1ILL Itir RESTRESTRICTED Report No

1ILL itir RESTRESTRICTED Report No. AF-58a Public Disclosure Authorized

lolls repor, wais prepared lor use w`ithin th'e Bank and' its cumriaWoed organiza"iOnS1. They do not accept responsibility for its accuracy or completeness. The report may Iinot be pubuiishedle normar it be quoted as representing fheir vi

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION

Public Disclosure Authorized AF58 Volume 15

PROSPECTS FOR ECONOMIC DEVELOPMENT. IN EAST AFRICA

(in four volurnes)

VOLUME III - TANZANIA

(in seven parts) Public Disclosure Authorized

PART FIVE: ANNEX D - TRANSPORT

August 31, 1967 Public Disclosure Authorized

Africa Department EQUIVALENTS

Currency

1 Tanzania Shilline = U. S. $0. 14 U.S. $1 = T. Sh 7. 14 'r- I = U.S. $2.80

E 1 = T. Sh 20.00

Weight

Throughout this report, unless otherwise stated, tons refers to long tons of 2240 lbs. COMPOSITION OF THE MISSION

This rpnort is h;iqd on thp findings of' a Missi on to East Africa wrhich did its field work in Cctober, November and December 1966 and consistled of the following:

Colin M. F. Bruce, Deputy Chief of Mission -andChief Economist = Kenya (TID) Kudlapur G. V. Krishna, Economist - Kenya (IBRD) C. G. IAkhurs, AgriculaL.-l Advrise =VKe- (FAO). Maurice Fenn, Agricultural Economist - Kenya (FAO)

Pr-l .veite ,UepuUly CUI fLL of Mil-ssion and Chief Economist - Tanzania (Consultant) Bruno E. Scheltera, Economist - Tanzania (IBRD) Archie Forbes, Agricultural Adviser - Tanzania (FAO) Jacques Kahare, Agricultural Economist - Taiizania (IDIID)

Otto Maiss, Deputy Chief of Mission and Chief Economist - Uganda (IBRD) Nicholas Carter, Economist - Uganda (IBRD) David ir.M. Haynes, Agricultural Adviser - Uganda (IBRD) Montague Yudelman, Agricultural Economist - Uganda (Consultant)

H. David Davis, Adviser on Tourism (IBRD) Bernard H. Decaux, Adviser on Industry (Consultant) Jack Derrick, Adviser on Industry (ConsuLtant) Edward V. K. Jaycox, Adviser on Transport (IBRD) Aristides J. Macris, Adviser on Agricultural Training and Education (IERD) David McLellan, Adviser on General Education (Consultant) Lyell H. Ritchie, Adviser on Industrial Finance (IFC) Gavin Wyatt, Adviser on Power (IBRD)

The Mission's findings relate for the most part to the situation as of the end of 1966, although in some respects note has been taken of developments up to the middle of 1967. TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS

T. Thp Tranqsnprt REcnrnnv 1

The System 1 Transport Coordination 2 Priorities for Fu Development 14 Staffing and Organizational Needs 5 The Plan and Performance 6 Rephasing Transport Investment 7

II. Road Transport and the Road System 9

Road Transport 9 mile loal Syste:m1 Road Administration 12 R'oad TIaitennc-. Road Construction 14 P-lann-lng R'loaduILnvestm1ents 15 A Revised Road Program 15 FiLuancinig 'thle Rnoad Prrogrami 17 Project Identification 19

III. Airports 21

Organization 21 Financial Structure 21 Investment Program 21

IV. The Zambia-Tanzanian Transport Problem 22

Zambia's Alternative Outlets to the Sea 22 Emergency Transport Operations in East Africa 24 Long-Term Solutions 26

MAPS TRANSPORT TN TANZANIA

SUJM4ARY AND CONCLUSIONS

1. Investment and current expenditures in the transport sector have been low in recent years and traffic trends suggest that a much higher rate of such expenditures will be required over the next five years.

2. The trunk transport system of Tanzania is basically adequate in extent. There are few significant gaps at today's levels of demand for transport. However, the capacity of the railway and main port of Dar es Salaam require rapid expansion to meet recent and foreseeable traffic trends. rhere are sections of main roads which require upgrading in the next few years.

3. The recent addition of Zambian transit traffic to the Tanzaniaa trunk system due to the Rhodesian crisis and the uncertainty as to its future volume or duration raise difficult problems for transDort planning in Tanzania.

4. The secondary and minor roacl networks are inadequate in most areas of high agricultural activity and potential. Criteria to assess these needs must be established and measures taken to meet them in a systematic manner.

5. The general lac-k of storage facilities at the coast and at un-,-ountry production points seriously reduces the flexibility of the transport system.

Road maintenance is lagg:ing bhhind re^,uirements 9 and expenditures should -h increased substantially.

6. Staffing inadequacies seriously affect Tanzania's ability to p:Lan and carry out solutions 1to its transport problems. If sound plans for overr coming these deficiencies were promptly prepared, external assistance would be n-ropria e.

7. Planning of transport program-, and pro.jects lacks coordination. The various transport modes are planned in isolation. Contact, between Government authorities and the East African Railways and Harbours Administration (E__RH) is inadequate. There is a need for closer liaison between planning in the productive sectors and in transport. The Mission recommends the creation of a transport planning unit; within the Ministry of Communications and Works, audequatuel0y sta f.fced to asscss thUe trans-port need-- , of- the+1- cut-- onaco e- hensive basis.

8. Cost estimates in the published and later revisions of the Plan are M4s e ` __ 4:_ 4-1 _ As_4 _ A_r .0 _EAP -.. 4 MI- -4_.11 I±0I:l:41±g as is) WIIGU 1 Vl 1a ± 1j V Ul VVrV*> a w 4_L H' be a physical shortfall in the latest version of the road program of nearly 60 percent. However, this lower rate of physical achievement is more in line with what is economically appropriate in view of the substantial rise in …±2-. 4-2.t-. II-, T7IAnOTT _1_4__..~1 4~ 4- const,ruc'tuion costUb~.4- estir,at,es . leIL EAno:R8n pluan appear to relate uo Tanzania's needs, whereas the expectations as to EAR&H investment published in the 'Plan do not. - ii -

9.- in assessing the stat us Of transpo.rt projects anu prog.rams aund tne capacity of the Government and EAR&H to carry them out., and in accordance with our view of economic priorities with respect to those projects for which options are still open, the Mission suggests a total capital investment program for transport during the Plan period of r36.4 million. External assistance for most of the projects in this program is already assured. Nevertheless, the program would entail substantial increases over previous levels in the allocation of local funds, the shortage of which may prove to be a constraint on investment. TRANSPORT IN TANZANIA l/

I. THE TRANSPORT ECONOMY

The System

1. The development and improvement of Tanzania's transport systeml is a high priority task that rnust form an important element of any effective development ef'fort. While the economic development of the country has not so f'ar been retarded by a lack of reliable transport facilities, this could soon become the case if public investment and recurrent expenditures in transport were not increased substantially over the levels of recent years. The recent upsurge of economic activity in Tanzania has generated a proportionately greater increase in transport demand that has been difficult to meet.

2. The basic transport system consists of three main seaports, ab'out 1.500 miles of railway line, 21,000 miles of main, secondary and district roads, 20 airports handling scheduled flights, and coastal and lake shipping services. The system is extensive in relation to the volume of traffic it is called upon to handle because population and production centers are widely dispersed around the nerinhery of the couintry's sparsely ponulated and lonw-notertialR cen-tral plateau.

3. The main flow of traffic and, consequently, the orientation of the eoiintry 's trunk tranpnort sys.rtem7 run Vc9nrouhlvr eat--west to and( f-rnom the sepon rts mainly Dar es Salaam and Tanga. This pattern reflects the economy's past and present dependence on exported primary products and the reverse flow of manufactured and fuel requisites distributed throughout the country from the coast 1 ,rhere +he-r are e;+ile -,mnorted+ or prorducedr Tih +trun-rlr sysarcm te F' m-anzan ia CR also utilized by neighboring landlocked states and the eastern part of the Congo, ~wf.iiich rely on it varying drees fr------a - to the a (see dicus= sion of Zambian emergency transit traffic in paragraphs 63-80o below)*.

4. The railway system, operated by East African Railways and Harbours Admlinistration (TEAP&-T) n a common -sderv,cett T--,na enya .A Tj-ador forms the backbone of the transport system and carries the bulk of long-distance, hav,y t r a .During J_Q57--1964 1.L.. a avj~ffi;ci.a. U.. 4414. .. 1± -. 7 2 I _7 yJ- .9 .1.railway zL ,y fPreightI±4i .ZI I..4U traff-icU . grewW aUat theJI .1.rltvl U 5 c.-L slow annual rate of less than 3 percent, reflecting economic stagnation during the politically uncertain years of the early 19 6 0's. In 19659 the railways in Tanzania moved 1.33 million tons of freight which amounted to about 470 million ton-milles, an increase of aboutu 4 percent ln tnUuage and 15 percent in t,on-mr,1iles over 1964. Partial statistics point to a dramatic increase of perhaps 20-25 percent in tonnage and ton-miles in 1966, the highest yet recorded. This iln- crease primarily reflects the growth of domestic production and consumption and a resurgence in Congo/Burundi traffics. Zambian traffic also contributed substantially to the increase.

1/ This Annex deals w:ith the whole transport system of Tanzania (excluding Zanzibar) with primary emphasis on roads and airports, while railway and nort investment nrogrnms are discussed in Annex I-A. - 2 --

5. While the road system is fairly extensive, traffic volumes generally are low except in the vicinity of the major coastal centers and in the Lake Victoria area. -lost of the trunk road connections have been developed in a roughly north--south pattern cutting across the axis of main traffic flow handled primarily by the railways. The main function of road transport lies in the relatively short-haul services for the delivery and collection of goods to and from rail lines and terminals. H-owever, the recent increases in industrial goods' consumption have created demand for a greater range of transport services, in terms of quality and price. This has given a particularly large impetus to interurban road transport. More recent road improvement has been directed toward east-west routes, in response to traffic demand. On the basis of very fragmentary statistical information, it is estimated that main road traffic is increasing at about 7-8 percent annually, much higher than recent growth of national income.

6. Coastal and lake shipping services link the trunk system at its eastern and western ends. The privately owned coastal shipping services are also export/import oriented. amounting in effect to a feeder service to ocean shipping. The entire Tanzanian coast sou-th of Dar es Salaam is all but completely dependent upon coastal shipping for its links with the rest of the country. The important offshore islands of Zanzibar, Pemba and Mlafia rely on it completely. Lake shipping services provide internal links for Tanzania, as well as international links to Kenya and Uganda on Lake Victoria, and the Congo, Burundi and Zambia on Lake Tanganvika.

7. Air transport has a significant role in the cnuntrvys transport svytem. While air transport is mainly for passenger traffic and is not heavy, it serves a vital function and is heavily relied upon by public administration, tourism and modern commerce. Airports are well distributed geographically. The sched- l ed services of East African Airways (te nationa1 ca-rrie-r nf Tanzania, Keny and Uganda) adequately serve the present needs of the country.

8. Tanzania has three satisfactory harbor sites at Dar es Salaam, Tanga and b4tw.rara. All thre-e ports are operated by EARQH.DH Dar es Sala--- the manor port, has a nominal annual capacity of about 680,000 tons of dry cargo over the quays, plus bulk oil capacity at a serarate Jety Taga enirl a lighterage port, shares its hinterland with the larger port of Mombasa in Kenya. T+ ;s aplle o- #I1an`Jgx 4- o -1+ DO' ury aror Ions a year.MN I D | | E WJ i ' Wa.ucuu III lAla.1J L11 5 , aJ l ._J _ULUJLAJ , Ja1 -J 'VlXD a . lWIPG, ara is a modern port with two deep water berths, that can handle about 350,000 tons

0o dry caruo a year. miie bouth_n LCUIbd. andUIL_LdAiU CZ 1TanVg ±iLerhaU U4LpCALL"iy, general goods traffic at Dar es Salaam harbor has increased dramatically in the past two years (3u0 percent iin 19Uu) reaching cu ,uuuons of rLy carg, or about 6 percent above its nominal capacity.

Transport Coordination

9. Transport coordination with respect to investment allocation and appropriate modal division of function, is complicated in East Africa by the fact that there are three countries, each with different specific national objectives as well as a partnership in common transport facilities and services - railways, aviation, lake services and ports. -3-

10. In the past, "'transnort coordination"t in East Africa has large:Lv meant determining the ro:Les of road and rail transport by administrative means. The obiective; narticuilarlv in Kenvy and to a lesser extent in Tanzania, has been to restrict the expansion of road transport and to maintain a virtual railway mononolv in the transp,ort of goods in those areats or along the routes where railway services a:re offered. The achievement of this objective has been Rssisted by a relu,itanc-'e to improve certain key road sections which if they had been upgraded, would have permitted road transport costs to falL and thereby inncreaseits potential compentitiv poer. The rPetrictions on devrelon_ ment of road transport a:re designed to maintain the railway's "differential tariff"'' under which ratnes do not fully reflect the real costs of performing specific transport services. Rail tariffs have been based largely on as3ess- ment of what the traffic would "bear for- diAf4ferent catego,r4es o-f fPreight. MI, EAR&H has a specific constitutional obligation to maintain the differential 440?.4.i ±~U 044 U4ll W1 ULU U4J4JJX au )L JL1i I~U 1d~ Ia is. * .AAJI U_L11j6±,y tariffP anA at t-4he same t-ime, tuo operate on aL bai.Lo,lria codigy it charges low rates on particular agricultural exports, commodities for

UosticU_LL conSLsmptUio Ifo LoW-inc11ome= gop U and tahe input into aglcuu.ue. The subsidies on these have been counterbalanced by higher rates (or tax eq:ui valentsij on h11g1hLer vau.te, largVely impuored muanLLufacLUt-ed goods and fu,els ll. The differential rail pricing policy encourages uneconoic coM:JcUiLion from road transport by making it possible for road transport to undercut rail prices for higher value freight even when carrying such freight by road may involve a higher real cost to the economy. At the same time, the road licensing regulations, by limiting road competition, have inhibited road transport from fulfilling its economically justified role in moving particular types of goods or load sizes in certain areas of East Africa. The true costs of moving spe- cefic goods by the vario-us modes are however only vaguely known in East Africa. Reliable statistics to indicate the most favorable distribution of traffic and to provide the means of determining least cost solutions for specific transport problems are not readily available. Imposition of road transpOrt restrictions have been designed to protect railway finances and preserve the differential tariff as essentially an automatic fiscal tool for applying taxation and subsidies. In the absence of restrictions, road transport would tend to take away much of the profitable rail traffic and thus leave the railway with predominantly that traffic it carries at or below cost. It would undermine the financial viability of the railway unless the differential rail tariff were abandoned and a truly competitive environment provided.

12. For want of good cost data, the Mission is not in a position to assert categorically how much the differential tariff, and the restrictive road licensing necessary to protect it, have distorted the past pattern of demand for transport. It is clear, however, that such distortion is likely to become more pronounced in the future and increasingly costly as the composition of traffic and the pattern of transport demand become more differ- entiated with economic development. Such development will both require and justify a broader range of transport services. As a fiscal tool, the railway tariff is probably much less efficient than more direct subsidies and taxation. It is an inflexible tool which is moreover not under the Government's direct control. In the absence of detailed railway cost data, it is not possible for the three governments to ascertain clearly the extent to which particular goods - 4 -

or raiilwair users are tayxed o-r sbidhqiz7 e n r( hat trhe e rncnm-nic r-cr-,c-s of t.hceir transport policies are. The question of improving transport coordination within fthe East African reglon as awhole and of establishing~ appropriate transport policies for the separate countries, is now being studied in detail by a team of consultants. Their task is to reco.mmend an appropria+ely phased series of administrative and pricing measures to rationalize the transport system in the future. phis +-,I,, is bic financedbyr +the TMIDP, wit.Th +th- TIBRD as exec agent, and will be completed by mid-19068. (See also paragraph 55 for discus-

Priorities for Future Development

L_3 * ±ii UI aU1aCU.L~. OAtIU ~ .L_ UI 'o ~ A ±' L1 u ZULU _LVJ. I d±LL U.CId,11 port throughout the East African system since mid--1965 had led to serious locoLotive and rolling stock shortages on the Central Line in Tanzania during peak periods. This has disrupted the marketing of cotton and most other pri- .,mary products harvested during the cotton seasont. A badly needed program for renewal of wagons and acquisition of additional rolling stock is now underway thoughi sligghtly behind schedule. oSmIllalrly, the rapid increase-in dry cargo traffic over the quays at Dar es Salaam, together with major problems of management and labor productivity have led to port congestion, ship delays and rising costs, which will produce an increasingly serious bottleneck unless capacity is rapidly expanded through investment in additional deep water berths and sheds and accompanying improvements in efficiency.

14. Since traffic increased recently, a serious shortage of crop storage facilities has developed particularly during peak periods, both at the coast and at up--country production points. Railway cars have been used for storage, aggravating wagon shortages. Traffic backiogs nave been exposed to the rains and large amounts of cotton damaged. Adequate storage facilities are crucial to flexible transport capacity and must be provided.

15. The recent rise in demand for road transport generally has been met without recorded delays. However, increased traffic has resulted in progressive deterioration of the road system, primarily because there has been a lag in the maintenance effort relative to traffic growth. Major improvements to some main road sections appear to be justified by increasing traffic volumes but, except for the unusual situation in respect of heavy Zambian traffic on the unimproved sections of the Great North Road, there do not appear to be any serious bottlenecks in the main road system.

16. Concentration on providing and improving long-distance links among the scattered productive centers of the country has obscured until recently the complementary need to provide adequate minor road networks closely related to the productive activities of the economy and providing access to the major arteries. In some areas, notably around Mwanza (Geita peninsula and West) and, to some extent around Mtwara, local road construction and improvement have not kept up with the development of cash crop production. In other areas, where production potentials have yet to be realized, the establishment of minor road networks would form part of a general program of agricultural development. 17. In the Mission's opinion, the capacity of the basic trunk system ic in the main sufficient to meet current demand. Its improvement should follow and keep pace wit1h develo,n.ent, 'but sh.ould not be rcelied upon to stir,ulate it. New trunk connections should be undertaken only after careful studies of traffic trends and the likecly benefl its (iin rellation to costs) of adding to the e.Kis_+n_ system. On the other hand, investment in secondary roads, and especiall;y in m--inor networks of purely local import ance could in itself stimulate ecoS4o-i c change and growth if accompanied by other suitable developmental programs.

18. Beyond meeting Tanzania's own needs9 extraordinary burdens have recently been placed on the Tanzanian transport system by Zambian requirements arising from Rhodesia's declaration of independence in November 1965, and the subsequent international embargo on certain dealings, especiailly oil trade, with Rhodesia. This additional traffic, where adequate facilities do not exist to handle it, has overloaded Tanzania's trunk system and hampered the movement of domestic traffic. The current Zambian transport emergency and Zambia's long-range polizies to reduce its dependence on Southern Africa are discussed later in this Annex. Generally, Zambia's current transport requirements throughl Tanzania tend to reinforce the priorities for improvement of Tanzania's trunk system and port capacity, but have drawn both transport services and pu7blic concern away from the minor roads.

Staffing and Organizational Needs

19. Staffing weaknesses seriously affect Tanzania's ability to plan and implement a suitable transport program. Lack of administrative and management strength, both public and private, is often a major cause of shortcomings in the transport system. To overcome these weaknesses, a wide range of measures is necessary, including better education and training programs, salary increases for public officials and other incentives and extensive use of foreign expertise both within the administrative and operating organizations and as consultants.

20. There is no transport planning section within -the Ministry of Com- munications and Works (COMWORKS), although the Government has long recognized the need for such a section. It should be established without delay and provided with an adequate staff capable of assessing the road, rail, air and water transport requirements of the country and of establishing investment priorities based on economic criteria. The section should also consider appropriate national policies for road licensing and transport taxation and pricing. The Mission recommends that representatives of the railways and ports be included in this planning unit.

21. The implementation and administration of road and, airport works and programs also suffers from staffing weaknesses. Considerable engineering and administrative expertise is required for project preparation, drawing up of contracts, supervision of works and carrying out of sound maintenance programs. W4hile the prudent use of consultants can relieve the Government of some of this burden, the present staffing of COMvWORKS even inhibits suitable supervision of such consultants. 6 -

M_ke Plan an' lerforlormance 4-L~I L(II01U I .LI Ji1d H

22. The Tanganyika Five-Year Plan for Economic and Social Development (1964/65 1968/69), published in 1964, proposed a total public investment of 29.2 milion inl transbpor fi e duin t±he Plan period. his included. f13.9 million for road construction and improvement and. 11.2 million for air- portss, ifor a uotaL of 15 .1 1mmiIllion to be invested by the Tanzania Goveib-ment. The remaining 114.1 million was to be invested by EAR&H in the railways, lake services and porsb of ianzania. On the basis of unreliable cost estimates: the transport sector investment targets were shown to amount to about 20 percent of Plan public investment if accurate, which wouid probably be too smaii a proportion, considering the very low levels of past transport expenditure, the country's transport needs, and the output targets of the Plan.

23. The Plan certainly seriously underestimates the cost of the contemplated road works. The Mission foresees these costing in excess of f21 million, about 50 percent more than the Plan estimates. Increases of this magnitude must cast some doubt on the economic justification of major elements of the road program. However, since the original road list proposed by the Government was not based on cost/benefit analyses, the Mission is unable to assess the impact of cost changes on the economic justification of many of the projects. A review of the economic justification for a number of road projects appraised for an !DA credit (48--TA, February 1964) indicates that, despite large cost estimate increases, most of these projects could still be justified on economic grounds. Feasibility studies of the remaining projects in the program are required.

24. The Plan was also misleading in respect of major EAR&H 'planned" investments in railways and ports. It is clear that this original program, covering the most important elements of the country's trunk system, bore no relation to other sectoral plans and did not represent a firm undertaking of EAR&H. Moreover, major portions of the listed investments were to be in two large railway extensions, which could neither meet EAR&H's own investment criteria nor be economically justified from a national point of view. This lack of realism stems in large part from the absence of suitable consultation between the Government and ZAR&H concerning railway plans and the failure of the Government to propose suitable railway investment programs in light of national needs and alternative solutions.2/ The establishment of a transport

1/ The identified road and airport works would cost about f24 million in all, of which 115.1 million would be spent during the Plan period, representing a 63 percent physical completion of a specific project list.

2/ The Government has a built-in bias in favor of 'railway solutions" to transport problems without regard to economic considerations because the funds necessary to finance EAR&H investments, and to cover possible operating losses, can largely be obtained without imposing a direct burden on Tanzania's financial resources. Through the medium of EAR&H's finances it is possible to share these burdens indirectly with Kenya and Uganda. - 7 -

planning section, which we recommend in paragraph 207 above. could help in ensuring a more integrated approach in the future. At present, the major transport modes are planned in isolation.

25. Experience during the first half of the Plan nerind indinates that the physical targets of t]ne road program (namely, 63 percent completion of the projects started during tie Pln -nperiod) are far bevon the cornintrv's nresent administrative and technical capacity. Since the original road program was estahlished, other road prnioets estimated to cost about O1 million have been added. These include extensions or greater improvement of roads included in the original list and the Iringa-Trnd1uma sector of the Great North Road. There will undoubtedly be a large shortfall in physical completion of road projects, the Mission believes, amounting to about ah0 percent shortfall on the original plan and about a 60 percent shortfall on the expanded list. In addition, the p,-ttern of R&AR&H investmnts indica in the Plan has had be altered completely.

26. The effect of this physical shortfall and major change in investment pattern upon the output of other sectors may not be adverse. The revised pl-n prepared by EAR&H now appears to relate more closely to Tanzania's needs than th+e onrigin,al list did. On the other h.and, ,while th411eroadA prograim has not been seriously reviewed by the Government in the light of the prevailing technical

constrai;nts or the obvlous- unAerest-mmate ofl costs, nor adjusteLInd to aU ne suitable pattern of priorities, shortfalls in physical completion are not like-

ly)t seriouslyCIo affect prod1 -4th4 -41, e short run nor udisrupt tuhe prog s o specific projects in other sectors, since the original plan was apparentl:y b~ased on the general ueuun±Ica' nee's 01 ULe roau. system, rathier "iani c±uosc±y UbtU u ^ bL11= _,U11C11CUlL C IlU U W1 bILl ua bybU1,LI U61 - ull l b y geared to the plans of other sectors.

Rephasing Transport Invesetment

27. In view of the weaknesses of the Plan, changes in its content and lags in its implementation during the first half of the Plan period, the Mission has considered a rephasing of transport development over the remainder of the Plan period, based on our appraisal of the capacity to plan and implement a program of works, likely costs and the present status of Droject preparation. We have also mnade prelimlnary judgemen-ts as to the economic justification of those few projects not yet under way and of those which still could be rephased if necessary.

28. During the first two years of the Plan, total public investment in new transport assets amounted to about 15.75 million, including 11.7 million for railways , tl.4 million for ports (not including U0.7i4 million for railways and harbor replacement of assets), 132.5 million for road construction, and about !145,000 for airport facilities. The Mission expects additional investment expenditures to amount to E25.5 million during the last three years of the Plan - j5.3 mlliion on railways (not including $4.4 million for replacement), fE5.3 million for port expansion, 113.6 million in roads and about 11.3 million in airports. Thus over the Plan period, a total of 131.3 million would be invested in the transport sector, representing about 30 percent of estimated total public investment during the period. Table 1 shows the Mission's estimate Table :L: IDUBLrEC D\TW7ESTIENT IN TANZAINJIA'S TRANISPORT SECTOR, 1964/65-1970/7'1 a/

Total Mission Total Programs Actua:l Mission Forecast 1961/65- Forecast 1966/67- 19- 4T7/675 1977/7 1966/67 1967/6d 196d/69 1968/69 1969/70 1970/71 15'70/71

COMWOR KS

Rc)ads 1.16 1.37 3.24 5.17 5.05 15.99 4.50 4-.50 22.46

Airports 0.10 0.0,4 0.58 0.61 0.19 1.52 0.30 C).25 1.93

Sub-total 1.26 1.4 1 3.82 5.78 5.2h 17.51 L.80 L..75 24 .3c

EAR&H::

RailwLys (net) b/ 0.65 1.01 2.57 1.52 1.23 6.98 1.14 1.16 7.62

Harbors (net) 0.06 1.32 2.28 1.56 1.5C 6.72 1.30 C).63 7.271

Sub-total 0.71 2.33 4.85 3.08 2.73 13.69 2.L4L 1.79 i14.89

Combined net total '1.97 3.7)L 8.67 8.86 7.97 31.29 7.24 6.54 39.28

EAR&H rep:Lacenent 0.18 0.56 2.21 1.41 0.79 5.15 0.63 C).59 5.6L

Gross investment 2.15 4.30 10.o8 1C.27 8.76 36.35 7.87 7.13 k4d 9i

ail EAR&H uses calendar years. b/ Including in:land water services and road transport services operatedi by EAR&H in Tanzania.

Note: The table does not include an investment of approximately ; 5.53 -million bp:; Tanzania in the construction of an oil pipeline nihich be-an in 196 and is e:-,cctn-d tc be compl)eted b>.t`e end( cf 1969d, or investment in a la~-ge trucki ilect, to se:ve Sait,-.bia transport requirements. - 9 __

of the phnasina f tranrsrt ilnvr--stmnt byr the Minisct+r f (-irpmuini ,'i-na and Works (COMWORKS) and EAR&H in Tanzania for the five-year period comprising the three remaining years of the Plan period, 1966/67 - 1968/ 6 9, together with the two subsequent years 1969/70 - 1970/71. The table indicates a steep increase inttanspor in1vestment± -Ln 1 continuing thereafter.4.~ ± B. 4.othroad investm.ent and the total investment of EAR&H in railways and ports are likely more than to double during 196 6 / 6 7 as co-pared with the previous year. Replacement investment in railway wagons and motive power is expected to increase fourfold in 1 Qr54 /(•7

T 1- longe-rIUnIJ 1hLg1he6 ±leVelsIof t=Znltu U U Un t r a ntuiufeU U.L Usb Wlp- tions as to an improved capacity to implement projects and the availabil:ity of

I-LnacLa'i. resources 'Uo'Ui' ±ULocaL an1u foreL~,ig. \ or. deta~ils on1 roa'Us andU air.ports see below, and on the EAR&H program see Annex I-A.) Most of the projects to be executed durng the nextu two or tUihree years are n-v in ana-UvanceU stage of preparation or actually under way. Most of the projects have obtained e.xternal finance. O1f thle 116.0 mrilion program oI road works, projects whose total cost amounts to over 112 million, or about 75 percent of the total program, are sup- ported by foreign financial commitments totaling about I,O.1 mllion. EA3R&H nas obtained about 70 percent of its estimated borrowing requirements for capoital development over the next three years through 1969. `nere are further transport projects which appear to be justified and possibly attractive to foreign lenders and which could be prepared for implementation before the end of the Plan period. The major constraint in the short run could be in the provision of local finance to cover Tanzania's share of foreign-assisted road projects. The steep rise in expenditure, although accompanied by increased disbursements of committed aid, calls for a similar doubling of finance from local sources over the next five years as compared with the past five-year period.

II. ROAD TRANSPORT AND THE ROAD SYSTEM

Road Transport

30. The volume of road transport is increasing rapidly in Tanzania. Its primary role is in providing relatively short-haul services in rural areas to and from the rail line and in and around the main towns. Longer distance road transport between the population centers is also on the increase.

31. The vehicle fleet in Tanzania is estimated to be growing at an annual average rate of 7.5 percent. The Mission estimates that in 1966 there were about 55000 registered motor vehicles (not including motorcycles and farm machinery) in Tanzania, or about one vehicle per every 190 inhabitants, about the same ratio as in Uganda, but lower than the Kenya ratio of about one per 100. Of the total fleet about 45 percent are private automobiles, whose numbers have increased at a rate of 10-11 percent annually over the last five years. About 20 percent of the fleet consists of trucks, buses and tractor-trailers, whose numbers have been increasing at about 8 percent a year. Over 70 percent of the total fleet has been registered during the past five years, indicating that the fleet is not over age, and has probably been growing in capacity and efficiency more rapidly than in numbers. - 10

32 VillL1Le the road transport ±indutL ry hasU ubnII rLUwi i1 rpLcdL y 11.0I11 a 10.w level, it is still not highly developed. The carriage of goods and passengers for hire or rewardis restricted by route-licensing and arealicenising reg;u- lations designed primarily to protect the railway's differential tariff from roadU competition. 'licenesinig 5y- S l is aUdm1iis terd by- tue TranUs1ooUrt Li- censing Authority (TLA) under the Minister of Communications and Works. There are thre types uo licenses: the 7liA License a,pplying to passenger services the B License for goods services- and the 1C" License for carriage of goods 7 by their owner in his own vehicle. APplicants I=for "A or 'B- Licenses must prove the need of their services on the specific route or in the specific area in question before a public meeting of the TLA. The most frequent objector at such meetings is the railway. In 1965, there were only 1)400 'AW Licenses (including urban buses) ana only 1Q)9u M bicenses in Tanzania. un the otner hand there were over 6,300 `C Licenses. Although there are no satisfactory statistics on utilization, these figures suggest that the "'for hire road transport industry actually handles a relatively minor element in the overall movement of goods by road and that licensing restrictions have forced. a great part of the demand for road transport to be met in a relatively high cost way. As a result of the licensing system, a substantial amount of "piracy'' exists, with "'C' licensed and unlicensed vehicles operating for hire and reward. The administration of the road-licensing regulations is not very effective, and therefore the economic effects of the system are difficult to assess. The modification, continuation or abandonment of present road-licensing regu lations is one of the major points on which a current study of transport coordination in East Africa will make recommendations.

33. While the road transport industry consists primarily of owner operator truckers and small rural bus companies, there are some large units. The EAR&H, for example, runs a feeder service between the Central Line and the Southern Highlands and there are two large bus companies; both subsidiaries of United Transport Overseas Ltd. (U.K.) offering long-distance services on main routes in Tanzania. The newly formed Zambia-Tanzania Road Service Co., a public corporation owning over 400 large trucks 9 is exclusively engaged in the movement of Zambian import/export traffic through Tanzania. The road transport industry is presently disrupted by the failure of the Tanzania National Transport Cooperative (TNT). TNTT was formed in 1965 by the amal- gamation of regional transport cooperative societies that were established early in the 1960's. The National Cooperative had strong political backing1 , but was weakly organized and managed. TI'TT expanded its fleet and services at a very fast rate in 1965, overextending its finances and weakening its control over its membership. With apparent immunity from administrative action, TNT operated without licenses throughout the country and subcontracted to nonmembers holding 'C' Licenses to meet many contractual obligations. In 1966, TNT was nearly defunct since its local elements had begun to withdraw and form again as cooperative societies on a regional basis. The Government is examining TNT's problems with a view to reorganization.

34. The Zambian transport emergency during 1966, which has continued into 1967, has also disrupted road transport services in Tanzania. Despite administrative efforts to keep canacity in the rural districts to move crops9 both common carriers and private haulers have been drawn to the commercially attrac- tMive mo-vement of goods to 7Zmhia9 under contract to an agent of the Zambian Government. The longer run im-oact of this road lift on the road transport industry is hard to forecast since it depends on how long this traffic continues and how much residual traffic remains on these routes after the emergency subsides.

The Road System

35. The main road system of Tanzania connects most of the areas of major population concentration in the countrvr. The density and extent of minor roads feeding into the main system varies in different parts of the country. Roads are most concentrated in the hinterlands of the three main sea.ports and along the shores of Lake Victoria. Most of the trunk roads have been developfed in a north-south pattern. to comnlepment rather tl

Recently, however 9 improvement of the east,west routes of the road grid has been emnhRsizid_- r9ut to growirn trffiic demand reflecting the increasing competitive ness of road vis a-avis rail transoort.

36. The road networh comprises about 10,100 miles of main and secondary -rroads-1-nintaninprI by-it.he centr+al Goverrnment abou 107nn milesz rof' gazeq7tJ-P district roads maintained by District Councils and an unknown mileage of un-- classifie-rl minor ros an tacks for uhic there is noestablished -c responsibilitty. About 850 miles of road are bituminous paved and 800 miles are engineered gravel 1he remaining 19 rnnO miles of public road are low!T-. standard gravel or earth roads.

37. Provision of a serviceable all weather highway system \iould be costly 4n ro na4 ",cas -1-W -e A 4 4- y o-l 4-A- 114 SA ov- An' popula 4 on ce v are.)|nter_. il 1 1 Cl±llL ll all, u 1 Uy V1 Cl.L0 ± ±0D}J L_ u _LJ0,UGi1 W U .D widespread. Historical:Ly, Government has rmiet the problem by constructing a very extensive lou -standard, 'low-cost networkU of aULi--weather roads . Thl1-1s i n-- tegrated low-cost main road network has with few gaps, been attained and is s Uil capUbJe ouf me e t1in road tUra1nsplSUIb LquItltCI L ,[ Wi rI a UftUU I eCU if.uienIcy

However 9 maintenance has lagged behind traffic growth and the serviceability of these traffic and maintenance-sensitive roads is declining. Traffic growth will require progressive upg:rading of the main roads. including major reconstruction and realignment to fulil engineered standards. This next stage of Tanzania's main road development, which to a limited extent is already under way, is prov--- ing to be rmiuch m,ore expensi-ve than was the provision of the existing all- weather access facilities. Adequate maintenance is vital to avoid the premature necessity for such costliy improvements.

38. The minor road system of the country is for the most part poorly built and maintained. A very small part of it is built for all-weather use. WTith a rapid rise in th(e promotion and use of such agricultural inputs as fertilizers, equipment and services, and the growth of rural incomes in some areas. the need for all-weather access is increasing. Mlinor road development and improvement in the areas of high agricultural potential has been inadequate in the past and the Mission recommends that more emphasis be placed on developing and maintaining this part of the system. The Government has recognized the need for local road development and has spent about 11 million on this over the past five years, with the assistance of U.S. and U.K. funds. However9 - 12 - the Government has been as vet unable to take what appears to the Mission to be primarily the organizational and planning steps required to meet the need on a continuing or systematic basis (see below).

39. Central Government expenditures on the road network over the nast five years, including administration, maintenance and construction, have averaged ahougt r3R2 million a year (see Table 2)- This nrmount of expenditure is low in relation to the extent of the road system and its utilization, and in9icates a slow erosion of the asses in rona facilities The Missirn rpcom- mends a substantial increase in road expenditures over the next few years.

Table 2: CENTRAL GOVERNMENT ROAD EXPENDITURES 1961/62 - 1965/66 (in f million)

Year Administration a/ Maintenance Construction Total

1961/62 o.4 1.5 1.2 3.1

1962/63 o.6 1.4 1.0 3.0

1963/64 0.6 1.5 1.0 3.1 1964/65 0.7 1.4 1.2 3.3

1965/66 0.7 1.5 b/ 1.4 3.6 a/ Estimated b/ lNot including extraordinary maintenance on the Great North Road required by Zambian emergency traffic.

Road Administration

40. The major constraint on past road development expenditure in the recent past has probably been the shortage of professional staff in the Division of Roads and Aerodromes within the Ministry of Communications and Works. This shortage developed due to the progressive departure of expatriate engineers and to the difficulties of replacing these individuals from either local or foreign sources. As a result, the technical preparation and basic planning of road projects have been generally inadequate. The administrative establishment of 50 engineers would be adequate to meet the current requirements of Tanzania's highway system, but only about 35 of these positions are filled. While it is Government policy to fill administrative positions with Tanzanian nationals, the supply of qualified nationals is at present inadequate and delay is inevitable before sufficient numbers of experienced local personnel will be available to take over fully the duties of highway administration. In the meantime, the Division of Roads and Aerodromes will have to continue 13 to denend heavily on the! emnlovment of foreign nationals. Continuitv of the road administration should be maintained by ensuring that responsibilities presently held b1r foreigners are transferrPe9 tn nationa1 at a npaee onn.istPnt with the ne,ed for sound management and that the accumulated experience of fhfzoq p: Rl1+r;.pf> :i -n-cc3 t.n-f-- no-- inrnc in a wrcfomrn0ti frAni niT nrnm

41. rp.e Government recognizes the need to restore the strengTt+h of the Roads Division and is taking steps to that end. Recently, for example, PoiT ngi,nerinna iqlqries were increasedr itomore competit i 1levels; an OVerEeaS0O-p recruitment campaign attracted ten engineers in 1966, and further recruitment is u,nder wayf . Expatriate engineers and funds for -pplemAentn- their local salaries jhave,been provided under a Swedish bilateral program; and similar assisaneeis 'being sought from -thercounties.I Th--vrrretha ple to the International Development Association for a loan to cover the cost, over a ''f years 9 of foreign staff to train nationals. The 4-vernment is also providing incentives, through scholarships and promotional campaigns am.ongs-t -st udents-U 0ULU~I '0 4to'2td0 - ,-;rc 49 -- -on-national's 4Co C(tv0RS The.n7),Ml- -expects fnr -- _~--- 4 ,I.,Ul'2 C1U; L, Y 1.j UI1c, d , _L IlO'2 .JI'JJX') ile 1*L_LLIi. '2± ,-y CA-4 VS:' 20-) the supply of-.national professionals in five years to be sufficient to staff fuLly th1c nuak D./JLViviLsio, IU±lli10uUri figU.Lt!,n consuIlO dikltarueAIb y to, uC b usIl required. The Mission believes that the interim employment of expatria-tes and "longer-tte.ULL It?. c-rogrvms of tricI-11P lngnational 1L11_Z highIa prioritL-Ly andi 1,eltL1sLL external support.

42. While the administrative machinery of the Division of Roads and Aerodromes and of the related Regionai Engineer Office (Regional Engineers handle all COMWORKS responsibilities in their regions) is basically adequate, advanced planning nas not been established as a distinct function witnin tne Division. The proposed overall transport planning section within the Ministry (CoMI1JORKS), in meeting this organizational requirement, would be responsible for planning road investments in close cooperation with the Division of Roads and Aerodromes. Planning road investments has been hampered by a general lack of adequate road transport information, including data as to traffic volumes, origins and destinations, traffic composition, economic costs of road transport, road construction and maintenance and other basic inputs for investment decisions, an early task for the proposed. planning section would be to devise an improved system for collecting and interpreting such information.

Road Maintenance

43. The maintenance of the 10,100 miles of roads under the author-ty of COMWORKS is financed from the central Government's annual budget. On the other hand, the maintenEnce of the 10,700 miles of district roads is met; by allocation of various locally collected taxes supplemented, where considered necessary-,.bY`the central Government. Assessment of maintenance requirements for COMWORKS' roads is based on formulae developed a number of years ago and is related to prices for labor, equipment and materials that are no longrer operative. On-this basis, the annual allocation for maintenance of various types of roads is determined to be i450 a mile for bituminous paved roads, 1220 for gravel roads and f120 for earth roads. In accordance with these guidelines, maintenance expenditures on the CONMWORKS roads were restricl,ed in 1965/66 tboabout 1l.5 million. This amount is inadequate, particularly - 14 -

for the Deriodic resurfacing of bituminous paved roads and reballasting of gravel and earth surfaced roads. While comprehensive information on maintenance allocations for district roads was not available, indications are that funds available for this category of roads were even less, averaging about 120 a mile. The formulae used for determining maintenance budget reouire- ments should be reexamined in view of rising costs of labor, higher charges for plant and supnlies, and general traffic growth. The Mission estimates that an increase of about 50 percent in maintenance expenditures would be reasonlnb½ ~nding- thb detaile.1d review thaqt should tnke nlTae_

44. Althiough mechanization of roat9d maintenance o,nerations is an acepted policy, lack of the necessary equipment results in most road maintenance being car,rie out. by-v maniiu1 labor. The Miq-sion recommend9s that. the etprtmenrtmPntal ronad plant capacity be increased for improved maintenance and also for low-standard road betterment and construction of works in rural areas=- Suh Aa cb -purpose road plant appears eminently suitable to Tanzania, since maintenace operations reure~c~)o-ncentrated e-f'fortrduri ng the-6 ra inyr sesns. 1"ni nten2ne pl ant capa-n city becoming idle during the protracted dry seasons could then be used for needed road construction and betterment in rural areas. To carry out such maintenance operations, improved administrative and supervisory capacity will be essential.

Road flcnqtrnn±.jon

145. The standards of the road network reflect the previous policy of constructing low-cost roads. Few roads have engineered designs and much of th+e netw.--ork was constructed from the rou,gh layou1ts ol Ir14irrli-her starndrds a-re now required for the sections of the main road system where traffic justifies irT'o,,' Four ra clas f'yrom aspchltq pe t or low type rngrae surfaced roads were worked out for the purposes of the detailed engineering of the TringaT-undwm1a road noW under 1ay-. The Mission reco- ds th-a+ th- sandards be used as a guide in prescribing uniform criteria for road construction in the

I L U LU.S.

4Past experJence as to the costs of road construction are not a satisfactory guide for estimating the cost of projects now under consideration. rno-'a- projects' cos's are now es 14 a-l-ed t c e 5n percen-l 11gher thian _;n the L1. U, JAL J ~u 1 u~ 110W Z U~al'UIIi u~ uI u ~I u a1"~ ±1 ''-'- U Plan due in part to rising costs of labor, materials and management, but above all d-ue to0 Ulth higher des,ig standards now seen tuo be necessary. Typical construction cost figures used in the Plan vary from h,14000 - 125,000 a mile for bituminous paved roads and I8 ,000 - f20 ,000 a mile f'or gravel paved roads according to location and terrain. The estimated foreign exchange cost of road works is roughl-y 65-75 percent, according to the nature of the work9 these foreign costs include depreciation of equipment, imported materials, spare parts and the foreign cost elements of fuels anu constr-uction and engi-neering services.

47. The capacity of the road construction industry in Tanzania cannot be appraised meaningfully without reference to the larger context of the East African or wider market situation of the industry. Only a few contractors of a limited size are established locally, but based within East Africa there are a number of large European construction firms. Construction and contract awarding procedures are appropriate to attract foreign contractors and thereby - 15 - make available to the country on a comoetitive basis any construction capacity required for future investment programs.

Planning Road Investments

48. In the past, the Division of Roads and Aerodromes has planned road works on the basis of its familiarity with apparent technical deficiencies and localized failures in the road system without much reference to the likely economic benefits of improvement. Raw, and often misleading,. traffic data and outmoded rules-of-thumb are often used, permitting only a crude evaluation of proposed works. The ranking of priorities has been influenced to a large extent by such criteria as the attractiveness of possible projects for foreign financial assistance; which is a malor reason for lack of progress on meetina minor road requirements. The proposed planning section with COMWORKS should have as one of its most urgent tasks the establishment of sound, practical criteria for assessing the timing and extent of justified road investments, based on local cost cocnditicons and the transport needs of the countrv.

49. The general inadequacy of access to the main traffic arteries in Tanzania appears to be largely due to the lack of suitable governmental coordination in asssessin`g locial1 tra,nsport requirementscnd meeting them. There is insufficient consultation between the Ministry of Works, the Ministry of Agricultu,re andnl r+isi-The (\Ciinnil oncrni ng lo t1+tnsort+ needs. The Mission recommends the creation of an ad hoc interministerial "task group" to look i nto t+hee feeevder road and loca1- storage problems of specif-i, areas n high agricultural activity and potential, concentrating in the first instance i.Lo +nthsLiuflLiV +sO 0.4reas tao iwhW ILGCli m1e1 re U aa4 -WLi-1 aS.L.Li;ackr log ijo4-l nmde,S' VA iiL 0 1'C.1evdet V 1L i4A.. Li . This11it. 0: +,,I'J.sf 5± Li e~ jIA. L.. 14._w be supplemented by a small consultant team to help it plan investment programs in selected areas. In the course of planning for a scic area, the group would acquire experience as to the best way to organize planning machinery to keep trac'k of thLese neeUds on a permiarient bas4s. TI sloull also formulate investment criteria and recommend design standards, construction methods, malintenance organization, p'lant andU otheL requiements) a thUewrWit a budgetary control procedures, suitable for a continuing program.

A Revised Road Program

50. Given the status of the road program and our assessment of the capacit y' of the Division of Roads and Aerodromes to plan and carry out road works, the Mission has attempted to revise the road program for the remainder of the Plan period and s-ubsequent years (see TaUle DJ. WUrks now WlUer way or in an advanced stage of technical preparation and/or financial commitment do not appear to be beyond the present capacity of the Division - muost ha-ve now reached contractors or consultants after very long preliminary periods - and should reach peak activity in 1967/68. To continue a reasonable level of road construction activity, additional works have been selected on the basis of a preliminary judgment as to their economic justification and the present stage of their preparation and on the assumption that the Division of Roads and Aerodromes t planning and executive capacity will be strengthened and that local and foreign finance will be arranged. Accordingly, we estimate total investment in road development of E16.0 million during the 1964/65 - l9t;8j69 TABLE3: MISSICN S RUVISED ROADPRCOGRAM

(in 1: thousiands)

P 1 a n P e r er ea rt e r PLAN E4stinated pDUvIGrs 1966/ 1967/ 1968/ 1969/- [970/ * Fi 1iterna1 a/ RE}t3REttCE Total Cost Expenditure 1967 196E1 1969 1970 L971 Forirard Finazice Available

I. PROJECTS URDIUDATOR IlN ADVANCED STATE OF PRIOARATICN

A. Trank Roads

1201 Bridge-Uganda Blorder-Eukoba 394 14 200 180 - _ _ * 138 120C Bridge-Nyakanaadi-Uvinza 250 - 50 15( 50 - - SC 1203 2 Bridges-Uvinisa-Zambia Border 33D - 55 15( 125 - - 90 1302 Chalinse-Segerat 900 74 350 476 - - - 670 1501 Taveta Junctionl-Segera 1, B0 172 700 700 228 - - 1,35C' 1702 Bridge-Nyakana-Maanza 67 52 15 _- _ 17(3 Morogoro-Iringai 3,220 44 35 77 850 1,100 1,114 - 116 1707 Lindi-}laa3i 525 395 100 30) - - - - 395 1709 Iringa Tondasma 6 100 - 200 300 700 1,600 l,80O 1,500 50f1 Total Trunk Roads 13, 7 l ; 1TO 27i 2 T 1

13. Major Second,ry Roadls

1801 Magu-Bukiba 250 2 - 73 175 - - 1802 tyoli-Itungi Port 1,814 54 450 700 610 - - - 1,360 1803 Kolondoto-Bariadi 1,220 45 5 420 500 250 - - 910 t804 Dar ea Salaas-KIibiti 1,215 112 350 40' 353 - - - 910 180)5 Bumda-ransio 625 61 246 318 -- - - 477 1815-16 General. Programa 98 88 10 __- - - - - Total Major Secondary Roads ',222 7JT 1,911 ]L 2i - 137

C. Minox or Rurral Roads

1901 RuraL Feeder Road Improvements 1,385 985 100 200 100 - - - 545 1 990 Cotton Roads (General Program) 400 40 _6 .D 60 1 90 Total Minor or Rural Roads i7- 1,025 165 270 79t -90

D. Miscellaneou, Road Works &Eouipnt

1903-09-11 Main Roads in Tonshipa 228 5 71 102 50 - - - 36 19'2 Betteretent Uni's 345 - - 145 100 100 1906 Heay P1lant for Maintenance 125 21 - 5S 54 - _ _ 21 1957 Ferriea (3) 125 i _D 212 _- Total Mislcellanec.s 823 80 71 347 100 - _

EC.Other, ngeineig &Survey

Road Feasibility Studies (5) 151 - 25 75 51 - _ _ 13(8 1303-1806 Prelim. Eng. Kant Trunk Road 373 - 100 273 - - - - 300 Others (nea.) 62 85 75 63 454- Total Engineering &Survey 8b9 _ _ liL _ - _-

TD AL ADVINCEDFROJECTS 22,225 2,280 3,212 5,014 4,090 3,125 3,ook l,5oo 8,062

II. POSSINBLEADDTDICNS DURING PLAN PFRIOD

14l1 Dodoma-Singida 190 - - - 75 115 1701 Uaagara-KikongoD 104 - - - 77 27 18(7) I Buchenzi-Karuno 622) 1808) Geita Peninsula Roads) Katunguna- ) 26 30 33 500 569 20C 1809) &Acceas &Spurs ) Sengerema 128) I Basisi-KasemwL 608) Study of Rural Road Needs 100 - - 5D 50 - - _ Rural Feeder Roads (continuatiom of pretsent progran 1901 plus outcone of further study) - - 5° 150 250 250 Feasibility Stadiea (nes.) _ - 25 50 _ _ _

TCTAL 2,306 3,242 5,172 ;1,992 4,086 3,554 l,5DO

a/ Incu,ding assiatence fraum IDA no. under- negotiation. - 17 -

Plan period, reaching a high o 5.29m,illionin I967/68R The t. Ai in feels that an appropriate level of road investment to be maintained over subsequent years w..oud be of the order of 4.0 = .0 milllon. yea

1Financing 4th-e FRoad 'Propramn

51. Table 4 indicates the- ph-asi3g o ±oreignfinnciarl assiQstance already obtained by the Government for road projects and the local finance to carry out 'the projects. tlere appJ[)ear Lu U' u ppor U nUll 'or1I UUobUta l±il6 ininUga.l Cx- ternal financial assistance in 1967/68 for road plant acquisitions and detailed engineering worIs and, in 1968/699 for the construction of projects beginning in that year and carrying over into subsequent years.

52. Assuming foreign exchange cost financing from abroad for these projects, the local financial burden on the Governrment will nevertheless rise steeply from the annual average of about f6o0,ooo in 1964/65 - 1965/66 to about 11.2 million in 196/6Q'7, and E2 million in 1967/68 and 19068/069. In add'ition to capital expenditures, the Government's allocations to road maintenance should be increased by about 50 percent over 1965/66 levels reaching -2.3- E2.4 million by 1968/69. The total local financial requirement for the remainder of the Plan period will amount to about E-14.2 million, rising irom about fl3.0 million in 1965/66 to about f5.0 million in 1967/68 and 1968/69. Availability of local finance may prove to be a major constraint on road development expenditure: maintenancei %hould generally have the prior claim.

53. Total road expenditures would rise from an average annual level of f3.2 million during the last five years to an annual average of 17.5 million during the next five years (not including extraordinary maintenance on the Great North 3oad required by Zambian emergency traffic).

54. Central Government road-user taxation, consisting of import duties on road transport equipment and fuels, consumption taxes on fuels and license and registration fees, has amounted to roughly f20 million during the past five years as compared with total central Government road expenditures cf 116.0 million over the same period. Taxes on fuels and. some import duties have been progressively and substantially raised in recent years as a general budgetary measure. The Mission believes that considerable caution slhould be exercised in instituting any further increases in road-user taxation to finance the steep rise in road expenditures due to the implications for transport coordination among the various modes (see paragraphs 9-11 above).

55. Whfile road users should make a reasonable contribution toward the costs of providing and maintaining the road system, the position in this respect is not at all clear in T'anzania. In the first place, the revenues from road users which should be considered as charges to cover Government road costs and those which should be considered as general taxation, such as general revenue import duties, or duties designed to save on foreign exchange expenditures, have not been analyzed. Secondly, the proportion of revenues that should be ascribed to the interurban system as opj!vsed to urban streets has not been analyzed according to facility utilizatiin. While road-user revenues, properly so regarded, may not have covered road expenditures in the past, the proportion Tablie 4: TOTAL ROP.D EXPENIDITURE /U'NFIN.P1NCING, 196L/65 - 15'70/71 (in L million)

Plan Period Thereafter A.ctual istimated

TypIe 4961/7E;56766 1966,/67 1 9'67/66 1766/9- 16699( 1C970/Z71

A. CAPITAL EXPEN4IDITURE 1.2 1.4 3.2 5.2 5.1 4.5 4-5

Foreign assistance (firm)a/ 0.6 0.7 2.1 3.1 1.6 -0- -0- Local finance required 0.6 0.7 1.2 2.1 3.5 4h5 45 Possible additional foreign ass't.a/ - - - 0.2 1.5 2.6 2.6 Local req'mt. with add. ass't. 0.6 0.7 1.2 1.9 2.0 1.9 1.9

B. RECURRENT EXPENDITURE 2.1 2.2 2.5 3.0 3.1 3.2 3.2

Maintenance 1.L 1.5 1.8 2.2 2-3 2.L4 2.4 Administration 0.7 0.7 0.7 0.8 0.8 0.8 0.8

C. EMERCGE]NCY MAINTENANCE - 0.2 1.2 ? ? ?

Foreign assistance - 0.6 ? ? ? ? Local finance - - 0.6 ? ? ? ?

TOTAL ROAD EXPENDITURE ' 3.3 3.8 6.9 8.2 8.2 7.7 7.7

Foreign assistance incl. add.a/ 0.6 0.7 2.7 3.3 3.1 2.6 2.6 Local requirement 2.7 3-1 4.2 4.9 5.1 5.1 5.1

a/ Disbursements estimated in accordance with project expenditures - 19 - of t .otalroad cost11.s that should be borne y prlvale roal usersi no' a4t all clear. The total annual costs of road improvements should probably be torne by luiie roadU users buL)tLa propori iJ4on oflmaniendlance an' adm.Unistration and scmie of4i the annual capital costs and depreciation of the basic access networlk would

uuG LUUC a UUI Wu.ei LtlJ.dA. OIUL uc LUC S.I led.CUCLeI-L 7 UUC LU U11C 01kL L-I biy llUn administrative need for this access unless Government vehicles are also made subject to road-user charges. Finally, to require the road user to imieet. the costs of the highway system, while continuing to protect the railways by restrictive road licensing would probably iead to a maidistribution of demand by obscuring real economic costs. All of these questions are to be analyZed in a joint East African transport coordination study now under way.

Project Identification

56. The following road projects merit consideration for external financial assistance:

(1) Morogoro-Iringa. Detailed design of this main road section (148 miles) to be improved to bituminous paved standard over its whole! length should be completed in 1968. The total cost of the project, including an allowance for contingencies, is now estimated at about E3.0 million. Construction of this road section may be delayed by the heavy Zambian traffic on it at the moment and the uncertainty as to f'uture development of this traffic. The Zambian traffic raises problems as to how to arrange a detour through the escarpment and gorge sect;ions of the road during construction and as to the design standards which should be finally adopted. Construction could probably not begin much before late 1968 or early 1969, when normal traffic patterns, on which economic justification should be based, might have been reestablished.

(2) Iringa-Tunduma. Detailed design of this 300-mile sect:ion of the Great, North Road is being financed by USAID and shou:Ld be completed by mid-1968. The design standards to be adopted will be decided upon in mid-1967. The cost estimate of 16.1 imillion indicated in Table 3 is roughly based on bituminization of about half the distance and gravel construction of the other half. On the basis of normal traffic, bituminization of the road would appear justified as far south as perhaps Makumbako: a decision as to what design standards to adopt and whether improvement is required from Makumbako to the Zambian border very much depends upon future expectations as to the volume and duration of heavy road traffic to and from Zambia. Construction of portions of this roa(d could begin in 1968/69.

(3) Geita Peninsula Roads. Feasibility studies have been carried out on four feeder roads (110 miles) and associated spur and access roads. The group constitutes a project which appears to be economically iustified with rates of return estimated at about 16 percent. Total cost of the project, as presently defined- is estimated at El.4 million including a contingency - 20 -

allowyance ofc ab-out 15 percent in vie-4 the presen statu4. of engineering. Construction of these roads could begin in 1968/69, the llast- year ofIL the Pl'an period, provided 4ha 4 d.etaileA engineering begins by late 1967.

(4) Road Maintenance and Betterment Plant. The Government has p'lannedU thie acquisition o0f p'LantL f0or t.ihuree bue'uulern -aii'us and a bitumen sealing unit, for departmental works of a minor nature on the main and secondar-y roads, and for the periodic maintenance requirements of reseal and reballasting. This appears sound to the Mission and required beyond urgent plant renewal needs. The total cost of the four units is estimated at T345)5,00.

(5) Other Roads. There are numerous other road works contemplated by the Government which cannot begin during the Plan period. Despite the lack of any comprehensive view of road priorities in Tanzania, some of these appear worthy of further study with a view to implementation during the next plan period. These include:

(a) Makuyuni-Oldeani Road, which may be justified on the basis of present agricultural traffic, and has importance for the tourist industry;

(b) Biharamulo-Bokoba-Uganda Border Road or parts thereof which would connect with a proposed improved Uganda road south from Masaka;

(c) Kigoma-Burundi Border Road which would provide an improved and apparently lower cost access for Burundi to the sea via the Tanzania Central Line;

(d) Mombo-Leshoto secondary road serving a rapidly growing agricultural traffic;

(e) Tourist roads which have yet to be defined in any detail but which appear to be generally required;

(f) Tanga-Kenya border road to link up with a proposed improved Kenya road from Mombasa; and

(g) Mtwara-Mingoyo main road to improve the Mtwara Lindi connection and serve a developing agricultural area and growing traffic.

Feasibility studies are contemplated for most of these roads, and s;qi 1f.ne hRm hppn ohtainpd or is sonuaht from USAID and UNDP with the financing of consultant services in connection with a number of them. Major truink road immprovements and extensions are alsn being considered; the Mission believes these should be carefully studied as longer-term and probably c+agedtA rov s The Eastern Truink Road - 21 -

connect1ng th1e Dar Cs -a-aar.zra - wit twar.a and islwa aI par aIllein existing coas:tal shipping services, is now being investigated from a

---Ie - nbin - 15, a-et,t4 -_ -.d s1houl be an-alIyzeL4tiU. - Te lNorthern Trunk Road connecting Arusha and Mwanza, faces major problems of routle selection and to som1e extent woulu parallel raiJL serVlUce Varicus sections of this possible future connection are being studied in isolaUioun. Llth pruu±lell sihluoU be vieweu as a whule ini a. uumprenesitive feasibility study. The Western Trunk Road, along Lake Tanganyika, appears to be! a very long-range proposition, and present improvement to bridges on this route would appear to be adequate for some time.

III. AIRPORTS

Organization

57. The planning, construction and maintenance of airports are the responsibility of the Division of Roads and Aerodromes within the Ministry of Communications and Works which maintains 54 airfields in Tanzania, of which Dar es Salaam Airport, the only international airport, and 19 others have scheduled air services. It is also responsible for provision of crash, rescue, and the fire-fighting f'acilities, the management of Dar es Salaam Airport and the collection of landing fees.

58. Air traffic control and meteorological services are provided throughout East Africa by the Directorate of Civil Aviation and the East African Meteorological Department respectively, which under the new Treaty for East African Cooperation are to be largely decentralized under officers designated for each partner state. The national air carrier, East African Airways Corporation, is also jointly owned by the three East African countries and operates scheduled services locally and internationally. Under the new treaty, the Corporation and its Board of Directors are to look for general policy guidance and for approval of annual programs, alterations in tariffs9 major investment, projects and major changes in salary structure, to tl-e Community's Communications Council which consists of the three permanert East African Ministers and the Minister responsible for communications in each partner state.

Financial Structure

59. There is no separate accounting for airport receipts and current expenditures since both are incorporated in the central budget. The Mission was unable to ascertain, annual airport receipts. Current expenditures on airport facilities have been very small over the past five years, ranging from E90-000 to T,9OOO annually.

Tnvestment. Pronrqm

60. Ovre- the nnpt five venrs only Tf31O, noO has been invested in airport improvements of which about E220,OOO was spent on the terminal buildings and runway at Dar es Salaar. Only 1.50,0on has been spent on the minor airfieldls, - 22 - the remaining fh4nnOO on the riinwnv at Tanga and feasibility studies for proposed new facilities. Investment over the remainder of the Plan period will be at. mucih hialghpr level1 than in thp ans-t-.qmonti,ng tor perhaps <1 million (see Table 5). Small additional amounts to be spent on airstrips at or near wild- lifeP sanctuar,pvie are i ncluded~ in the allocation to the tourism sector (see Annex III-C).

61. Although the Government has not analyzed these investments systematic+ally 1 , and has imade no projections of traf-fic, thie M4ssion. f'eels tt th- above expenditures are likely to be justified. The Mtwara runway extension is required for the service of Zmbian copper-lift planes. The Dar es Salaam runway extension is required to improve the handling of jets of the Boeing 707

62 Tn ad1dit-lUon to this 12L m5 th e JveIrnlmenl is conslder-"---g `-e establishment of a new airport at Sanya, serving the Arusha-Moshi area. The resiting of the EACSO secretariat at Arusha will increase air traflic there and safe exupansion of the present airport at Arusha does not appear to be feaSlule. The rMission therefore believes that a new airport in hins area, capable of handling all aircraft on scheduled internal service, merits further study. Preliminary estimates indicate that a new airfield at Sanya of the type suggested would cost about i450000. However, the Government is also consliuering Dllye. as the bite of ai ll natLionLaLUll jet airpyort to serve the needs of the tourist trade. For reasons stated in Annex III-C, we do not feel the potential tourist traffic directly to northern Tanzania from overseas would justify this project which could cost 19 million.

!V. THE ZAHBIA-TANZANIAN TRANXSPORT PROBLEM

Zambia's Alternative Outlets to the Sea

63. Zambia's long-range aim to diversify its trading and transport pattern and its immediate problem of trying to do this on a crash basis due to Rhodesia's unilateral declaration of independence (UDI) have important implications for transport investment in East Africa, especially in Tanzania.

64. Because Zambia is a land-lockec country, depending heavily on exports and imports, a reliable access to the sea is essential. The country's primary link to the sea is over the Rhodesia Railways (of which Zambia is part owner with Rhodesia) from the Copper Belt through Rhodesia and then over Mozambique railways to the Mozambique ports of Beira and Lourenco Marques, both about 1,500 rail miles from the Copper Belt. Existing alternative routes include: a route over the Bas Congo-Katanga (BCK) and Benguela Railways through Katanga Province and Angola to the Angolan port of Lobito on the Atlantic; the Katanga- MIatadi rail/water route via Port Francqui, Congo; a route over the rails of the BCK and the Compagnie des Chemins de Fer du Congo Superieur au Grands Lacs Africains (CFL), then across Lake Tanganyika and finally over the East African Railways line to Dar es Salaam. In addition to the alternative rail links, Zambia is connected through its trunk road network to the neighboring national highway/railway systems in Tanzania and Malawi which also provide outlets to Table 5: IN71 LSTMENT EXPE-I)ITURES ON AIRFIELDS

(in E thousand)

Estimated Plan Ongoing Projects TotaLl Prior Expenditures Ref. or in Preparation Cost Expenditures 1966/67 :1967/68 1968/62 Thereafter

2101 Dar es Salaairi

Terminal Bldg. 80 63 1L7 - - -

2102 General improvements - other airports 120 '32 - 45 .3 -

2104 Bakoba Airport, 50 . - 50 -

2105 Dar es Salaam runway ejxt. 485 30 2'70 185 _

2107 Moshi Arusha, Mwange Tabora 170 9 :30 44 87 _

None Mtwara runway ext., 500 2,50 250 - -

2106 Mbeya Aerodronie rebsiting 166 - - 17 149

2201 Airport fire services - buildings 21 7 _9 -

2202 Airport fire services - equipment 4 1 1 1 1

2203 Crash tenclers 35 3 9 10 13

2204 DaLr es Salaam Airport Fire Stati,on 3 1 6 -

1.,662 1145 577 605 186 149 - 24 - the sea. However, road transport of bulk goods over these distances appears irmpractical except as an emergency measure in a situation where rail access is temporarily denied.

65. The movement of Zambia's copper production (about 755,000 tons in 1965) has by international agreements been historically directed to the Rhodesia Railways and the Port of Beira.l/ In 19°0, arrangements between the Copper Belt iIines and the Government of the Federation of Rhodesia and Nyasaland Limited copper exports via Lobito, the most likely competitor, to 36,000 tons a year. As a result of these arrangements, the alternative rail routes have not developed to sufficient capacity to handle more than a small amount of Zambian copper. Under normal circumstances, most of Zambia's imports, a high percentage of which originate in Rhodesia, have also utilized the Rhodesia Railways.

66. The orientation of Zambia's trade, economy and transport facilities toward Rhodesia is an outcome of the nast federation of these two territories (1953.1963) under U.K. rule. It is the long-term policy of the Zambian Govern- ment to reduce the countrv's dpnnce on Rhode,9sia f-or a toq the sea and for the supply of a wide range of manufactured goods and raw materials and to develop new and closer trade relations with -East Africa. UDIT annd +hei~ emerge~~ncir transport problems arising from it have .iven added impetus to Zambia's shift in its international transport nattern_

EmergPncy Transport Operations in East Africa

(67. The emencran sport of petr+oleum pr-odcts n stee,l rdriums +n Zambia and backloading of copper and empty drums by truck in Tanzania began in Decem.ber 1965. Over 150 privately owned trucks in Tanzania, andalike number in Zambia, were put into service on the road between Mikumi railhead and Zambia by Central African Road Services (CARS) of Za.bia acting as agent of the Zambian Government. In mid-1966, the newly formed Zambia/Tanzania Road fSer.vLices Co. 9Ltd (ZRS) owned by the Z-bian -an Tanzanian GovCrnm-cnt (U3 percent each) and by Fiat (30 percent) began operating 30-ton truck-trailer u.i4Lt-s ove r the fullI1 di s t-ance from Dar ess Salaam to the Zmbil,,-;a 1line of' rail. The ZTRS fleet now consists of about 2140 truck-trailer units, and will be -full , MTRS expanduedutSA.JAIutS toU 430--jCA unit4-s0110 _Li- n -196p7.I . O)peratiAyA CUtI~ ng ~ at40L 4 Ut.L~ CA01UAcapacity+- u,lUlC the -11UCL is41 toC carry 600,000 tons a year, including 100,000 tons of Petroleum, Oil and Lubricants . .. i) In coIllapsible pillow tanks, 200,000 tons of general imr,ports, and 300,000 tons of copper for export. The ZTRS operation involves a capi-tal expenditure of I5 million shared by the three partners in proportilon to their contribution to equity capital. Zambia guarantees minimum traffic for a period of five years (20,000 tons of imports a month), which goes beyond the time period normally associated with an emergency. In early 1967, it was announced that a fleet of 280 large oil tank trucks, operated by U.K. and West German road hauler contractors, would be introduced to handle P.O.L.

1/ The Tripartite Agreement between Rhodesia Railways, Chemin de Fer du Bas Congo au Katanga and Caminho de Ferro de Benguela (1956); the Beira Convention between the U.K. (on behalf of Zambia, Malawi, Rhodesia and the U.K.) and Portugal (1950): the Agreement between Southern Rhodesia and Nlorthern Rhodesia relating to Rhodesia Railways (1963). - 25

68. Thle emergency operation o-P about 115120- heay trucks a day over the Great North Road, in addition to normal traffic, is beyond the safe capacity of .most stretches of0Lt he road south1LLioft tJLorogoroIt-o tlle border. Dus, clouds., deep ruts, steep gradients and narrow, winding carriageWay combine to make the oil-run ex1remelty dangerous. m, - A A- a: - C ua W~~~~~ _L.J ULI Ul AII- 11.W16CVU, . _I~ 1Cualacullau Ui- Uy UII11Z 11t:NCV' UI 1 G11 1u- 1iJ

69. Energency maintenance operations on the worst stretches of the Great North Road costing 000-600 in 1966/67 (about 30 percent of total norma:L road rnaintenance expenditure in all of Tanzania) are being carried out by private contractors . T mainienance works, costing about E2s,00 a mile, will Iapparently only keep abreast of the maintenance problem. Large expenditures on maintenance will continue to be necessary as long as this heavy Zambian traffic is diverted to the road. Up to now, increased maintenance expenditures on the Great North Road have been financed entirely from external sources, including grants by the U.S. and U.K. and a I,50(,000 loan from Zambia for equipment and a portion of contract works. A further f650,000 is being spent on regraveling the road to Mtwara from Iyayi on the Great North Road so that this route can be opened to Zambian import/export traffic. This is being financed from Tanzanian internal funds.

70. Early in 1966, a military-type airlift of fuel supplies to Zainbia from the Congo and East Africa was undertaken by U.S., U.K. and Canadian Air Force planes. This has been discontinued and replaced by the operations of Zambia Air Cargoes Ltd., a newly formed company operating four large cargo planes, two each owned by the Zambian Government and the Roan Selection Trust. These aircraft carry 20--ton loads of copper to Dar es Salaam and return to the Copper Belt with fuel in pillow tanks and other vital imports. At full capacity operations, these aircraft will deliver about 60,000 tons of copper a year to Tanzanian ports. Construction is now under way in lengthening the airport runway at Mtwara (1500,000) to accommodate these planes and thereby relieve Dar es Salaam Airport and harbor of these operations.

71. Up to the present, rail transport has not carried a major share of the Zambian traffic, al-though consideraole quantities of P.O.L., cement and bitumen have moved over the Central Line to Kogoma and then by lake steamer to either Mpulungu in Zambia, or to Albertville in the Congo, for onward movement into Zambia. Very small amounts of copper have been handled from Mpanda, transshipped from road vehicles. At the outset, the railways moved most Zambian- bound P.O.L. in drums from Mombasa to Mikumi railhead for onward transport by road but in September 1966, this traffic was diverted to a throughhaul by road. However, it is unlikely that the Great North Road in Tanzania can remain pass- able during the rainy season for increasing traffic volumes and, therefore, EAR&H is advancing the planned date of locomotive and rolling stock acquisitions to anticipate a sudden rise in demand for its services via Kigoma and the Central Line.

72. The port of Dar es Salaam formed a maJor bottleneck in 1966 and was one of the factors that prevented the large-scale diversion of Zambia's general imports. Tt. wa relatively easy to dIouble the throughmut at the oil letty from 253,000 tons to about 520,000 tons, but Tanzanian traffic and the small amounts of copper reaching Dar es Salaam (42,00n tons in 19Q6) took up all of the oana.city - 26 -

over the quays. EAR& and the Tanzanian Gnvernmnnt. have agreed with 7ambhia on a phased build-up of dry cargo Zambian traffic through the ports, to reach the annual rat.e of' 4r nn to9ns by Juine 1967 of w Phich24L nn tons would be through Dar es Salaam (192,000 tons of copper exports, 729000 tons of imports), 50,000 tons through Tangan nd 150 nnn tong t.hrngch Mfwtnr - Tn andle fthis vorliume nf traffic, new works and/or equipment are required at all three ports, especially at Dar es Salaam. These are being acqir and are ino f'inn by0flhir conm- bination grant, short-term loan and long-term loan of 12.0 million from Zambia to EAtR&H.

T.LorngTe..,, Solutions

73. The erergency tr a--o---t of oil- A copper has so far p r o v ed to be a very expensive operation and has failed to reduce appreciably Zambia's

uependuence upon Rhode±sia, fUo acUess0 tU Uthe Oea.. JBy LaUt 1966, LardllUiu. WaO facing a severe fuel shortage; copper production was down by 25 percent; there were still costLy- stockipyileb of IlRniuicU-e- copper; andrZmia had been forced at times to ship copper through Rhodesia at a rate nearly equal to that for total output. Zam-Lbia therefore wishes to develop as quickly as possible per- manent alternative transport capacity to the sea. In these circumstances, Tanzanian transport planning depends largely upon Zambian decisions.

7 '4.* IJC ITi umosd-vacell oU c-urrtnu luprobpslb is Lhl constructioni of 960-mile oil pipeline from Dar es Salaam to Kapiri Mposhi, Zambia, capable of handling the entire refined fuel requirerents OI Zambia - 6UU,UUU tUon in 1965 and 2809000 tons in 1970. The line is being designed so that it can also carry crude oil when Zambian demand justifies a domestic oil refinery. The Zambian and Tanzanian Governments have formed a joint company to own and operate the pipeline which is estimated to cost about 117 million. Early in 1967 a contract for the construction of the line was concluded with a subsidiary of the Italian ENI with Italian financial institutions providing the necessary credit repayable over 15 years at an interest rate of 6 percent. The pipeline is to be built as quickly as possible so as to be in operation by the end of 1968.

75. The pipeline was the subject of a feasibility study by Stanford Research Institute (SRI) in conjunction with its study of the TANZAM highway proposal. This study compared alternative existing and possible new transport modes and routes and found a pipeline to be the lowest-cost solution for moving P.O.L. into Zambia.l/ The case is not wholly convincing from a purely economic point of view, first because it rests on a comparison of transport rates in- stead of transport costs (petroleum products rates on the Rhodesian Railways do not reflect cost of movements) and, second, because it does not consider existing facilities as sunk investments and therefore does not compare marginal costs of moving P.O.L. on these facilities with the full costs of doing so via any new facility. However, if the feasible economic choices are narrowed by taking as given Zambia's decision that P.O.L. supplies must be permanently diverted from their traditional route through Rhodesia and other existing

1/ The pipeline to be constructed, however, is somewhat larger in diameter and capacity and about 50 percent more expensive than that recommended by SRI. - 27 - alternatives are excluded, the pipeline a-ppears to be the low-cost solution. In any event, the economics of the pipeline concerns Zambia rather than Tanzania. For Tanzania, the pipeline should provide an adequate financial return on its inves-tment and, at least for some time, provide access to a sizeable mar:ket for the petroleum products of Tanzanias newly opened refinery wnich otherwise would have considerable excess capacity. These benefits, however, hinge on the utilization of the system by Zambia.

76. The Governments of Zambia and Tanzania are also planning the accel- erated improvement of the Great North Road beyond standards which would be economically Justified under normal traffic conditions, in order to handle the traffic diverted to this road by Zambia's policies and the present crisis in Central Africa. here again, the basic economic choices are Zambiats. Tanzania's planning must adjust to the Zambian decisions, always provided that the return to Tanzania adequately covers its share of the investment. From Tanzania's point of view, the heavy Zambian traffic over its road network can be expected to continue for some time and must therefore be provided for in addition to Tanzania's own needs. The advantages to Tanzania of an improved road lie in the reduced transport costs for domestic traffic from the Southern Highlands (though these savings at present would not by themselves justify the full investment) and also in the additional benefits from the increased transport activity, employment, fuel taxes, and port revenues generated by Zambian traffic. W1hile the Mission has not attempted. a detailed calculation, we reckon that Tanzania can probably realize a very satisfactory return on its extra road investment of about m4 million, and extra port investment of roughly E4 million, for a 600,000-ton handling capacity, assuming that Zambian road traffic is maintained in volume for a number of years. However, these extra investments have not been included in either the road program or the EAR&H program described in the Plan.

77. In addition tc the pipeline and improved road connection, the Tanzanian Government (acting as project leader on behalf of the three East African Governments) and the Zambian Government are considering the construction of a 978-mile rail link from KamDoyo on the Rhodesia Railway line to Kid.atu railhead in Tanzania which would provide a 1,300-mile route from the Copper Belt to the Indian Ocean. The idea of this link predates the emergency by many years and has been the subject of a number of engineering and economic investigations. The link has recently been studied by a U.K.-Canadian team of engineering and economic consultants, financed by the U.K. and Canadian Governments. Although the consultants' report has not been made public, it is understood that the estimated cost of the rail link, including civil engineering works, motive power, rolling stoek. interest during construction and required EAR&H track relaying and port expansion, amounts to 1138 million.

78. From a financial point of view, the rail link could presumably be a viable nr1dertaking if a very substantial nronortion oif Zambia's traffic were diverted to it from present routes and there were no need to compensate existing sr-csems for divertedm t-affic. From s rpgirna,l noint of vi-w- thp Peconoici; ly a - -~~~~~~gi --- _ .- --___- -- - justification would require a comparison of the total capital and operating costs of .MovingZam bia's traffic via a new li nk with the increm.ental costs of moving it via existing iacilities or a combination of existing facilities. A cost,o.aioI -I-4 - r.gtas-4-k4- cIInr be necessary forvrosco.iain-t-vr oro'-. ar!r r--,, -- Mhir+i nnQ on-f nnwre. andrn existing facilities, since one such combination might prove more econom-cally adUvaniiLgCUou sIl11 UIll VterSiOn1 c7.a.L I 4r I vV a_I7041,LZ . - 28 -

79. To determine whether the rail project would be advantageous to Zambia on the basis of economic justification alone, it would be necessary to compare the economic costs of moving Zambia's traffic via existing facilities with those of moving it via a new rail facility) or in some combination of existing and new facilities. The economic costs to Zambia would consist of the capital and operating costs within Zambia of performing the movements by the various alternatives plus thae total freight bill (including profits and taxes) paid to non- Zambian entities. Since Zambia is landlocked, costs to the country would to a considerable extent hinge on rate charges beyond its borders, unless Zambia owned the entire facility to the sea. Other important factors of a noneconomic nature of course weigh very heavily in any decision. If analysis were to show that the new link would entail a net economic cost to Zambia, the magnitude of this cost would have to be weighed against the advantages that a rail link might bring in terms of added security, greater transport flexibility, competitive pressure on rates and the like.

80. For Tanzania, the rail link question is somewhat different. Since the railways would carry primarily Zambian traffic and any Tanzanian traffic wzould be marginal, Tanzania need only weigh the financial costs and benefits that Tanzania would share in the enterprise. Tanzania's decision to take an equity share in the rail link and/or to build additional port facilities at Dar es Salaam to handle Zambia's traffic must be based on a calculation of this kind, in which expectations regarding the level of facility utilization over this amortization period would be crucial. Tanzania would also have to consider whether it would be justified to allocate such a large proportion of its financial; mannower and other resources to a single transport undertaking rather than to other development programs and projects and also take into accunt tfhe inmact. of this partieularlv extensive venture on internal monetary stability and the country's debt and foreign exchange positions. I m o '- l . X 6<,XX

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