfall to a number of wadis 1/, where groundwatercan be reachedby shallow wells.

1/ Sharply defined depressionsin the desert, forming the beds or valleys of streams, usually dry except in the rainy season. -2-

2.02 Most of the economic activity is located in the capital, Aden, with a population of 250,000or about 16% of the total population (1.6 million). Due to its strategicposition on the trade route through the Suez Canal, Aden developed into one of the world's largest entrepot trade and bunkering ports and an importantnaval base. The closure of the Suez Canal and the withdrawal of the British military garrison in 1967, followedby the discontinuationof British budget support in 1968, caused an immediate decline in economic ac- tivity, rapid depletionof foreign exchange reserves,mounting trade deficits, unemployment,and considerableemigration of skilled manpower. To meet this emergency,the Governmentcut public expenditures,mainly by reducing sala- ries, and ensured bilateral assistance for its basic investmentneeds, es- pecialLy from Eastern European countries, the Union of Soviet Socialist Re- publics (USSR) and the People's Republic of China. Total GDP dropped by pos- sibly 20% between 1966 and 1968 and since then has virtually stagnated. How- ever, agriculture,the subsistencemainstay for over two thirds of the popula- tion was little affected. Per capita GNP was about US$100 in 1973. The re- cent completionof several developmentprojects coupledwith the expected re- opening of the Suez canal and the related increase in Aden port traffic should lead to a resumptionof moderate economic growth over the next few years.

B. The Modes

2.03 The transportsystem of the PDRY comprises5,500 km of roads and tracks,2 ports, and 15 airports and airstrips. Pipelines connect the oil refinery at Little Aden with the Port of Aden. There are no railways. The present transportnetwork reflects the historical,economic, and political developmentsof the country. Aden is isolated from most of the hinterland, formerlya collectionof small feudal states which discouragedthe develop- ment of an adequate communicationssystem. Consequently,at the time of in- dependencein 1967, the transportnetwork consisted of only a few good roads around the capital and a well-developedport in Aden, with limited air con- nections and coastal shipping.

(i) Highways

2.04 Details of the highway sub-sectorare discussedin Chapter III.

(ii) Ports

2.05 PDRY is served by the major internationalport of Aden and a small unprotectedcoastal port at Al Mukalla. Both ports are administeredby the Yemen Ports and Shipping Corporation(YPSC), an autonomousgovernment agency under the supervisionof the Ministry of ComTmunications(MOC). Aden is a large bunkering port with predominantlyinter ational trsffic. The closure of the Suez Canal in mid-1967 reduced the activities in Aden Port considerably (Table 1). Furthermore,the two competingseaports at Djibouti in the French Territoryof the Afars and the Issas and at Jeddah in Saudi Arabia, both with facilitiescomparable to those of Aden Port, have attractedmuch of Aden's previous entrepot trade. Revenues and expendituresof the YPC reflect the reduced level of activitiesin Aden Port (Table 2). However, with the expect- ed reopeningof the Suez Canal the Governmenthas requestedthe assistanceof the Associationwith a project to rehabilitateAden Port. This project has been appraised and as proposed includes finance for supply of equipment and technicalassistance to the three major entitieswithin the YPSC - namely the Aden Port Authority, the National Shipping Company, and the National Dockyards Company.

2.06 Master planning for the port of Aden is being undertakenwith the assistanceof the Kuwait Fund; consultantsare now in the field. In addition, the Associationunder Credit 370-YDR is financingfeasibility studies for a new fishing port at Nishtun in the Sixth Governorate,about 350 km east of Al Mukalla.

(iii) Coastal Shipping

2.07 Coastal trade is mostly handled by dhowws. Freight statistics are not availablebut present movements are small. However, the planned ex- pansion of fishing activitiesalong the coast and the increased agricul- tural production in the Wadi Hadramawt (para 5.06) will require transport of increasedquantities of petroleumproducts and other basic inputs from Aden. The National Shipping Company under supervisionof MOC is operating four coasters and a number of lighters, tugs and launches used for stevedor- ing. Its operations are presentlyhampered by a lack of experiencedpersonnel, particularlyin shippingmanagement, cargo handling, and accounting. These shortcomingswill be provided for in the forthcomingPort project proposed for IDA financing (para 2.05).

(iv) Civil Aviation

2.08 The country has one internationalairport in Aden and 14 local airstrips,of which only 8 are in regular use. The Civil Aviation Department under MOC is responsiblefor Aden Airport and all local airstrips. The Aden Airport has traditionallybeen a connectingpoint between East Africa and the Far East. In 1972, it handled 137,000 passengersand 2,300 tons of freight. After a drop in traffic volumes followingthe decrease in economic activity during 1967 and 1968, both passenger and freight traffichave resumed growth and are now 80% and 60% of pre-independencetraffic, respectively(Table 3). All local airstripsare unpaved and runway conditionis generallypoor; there are no terminal buildings or navigationalaids except at Al Riyan, where radio contact to Aden is frequently interruptedby equipment failure. Traffic data for the local airstripsare not available,but both passenger and freight movements are small.

2.09 Training in air navigation and meteorologicalservices has recently been provided to local staff under a SIDA/UNDP/ICAOtechnical assistance program, which also provided meteorologicalinstruments and telecommunications equipment to Aden Airport. Consolidationof the results obtained and exten- sion of technicalassistance into all airport operationalfields are required to achieve a satisfactorylevel of service. Government is aware of these needs and is actively seeking sources of finance to meet theni. - 4 -

2.10 Domestic civil aviation operations are carried out by the national carrier, the DemocraticYemen Airlines (Alyemda)which also operates inter- nationally. Alyemda's operations are hampered by an obsolete fleet in which all aircraft are over 20 years old and by inadequate administrativeand tech- nical personnel. Alyemda's management is aware that improvementin aircraft fleet and staff capability is urgently required and that its long-termopera- tions should be based oniidentification of a suitable route structure. The current Five-Year plan makes financialprovision for remedyingmost of these deficiencies(aircraft replacement, airport rehabilitation).

C. Policy, Planning and Coordination

2.11 lTheprincipal economic aim of the Government is to change the serv- ice economy of pre-independence,based on trade and bunkering in Aden, into a mixed service and commodity-producingeconomy, with the main economic ac- tivities concentratedin the public sector. To achieve this aim, the Govern- ment has nationalized most foreign enterprises, is encouraging the creation of producers' cooperatives,and has made and plans to make considerablein- vestments in agricultureand fisheriesprojects, and a good road network linking the agriculturalareas with market centers and with Aden.

2.12 A Three-Year DevelopmentPlan ended in March 1974. Due to lack of domestic finance, however, its implementationfell short of its targets, and investmaentexpenditures during the Plan period amounted to only YD 21 million or 52% of total planned investments (Table 4).

2.13 Since then Governmenthas started a national Five-Year Development Plan covering FY 1975-79. Total proposed investmentsunder the Plan amount to YD 75.4 million or an average YD 15.1 million annually. Total planned investmentsin the communicationsand transport sector amount to YD 19.1 mil- lion, of which YD 16.3 million are allocated to roads. In view of the steep increases in domestic and internationalprices since the Plan was drafted in 1973, Government is reviewing annually its sectoral and total allocationsto bring them in line with available financing. The constructionof the roads proposed in this project is not affected because of their high priority in the Plan.

2.14 The Planning Ministry is responsiblefor drawing up and coordinat- ing the Government'slong-term investment plans. MOC is responsiblefor over- all planning of communicationsand transportation,except the highway mode which is the responsibilityof the MPW. The Plan recogniges the need for coordinationbetween investmentswithin the transportsector and between in- vestments in the transportsector and other sectors of the economy. Provision of technical assistanceunder the proposed project satisfies this need. - 5 -

III. HIGHWAYS

A. The Network

3.01 The total length of the network of roads and main motorable tracks in the PDRY is about 5,500 km (Table 5). About 4,800 km are rough tracks passable only by light trucks and four-wheel-drivevehicles; of the remainder, about 475 km are asphalted, about 200 km cobbled and a negligible length is gravel-surfaced.

3.02 Both in terms of extent and quality, the network is insufficient to meet the present demand for goods and passenger traffic. Large areas of the country, in particular those far from the capital, have no road links to other parts of the country.

3.03 In addition to municipal streets, the asphalted network consists of about 350 km radiating from Aden; of these, 185 km were built before independ- ence and have lasted well in spite of lack of maintenance,but they are now in urgent need of rehabilitation. The remainder has been built recently with bilateral aid from the People's Republic of China, and by MPW force account, partly assisted by UNDP personnel and World Food Programme (WFP) financing.

3.04 Cobbled roads have all been built with the NPW's own forces. They are an improvementover the rough tracks, but they have no proper base or sub- base constructionand are liable to failures when subjected to heavy traffic. As traffic increases,most of these roads will have to be reconstructed.

B. Characteristics and Growth of Traffic

3.05 The motor vehicle fleet in the PDRY comprises about 19,000 vehicles, of which 64% are passenger cars and light four-wheel-drive vehicles, 35%Oare trucks and 1% are buses (Table 6). The large number of vehicles left by the British military forces and civilian personnel in 1967 resulted in tem- porary over-capacityof the vehicle fleet, which only recentlyhas again begun to grow perceptibly at about 2% per annum. All vehicle imports are handled through the State-ownedForeign Trade Corporation. In order to reduce main- tenance problems, Governmentlimits the number of types of vehicles imported for use by governmentalagencies, state corporationsand cooperatives. The vehicle fleet is adequate to meet present transport demand.

3.06 About 1,200 trucks are privately owned, mainly ty individualsoperat- ing one or two vehicles; all other trucks and most of the light four-wheel-drive vehicles are owned and operated by State-owned enterprises or agricultural co- operatives. Passenger cars are mostly privately owned.

3.07 Traffic is limited on the entire network, because of the low eco- nomic activity, the bad conditionof the roads and tracks, and the dispersion of the population. Traffic is heaviest in the vicinity of Aden and between Aden and the agriculturalarea in Wadi Tuban. Existing traffic counts give - 6 - only limited coverage of the country, but the MPWis presentlystarting reg- ular traffic counts on the main roads followingthe recommendationsof the Swedish consultant,Viak, whose serviceswere financed under Credit 240-YDR. Based on expected economic growth, the overall traffic growth rate is estimat- ed at 7.5% per annum during the period of the Five Year DevelopmentPlan.

3.08 The Government regulatestrucking in order to keep freight rates low yet allow for a small profit margin, to ensure transportservices to all parts of the country and to achieve an equitabledistribution of freightbetween truck operators. Commercial truck operators are allottedloads and routes by the General Departmentof Transport (GDT) under the Ministry of the In- terior.,The GDT levies a fixed charge per trip determinedby the load ca- pacity of the vehicles. After deducting20% for its own administration,the GDT distributesthe funds thus obtained to the MPW (30%), the Veterans' Family Fund (30%), and the municipalities(20%). The Government,with Viak's assistance,has recently completeda study of the system of freight rates and the activitiesof GDT with a view to simplifyingthe rate structure and revise the freightrates where necessaryto ensure that they shall be reasonably related to transportcosts. During negotiationsan understandingwas reached that before June 30, 1977 the authoritieswould introduceappropriate arrange- ments for periodic revisionof transportrates to keep them in line with transportcosts.

3,09 There is no inter-citybus transport,but a State corporationope- rates buses in Aden and Al Mukalla. Inter-citypassenger transportis by trucks and small four-wheel-drivevehicles.

3.10 The maximum permissiblesingle axle load is limited to 8.5 tons. Due to the poor conditionof the road network, there is little overloading. With the constructionof new roads higher permissibleaxle loads may be more economicalin the future (para 3.19). During negotiationsthe need for re- vised legislationgoverning vehicleweights and dimensionswas discussedwith Government,and agreementreached that appropriatemeasures would be taken within two years of the credit agreement.

C. Administration

3.11 The MPW is responsiblefor planning, executionand administration of road works. In that ministry,the Highway Departmentis responsiblefor road constructionand maintenance;the EquipmentDepartment is responsible for the purchase,maintenance and administrationof the equipmentpool, in- cludinghighway equipment; and the Planning Unit is responsiblefor highway planning,supervises road transportstudies and related data collection. The present organizationof the Highway Departmen (Chart)was adopted in 1972 as a result of recommendationsmade by Viak under the First Highway Project. The organizationalstructure is adequate for present and envisagedneeds, but the Departmentsuffers from a lack of experiencedpersonnel. The Soils and MaterialsDivision and the various constructionsites are also short of experiencedstaff. The Survey and Design Division is adequately staffed and functioningwell, whereas the MaintenanceDivision, established on the advice - 7 - of Viak, is still in a formativestage due to staff constraints and requires continued technical assistanceand on-the-job training to attain efficiency in operation. Technical assistanceto overcome these difficultieswill be provided under the project (para 4.06) and under bilateral agreementswith the German Democratic Republic,Hungary and the USSR.

3.12 The Highway Departmentmaintains field offices in each Governorate, which are responsiblefor highway maintenanceand such minor improvement works as can be carried out by their available force and equipment. They are responsiblefor organizing the work force on the WFP job sites (para 3.03), and occasionallyfor directing volunteer labor-intensiveroad works, mostly undertakenon feeder roads or for urgent repairs on existing roads and tracks. The field offices are insufficientlystaffed to carry out these tasks, and it is difficultto attract qualified staff at the present low level of Gov- ernment salaries (para 2.02). This uxisatisfactorysituation is unlikely to improve until Governmentsalary scales-are revised upwards, which, in view of the country'sdifficult financialsituation, is not likely to happen in the near future.

3.13 The NPW's EquipmentDepartment is responsiblefor all MPW equipment, including equipment for road constructionand maintenance. Its two main work- shops, one in Aden and one in Al Mukalla are adequately equipped. Field work- shops exist in each Governorate;most are inadequatelystaffed and equipped, but the NPW is now making efforts to improve the shops. Viak recommended improvementsin the administration,operation and cost accountingof the MPW EquipmentDepartment and its field offices. While the Governmentis implement- ing the recommendations,progress so far has been hampered by lack of quali- fied personnel. The aforementionedbilateral agreements (para 3.11) are ex- pected to acceleratethe pace of implementation.

D. Planning

3.14 Annual and long-term budget and investment proposals for road works are prepared by the Planning Unit and consolidatedby the Planning Ministry with budget proposals from other ministries. To supply this Unit with high- way planning data and analyses, a separate Road Study Unit has recentlybeen set up in the Highway Departmenton Viak's recommendation. The unit is in charge of collectingtraffic data, cost analysis and equipment and manpower requirements. It has a staff of only one planning engineer, but two traffic analysts are expected to joint the unit after completing fellowshiptrain- ing abroad. The proposed project includes technicalassistance in planning which is also intended to support the efficient operationof the unit.

3.15 The Three-Year DevelopmentPlan covering FY1972-74contained a num- ber of highway improvementand constructionworks totallingYD 7.5 million. These projects were selected without being preceded by feasibilitYstudies. However, during 1972-73 under the First Highway Project Dar Al-Handasah (Lebanon)and Viak carried out highway feasibilityand maintenance studies respectively. The results of these studies now form an adequate basis for highway planning in the MPW. L. Financing

3.16 ilighwayconstruction and maintenance are funded from the general budget and by foreign loans and grants. Government expenditureson higlhways during 1970-73have more than quadrupled from about YD 0.5 million to YD 2.3 million (Table 7). hlisincrease has been realized with foreign aid from the People's Republic of China and the USSR.

3.17 Revenues from road user charges in 1972 consistedof import duties on motor vehicles and spares (9%O);import duties and taxes on oil products (69%o); vehicle and drivers' licensing (10%); and GDT charges and minor amounts in road tolls (12%). The road tolls are collected by local road authorities. The only portion of the revenues from road user charges earmarked for the road budget is the 30% of the GDT revenues allocated to the llPW'sHighway Department budget (para 3.08). Road user revenues are sufficient to cover the increases in expenditureson road administrationand maintenance recormendedby Viak (para 3.24), as well as a significantproportion of the investments.

F. Engineering

3.18 Highway design is carried out by the Survey and Design Division of the ilighwayDepartment, and by consultants. The Survey and Design Divi- sion carries out design of improvementand some constructionworks; its performanceis satisfactory. The infrequentmajor design works are carried out by consultants. Detailed engineering for the project roads was carried out by Dar Al-hlandasah; other recent design works have been carried out by a bilateral aid team from the People's Republic of China, and the UNDP rendered assistance to the Survey and Design Division when detailed engineering was prepared for tile36 km 4obat Dukein-Kersh road towards the Yemen Arab Republic border.

3.19 Under the First Highway Project Viak prepared basic guidelinesfor road standardswhich are satisfactory. Detailed standards, especially for higher class roads, have been prepared on the basis of feasibilitystudies; these design standardsgenerally fall within the guidelines developedby Viak. During negotiations,the Association agreed with the Government on the intro- duction of completehighway design standards,including design axle loading for bridges, and a related timetable.

G. Construction

3.20 The ConstructionDivision of the Highway Department is responsible for road constructionworks. It carries out force account constructionand supervises the works on the UNDP-financedNobat Dukeim-KershRoad and the Am Ayn-NagabahRoad, being constructedwith bilateral assistance from the People's Republic of China. - 9 -

3.21 Table 7 shows that expendituresfor highway constructionhave sig- nificantly.increasedduring 1971-73. The UNDP and the WFP have financed equipment,materials and part of wages for constructingthe Nobat-Dukeim- Kerish Road; constructionis carried out by 11PWforces under the direction of experts provided by UNDP. The WPP also assists the Highway.Department with food contributionson about 15 minor road and track improvementand constructionworks. The projects contain an important element of training for Highway Department staff on the job. The An Ayn-Al Mukalla Road is being constructedwith staff and equipment from the People's Republic of China. The Highway Department exercises a nominal supervisionof this project.

3.22 The quality of-constructionis generallysatisfactory, but the lack of staff in the ConstructionDepartment and of funds regularlycause delays. The local contractingindustry is insignificantand capable of under- taking only minor road works such as haulage and masonry works. Since, in accordance with the Government's general policy, the 1PW intends to eventually carry out most road construction and mpaintenance works by force account, the Government does not encourage the creation of a local private sector construc- tion industry.

3.23 The IHighway Department has a soils and materials laboratory adequate for envisaged needs. The Departmentis, however, short of skilled staff for constructionsupervision and requires technicalassistance to continue that rendered by Viak. This assistancewill be provided under bilateral aid agree- ments (para 3.11).

H. highway Maintenance

3.24 Lffective highway maintenancewas virtuallynon-existent before the start of the First liighway Project in 1971. The Credit Agreement for that project required the Government to allocate YD 150,000=for road maintenance in-FY 1972, and in the following fiscal years such funds as would be-consis- tent with Viak's assessmentof the appropriatelevel of.highway expenditures needed to maintain the highway network in a satisfactorymanner. During im- plementationof the project, some improvementin road maintenance-hasoccurred, notably in equipment repairs and in works supervision,but lack of maintenance is still evident, particularlyon the asphalted road network. Although the Governmentrealized the importanceof adequate maintenance,budgetary con- straints in recent years have caused annual maintenanceexpenditures to re- main at an average of YD 150,000 (Table 7). Early in 1974 Viak drew up a highway maintenanceand improvementprogram calling for average yearly main- tenance expendituresof YD 150,000 on asphalted roads, and maintenanceand improvementexpenditures of YD 380,000 on other roads and tracks. In view of the country's difficult financialposition, significantincreases in the budget allocationfor road maintenancewould have been expected to occur only gradually, and the maintenance efforts so financed concentratedon the as- phalt roads where traffic volumes are highest and pavement distress most evident. However, during negotiationswhen Viak's recommendationswere dis- cussed, Governmentinformed the Association that its 1974/75 allocationfor road maintenancewas YD 527,340 and that future allocationswould be made oa - 10 - the same basis; moreover, YD 700,000 had been allocated in the 1974/79 Five Year Plan specificallyfor the repair and maintenanceof existing asphalted highways. The budgetary needs of road maintenance,therefore are being very adequatelymet.

3.25 Equipment for highway constructionand maintenance is of varied manufactureand originates from the US, UK, German Democratic Republic, Czechoslovakiaand USSR. It is operated in pool with all other MPW equipment. Some of the equipment, notably light graders and large crushers,which are not sufficientlymobile, is not suited for conditions in the PDRY. Credit 240-YDR financed the procurementof some replacementitems. Government has requested that provision be made under the currently proposed credit for purchasing the remainder (para 4.07).

I. Training

3.26 While the present staff of the Highway Department contains some capable engineers and administrators,many posts are vacant and a large part of the staff lacks practical experience. The Highway Department has a Train- ing Section but it is largely ineffectiveas it has a staff of only one, and no training programs exist. On-the-job training provided by Viak in the Highway Department and by bilateral technical assistance from the German Democratic Republic in the EquipmentDepartment has given good results for the few qualified counterpartsthat could be found. A training course di- rected by Viak for 14 surveyors in the Highway Department has also given good results. In addition,a total of 16 fellowshipsabroad ranging =from 2 to 12 months were granted by UNDP and bilateral sources, they concentratedon middle level management and specializedtrades and were only moderately successful, mainly because of language difficulties. Highway Department management staff who could have benefited from fellowships,received only two of these grants. Government proposes to remedy the situation and has requested that a suitable number of fellowshipsabroad for Highway Department management be provided under the project.

IV. THE PROJECT

A. General

4.01 The project consists of:

(a) constructionof 358 km of road from Al Mukalla to Saywun via Al Riyan and Al Qatn, including a b anch from Al Riyan to Ash Shihr, and supervision of this construction (see Maps);

(b) engineering and economic studies of the Nagabah-Ataq-Beihan- Al Ayn road (320 km) (see Maps); - 11 -

(c) technical assistance in planning, to the NPW, including fellowships;

(d) purchases of equipment and related spare parts for highway maintenance;and

(e) refinancingof highway engineeringCredit S-12 YDR.

B. Road Construction

4.02 The project roads to be constructedwould replace the existing cob- blestone roads from Al Mukalla to Al Riyan and from Al Qatn to Saywun and pro- vide a new road connection between Al Riyan and Ash Shihr on the Coast and Al Riyan and Al Qatn in the Wadi Hadramawt. All roads would be constructedwith a two-lane, 6m-wide bituminous surface-treatedcarriageway, and lm-wide shoulders. Feasibilitystudies of the Al Mukalla-Al Riyan-SaywunRoad were carried out by Dar Al-Handasah financed under Credit 240-YDR; and of the Al Riyan-Ash Shihr Road by a FAO/IBRD CooperativeProgramme fisheries project preparationmission. The detailed design, also financed under Credits 240 and s-12 YDR, was prepared during 1972-73 by Dar Al-Handasah. Details of the design standards,which are satisfactory,are shown in Table 8; proposed alignments are shown on Map 11046.

4.03 Currently three roughly parallel tracks exist between the Wadi Hadra- mawt and the coast: one connecting Ash Shihr with Ghuraf in the eastern end of the Wadi Hadramawt; the second leading from Al Mukalla to Haura in the western end of the Wadi; the third approximatelyequidistant between these two, and approximatelyon the proposed alignmentof the project road (see map 11046). Based on the feasibilitystudies, this middle alignment was selected. In the areas along the coast and in the Wadi Hadrawawt, the project alignment closely follows the present cobbled roads. The mountain and plateau areas are desert and virtually uninhabited. Acquisitionof right-of-way,therefore, did not impose any constraintson alignmentselection, which was made in con- sideration of constructionand transport costs, and the region's development potential.

4.04 The coastal road and the stretch in the Wadi Hadramawt would pass through flat or slightly rolling terrain. Two very steep escarpments,at Abdallah Gharib and Al Qatn, lead to an arid region, which is mountainous to the south (about 30 km) and a flat plateau to the north (about 100 km). Con- struction materials are abundant along the alignments;although the plateau region is for the most part arid, some perennialwater sources near the pro- posed alignment have already been found. Government is carrying out explora- tory drilling to locate additional sources in order to reduce transport costs during construction. As constructiontechniques can be simplified if water is freely available, costs may be further reduced; Government'sexploration work up to a ceiling of US$60,000 is proposed to be financed retroactively from the Credit. - 12 -

C. Engineering and Economic Studies of the Nagabah-Ataq-Beihan-AlAyn Road

4.05 The Nagabah-Beihan-AlAyn road would link the Al Ayn-Al Mukalla Road, currently under construction,with the Wadi Beihan agriculturalarea. Detailed engineering exists for about 240 km of this road (the sections As Said-Beihanand a branch road Ataq-Nisab),but requires revision in the light of the findings of a feasibilitystudy carried out by Dar Al-Handasah (para 3.15). The project provides for the updating of this feasibilitystudy, its extension to include the Nagabah-As Said section, and the revision and exten- sion of detailed engineering (estimatedat about 100 km) as may be identified. The Government is likely to request the Association to include this road as a component of a future highway project.

D. Technical Assistance to the Ministry of Public Works

4.06 Governmentwill receive bilateral aid from the USSR, German Demo- cratic Republic and Hungary which will provide for the continuationand con- solidationof the work of Viak and implementingits recommendationsfor: (i) executing and supervisingroad works; (ii) implementingcost accounting and control systems for equipmentmaintenance and for road works; (iii) continuing traffic counts and analyses; (iv) procuring equipment and spares; (v) planning and organizationof road works; and (vi) drawing up and implementingtraining programs for Highway Department staff. To balance the team of experts pro- vided in this way the credit will finance the services of two transportation economistswlho will concentrateon the economic aspects of the highway sector. To further supplement the technical assistanceto the NPW, the project would include fellowshipsabroad which would provide selected MPW staff with much needed exposure to modern highway administration. During negotiations,the details of the technical assistanceand training, including the number and types of fellowships,were discussed and agreed with the Government.

E. Purchases of Equipment and Related Spare Parts for Highway Maintenance

4.07 Although the road maintenance equipment fleet of MPW is nearly large enough to cope with foreseeableneeds, it includes many items nearing the end of their useful life, and is of diverse origins and manufacture. In reviewing the adequacy of the fleet during 1972 Viak identifiedrequirements for addi- tional and replacement items, which since then have been partially met through procurementunder Credit 240-YDR and bilateral assistancefrom the USSR. Some items, however, are still urgently needed. These are, principally,heavy graders for road maintenance and improvementworks and a portable asphalt plant with loaders and trucks to expedite the long-deferredrepairs and main- tenance of the paved road network. The project, therefore,provides for the purchase of such additionalequipment and related spare parts. The items of equipment to be procured have been discussed and agreed with Government and are listed at Annex E.

F. Re-financingof Highway EngineeringCredit S-12 YDR

4.08 Highway EngineeringCredit S-12 YDR financed principallythe detailed engineeringof the roads to be built under this project. Governmentand the - 13 -

Association thes agreed that the Credit might be refinancedunder a subsequent highway project. Accordingly,it is proposed that the US$560,000 proceeds of Credit S-12 YDR less the US$30,000 first maturity payment which falls due on May 15, 1975, be cancelled and reallocatedto the proposed credit as part of the project costs.

G. Cost Estimates and Foreign Exchange Component

4.09 The total cost of the project is estimated at US$31.8 million equiv- alent, including taxes and duties. The contingencyprovision for price es- calation is estimated at 15% for civil works as most constructionmaterials and foreseeableequipment spares will be contractedwhen work begins, and 10% for all other items except the refinancingof Credit S-12 YDR. Physical con- tingencieshave been allowed at 10% for all items except the road maintenance equipment procurement and the refinancingof Credit S-12 YDR. A summary of the estimatedproject costs is given on page 14.

4.10 The constructioncost is based on the Bill of Quantitiesprepared by Dar Al-Handasah in their detailed design. Because there has been no his- tory of road works executed by contract in PDRY, and Government,the Kuwait Fund and the Associationwere uncertainof contractors'response to bidding of the project roads, tenders, invited internationally,were opened in July 1974 for the package of road contracts. A contractorunqualified to do the work submitted the only bid, (about US$51 million), which was unacceptablyhigh and was rejected. An investigationby the consultant revealed that contractors failed to respond partly because of their unfamiliaritywith conditionsin PDRY, but mainly because of the volume of road works being contractedelse- where in the region where conditionswere more familiar and continuityof work appeared reasonablyassured. It appeared, therefore,that the only means of building the project roads would be by Government'sdoing the work with its own forces. However, Governmentlacks the management and technical expertise for such an operation; therefore these capabilitieswould need to be provided by an external agency. Because of their constructionmanagement expertise and their associationwith Governmenton other matters, (mainly procurementin connectionwith a previous highway project Credit 240-YDR), Government,the Kuwait Fund and the Association agreed that the UK Crown Agents (CA) provide these services. Accordingly a CA team was invited to PDRY in September! October 1974, and resulting from that mission and a later more detailed site visit in February 1975, submitted their constructioncost estimate based on the consultants'Bill of Quantities. This cost figure was confirmed at Credit negotiations.

4.11 The cost of the constructionsupervision, and engineeringand eco- nomic studies of the Nagabah-Beihan-AlAyn Road (about 80 man-months),and of technical assistanceto the MPW (about 48 man-months)were estimatedon the basis of the cost of services of a similar nature in the PDRY. Fellowships were estimated to cost US$10,000 for an average stay of eight months abroad. - 1 -

YD (Thousands) US$ (Millions) %Foreign Exchange Local Foreign Total Local Foreign Total Component l.(a) Constructionof Al Mukalla-SaywunRoad 2,88D 1,920 4,800 8.35 5.57 13.92 40 ) (b) EngineeringServices for ) supervision in connection with l(a) 20 85 105 0.06 0.24 0.30 80 ) 65%

2. Procurement of construc- ) tion equipment and ) materials (1(a)) 0 3,280 3,280 0 9.50 9.50 100 )

3. Engineering and Economic Studies of Nagabah-Ataq- Beihan-Al Ayn Road 35 140 175 0.10 0.40 0.50 80 4. Technical Assistance to MPW including Fellowships 40 100 1140 0.12 0.28 0.40 70 5. Procurement of Road Maintenance Equipment and Spare Parts 0 190 190 0 0.55 0.55 100 6. Refinancing Credit S-12 YDR 0 185 185 0 0.53 0.53 100

Subtotal 2,975 5,900 8,875 8.63 17.07 25.70 67

7. Contingencies: (a) Price: 20% on 2 & 5; 17.5% on 1(a); 10% on l(b), 3 & I 515 1,065 1,580 1.50 3.07 4.57 (b) Physical:10% on 1, 3 & I 295 225 520 0.87 0.66 1.53

Subtotal 810 1,290 2,100 2.37 3.73 6.10

TOTAL 3,785 7,190 10,975 11.00 20.80 31.80 66 - 15 -

4.12 The foreign exchange componentof civil works was originallyesti- mated by Dar Al-Handasah at 70% on the assumption that, in the absence of capable local contractors,the civil works would be carried out by foreign firms with minor parts of the works (haulage,camp construction,etc.) sub- contracted to local firms. Under the new arrangementsfor construction (para 4.09) the foreign exchange component is estimated at 65%. The foreign ex- change component of consulting services for constructionsupervision, tech- nical assistanceand detailed engineeringwere based on the assumption that these services would be carried out by foreign firms. During negotiations, the cost estimates for all project componentswere discussed and agreed with the Government.

H. Execution

4.13 To implement the arrangementsreferred to in para 4.10 above the roads will be built by a special semi-autonomousproject unit set up under MPW. This unit, which will be managed and operatedwith the assistance of CA under contract with MPW, will have freedom to act as a contractor in that it may:

(a) hire expatriate and local staff at competitiveand incentive wage rates; and

(b) import constructionmaterials, vehicles, equipment and spare parts free of duties and import control.

4.14 Separate provision is made in the Credit to enable the purchase soon after Credit effectivenessof needed constructionequipment and principal constructionmaterials. An advance of US$1.4 million (about 5% of construc- tion cost) will also be made to the project unit so that it can meet mobiliza- tion costs covering constructionof camps, workshops and facilitiesneeded prior to road constructioncommencing. So that the remaining payments under the project at any one time would relate to the actual amount of work then completed,Government has agreed to pay the unit as a contractor- according to the measurementsof the work items performed. This procedure would also simplify project supervision. As the project is not of sufficient duration (39 mo.) to depreciate fully the larger, more expensiveequipment items, CA will purchase some used equipment. Such equipment, produced by the main internationalmanufacturers, is now available in several parts of the world, but principallyin Europe, as a result of the reduced amount of work avail- able to the road constructionindustry. The procurementof such equipment will ensure that excessive constructioncapacity should not remain on comple- tion of the project; appropriateequipment with residual life could then be used for road maintenance tasks. Local personnel trained on the project would be absorbed into MPW's road constructionand maintenance organizations;after completionof the road constructioncamps would not be dismantled,but used as road maintenance camps and depots. During negotiationsassurances were obtained from Government that as a conditionprecedent to Credit effectiveness it will:

(a) take the legal or administrativeactions needed to set up a semi-autonomousunit, under MPW, to construct the road; and - 16 -

(b) enter into a contract on terms and conditions acceptable to the Association to provide the managerial and technical skills needed to operate the constructionunit, with CA or other competentmanagement group satisfactoryto the Association.

4.15 Constructionsupervision will be the responsibilityof MPW who will be assisted by the design consultant,Dar Al Handasah. MPW proposes to invite proposals from consultantsto execute the road studies of the Nagabah-Beihan- Al Ayn link. Individual experts will be recruitedby Government to provide the other technical assistanceservices needed. During negotiations,assur- ances were obtained from Government that it will:

(a) retain firms acceptable to the Associationon terms and conditions satisfactoryto the Associationto provide constructionsupervision and execute the road studies of the Nagabah-Beihan-AlAyn link; and

(b) recruit individualexperts satisfactoryto the Association on terms and conditions acceptable to the Associationto provide the needed technicalassistance services.

4.16 Civil works are expected to begin in late 1975 and to be completed about March 1979; studies of the Nagabah-Beihanroad should commence in late 1975 and be completedabout December 1976. Technical assistance to MPW should last for about two years from mobilizationof the needed experts. During nego- tiations a schedule for project implementationwas discussed and agreed with Government.

I. Procurement

4.17 CA will purchase on Government'sbehalf used and new road construc- tion equipment (para 4.14), and materials needed for road construction, through internationalcompetitive bidding in accordancewith the Bank's Guidelines for Procurement. There is no local manufacture of the equipment types needed. During negotiationsprocurement procedures were agreed with Government.

J. Financing

4.18 The project cost (US$31.8million) will be financed jointly by Gov- ernment (US$1.0million), the Association (US$15.5million) and the Kuwait Fund (US$15.3million). An amount of up to US$60,000 will'be financed retro- actively as from December 1974 from the Credit to meet some of Government's costs in the explorationfor groundwaterto facilitate constructionin the arid plateau area of the project road (para 4.04). A summary of project financing is at Annex B. Government's contribution amounts to 9% of local costs; the Association will finance 50% of foreign costs and 47% of local cc 's, and the Kuwait Fund will finance 50% of foreign cost and 44% of local costs. During negotiations,at which the Kuwait Fund was represented, a financingplan for the project was discussed and agreed with Government. - 17-

Assuranceswere also obtained from Government that it will be responsiblefor providing any additionalfunds needed to complete the project in the event of cost overruns.

K. Disbursements

4.19 Disbursementsfrom the credit account would be made on the basis of:

- 47% of the total cost of road construction,procurement of constructionequipment and materials,and engineeringservices;

- 0% of the cost of procurementof road maintenance equipment and spare parts; and

- 100% of the total cost of all other project items.

All requests for disbursementsfor road constructionand supervision together with supportingdocuments would be sent to the Associationand the Kuwait Fund upon receipt of which each institutionwould disburse its respectiveshare.

4.20 Based on the foregoingand in accordancewith the schedule for proj- ect execution,an Estimated Schedule of Disbursementshas been prepared (Annex C) and agreed with the Governmentduring negotiations. Should funds remain in the credit account after project completion,any undisbursedamounts would be used for the procurementof road maintenanceequipment.

V. ECONOMIC EVALUATION

A. Main Benefits and Beneficiaries

(i) Introduction

5.01 The roads to be constructedare located in the Fifth Governorate in the central part of the country. This governoratehas a populationof about 451,000 which is primarily engaged in agriculturaland fishing activi- ties.

5.02 Until independencein 1967, most of the country's developmentwas concentratednear Aden and communicationswith the rest of the country were difficult and practicallynon existent. Since then, Gover,nmenthas concentrat- ed on integratingthe various regions of the country economicallyand adminis- tratively as well as politically. To link Aden with Al Mukalla in the Fifth Governorate for these reasons, it is constructinga main paved road along the coast with bilateral aid from the People's Republic of China. The project road sections will extend this route from Al Mlukallato Ash Shihr (about 66 km), and to Wadi Hadramawt (about 292 km). - 18 -

(ii) Descriptionof the Area Served

5.03 The two areas to be connectedby the proposed road - the Wadi Hadramawt area and the coastal area of the Fifth Governorate- are at pres- ent only connected by tortuous tracks. Consequently,these two areas have developed into separate economic regions with limited exchange of goods and services. Table 9, which presents population statisticsof the principal cities in the Wadi Hadramawt and coastal areas, shows that 81% of the total population of the Fifth Governorateor approximately365,000 inhabitants would be the principal beneficiariesof the proposed road. This population does not include approximately9,000 nomads who roam the semi-arid plateau between the aforementionedtwo areas. Al Mukalla along the coast and Saywun in the Wadi Hadramawt, together with Aden (with an estimated populationof about 250,000) are the three largest cities of the country. The Wadi Hadramawt is the second largest wadi in the country. Together with a few population con- centrationsin the Second and Third Governorates,it is one of the most pop- ulous regions of the country.

5.04 Most of the agriculturalproduction in the Fifth Governoratetakes place in the Wadi Hadramawtwhere about 8,000 ha are cultivated. The only other significantagricultural area consists of 120 ha of tobacco near Ghail Ba Wazir. The production and consumptionstatistics shown in Table 10 indicate that the majority (98%) of the agriculturalproducts grown in Wadi Hadramawt are consumed in that area. Until recently, there has been little incentive to increase the agriculturalproduction, since the lack of a road between the Wadi Hadramawt and coastal areas impedes the developmentof markets on the coast. The present, potential demand for agriculturalproducts from the Wadi Hadramawt in the coastal area, is estimated at 26,000 metric tons per year. This quantity does not include additional shipmentsof agriculturalproducts, which could be transportedover the proposed road for consumptionelsewhere in the country or for export.

5.05- The main activitiesother than agriculturein the Fifth Governorate consist of coastal and deep sea fisheries and related industries at Al Mukalla comprising a small fish meal and oil manufacturingplant and a boatyard for the constructionof wooden vessels. Table 10 shows that of the 1974 total catch-estimateof 95,900 metric tons, only 2,800 metric tons of dried fish and 120 metric tons of fresh fish were consumed in the Wadi Hadramawt. With the existence of a road between Wadi Hadramawt and the coastal areas, the present demand for fresh fish in the former area would amount to about 10,000 metric tons. The Associationis presently financing a fisheries project in the Fifth Governorate.

5.06 Table 11 shows the public investmentsplanned for 1975-79 in the Wadi Hadramawt and the coastal areas. Finance for most of these projects has been secured and their executionhas alreacy been starced. The projects in the Wadi Hadramawt are primarily intended to raise agriculturalproduction, while those in the coastal areas are primarily intended to develop the fish- ing industry. These projects provide an assurance for the projectionsof normal traffic growth (para 5.12) and they also support the estimate of - 19 - generatedtraffic on the main link between the coast and Wadi Hadramawt. Constructionof a paved road between these two areas will lower transport costs significantlyand should promote the movement of people and trade, particularlyof manufacturedgoods and fresh fish from the coast in exchange for agriculturalproducts from the Wadi (para 5.12).

5.07 Another traffic generator in the area of influence of the Al Mukalla- Saywun road is the potential for tourism in the Wadi Hadramawtwhich has many historicalplaces and a remarkablelocal architecture(the clay multi-story buildingsof Shibam, the fortress of Arr, the ruins in Al Wasita and Rudood and the high cliffs of the Wadi). There are many hotels with excess capacity in the Fifth Governorate,while two, one in Saywun and one in Al Mukalla have modern facilities.

5.08 The main beneficiariesof the proposed road constructionare ex- pected to be the producers and consumersin the area. This distributionof benefits is the result of Governmentcontrol over rates, which intends to limit profits on vehicle operation and to set rates in line with vehicle operating costs. Government'sobjective is to stimulatedevelopment and economic integrationby passing on to producers and consumersmost of the road user savings resulting from road improvementworks.

B. Economic Evaluation

(i) Traffic on the Al Mukalla-SaywunRoad

5.09 The present, northbound trafficbetween Wadi Hadramawt and the coast consists primarilyof the transportof passengersby truck or four-wheel drive vehicle and the followingproducts: dried and fresh fish, including dried sardines used as camel feed and fertilizer,and imported canned fish, rice, fertilizers,fuels and manufacturedproducts. There is excess truck capacity southbound,since the present traffic in this directionconsists only of the transport of passengers,some agriculturalproduce (see Table 10), and charcoal. The traffic statisticsof Table 12 indicate that the average annual growth rate of the average daily traffic (ADT) between Wadi Hiadramawt and the coast amounts to 18.8% for the period 1968-74 and 9.7% for the years 1972-74,while the 1974 ADT is 59.

5.10 The local traffic statisticsof Table 13 show that during 1971-74 the growth rate of this traffic in the Wadi Hadramawt has been particularly high. The 1974 ADT representinglocal plus through traffic ranges from 129 to 188 for sectionsof the proposed road in the Wadi Hadramawt, and from 137 to 313 for sections of the proposed road along the coast.

5.11 On the basis of past trends in traffic growth and planned economic developmentin the Wadi Hadramawt and the coastal areas (see Table 11) the average annual growth in through trafficwas estimatedat 9% for the first ten years of the project life and 8% for the remainingten years. Correspond- ing annual growth rates for local traffic in the Wadi Hadramawt are 8% and 7%, and for local traffic along the coast 6% and 5%. Tables 14 and 15, which - 20 - present normal traffic volumes by section on the road network analyzed for 1979 before and after opening of the Al Riyan-Al Qatn road, respectively, indicate that after opening a significanttraffic diversion to this road is expected.

5.12 The reduction of transport costs following completionof the road between the coast and Wadi Hadramawt should generate additional travel and trade (para 5.06). It is difficult to estimate the additionalvehicles in- volved, because of the existence of excess truck capacity southbound and the possibilityof shifting from four-wheeldrive vehicles and light trucks to buses and heavier trucks, and the shift in trade from low value to higher value commodities. Therefore, the benefits from such traffic have been estimated directly,assuming price elasticitiesof respectively1.5 for passengers and 1.00 for freight. These elasticitiesmay be too conservative consideringthat the current volume of trade and traffic is minimal and that the Government intends to promote the economic integrationof these two areas by appropriatemeasures. For the local roads, generated traffic and benefits have not been taken into consideration.

(ii) Benefits from the Proposed Road Construction

5.13 Benefits from road constructionwere quantified for savings in vehicle operating costs of normal traffic. The operating costs for the five vehicle categoriesconsidered (passengercar, four-wheel drive vehicle and trucks with load capacities of 5, 8 and 12 tons, respectively)are shown in Table 16; they are based on the averaged characteristicsof typical vehicles by type of road as given in Table 17. The expected unit savings in vehicle operatingcosts range from 37% to 57% for passenger cars and four-wheel-drive vehicles and from 36% to 64% for trucks.

5.14 Significantbenefits will also accrue from the reduction in other transport costs such as the cost of packaging and losses due to breakage, other damages, and spoilage of perishable goods. These benefits could not be fully quantifiedbecause of lack of data; only the potential spoilage of fresh fish has been estimated. Limited quantitiesof fresh fish are currently been transportedin light trucks from the coast to Wadi Eadramawt, although the catch is largely spoiled upon arrival; trucks occasionallybreak down and the catch is a total loss. On conservativeassumptions regarding the degree of spoilage and the volume of fresh fish likely to be transported upon opening of the main road link, the benefits from reduced spoilage are estimated at YD 175,000.

5.15 Other quantifiablebenefits are savings in maintenance costs of existing cobbled sections and escarpmentsof the proposed road construction.

(iii) AlternativesConsidered

5.l6' Two alternative road surfaces were considered for the proposed road connections: oil-stabilized-gravel and bituminous surface treatment. In ad- dition, two alternativeroad alignments along the present Eastern and Western - 21 -

tracks were considered for the main connection (Al Riyan-Al Qatn). Economic considerationsresulted in the selectionof a bituminous surface treatmentof the proposed alignment.

(iv) Economic Returns

5.17 For the evaluation of the economic returns (ERs), the initial invest- ment cost was taken as the basic constructioncost (YD 5.84 million) together with the provision for preliminarycosts (YD 1.16 million) and overheads (YD 1.19 million) totallingYD 8.19 million. To this sum was added a contin- gency allowance for quantity increase (YD 0.49 million). Constructionwas assumed to commence in 1975 and to be completed in early 1979.

5.18 The ER was computed on the basis of the full stream of benefits, annual and periodic maintenance costs (see Table 18) and initial investment costs. The returns, given in Table 19, show that the constructionworks would have an overall rate of return of 15.4% with the various sections rang- ing between 12.7 and 23.6%. The first-yearreturn of the constructionworks is 12%.

5.19 Sensitivityanalyses testing the ER of the whole project (15.4%) gave an overall project return of 14.6%, assuming 15% cost overrun, and an overall return of 14.5%, assuming a 15% reductionof benefits (see Table 20). ER's based on more conservativetraffic forecasts also show that the proposed road constructionwould be justified (see Table 19). The lowest ER based on the most conservativetraffic forecast amounts to 11.0% and relates to the Al Qatn-Saywunsection. From a probabilityanalysis, taking into consideration factorshaving a significantdegree of uncertainty (constructioncosts, main- tenance costs, traffic forecasts, and vehicle operating costs), it appears that the overall ER will have a 75% probabilityof being higher than 13.8%. Details of the probabilityprofiles assumed in the calculationsand the re- sults are given in Annex D.

5.20 The above ERs are conservativeestimates because the benefits do not include:

(i) savings in passenger travel time, reduction in accidents, and increased comfort of travel;

(ii) transport savings from a probable shift to larger size and more efficient vehicles;

(iii) savings from generated traffic on the local roads;

(iv) savings from reduced packaging requirements,breakage, other damage, and spoilage of perishable goods except fresh fish; and

(v) the possible exploitationof oil north of Wadi Hadramawt. - 22 -

Neither were certain important indirect benefits consideredsuch as the socio-politicalimprovements made possible by a better road between the Wadi Hadramawt and the coast.

C. Road Studies and Technical Assistance

5.21 Benefits from road studies and technical assistancehave not been quantified. Revision and extensionof the feasibilitystudy of the As Said- Beihan and related detailed engineering (see para 4.05) is required on the followingbasis. The Am Ayn-Al Mukalla road, which is presently under con- struction and will connect Aden with Al Mukalla, and the Nagabah-Beihancon- nection would link the agricultural areas of the Wadi Beihan and the Wadi Habban with three major cities (Aden, Al Mukalla and Ash Shihr). Consequent- ly, the Nagabah-Beihan connection would integrate these two wadis with the rest of the country, which appears desirable from economic and administrative view points.

5.22 The technical assistanceshould help ensure that future operations and investmentsin the sector would maximize socio-economicbenefits. It is justified on the basis of increased efficiencyof investmentsand operations in the transportsector as a whole. The two proposed transport economists provide, with the forthcomingbilateral technical aid, a well-balancedteam for assistancein road constructionand planning. The fellowshipsare expect- ed to contribute to a more efficient and adequate NTW organizationthat can be increasinglyresponsive to the administrative,planning, and operational requirementsof an integrated transport system.

VI. RECOMMENDATIONS

6.01 During Credit negotiations,Government confirmed its intention,by June 30, 1977, to instituteprocedures for the periodic revision of freight rates for truckers (para 3.08), and agreed:

(a) the need for appropriatelegislation governing the weights and dimensions of vehicles using the national highways system and a timing for its enactment (para 3.10);

(b) the need to introduce appropriatehighway design standards to cover the requirementsof the national highway system (para 3.19); and

(c) the need to allocate annually fund adequate fir the maintenance of the national highway system (para 3.24).

6.02 As conditions of effectiveness of the credit Government will:

(a) take the necessary legal and administrativemeasures to set up a semi-autonomousconstruction unit under MPW (para 4.14); and - 23 -

(b) enter into a contract on terms and conditionssatisfactory to the Associationfor the provision of the management and technicalskills needed to operate the constructionunit with CA or other competentmanagement group satisfactoryto the Association (para 4.14).

The prior or concurrenteffectiveness of the Kuwait Fund Loan is also a con- dition of effectivenessof the proposed Credit.

6.03 The project provides a suitable basis for an IDA credit of US$15.5 million equivalentto the People's DemocraticRepublic of Yemen on the usual terms.

Mai 1975

APPRAISAL OF A SBUONDHIGHWAY PROJECT

PEOPLE'S DEKOCRATICREPUBLIC OF YEMEN

Activities in the Port of Aden, 1966-73

1972 1973 Type of Activity 1965 1966 1967 1968 1969 1970 1971 Port Calls ships 5,727 6,246 3,100 1,382 ',568 1,613 1,466 1,371 1,320 dhows 2/ 1,519 1,443 1,415 1,347 1,434 1,310 938 705 625 Tonnage(1000 NRT) ships 28,442 21,426 15,349 6,101 8,089 8,174 6,512 5,695 5,542 69 dhows 148 140 - 137 128 131 125 88 65

Tran.sitPassengers (1000) 146 128 28 1 3 3 2 0 0 BunkerFuel (1000metric tons) 3,321 3,489 1,400 388 576 557 409 353 305 Dry Cargo (1000metric tons) 698 674 482 455 436 460 299 303 309 imported 65 exported 296 279 256 201 185 155 132 73

Oil Cargo (1000metric tons) 8,274 8,083 6,109 5,145 6,609 6,477 3,896 3,720 3,342 imported 2,723 exported 4,243 3,985 4,355 4,372 5,585 5,625 3,138 3,100

1/ CalendarYears. 2/ Poweredbarges of smalltonnage used mainlyfor coastaltrade.

Source: Yemen Ports Corporation. H

May 1975 APPRAISAL OF A S1CONDHIGHWAY PROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YE2EN.

Revenues and Expenditures of Yemen Ports Corporation. 1966-73 (YD thousan

1966 1967 1968 1969 1970 1971 1972 1973

Revenues 1,738 1,851 962 924 1,041 1,246 969 886

Tolls and wharfage on imports, exports and 542 517 362 45h1 491 675 422 380 transshipments Tolls on bulk oil installation 347 398 113 66 71 77 '73 71 Tolls and commuted payments on little Aden 151 151 123 121 160 152 153 112 Refinery Pilotage charge' 154 181 51 39 49 48 40 40 Port dues 406 457 140 113 157 147 158 152 Others 139 147 172 134 113 147 123 131

Expenditures 1,540 1,500 1,455 1,1Oll 880 937 894 829

Current expenditureg, 1,371 1,294 1,366 791 822 868 888 819 Capital expenditures-/ 169 206 89 220 58 69 6 10

Balance 198 352 - 493 -87 161 309 75 75

- 1¢~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- 1/ Fiscal years ending iMarch 31. I' 2/ Including depreciation and renewals.

Source: Yemen Ports Corporation.

May 1975 TABLE 3

APPRAISALOF A SICONDHIGHWAY PROJHET

PEOPLE'S DEKOCRATICREPUBLIC OF YEMEN

Aden Airport Traffic 1965-72

Passengers Freight Aircraft Arrivals and Departures- (thousand Movements Year (thousands) metric tons) (thousands)

1965 169.2 4.0 12.3 1966 163.6 3.2 10.6 1967 89.9 1.7 6.2 1968 106.5 1.8 5.6 1969 125.7 1.9 6.4

1970 147.8 2,4 6.7 1971 153.1 2.3 7,0 1972 137.4 2.3 6.1

l/ Excluding transit passengers Source: Department of Civil Aviation

May 1975 APPRAISALOF

A SECONDHmBWAY PROJ1IT

PEOPLE'S DEYCRATIC REPUBLIC OF YEMEN

Planned Public Investments 1972 - 74 and 1975 - 79 Total Planned Investm nts Average Annual Planned Investments Distribution YD2?iIlion) (YD million) (Ti A. Investments by Sector 1972-71975-1979 1972-191h 1975-1979 1972-1974 1975-1979 Agriculture and Fisheries 10.5 27.7 3.5 5.5 26 37 Industry 9.7 13.5 3.3 2.7 24 18 Transport and Communications 12.8 19.1 4.3 3.8 32 25

Mineral Exploration 2.6 0.9 0.9 0.2 6 1 Social Services 4.7 14.2 1.6 2.9 12 19

Total 40.3 75.4 13.5 15.1 100 100

B. Souree of Finance

Domestic 24.5 34.5 8.2 6.9 61 46 Foreign 15.8 40.9 5.3 8.2 39

Total 40.3 - 15.1 100 100

/ Fisecal years ending March 31. Fisoal years 1972-74 correspond to the comrpleted Thbrewsrr Dev-loapent Plan; fiscal years 1975-79 oorrespond to the ourrent Five-Year Development Plan.

2/ Expenditures during fiscal years 1972-73 amsounted to YD 12.3 million or 31% of total planned inveBtments, during fiseal years 1972-74.

Sources Quinquwnnial Plan for Economic and Social Development (1974/74-1978/79), Aden,PDRY, March1974. May 1975 APPRAISAL OF

A SECONDHIGHWAY PROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YEMEN

Length and Distributionof Road Network. 1973 (km) Surface Type

Governorate Asphalt Cobble Gravel Earth Beach Total

Firsti 105 0 0 48 0 153 Second 88 0 21 602 2 713 Third 272 0 0 523 87 883 Fourth 0 0 0 1030 59 1089 Fifth 10 203 11 1952 9 2185 Sixth 0 0 0 486 0 486

Total 475 203 32 4641 157 5509

% of Network Length 8 4 1 84 3 100

1/ IncludingAden which has 83 knmof asphalt roads.

Source: Highway Technical Assistance Interim Report, Part I, Viak, Aden, March 1972, and Ministry of Public Works.

May 1975 TABLE 6

APPRAISAL OF

A SECOND HIGHWAY PROJBWT

PEOPIE'S DEMOCRATICREPUBLIC OF YEMN

Registered Vehicles by Governorate,1971

Govern9rate2/ Cars -2axis Buses Trucks Total

First3/ 8,827 921 108 2,820 12,676

Second 77 200 21 1,500 1,798

Third 129 831 - 4o6 1,366

Fourth 269 177 - 1,o040 Fifth 39 626 - 2,165

Total 9,341 2L755 129 6,820 192045

1/ Excluding vehicles belonging to the Ministrie8 of Defonse and Interior. f/ Vehicles in the Sixth Governorate are registered either in the First or Fifth Governorate. 3/ Including56 cars and 1,h70 trucks, belongingto Government,which are not registeredby Governorate. L/ Includingfour-wheel drive vehicles.

Source: Central StatisticalOffice

May 1975 APPRAISAL OF

A SEOND HIGHWAY PROJECT

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN HighwayRevenues and Excpenditures1968-1973- (YD thousand)

Revenues 1968 1969 1970 1271 1272 1973 Import duties and taxes on gasoline, diesel oil and lubricants 600.0 670.0 837.6 1056.3 1149.6 n,a on vehicles and spares 122.8 172.5 160.3 142.4 146.9 n.a. Import duties n.a. GDT charges and road tolls 160.0 254.4 235.6 224.6 200.0

Licensingfee, on vehiclesand drivers 157.0 141.5 136.3 153.6 168.0 n.a. Cart tax 0.6 0.7 0.7 0.14 0.3 n.a. Total 1,040.4 1,239.1 1,370.5 1,577.3 1,6614.8 1,665.0 2/ ___ Expenditures 2 Administration 35.1 27.7 25.7 30.6 35.8 68.2 Workshops 196.6 201.2 251.14 252.6 172.8 176.6 Road maintenance 189.6 202.1 133.2 1714.7 / 13147 lf,0.0o Road construction 369.7 173.0 105.8 1451.34/ 1,1639W 1,95,24' Total 791e0 604.0 516.1 909.2 1,507.2 2,361.0

1/ Fiscal years ending March 31. 2/ Not including expenditureson municipal roads averaging about YD 32,000 per year. 3/ n.a. = not available - ,lIajorproportion of constructionexpenditures provided by People's Republic of China.

Source: Ministry of Public IWJorks.

May 1975 TABLE 8

APPRAISAL OF

A SECONDHIGHWAY PROJECT

PEOPLE'S DEMOCRATICREPJBLIC OF YEMEN

Design Standardsfor Project Roads

_Lypeof Terrain Design Element Flat Rolling Mountainous

Design speed (km) 80 50 30

Lane width (m) 3 3 3

Lanes (No.) 2 2 2

Shoulder width (m) 1 1 1

Minimum horizontalradii (m) 200 100 40

Maximum grade (%) 4 9 13

Minimum sight distance (m) 110 60 33

Passing sight distance (m) 500 200 100

Maximum Single Axle Load (m tons) 10 10 10

Source: Dar Al-Handasah,November 1973

>y 1975 TABLE9

APPPAISAL OF

A SECOND HIGHWAYPROJECT

FEOPLE'q DEMDCRATICREFUBLIC OF YEMEN

1973 Fifth GovernoratePopulation Statisticsi/

.- ~~ ~~~~ , -dadi Hadramawt Fifth Governorate Area Coastal Area District Population City ,Population City Population

South 107,764 Saywun )43,637 Al-Mukalla 53,295

East 81,696 Tarim 42,906 Ash Shihr 31,716

West 82,539 Sif 34.096 Ghail Ba Wazir 25,656

Center 4B,114 Shiban 28,561 Al Hibs .1971

North 130,544 Al Qatn 26,355 Proom, 9,497

Wadi Ahned. 23,944

Haura 9,972

Sah 9,965

Al Ghuraf 5,475

; Tota2l 450,657 j 22h,911 1139,735 100 50o j 31

1/ Country'stotal populationis approximately1.6 million.

Sou.rce: Ministry of Planning

Mya,1975 TABLEI7

APPRAAISALOF

A SECOND HIGHWAYPROJECT

PEOPLE'S DEMOCEATICREPUBLIC OF YEMEN

1974 Production and Consumption 3stimatesfor dTadi Hadramap-et and Coastal Area of Fifth Governorate (metric tons)

_ Production Consumption Product Wadi Coastal I Wadi I Coastal HadramawtE Area Hadramawt i Area

4heat 6,6h0 - 6,6h -

Sorghum 2,500 - 2,500 -

Vegetables 2,800 2,500 300

Alfalfa 15,400 . - 15,00

Dates 9,600 - 9,100 500

Sesame 120 I ' -

Dried fish, - 2 2/8-

I Fresh fish, - 5,9o0 120 4,890

Toal 37,060 39,060 5,690

1/ n.a. * not available. 2/ Excludes dried sardines used as camel feed and fertilizer.

Source: Saywun AgriculturalResearch InstitutE,Mukalla and Ash Shir Fish Corporations,and Handbook of Statisticsand Tourism for the Northern District,Fifth Governorate(1970).

MayV1975 TABLE 11

APPRAISALOF

A SECONDHIGHWAY PROJECT

PEOPLE'S DENDCRATICREPUBLIC OF YEMEN

Pablic InvestmentsAln Fifth Governorate 1974-1979

Commencement Project Costs Nature of Project & Completion (I thousand) Foreign Description Years Local Foreign Total Financing

A. Wadi Hadramawt

11.State farm 1974/75 157 - 157 2.)Drilling of 40 artesian wells 1974/75 - 1,070 1,070 bilateral aid 3.iTwo cold storage facilities for fish (Al Qatn & Saywun) 1975/75 - 60 60 bilateral aid 4.!Station for the renting of I agricultural implements 1975/76 133 - 133 5. Wadi Hadramawt agricultural 6 development study 1975/76 11 89 100 IDA 6. Centres for plant protection 1 975/79 60 / - 60 J 7. Veterinarycentres 1975/79 68 - 68 8. Electrification 1976/77 1,340 1,005 2,345 bilateral aid 9. Agricultural9 Project 630 2,170 2,oOO IDmA Subtotal 2,399 4,394 6,793

B. Coastal Area l

10. Cold storagefacilities for l fish at Al Mukalla & Ash Shir 1974/76 114 536 650 IDA 11. Technical assistance for fisheriesdevelopment 1974/76 66 965 1,031 IDA 12.'Al Mukalla boatyard 1974/76 - 110 .110 bilateral aid 13. Fishing vessels 1974/77 100 553 653 IDA 141.Al Mukalla water supply study 1975/76 3 16 19 IDA 15. Cold storage facilities along coast 1975/77 - 200 2005' bilateral aid 16. Coastal road from boundary with Fourth Governorate to - Al Mukalla 1975/77 - 410-5l 41i bilateral aid 17. Maifa Hagr development 1975/77 652 - 652 18. Fish canning factory (Al Mukalla) 1975/78 - 1,280 1,280 bilateral aid 19. Expansionfish meal factory 1975/78 155 2,420 2,575 Arab Fund 20. Coastal road from Ash Shir to boundarywith Sixth Governorate. 1977/79 - 360 3605/ bilateral aid iSubtotal 1,090 6,850 7,940 _

C . tGail Ba Wazer

121.Tobacco production 1976/79 81 _ 81

Total 3,570 - 11S244 1l4,814

/ Excluding Ministry bf Public Works investmentsfor the repair and maintenanceof roads, expansionof workshop-capaeit and purchase of road equipment. 2J Fiscal years ending March 31; fiscal years 1975-79 correspondto the current Five- Year Development Plan. This project is a possibility, since its financing has not yet been ensured. 2 Pbssibly supplementedby another internationalfinance organization. Estimate

Source: Ministry of Planning

MaY 1975 APPRAISAL OF

A S9CONDHIGHWAY PRW0JET

PEOPLE'S DEMOCRATICREPUBLIC OF YEYE

Annual Through Traffio Between Wadi Hadramawt and the Coast 1968-1974

Y / _ * Uteax}4;ate ack2 2;a-- _ _ LL1T_r . \Yearil FrWuMVD TrTaotal -Al Txok) PWD / Truck u 1 2 Total FWDIVF(W /Tnaok& otal FDY- 1 TruckA' Total

1968 n.a. n.a. 2,900 _ _ _ n.a. n.a. 4,900 n.a.| na| 7,800' n.a. | n-a. 21 1969 n.a. n.a. 3,800 _ _- n.a. 6,000 n.a. n.a. 9,800 j n.a. n.a. 27 n970 n.a. _-n.a. i n.a. n.5a. n.a. n.a. 13,000 n.a. n.a. 36 n. a, 6,800 n.a. 1971 ~~~~~~~~~n.a.1710 n.a. n.a. 4 n.a. n.i. 6,800 - - - n.a, n.a. 10,300 n.a. 47 2972 835 3,032 3,867 4 98 102 1,142 12,798 13,940 1,981k 15,928- 17,909 ' 5 144 49 1973 844 2,250 3,094 48 422 470 1,218 14,4641 15,682 2,110 i17,136 19,246 1 6 47 53 1974 996 2,132 3,128 84 1,458 1,542 1,442 15,350j 16,792 2,522 18,940 21,462 79

.1/ 1968-71 data are estimates based on Consultant' s report; 1974 data are information. estimatesbased on January through November 1974 2/ Centralbraok was opened late in 1972. Four-wheelF drive vehicles plus an insignificant portion of, midsized European cars. Trucks with 5 and 8 tons load d capacity plus fuel tankers; the number of fuel tankers has been during 1972-74 amounting to relatively constant approximately 95 on the Western Road aud 3,400 on the Eastern Road. TTrucks with 5 and 8 tons load capacity. n.a. = not applicable. H

Source: Departmentsof Public Transport at Al Mukalla and Ash Shihr and Departmentsof Traffic at Al Mukalla and Ash Shihr. 4a31975 APPRAISALOF

A SECONDHIGHWAY PROJECT

PEOPLE'S DENCCRATICREPUBLIC OF YEMEN

1971 and 1974 Local Traffic (APT)

_ ~~~~~~~~~~~~~~Vahicl_ _ - _ _ _ _ 1 _ . e i~ e-l a _ _ _ _ _. Car FWDV Truck A Truck B Truck C All Vehicles Lrowt"m Road Section? 1971n1974 1971 1 19X741971 11974 19711b1974 1971 1974 1971 197 _ twae

Al Mukalla-Jol Mas'ha * 26.0 32.0 89.0 109.0 55.0 55.0 56.0 56.0 12.0 12.0 238.0 264.0 4 Jol Mas'ha-Buwaish * 19.0 26.0i 84.0 107.0 50.0 50.0 49.0 49.0 12.0 12.0 214.0 244.o 5 Buwaish-AlRiyan * 4.0 4.9 ! 63.0 77.0 28.0 29.7 29.0 30.7 5.o 5.3 129.0 147.6 5 Al Riyan-Shuhair * 3.01 3.71 47.o 57.8 27.0 28.6 26.0 27.6 5.0 5.3 108.0 123.0 4 Shuhair-Ghail Ba Wazir 2.01 2.5 29.0 35.5 12.0 13.9 13.0 15.0 2.0 2.3 58.0 69.2 6 Ghail Ba Wazir-Al Hibs - - 6.0 7.0 3.0 3.5 4.0 4.5 - - 13.0 15.0 5 Shuhair-Ash Shihr * 4.ol 4.0 36.0 36.0 23.0 23.0 23.0 23.0 2.0 2.0 88.o 88.o 0 Ash Shihr-Al Hibs _ _ 5.o 5.0 3.0 3.7 3.0 3.7 - - 11.0 12.4 4 Al Hibs-Al Ma'arah _ _ 2.0 2.0 1.0 1.3 - - - - 3.0 3.3 3 Al Ma'arah-Sah _ _ 3.0 3.7 1.0 1.3 1.0 1.3 - - 5.o 6.3 6 Sah-Ghuraf 14.0 14.0 22.0 22.0 6.0 6.o 6.o 6.0 2.0 2.0 50.0 50.0 0 Ghuraf-Tarim 100.0 122.0 60.0 73.5 12.5 15.3 12.5 15.3 2.0 3.0187.0 229.1 7 Ghuraf-Saywun 84.0 117.0 61.0 85.o 16.0 19.6 16.o 19.6 6.0 7.3 183.0 248.5 11 Saywun-Shibam * 50.0 70.0 43.o 60.0 8.0 11.2 8.0 11.2 4.0 5.6 113.0 158.0 12 Shibam-Al Qatn * 4.0 5.0 26.0 36.0 8.5 12.9 8.5 12.9 2.0 3.0 49.0 69.8 13 Al Qatn-Ajlanieh - 1.0 18.0 22.0 7.5 7.5 7.5 7.5 2.0 2.0 35.0 40.0 5 Ajlanieh-Haura - - 14.0 19.0 5.3 5.3 5.3 5.3 2.0 2.0 26.6 31.6 6 Jol Mastha-Thailah Al Ulya 7.0 9.8 5.0 7.0 6.0 6.o 6.o 6.o - - 24.0 28.8 5 Thailah Al Ulya-Al Fardah ------Al Fardah-Ruhab - - 1.0 1.2 1.0 1.0 1.0 1.0 - - 3.0 3.2 2 Ruhab-Al Hajarain _ _ g.o 9.6 1.5 1.5 1.5 1.5 2 m12.012.6 2 Al Hajarain-,Haura _ _ 6.0 6.5 4.5 4.5 4.5 |4.5 2.0 2.0 17.0 17.5 1

lJ The vehicles are: (i) midsised Europeancar; (ii) FWDV: four-wheeldrive vehicle; (iii) truck A with load capacityof 5 tons and diesel engine; (iv) truck B with load capacity of 8 tons or 42 passengersand diesel engine and (v) truckC with load capacity of 12 tons and dieael engine. 2J The road sections with asterisks form part of road construction. / Over-the period 1971-74. Sercet HighwayFeaslbility and Preliminary !ngineering Study, Final Report, Volume I, Dar Al-Handasah, I! Aden, December 1972 and missimi estimates.

May 1975 APPRAISALOF A SEClONDHIGHWAY PROJECT

PEO)PLE'S DEMJCRATICREPUB3LIC OF yEMFM

Normal Traffic 1979~Before Opening of Al Makalla-SaYwun Road (ADT)

___ Car -,FneTuk B Tuk C __ All Vhce Road Section2/ Loca1!ThrouTh _Totajj ocl 4 ruhTtal Local Through iTotal Local ThroughiTtiLoaIruhTotal Iocal Through Ita~l

AlMukalla-olMas'ha* 42 -4 1 142 81150 66 30 96 6. 31 I 98il14 ~ - 14 331 691400 Jol M4as'ha-Buwaish *35 - 35 i.4o ~ 1 5j1145 61 27 88 60 27 87 15 - 15 311 59 370! Buwaish-Al Riyan * 6 - 6 100 5 105 36 27 163 37 27 614 6! - 6 185 59 2414 Al , Riyan-Shuhair * S 5 ? 1 1 1 0 3 25 3 2 6 6 - 6 16 421 Ghail BaHibs Wazir-Al - - 961 4I 354I 22 2657'3 2 2816 906 48 139 Shuhair-Ghail Ba Wazir 3 - 3 47 14 Sl 17! 22 39 1 I 9 1 1 4l232 2 2 - 2 i8 149 67 Shuhair-Ash Shihr * 5 l114212 -41 28~ - 28 - l 05- 0 Alh Shibrs-Al 44ara44-28 28656 1 Ashh-Al Hibs -! - 3' 6 12 31 I36 5 32 37 2 12 121 69 87 AlMHbsAlarah arah -3 611! '2 31133 2 32 1334 - - 16 69 785 Sah-Ghuraf - I - 11 2 3,~~~~5 33 1.321t!34 - 69 78' Sa-hurafTa -6 16 26 6.32! 7 28 35 7 i29 36* 21 2 58 63 121 rim !Ghuraf-Saywun1 ~~~~~~160 1602~ 25 118 143 25 181143 10I - 110 356 14 39 Saywun-ShibaLm172112141~ 12 -196 1 .9 1 0 1 31 2 01 01130 2 2 'Saywun-Shibam* -101102' 88! 14192 16 111127 16'i 11 27 8'1 -92 8 230 26 256 IShibam-Al Qatn *7 - 7149~ 3 52 18 8 i26 181 8 26 4 - 14 96 19 1151 lAl Qatn-Ajlanieh 1 I- 1 29 2 31 9 3 12 9' 3 !2~ 2 - 2 50 8 58 ~Ajlanieh-Hauira - -124 2 4110 6' 14110o 2 2 38 11 1491 Jol Mas'ha-Thailah Al Ulya 1 1 0 3 1 0 7 1 1 -1 - - 3 10 148 tThailah Al Ulya-Al Fardah - - - ' 3 14 1 3 4 1 14;5 0 1 IAI Fardah-Ruhab - - l 2 3 5 1 3 41 1 15' - - - 14 10 114 Ruhab-AlBajarain -~~~~~ - 10 3 13' 2 3 1 5 2114 6 - - 114 10 214 tA aaai-ar :1 8 311 5 3 i8 5I14 9 2 I2 20 j10 30 !AlRiyan-Al Qat: Qt * -,' . 05 _- 5 5 -,n_ - -_ 0. 05

LJ The vehicles are: (i) midsized E'uropean car; (ii) FWDV:-four-wheel drive vehicle; (iii) truck A with load capacity of 5 tons and diesel engine; (iv) truck B with load capacity of 8 tons or 142 passengers and diesel engine and (v) truck C with load capacity of 12 tons and diesel engine. 2JThe road sections -withasterisks form part of road construction.

Source: Mission estimates

NV~ 1975 APPRAISALOF A SEOND HIGHWAYPROJET

PEP!LU'8 D3OCRATICRV'UBLIQ OF YOM

Normal Traffic 1979 After Opening of Al Mukalla-Sywn Road (ADT)-

r 4 .~~~~~~~~ ~~~~JA11V~~~~~All les Road__ Section___al_I__Through Total LoaLThrough T~otal LolThrouzhi Total rog OL~ho oa TT

Al Makalla-Jol Mash'ha* 42 - 42 142 8 150 66 30 9 67 31 98 14 14 316-o iJol YMaslha-Buwaish * 351 - 35,140 81148 61j 3 19l60~ 31 9i115 - Buwaish-Al Riyan * L5 3n 69 1380 6j - 6 10 0 6 30 66 37 31 681 6-6 185 6 1 Al Riyan-Shuhair * 5 5 76 8 84 2 Q 35 31 66' 314 31 65 - 5 ? 01 220 Sbuhair-Ghail Ba Wazir 3 - I3 147 - 47 17 - 1 - 1 3j 3, 88 -~ 88 Shuhair-Ash Shihr * 81 7 l ~ - 5j - - - 11 -'18

A Hibs-Al Matarah - - - 3f 2 5 2 3 5S 1 3 4 61 8 Hibs-~~ 6 2 8 2~~1 ~~2 2 1 !Al Ma'arah-Sah - - - ~ 1O7 7 3 2 3 I < Sab-Ohuraf 16 1 - 91 17 16 ~~~~~6 1.277 3 0 7 3 0 2< 2 58 7 65 Ohuraf-Tarim 160. 0 961 1197 20 10 30 20 10 3 0~ 21 321 GhrfSaywun-Sin 1102 - 7 10 2488 3 26 25 12 37 i25 12 37 10 356 26 38 Shibam-SAlyQan 7 49 4 532 1 24 42 18 25 43 41:4 960 53 149 Al Qatn-A.jlanieh - '2 , t loi 91 1 iOj 2l 0 3 53 Ajlanieh-Haura 1- -- 24 1125 6j 1 7 61 7 2 -2 381 3 hbl Jol Mas'ha-ThailahAl Ulya 14 - i 14 10 - 10 71 - I7 33 1- 38 Thailah Al Ulya-Al -- Fardah - - - - I - AlkFardah-Rubab -l 1 1 - Ruhab-Al Hajarain -l I 1 - - 4 ~ 0 - 10 2 - 21 - 2 2~ 111 - 4 Al Hajarain-Ha-ura - - - 8) - -1 1 - 5 5 2- 89 20* *Al Ri aiAlan - l l0o -J 39 4 0 40 2120 9 209

2! The vehicles are: (i) midsized F)aropean car; (ii) FWDV:four-wheel drive vehicle; (iii) truck A with load capacity of 5 tons and diesel engine; (iv) truck B with load capacity of 8 tons or 142passengers and diesel engine and (v) truck C with load capacity of 12 tons and diesel engine. 2/Theroad sections with asterisks form part of project road construction. Source:Mission estimates IMaYr1975 APPRAISALOF

A SECOND HIGHWAY PROJET

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN

Vehicle Operating Costs of Tycical Vehicles by Type of Road (YDA.000 km: exclusive of taxes)

.Depreciation . Total Typical and Interest . Fuel Maintenance Tires Oil and Lubrication; Wages and Salaries I Operating Costs Vehicle!S Traok- Ccbld avdobble,dPaePaveB Tak|Cbie t'Tra-ok 5 Tobbledt Paved ".TrakCobid|PVX robbidpv-iTakCbled gPv

Car 32.240 21.050 13-750 10.270 8.690 5.650 5-950 3.690 1-.770 3.000 1.600 0.960 0.490 0.270 iO.210 _ _- 51.950 35.300 22.34° BWTV 20.I00 12.5900 8.230 12.800 12.190 8.OOO 8.180 5.070 l.93O 0 2.760 1.640 0.700 0.380 0.300 2.320 1.940 1.160 21.260

Truck A 44.700 27.7901 18.150 21.880 14.580 10.940 22.040 11.100 |5.2201 15.430 8.000 4.800 2.100 1.580 0.790 3.140 2.360 i.8904109.2o0 653410 41.790

Truck B 68.740! 41.060 25.580 26.250 16.410 11-930 1 27-590 13-790 6.2101 29.080 15.750 9.450 2.100 1.580 0.790 3.140 2-360 1.890|156.900 90-950 155.850

Track 0 78-180 149.140 32.090 1 28.760 18.100 |13.125 33.380 16.690 7.500f 70.910 |37.140 22.2901 2.450 1.840 0.920 3.140 2.360 1.89t 216.820 125.270 77.815

i/ The typical vehicles are: (i) mideized European oar with gasoline engine; (ii) FWDV:four-wheel drive vehiole with gasoline engine; (iii) track A with load oapacity of 5 tons and diesel engine; (iv) truck B with load capacity of 8 tons or 42 passengers and diesel engine; and (v) truok C with load capacity of 12 tons and diesel engine. On a level tangent, paved highway in good oondition, at average speeds of 80 km/h for cars and 72 km/h for YIDVa and trucks. Source: Mission estimates

May 1975 a'C APPRAISAL OF

A SECOND HIGHWAYPROJECT

PEOPLE'S I3EKOCRATICREPUBLIC OP YEMEN

Average Characteristios of Typical Vehicles by Type of Road

tPrioegf- - Vehicle Life Tire Life Annual Vehicle | Fiel Consumption | Typical Price? One Tire Number of (years) (thousand km Kilometr (km/gallon) Typehicael Pri) One Tire Tires Track CobbIed Paved Track Cobbled Paved Track obbled aved Track Cobbled Pave /

ICar 1,100.000 12.000 4 5 6 8 16 30 50 9,000 12,0001 15,000 22.0 26.0 4o.o IWvD 1,755.000 20.700 4 5 6 8 16 30 50 24,000 32,000 !40,000 18.0 21.0 32.0 Track A 3,389.000 36.000 6 5 6 8 14 27 45 20,000 28,000 35,000 9.6 14.4 19.2 Truck B 4,358.ooo 63.000 6 4 5, 7 13 24 40 20,000 28,000 35,000 8.0 12.8 17.6 2Tck C& 7,705.000 78.o000 lo 1 5, 1 6 . 16.0

2 The typioal vehicles are: (i) midsized European oar with gasoline engine; (ii) PWDV: four-wheel drive vehicle with gasoLine engine; (iii) truck A with load capacity of 5 tons and diesel engine; (iv) truok B with load capacity of 8 tons or 42 passengers and diesel engine; and (v) truck C with load capacity of 12 tons and diegel engine. 2/ CIF price, Aden. Y On a level tangent, paved highways in good condition, at average speeds of 80 kmih for cars and 72 kmAh for FWDV'a and trucks. Source: Mission estimates MaY 1975 APPRAISAL OF

A SECONDHIGHWAY PROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YEMEN

Constructionand Maintenance Costs (YD)

2/ Road Section ConstructionCosts Maintenance Costs -

Basic Preliminariesand Total ConstructionCost Overheads Construction Cost Recurrent Periodic3

Al Mukalla - Al Riyan 409,270 189,550 598,820 2,740 19,180

Al Riyan - Ash Shihr 411,380 192,510 603,890 3,900 27,300

Al Riyan - Al Qatn 4,511,020 1,732,510 6,243,530 24,800 173,600

Al Qatn - Saywun 506,430 232,330 738,760 4,370 30,590

Total 5,838,100 2,346,900 8,185,000 35,810 250,670

1/ Exclusive of taxes and contingencies. 2J Variations in traffic volume are not considered. 2/ Occurring in years 1983, 1988, and 1993.

Source: Mission Estimates

May 1975 TABLE19

APPRAISAL OF

A SECONDHIGHWAY PROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YEMEN

Rates of Traffic Growth and Return on Sections of the Al Mukalla - Saywun Road

-AverageArual Growth Rates (%) of . : verae_ Economic iFirst Year I Local Traffic Through Traffic Return Return 1/ Section 1979(%9 I 91979 -89 1989-99 1

Al Mukalla- Al Riyan 9 8 15-35 11.89 Al Qatn - Saywun and See Beloa See Bel 8 7 14.60 11.89 .AlRiyan -Ash Shihi- oi' j 7 6 13.95 11.89 (35 8 .1 km) ± i '' A Mu1qlla - Al Riyan 6 5 9 8 V13.15 l1.3h (27.4 km) 5 4 8 7 1 12.35 i 11.34 4_ __3 __7_6_11_45 _ _11_3_ Al Riyan -Ash Shihr . 9 8 23.55 22.41 (39.0 km) 5 4 8 7 22.65 1 22.41 AlRiyan-AlQatn J 4 3 7 6 !21.85 1 22.41 Al yan - Al Qatn I-T-- 155I -io.7 (248.O kn) - - 8 7 13.85 10.78 _ 10.78 ,A1 Qatn - Saywun ___ _ - a 7 6 _ 13 25 AlAQatn -Saywun 87 9 7 812.65 9.42 i^ (43.7 krm) 7 6 8 '' 7 11-75 i 9.42 6 5 7 6 10.95 9.42

1/ The first year return is defined as the ratio of net first year benefits to investmentcosts. 2J Entire proposed road construction.

Source: Mission estimates

May 1975 TABLE 20

APPRAISAL OF

A SECONDHIGHWAY PROJECT

PEDPLE'S DEMOCRATICREPUBLIC OF YEMEN

Results of SensitivityAnalyses

Assumptions

Cost of Total Economic Construction Benefits Return (%) Best Estimate Best Estimate 15.35 Best Estimate 15% Increase 17.95 Best Estimate 15% Decrease 145 15% Increase Best Estimate i 1b.55 15%Decrease Best Estimate 18.35

Source: Mission estimates

May 1975 ANNEX A Page 1

APPRAISAL OF

A SECOND HIGHWAYPROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YEMEN

Previous Transport Projects

First Highway Project - Credit 240-YDR

Amount of Credit US$1.6 million Date of Credit Agreement April 21, 1971 EffectiveDate November 9, 1971 Closing Date March 31, 1975 1/

1. The purpose of this project is to improve the operation and admin- istrationof the highway-relatedactivities of the Ministry of Public Works (MPW), and to prepare future high priority road constructionprojects. It comprises feasibilitystudies of about 800 km of road and detailed engineering of about 240 km; procurementof equipment and related spares for maintenance, workshops, and communicationsequipment; technical assistanceby consultants to reorganizethe MPW's highway related activitieswith emphasis on road maintenanceand workshop operations;and fellowshipsfor MPW staff. The UNDP participatesin project financingby providingUS$673,000 towards consulting services and fellowships. The Bank is executingagency for the UNDP for this part of the project.

2. The project started in mid-1971 with commencementof technical assistance. The Credit became effective in November 1971, and feasibility studies and detailed engineeringstarted shortly thereafter. Project execu- tion has generallybeen satisfactoryand the feasibilitystudies, detailed engineeringand technical assistancehave been satisfactorilycompleted. Delays have occurred in equipment procurement,largely due to the Government's cumbersome purchasing system. A reorganizationof MPW, recommendedby the technicalassistance, was carried out in 1972, and cost accounting and equip- ment pool systems are being set up as recommendedby the consultants. Progress, however, is hampered by the lack of skilled personnel, and the Government has thereforerequested, and been granted, an extension of the Credit closing date to March 31, 1976, to permit full utilizationof Credit funds for equip- ment purchases.

1/ Extended from June 30, 1974. ANNEX A Page 2

Highway Engineering Credit - Credit S-12 YDR

Amount of Credit US$560,000 Date of Credit Agreement November 17, 1972 Effective Date April 13, 1973 Closing Date March 31, 1975 1/

1. By mid-1972, feasibilitystudies under the First Highway Project, financedby Credit 240-YDR, had identifiedas the highest priority road constructionproject the 320 km long Al Mukalla-Al Riyan-SaywunRoad and the 35 km As Said-Ataq Road in the Fourth Governorate. Credit 240 YDR, however, containedprovision and funds for detailed engineeringof only about 240 km. The studies indicated that it would not be beneficial to reduce the length of the project roads. The need was also identified for a branch road 'etween Al Riyan and the important fishing town of Ash Shihr. Since other sources of financing, such as the UNDP, was not available the Government requested that the Association finance the detailed engineeringcost in excess of that provided for in Credit 240 YDR. In view of the delays (largely due to the inexperienceof available staff) in implementingthe recommendationsfrom the First Highway Project for organizationalimprovements in the MPW, further technicalassistance to the MPWwas also included.

2. The project has progressedwell. Detailed engineering for the Al Mukalla-AlRian-Saywun and Al Riyan-Ash Shihr Roads were completed on schedule in November 1973, and bids were received in July 1974. In early 1973, the final alignment of the Am Ayn-Al Mukalla road, under construction with bilateral assistance from the People's Republic of China, was changed to pass through Nagabah instead of Ataq; the As Said-Ataq road would therefore no longer connectwith this main road, and detailed engineeringof the As Said-Ataq road was eliminated from the project.

3. Viak continued to provide technical assistance as needed to the MPW until expiration of their contract in February 1974. Further technical assistance is now being provided by experts from the German Democratic Re- public, USSR and Hungary. The proposed Third Highway Project also provides for the services of technical experts.

4. The Credit has been fully disbursed and closed on March 31, 1975. The first maturity payment is due in May 1976.

1/ Extended from June 30, 1974.

May 1975 APPRAISAL OF

A SECONDHIGHWAY PROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YEMEN

Summaa of Project Financing (US$ Millions)

Government Kuwait Fund IDA Total

Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total IDA l(a) Construction of Al Mukalla - Saywun Road 0.92 - 0.92 4.46 3.28 7.74 4.44 3.26 7.70 9.82 6.54 16.36 47 l(b) EngineeringServices for supervislu cone-- - - 0.04 .13 0.17 0.03 0.13 0.16 0.07 0.26 tion with l(a) 0.33 47 2. Procurementof Con- structionEquipment and Materialsfor l(a) - - - - 6.03 6.03 - 5.37 5.37 - 11.40 11.40 47 3. Engineeringand Economic Studies of Nagabah-Al Ayn Road ------0.11 0.44 0.55 0.11 0.44 0.55 100 b4. TechnicalAssistance to MPW including Fellowships ------0.13 0.31 0.44 0.13 0.31 o.44 loo 5. Procurementof Road Main- tenance Eqpt.and Spares - - - 0.66 0.66 - - - - o.66 o.66 0

6. RefinancingCr. S12--YDR ------0.53 0.53 - 0.53 o.53 100 Subtotal 0.92 - 0.92 4.50 10.10 14.60 4.71 10.04 14.75 10.13 20.14 30.27 49 7. ContingencyAllowance (Physical) 0.08 - 0.08 0.39 0.31 0.70 0.40 0.35 0.75 0.87 o.66 1.53 Total Project Cost 1.00 - 1.00 4.89 10.41 15.30 5.11 10.39 15.50 11.00 20.80 31.80 49

Price escalationcontingencies are included in the base figures for items 1-5. May 1975 ANNEX C

APPPAISAL OF

A SECOND HIGHWAY PROJECT

PEOPLE'S DEMOCRATIC REPUBLIC OF YENEN

Estimated Schedule of Disbursements

IDA Fiscal Year CumulativeDisbursements and End of Quarter at end of Quarter -(IJS$tOOO Equivalent)

1975/76

September 30, 1975 2,305 December 31, 1975 3,390 March 31, 1976 5,325 June 30, 1976 7,260

1976/77

September 30, 1976 9,195 December 31, 1976 10,055 Yarch 31, 1977 10,765 June 30, 1977 11,475

1977/78

September 30, 1977 12,000 December 31, 1977 12,500 Yarch 31, 1978 13,000 June 30, 1978 13,500

1978/79

September 30, 1978 l1,000 December 31, 1978 lh,500 ?arch 31, 1979 15,000 June 30, 1979 15,250

1979/80

September 30, 1979 15,500

Source: Yission Estimates, January 1975

May 1975 ANNEX D Page 1

APPRAISAL OF

A SECOND HIGHWAYPROJECT

PEOPLE'S DEMOCRATICREPUBLIC OF YEMEN

Probability Analysis

1. The probabilityanalysis examines the effects of random variations in the constructionand maintenancecosts and benefit streams on the overall economic return. These variationsoccur separatelyin the costs of construc- tion of the Al Mukalla-Al Riyan section,Al Riyan-AshShihr section,Al Riyan- Al Qatn section and Al Qatn-Saywunsection; the maintenancecosts of each of these sections;the benefits stemming from savings in maintenancecosts of existing cobbled sections and escarpmentsof each of these sections; the benefits related to local traffic on the proposed road construction;and the benefits related to through traffic on the proposed road construction. The variations are expressedas a percentagedeparture from initialvalues.

2. The random variationsof all the constructionand maintenancecosts lie in intervalsof (-10, 0); (0, 10); (10, 15); and (15, 20) of a step func- tion with associatedprobabilities of 0.23; 0.31; 0.23; and 0.23, respectively. The cumulativeprobabilities of the variationsof each of these cost streams are not correlated.

3. The random variations of all the benefit streams lie in intervals of (-15, -10); (-10, 0); (0, 1); (1, 10) and (10, 15) of a step function with associatedprobabilities of 0.15; 0.20; 0.30; 0.20; and 0.15, respectively. The cumulativeprobabilities of the variationsin the benefit streams related to local and through traffic are fully correlated;all other cumulativeprob- abilities are not correlated.

4. The above variations affecting the overall economic return and their probabilitieswere fed into a computer which was then instructedto select at random one outcome of each of the variablesconsidered, allowing for realistic restrictionsfor interdependeiesin the variables. Given the selected out- comes of all the variables,the correspondingeconomic returnswere calculated. This processwas repeated until a large enough sample (1005 was obtained for a close approximationto the actual probabilitydistribution of the overall economic rate of return.

5. The resultsof the probabilityanalysis are given in Table D-1. This table shows the frequencydistribution and cumulativeprobability dis- tribution for the overall economic return. For instance,looking at the fifth line of Columns of 1 and 2, one observes that in the sample of 100, there were three overall rates of return with a value higher than or equal to 12.638 and ANNEX D Page 2 lower than 12.734. Looking at, for example, the second line of Columns 3 and 4, one sees that there is an 0.01 probability that the overall rate of return is lower than 12.446, which is equivalent to saying that there is a 0.99 pro- bability that the overall rate of return is higher than or equal to 12.446.

6. The probabilitiesused in this analysis do not eliminate risk but rather connect risk with the probabilitieson which the evaluation is based. It is evident that the probabilitiesare not generally objectivelyverifiable. Nevertheless,the results of Table D-1 express the degree of confidence in estimates through employment of probabilitieswhich may supplement qualita- tive judgements and give additional insight in the joint effects of various factors having a significantdegree of uncertainty.

May 1975 ANNEX D Table D-1

APPRAISAL OF

A SECONDHIGHWAY PROJBCT

PEOPLE'S DEMOCRATICREPUBLIC OF YEEN

Frequency Distribution and Cumulative Probability Distribution for the Overall Economic Rate of Return

i 2 3 Frequency that the Overall Rate of Probability that the I Overall Rate of Return - Intervals Overall Rate of Return I 'Return lies in the __. is lower than the Cor- 1 ;Corresponding Interval Higher than! lower responding Value in Overall Rate !ofthe 2nd Column or equal toi than i the 4th Column |of Return

1 O2°3-0 12.350 0.0! 12.35° 1 12.35o 12.346 0.01 12.446 0O 12.446 12.542 O.01 12.542 0 I 12.542 12.638 0.01 12.638 3 1 12.638 12.734 _ 0.04 12.734 12.734 12.830 0.05 12.830 2 12.830 _ 12.926 0.07 12.9?6 O 12.926 13.022 0.07 13.022 1 13.022 13.118 O.oB 13.118 0 13.118 13.214 0o.8 13.214 2 f 13.214 13.310 0.10 13.310 1 13.310 13.406 0.11 13.406 3 13.406 13.502 0.14 13.502 2 13.502 13.598 0.16 13.598 3 1 13.598 13.694 0.19 1 13.694 6 ! 13.694 13.790 0.25 13.790 2 13.790 13.886 0.27 13.8B6 9 13.886 13.982 0.36 i 13.982 2 13.982 14.078 0.38 14.078 14 14.078 14.174 0.42 14.174 3 14.174 I4.270 0.45 141.270 114.366 0.50 114.366 0 14.366- 14.462 055 114.462 O 14.462 14-5508 0.55 ; 14.558 3 14.558 14.654 0.58 14.654 0 14.654 14.750 o.58 114.750 1 14.750 14.846 0.59 114.846 3 14.846 14.942 o.62 14.942 1 14.942 15.038 0.63 15,038 3 15.038 15.134 0.66 I 15.134 4 15.134 15.230 0.70 15.230 2 15.230 15.326 0.72 15.326 3 15.326 15.422 0.752 15.422 2 15.422 15.518 0 79 115.518 2 15.518 15.614 0.81 15.61h 3 15.614 15.710 o.84 15.710 3 15.710 j 15.806 0.87 15.806 2 15.806 , 15.902 0.89 15.902 13 15.902 15.998 0.92 15.998 !1 15.998 16.094 0.93 16.094 0 16.094 16.190 0.93 16.190 1 16.190 16.286 0 94 16.32862 1 16.286 16.382 0.95 16.3827 1 16.382 16.478 0.96 16.478 0 16.478 16.574 0.96 16.574 i1 1 16.574 16.670 0.97 16.670 0 16.670 16.766 0.97 - 16.862 0 16.766 16.862 0.97 16.862 1 16.862 16.958 0.98 16.958 2 - 16.958 17.150 0.98 17.150

Source: Mission estimates

May.-1975

APPRAtSAL OF A SECOND HIGHWAY PROJECT PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN Organization of the Ministry of Public Works

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