Document of

The World Bank

FOR OMCLAL USE ONLY

L/\I 307' o - 67-4Rqxpt No. P-4967-GA

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LCAN

IN AN AMOUNT EQUIVALENT TO US$30i0 MILLION

TO THE

GABONESE REPUBLIC

FOR A

ROAD MAINTENANCE PROJECT

MARCR 16, 1989

This document bas a restricted distribution and may be used by recipients only ln the performance oftheir official duties. Its contents may not otherwise be diselosed without World Bank authorlzation.

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CUTMRENCY EQUIVALENTS

Currency Unit - CFA Franc (CFAF)US$1.0 - CFAF 309CFAF 1 - USS0.003

CFAF 1 million - US$3236

FISCAL YEAR

January 01 -- December 31

SYSTEM OF WEIGHTS AND MEASURES (MEDRIC)

1 meter (m) m 3.28 feet (ft)

1 kilometer (km) m 0.62 mile (mi)1 square kilometer (km2 ) - 0.39 square mile (sq mi)1 metric ton (t) t 2,205 pounds (lb)

ABBREVIATIOIS AND ACRONYMS

AfDB African Development Bank

ERR Economic rate of return

FAC French Bilateral Assistance

m Million

M-M Man-months

MPDE Ministry of Planning, Development and Economy

MTPECAT Ministry of Public Works, Equipment, Construction and Territorial Development

OCTRA Gabonese Railways

SAL Structural Adjustment Lending

TPU Training Production Unit

FOR OFFICLAL USE ONLY

THE GAE»ESE RPFUBLIC

ROAD MAINENANCE PROJEOE

LOAN AND PWECT SUMY

Borrower: 6abonese Republic

Beneficiary: Ministry of Public Works, Equipment, Construction and TerritorialDevelopment

Loan Amount: IJS$30.0 M

Terms: Amortization over 15 years, fncluding 5 years of grace at theBank' s standard variable interest rates.

Financinz Plan: 1ERD US$ 30.0 MAfDB 31.1 MGovernemnt 48.9 M

Total US$11O.0 M

Economic Rate of Return: An average of 5b%, ranging from 124 to more tt.n 100% for individ-ual components.

Staff Ap,rtisal Report: Report No. 7497-CA

Maps: IB» 205943B RD 21108

AFlINNarch 16, 1989

This document has a gostricted distribution and may bc used by recipients only in the performanceof their officiai dutie Its contents may not otherwise bc disclosed without World Bank authodzstion.

MEMORANDUM AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE EXECUTIVE DIRECTORSON A PROPOSED LOAN OF US$30.0 MILLION

TO THE GABONESE REPUBLICFOR A ROAD MAINTENANCE PROJECT

1. The foilowing memorandum and recommendation on a proposed loan tothe Gabonese Republic for US$30 million is submitted for approval. Theproposed loan would be on standard IBRD terms vith 15 years' maturity, includ-ing 5 years of grace and vould assist in financing a Road Maintenance Project.

2. Background. Gabon, a country of about one million people and a percapita GNP of about US$2,750 in 1987, is undertaking a major structuralprogram. This follows a period of prosperity reflecting the country's favor-able resource position and increasing public spending, which was interruptedby the precipitous fall lu Goverument oil revenues from about CFAF 400 billionin 1985 to about CFAF 70 billion in 1987 as a result of declining oil prîtes.The stabilization and adjustment program is assisted by a stand-by arrangetuentwith the IMF and a Bank SAL (Loan No. 29330-GAB). While sharply reducingpublic expenditures overall, the Government i anxious to safeguard a minimumlevel of road maintenance to avoid deteriorating road conditions becoming anobstacle to essential economic activity and renewed growth.

3. Because of the size of the country and the large volumes of trans-port it generates (particularly tlmber, manganese and oil), the transportsystem in Gabon is a key sector. The system comprises about 7,700 km ofroads, 700 km of which are paved, serving some 30,000 vehicles, a new 649 kmrailway between Libreville and Franceville, a vell developed domestic aviationsystem, two seaports, an inland vaterways system and coastal shipping. Whileroad transport is private, all other modes are dominated by parastatals, allof vhich require Government subsidies. Over the last decade, the Goverument'aas made large investments in transport infrastructure, particularly for theconstruction of the Transgabonese railways. As a result of the country'sdifficult economic and financial situation since 1985, vith the exception ofexpenditures to oomplete the railway, investments and even expenditures formaintenance of transport infrastructure have been substantially reduced. Thecondition of the road network is deteriorating rapidly and could becoue amajor bottleneck to the maintenance and expansion of agriculture and forestryproduction for the domestic and foreign markets. Additionally, the continuingfinancial losses of transport parastatals constitute a serious drain on theGovernment's resources. Progress in resolving both these problems is essen-tial to the Government's adjustment program.

4. Sector Strategy. The Government's sector strategy foeuses on:(a) ensuring adequate maintenance of the road netwvork during the economicadjustment period; (b) reducing the financial drain on Governument resources bythe parapublic enterprises by lmplementing cost reducing reform programs; and(c) restoring a balanced investment program in the transport sector in linewith a coordinated development of all modes through the implementation of abalanced three-year rolling investment and expenditure program for the sector.Items (b) and (c) are being addressed under the ongoing SAL, while item (a),included as a Government commitment under SAL, would be addressed through theproposed project ihich would also inelude technical assistance for the annualpreparation of %.).

- 2 -

5. Objectives. The main objectives of the road maintenance project,which contains the priority items of the Government's 1989-92 roads program,are to help Gabon: (a) preserve past investments în the road network; (b) op-timize the use of the limited resources available for road maintenance;(c) maintain vehicle operating costs at a reasonable level; (d) assure andimprove access to productive agricultural and forestry areas; and (e) initiatechanges in policies regarding the management (including Gabonization of roadmaintenance), organization and methods of execution of road maintenance inpreparation of an increased level of maintenance and rehabilitation vorksfolloving the project period. The combined effect of SAL and the road mainte-nance project would promote more efficient use of resources in the transportsector.

6. Description. The proposed three-year project includes: (a) anurgent program of road maintenance by contract for the most important sectionsof the road network, including some 460 km of paved roads, some 1,300 km ofgravel roads, and about 29 bridges; (b) a program of routine and a limitedamount of periodic road maintenance by force account for gravel and earthroads, including rehabilitation of existing maintenance equipment and purchaseof complementary equipment and spare parts; (c) training program aimed atGabonization of maintenance, planning and management; (d) institutionalstrengthening in the road sub-sector; and (e) preparatory and follow-upstudies. The project vill be revieved and revised annually in light ofavailable funding and an assessment of needs and priorities. The Government'sthree-year road program also includes the rehabilitation of three heavilydegraded earth roads; the construction of three regional workshops and certainother periodic maintenance vorks. These vorks have not been included in theproject but vould be carried out if additional funding becomes available onacceptable terms.

7. Rationale for IBRD Involvement. The proposed project would completeactions in the road sector undertaken under the structural adjustment programagreed betveen the Government and the Bank. It vould provide the means forGovernment to maintain a priority road network while simultaneously addressinga number of policy changes and implementing reform programs in the transportsector. The Bank's association vith the road maintenance project under thisapproach would ensure that a balanced investments program across the sectorvould be implemented during the structural adjustment period. It would alsoensure that adequate resources are made available for road maintenance essen-tial for the agriculture and forestry development objectives the Goverrmentand the Bank have agreed are critical for economic recovery.

8. Agreed Actions. During negotiations agreements vere reached thatthe Government vill: (a) agree vith the Bank on annual road maintenanceprograms, by the 30th of November of each year, including the actions neededfor its implementation; (b) consult vith the Bank, by the 30th of November ofeach year, on the annual transport sector expenditure program; and (c) com-plete a study by January 1, 1990 and thereafter implement, in accordance vithan agreed program, an appropriate level of road user taxes for heavy vehicles.

9. Status of Project Preparation and Co-financing. Draft terms ofreference for project preparation vere prepared during the October 1987 SALappraisal mission, and the resulting preparatory studies vere reviewed inApril 1988. The project vas appraised in July 1988 and reduced in scope

during the October 1988 expenditure review mission. AfDB has confirmed itsreadiness to participate in the project. FAC vill also provide part of thetechnical assistance needed for the road maintenance program through reassign-ment of staff already in place.

10. Justification and Risks. Lack of regularly maintained roads vouldincreasingly become a deterrent to economic activity and vould threaten theprospects for agricultural development which is essential for recovery andgrowth. Road rehabilitation and maintenance traditionally have high economicreturns leading to substantial savings of foreign exchange which have beenconfirmed by the preparatory studies. The main project riske are managerialand fînancial. To deal vith the managerial risk, adequate technical assis-tance has been provided through reassignment of technical assistance alreadyin place complemented by qualified consultants financed under the project, asvell as some modifications to the organizational set-up to manage road mainte-nance. The financial risk of lack of timely and sufficient contribution bythe Govern'ment to the project would be reduced through annual reviews wvth theBank of expenditure programs for road maintenance and for the road sectorunder the proposed project and for the entire public sector under the struc-tural adjustment program.

il. Recommendation. I am satisfied that the proposed loan would complyvith the Articles of Agreement of the International Bank for Reconstructionand Development and recommend that the Executive Directors approve it.

Barber B. ConablePresident

AttachmentsWashington, D. C.March 16, 1989

-4-Schedule A

TUE GABONESE REPUBLIC

ROAD MINITEANCE PROJECT

ESTXM OOSTS AfiD FINANCINO PLAN

Estimated Pro3ect Costa

-- -- US$ million ---------------

Item Local Taxes Foreign Total

1. Road Maintenance by Contract 7.5 4.5 18.7 30.7

2. Road Maintenance by Force Account 16.1 10.5 25.0 51.6

3. Training 0.8 0.8 2.2 3.8

4. Institutional Strengthening 0.4 1.0 4.4 5.8

5. Studies 0.2 0.3 1.9 2.4

Subtotal 25.0 17.1 52.2 94.3

Physical Contingencies 1.2 0.9 2.6 4.7

Price Contingencies 2.6 2.1 6.3 11.0

Total 28.8 20.1 61.1 110.0

% -26 18 56 100

Financini Plan

------ US$ million ------ % of

Item Local Foreian Total Prolect C0st

Goverument Funds 48.9 -- 48.9 44

lmRD -- 30.0 30.0 27

AfDB -- 31.1 31.1 29

Total 48.9 61.1 110.0 100

AFlINMarch 16, 1989

Sobedule BPage l of 2

TUE GABOIMESE REPUBICRCAD MIWIN5WE mmC

PRC>UffSN MEIOD AM DIStll"Nr

Amounts end Methods of Prcur"eUmt(USS mlllion equivalmnt>

item 1CB C OtheSb

1. Civil works by contract

(a) Maintenance 28.2 - , _ 38.2c.-) (.- ) ->) c(-) c-)

(b) Workshop rehabilitation -- 1.0 . -L O(--> (0.6) (--> (--) (0.6)

2. Equipment rehabilitation, P a 8.8 0.S 2.0 .. 21.3replenishent of the initial 8pare parts stoc, (3.4) (0.3) (1.3) (--> (5.0)tools, computer equlpment, and vehicles

3. Consumables for road mslntenance, including fuel 11.6 S.2 6.0 14.6 37.4lubricants, spare parts, tires, batteries, etc. (8.0) (4.S) (3.9) (- (16.4)

4. Consultant's services for construction supervision, - 9.5 - 9.Stechnical assistance, studies and training C"-> ('> (6.7) (-> (6,7)

5. Supplies for operationel support services fot irU -- TM 2.2 - 2.2and Road Research Center (-- (> (1.0> (-- tl.O)

6. Pellowships 0.4 0.4

Total 68.6 _ e1 s

(11.4) (5.4) (13.2) C-.) (30.0)

/a Including contingencies. Amounts in ( ) indicate pposed lin parttcipatlon./b Operating costs not subject to procurme_t.

AFIN

%arcb 16, 1989

-6-

Schedule B

Page 2 of 2

Allocation and Disbursement Cateiories

Amount Allocated % of ExpendituresCategory (US$ million) to be financed

1. Civil vorks for improvement 0.6 60%of Regional Workshops

2. Equîpment, tools, vehicles,initial stock of spare parts,conputers.(a) rehabilitation of equipment 1.0 75%(b) purchase 2.6 65%

3. Consumables(a) for road maintenance 14.5 75% through 12131190(b) for the TPU 0.7 35% thereafter

4. Consultants' services for:(a) technical assistance 4.2 80a(b) studies, seminars 2.3 80%

5. Supplies for operational support 0.9 75% thrcigh 12/31/90services 55% thereafter

6. Fellowahips 0.2 100%

7. Unallocated 3.0

Total 30.0

Estimated IBRD Disbursements

(US$ million)

FY89 FY9O FY91 FP92 FY93 FY94

Annual 2.0 7.0 7.5 7.0 5.0 1.5Cumulative 2.0 9.0 16.5 23.5 28.5 30.0

AP1iNMarch 16, 1989

-7Schedule C

Te GA8NESE REPIiILIC

1M NaITW PROJECT

!INETUELE OF XE PROJECr PROCESISNG EVEnIrs

(a) tiue taken to prepaue one year

(b) Project prepared by .. ,............. Public Voiks, Equipient, Construction and territorial Developaentvith soee assistance of consultants financed under a PPF for aTechnical Assistance Project

(c) Identification November 1987

(d) Departure of Appraisal Missio n June 1988

(e) rke,otiations ...... ...... . Februa y 1989

Cf) Planned Date of Effectiveness . .. ......................... . June 1989

LM8T OF LEFAIN PCRs AND PPARs

t go, Board Docusuet No. Title Date of Loan Signature

4S7 Sec N 77-112 Gabon, Second Hiway Project (lan 380-G) Jasmry 10, 1969

mA1INtlarcb 16, 1989

» u t ~ ~ ~ *l% E 0

10~ ~ O.t ta0 g.

11t N o

- 9-*

Scieue Dse 2 of 2

B. StateLt of Ut loesuts(o. of Jaumary 31, 1989)

Orinal St t t_.-'------ U8SOOOW '''

Fiscal Year Oapany lype of losineas LOu Iquty To»l Undled

1988 SPE OkwOé Vesefr 4,000 - ,000 4

1988 Conllog t4ntn8 32,000 -- 32,000 20,000

1989 Shell Gabon Petrolein 50,00% -- 50.000 50,000

1989 Elf Gabon Petrolen 10 -- o!

Total 96.000 09

La Investenta approv.d but unspnsd as of Jmnry 31, 1989.

AFliNMarch 16, 1989

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VOLUMES DE TRAFIC ROUTIER (1987)

C) C A N ANArol

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