Document of The World Bank Public Disclosure Authorized Report No: 20365-DJI PROJECT APPRAISAL DOCUMENT Public Disclosure Authorized ONA PROPOSED CREDIT IN THE AMOUNT OF SDR 11.4 MILLION (US$15.0 MILLION) TO THE REPUBLIC OF DJIBOUTI FOR THE Public Disclosure Authorized INTERNATIONALROAD CORRIDOR REHABILITATIONPROJECT June 1, 2000 InfrastructureDevelopment Group Middle East Department Middle East and North Africa Region Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective As of January 1, 2000) Currency Unit = Djiboutian Franc (DJF) DJF 1.00 = US$ 0.005618 US$ 1.00 = 178 DJF FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Francaise de Developpement CAS = Country Assistance Strategy CDE = Chemin de Fer Djibouti-Ethiopien CM = Construction Manager EMP = Environmental Management Plan ERA = Ethiopian Road Authority EU = European Commission HIV = Human Immunodeficiency Virus IAS = International Development Association ICB International Competitive Bidding IDA = International Development Association ISERST Institut Superieur d'Etudes et de Recherches Scientifiques et Techniques MOE = Ministry of Habitat, Urban Development, Environment and Territorial Planning MOET Ministry of Equipment and Transport MOF Ministry of Finance NCB = National Competitive Bidding NGO = Non-Governmental Organization PHRD Japanese Grant for Human Resources Development PIU = Project Implementation Unit PMRs = Project Management Reports QCBS = Quality and Cost Based Selection RD Roads Department RMF = Road Maintenance Fund RMI = Road Management Initiative SOE = Statement of Expenditure TA = Technical Assistance TOR = Terms of Reference VOC Vehicle Operating Cost Vice President: Jean-Louis Sarbib Country Director: Inder K. Sud Sector Director: Jean-Claude Villiard Sector Manager: George Tharakan Task Team Leader: Terje Wolden DJIBOUTI INTERNATIONALROAD CORRIDORREHABILITATION PROJECT CONTENTS A. Project DevelopmentObjective Page 1. Project developmentobjective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 8 C. Project Description Summary 1. Project components 8 2. Key policy and institutional reforms supportedby the project 10 3. Benefits and target population 10 4. Institutionaland implementationarrangements 10 D. Project Rationale 1. Project alternatives considered and reasons for rejection 12 2. Major related projects financed by the Bank and other development agencies 14 3. Lessons learned and reflected in proposed project design 15 4. Indications of borrower commitment and ownership 16 5. Value added of Bank support in this project 16 E. Summary Project Analysis 1. Economic 16 2. Financial 18 3. Technical 19 4. Institutional 19 5. Environment 20 6. Social 22 7. Safeguard Policies 23 F. Sustainability and Risks 1. Sustainability 24 2. Critical risks 26 3. Possible controversial aspects 27 G. Main Credit Conditions 1. EffectivenessCondition 27 2. Other 27 H. Readiness for Implementation 28 I. Compliancewith Bank Policies 28 Annexes Annex 1: Project Design Summary 29 Annex 2: Project Description 32 Annex 3: Estimated Project Costs 38 Annex 4: Cost Benefit Analysis Summary 39 Annex 5: Financial Management Assessment 57 Annex 6: Procurement and DisbursementArrangements 62 Annex 7: Project Processing Schedule 67 Annex 8: Documentsin the Project File 68 Annex 9: Statementof Loans and Credits 69 Annex 10: Country at a Glance 71 Annex 11: Letter of Road Sector Policy 73 Annex 12: EnvironmentalManagement Plan 80 Annex 13: Terms of References 105 Annex 14:Implementation Schedule 146 Annex 15:Review of the Construction Industry 148 Annex 16: Review ofRoad Management and Finance 151 EnvironmentalData Sheet MAP(S) IBRD No. 30713 DJIBOUTI INTERNATIONALROAD CORRIDOR REHABILITATIONPROJECT Project Appraisal Document Middle East and North Africa Region MNSID Date: May 17, 2000 Team Leader: G. George Tharakan Country Manager/Director: Inder Sud Sector Manager/Director: Jean-Claude Villiard Project ID: P069930 Sector(s): TH - Highways, TY - Other Transportation Lending Instrument: Specific Investment Loan (SIL) Theme(s): Transport Poverty Targeted Intervention: N Project Financing Data C Loan MXCredit 1X1Grant El Guarantee L Other (Specify) For Loans/Credits/Others: Amount (US$m): 15.00 Proposed Terms: Grace period (years): 10 Years to maturity: 40 Commitment fee: 0.5% Service charge: 0.75% (0% in FY00) Financing Plan: Source Local Foreign Total GOVERNMENT 2.35 0.00 2.35 IDA 2.60 12.40 15.00 OTHER 0.65 0.00 0.65 Total: 5.60 12.40 18.00 Borrower: GOVERNMENT Responsibleagency: MINISTRY OF EQUIPMENT AND TRANSPORT Address: Ministere de l'Equipement et des Transports, B.P. 2501, Republique de Djibouti Contact Person: H.E. Mr. Osman Djama, Minister of Transport Tel: 253 - 357913 Fax: 253 - 355975 Email: Estimated disbursements ( Bank FY/US$M): FY I 2 3 4 Annual 9.0 5.5 0.3 1 0.2 Cumulative 9.0 14.5 14.8 15.0 Project implementation period: 4 years (including maintenance period) Expected effectiveness date: 07/31/2000 Expected closing date: 12/31/2004 OCS PAD Fon ReMvM 2000 A. Project Development Objective 1. Project development objective: (see Annex 1) The objective of the project is to secure, over the medium-term,an acceptable level of service on the Djibouti-GalafiRoad which constitutes Djibouti Port's transit corridor to Ethiopia, during the period when a long-term corridor improvementscheme is being developedand implementedby the Ethiopian and Djibouti governments with assistance from the European Union. Followingthe outbreak of armed conflict between Ethiopia and Eritrea in 1998, Djibouti has served as the primary transit port for landlocked Ethiopia. The port of Assab, on the Eritrean coast, formerly played this role, first as part of Ethiopia, then under an agreement between Ethiopia and Eritrea following Eritrean independencein 1991. The road corridor between Addis and Assab, which passes some 20 kilometers from the Djibouti border, was upgraded and improved for this purpose. With the sudden shift of Ethiopian traffic from Assab Port to Djibouti Port in 1998,the 20 year old road connection between Djibouti Port and the Addis-Assab Road (via Dikhil and Galafi, see Map No. 30713 attached) received a level of heavy-vehicle traffic it was not in a condition to carry. While the Ethiopian Road Authority (ERA) has repaired and upgraded the 20 km spur road within Ethiopia from the Addis-Assab Road to the Djibouti border at the town of Galafi, the 221 km highway between Djibouti Port and the Ethiopian border has steadily deterioratedas a result of the heavy traffic and inadequate maintenance.Portions of the road are presently disintegrating,posing a risk of complete failure on long sections.Maintaining this road link is critical to Djibouti Port's ability to efficiently serve the Ethiopian traffic. The project will finance a limited, but adequate, rehabilitation of the road pavement and emergency repair of drainage facilities and ensure that these will be well maintained over the medium-term. This will guarantee that the existing lifeline to Addis-Ababa -- through which crucial Ethiopian agricultural imports such as fertilizers, as well as international famine-reliefshipments must pass -- remains functional until a joint Djiboutian - Ethiopian corridor development project, financed in large part by the European Union, is realized. Even under the most optimistic of scenarios, the implementationof this EU-financed project could only start in-the middle of 2002 and would take at least three years to complete, during which period, it is clear that the Djibouti-Galafiroad cannot remain in its present state without doing serious harm to the economiesof both Djibouti and Ethiopia. By providing a complementary,interim improvement of the existing road, this Credit could also enhance the project to be financed by the EU, by allowing sufficient time to consider all options for an efficient transport corridor from Djibouti Port to Addis-Ababa without the pressures of having to react to an emergencysituation. Most importantly,the project addresses an urgent need. As a result of the conflict with Eritrea, Ethiopia's only access to the sea is through Djibouti, and repairs to this road are now critical in view of a potential famine in Ethiopia caused by a long period of drought. In the event of a famine, this road would be the primary lifeline for supplying an estimated 1,000,000tons of food aid expected to be needed in the near future. 2. Key performanceindicators: (see Annex I) The key performanceindicators would include: Output: * Shorteningof the travel time between Djibouti Port and the Ethiopian border by more than 50 percent; -2- * Reduction in traffic accidents by 35%; * 40% reduction in vehicle breakdownsand vehicle operatingcosts; * Elimination of the dust problems now associatedwith vehicular traffic on this road; and * Proper disposal and collection of waste, regrading material sites after use, and use of archaelogical monitoring. Outcome/impact: * Continued increase in the use of Djibouti Port, as shown by Djibouti Port statistics. * Substantial completion of road rehabilitation by June 30, 2001. B. Strategic Context 1. Sector-relatedCountry Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Documentnumber: P-5416-DJI Dateof latest CASdiscussion: 01/15/91 Country Background. Djibouti is a small country