Document of

The World Bank

FOR OFFICIAL USE ONLY 'n-

Report No. 4603-MAI

STAFF APPRAISAL REPORT

MALAWI

FIFTH HIGHWAY PROJECT

November 14, 1983

Eastern Africa Regional OfficeTransportation II Division

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency lJnits Malawi Kwacha (MK) and TambalaUS$1.00 MK 1.25MK 1.00 100 taimbalasSDR 1.00 MK 1.32105

WEIGHIS AND MEASIJRES

1 foot (ft) 0.305 meters (m)1 mile (mi) 1.609 kilometers (km)1 square mile (mi2 ) 2.590 square kilometers (km2)1 ton (t) 0.907 rnetric tons (m ton)

GLOSSARY OF ABBREVIATIONS

AfDB (AfDF) African Development Bank (Fund)DBST = Double Bitumen Surface TreatmentDRIMP District Roads Improvement and Maintenance ProgramEDF European Development FundEEC European Economic CommunityEPD = Econom--c Planning DiLvision

(Off]ce of the President and Cabinet)HDM = Highway Design and Maintenance Standards ModelKfW Kreditanstalt fur WiederaufbauMi = Ministry of Iransport and CommunicationsMWS Ministry of Works and Suppl.iesNRSC = National Road Safety' CouncilODA Overseas Development-. AdministrationOPC = Office of the President and CabinetPVHO Plant and Vehicle lILLre OrganizationSBST Single Bitumen Surface TreatmentTANZAM lanzani a-Zambia HighwayIAZARA = Tanzania-Zambia RailLwayTPU Iranspcirt Planning UJnit of OPCIRRL = Transportation and Road Research LaboratoryUNCDF United Nations Capital Development FundUNDP = United Nations Deve:Lopment ProgrammeUSAID = United States Agency for International Developmentvoc = vehicle operat ing costvpd = vehicles per day

GOVERNMENT OF MAL-AWI

FISCAL YEAR

April 1 - March 31

FOR OFFICIAL USE ONLYMALAWI

FIFTH HIGHWAY PROJECT

STAFF APPRAISAL REPORT

Table of Contents

I. THE TRANSPORT SECTOR Page No.

A. Effects on Geography and Economic Structure on Transport ..... 1B. The Transport System ......................................... 2C. Transport Policy and Coordination ............................ 4D. Previous Bank Group Involvement in the Sector ................ 6

II. THE HIGHWAY SUBSECTOR

A. The Network ............................. 9B. Road Use ............................. 10C. Administration and Training ................................. 16D. PLanning and Financing ...................................... 18E. Engineering ................................................. 20F. Construction ................................................ 20G. Maintenance ................................................. 21

III. THE PROJECT

A. Objectives .................................................. 24B. Project Scope ............................................... 24C. Detailed Project Description ................................ 25D. Financing ................................................... 31E. Implementation and Procurement .............................. 34F. Disbursements ............................................... 35G. Accounting, Auditing and Reporting Requirements ............. 38H. Environmental Impact ...................... 38

IV. ECONOMIC EVALUATION

A. Economic EvaLuation of Project Components ................... 39B. Risks ..... 46

V. AGREEMENTS REACHED AND RECOMMENDATION . . 48

Annexes

1. Transport-related IDA Projects in Malawi . . 502. Road Design Standards Adopted by the MWS . . 56

This report is based on the findings of two Bank missions which visitedMalawi in February-March and June-July 1983, comprising Messrs. K. Clare(Economist), S. Sigfusson (Engineer) and F. Sharratt (Consultant Engineer)on the first mission and Mr. P. Jensen (Engineer) on the second mission.

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Annexes Cont'd Pages

3. Terms of Reference for the Economic Analysis and SelectionCriteria for Improvement of District Roads under DRIMP ........ 57

4. Economic Evaluation of Luwawa Turnoff-Charnphoyo Road ............. 615. Traffic and Traffic Growth Rates for Paved Roads ................. 626. Average Traffic Levels for Unpaved Roads . . 637. Vehicle Operattng Costs ........................................... 648. Related Documents and Data Available in Project File ............. 65

Charts

1. Organization of the Ministry of Works and Supplies .............. 662. Project Implementation Scheciule ................................. 67

Maps

IBRD 17177 Project Roads ...................... 68IBRD 17178 Transportation Network ............................... 69

MALAWI

FIFTH HIGHWAY PROJECT

STAFF APPRAISAL REPORT

I. THE TRANSPORI SECTOR

A. Effects of Geography and Economic Structure on Transport

1.01 Malawi is a long, narrow, landlocked country situated in theGreat African Rift Valley, with a land area of about 94,300 km2 and a lakearea of 24,200 km2 (see Map IBRD 17178). A major escarpment runs thelength of the country, separating the Lake Malawi plain from the plateau tothe west; altitudes range from about 60 m above sea level in the ShireValley in the south to over 2,500 m in the northern plateau. Rainfallaverages between 750 mm and 1,600 mm, but is much heavier in the highplateau areas of Mulanje, Zomba, Viphya and Nyika (4%' of land area). Thehigh rainfall and long rainy season in the mountainous areas, combined withsteep slopes and scarcity of naturally available gravels for roadconstruction and maintenance, render gravel roads uneconomic in thoseareas.

1.02 Gross domestic product increased in real terms at the relativelyrapid rate of 5.5%O per year over the period 1964-82. Even so, per capitaGNP is an estimated US$210, and Malawi is classified by the United Nationsas one of the least developed countries in the world.

1.03 With a population of about 6.0 million, growing at an averagerate of 2.9%O p.a., Malawi has one of the highest population densities persq km of agricultural land (140 per km2) in Africa. However, developmentin the country's three administrative regions has been unbalanced. Untilindependence in 1964, most development was concentrated in the SouthernRegion, which had the only rail link, most of the all-weather roads, theadministrative capital of Zomba and the main commercial center ofBlantyre. This fundamental imbalance, aggravated by the still inadequateroad access to the north, has caused the Northern Region to remainisolated and undeveloped, and it is still sparsely populated. At present,almost three quarters of the total population lives in the southern half ofthe country, and one of Government's main socioeconomic objectives, as setout in the Statement of Development Policies (1971), is the promotion ofmore balanced regional development. To this end, it has moved theadministrative capital some 250 km north from Zomba to Lilongwe, and hasinitiated several agricultural development projects in the northern halfof the country, including major projects at Lilongwe, Salima, Karonga andViphya, and smaller projects around Kasungu and Mzimba. The road networkis also gradually being upgraded in the Central and Northern Regions, andfurther development in these areas is underway and planned under theNational Rural Development Program.

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1.04 Sin-e almost 90% of the population lives in rural areas, andagrxculture colitributes over 90% of Malawi's exports, rural development isa primary economic and social objective. In addition to raisingagricultural productivity, it is seen as an effective vehicle for theGovernment's policy of redistributing incomes in favor of the rural poor.Although the most rapid growth in agricultural output in the past has beenachieved by private estates and discrete regional projects, since the startof its National Rural Development Program irn the mid-1970s, Government hasincreasingly supported agricultural development through minimum packagerural development projects with rather wide geographic coverage. The BankGroup has given considerable support to this Program, and is currentlypreparing for its fourth phase.

1.05 About 50% of Malawi's total land area is classified as forestland, about 20%0 of which consists of forest reserves, administered by theMinistry of Forestry and Natural Resources as protected government land.Malawi's Forestry sector produces a limited number of forestry products:sawn timber, veneer, plywood, poles and fuelwood. Annual production ofindustrial roundwood from both state and private forests is about 85,000m3. The wood is locally processed and largely absorbed by the domesticmarket, as exports of forest products are negligible and some 20% of thesoftwood requirements are imported. The Government is expanding the woodprocessing industry and exploring the potential export market for woodproducts in southern Africa.

B. The Transport System

1.06 Malawi's transport system consists of about 13,280 km of roads,678 km of railways, 4 lake harbors and a number of landing points servedby a lake service, and 4 airfields served by domestic services. Theprincipal features of this system are: a main road network of about 2,900k6, which is fairly well developed south of Lilongwe but less developed inthe northern half of the country; the rail system which lies entirely inthe southern half of the country and is primarily used for Malawi's exportsand imports and a small amount of Zambian transit traffic; lake transportwhich mainly serves the north and compensates to some extent for thelimited land transport links; and air transport which handles mainlypassenger traffic. Roads dominate internal transport while the railwaycarries most export-import freight. The main outlet to the sea forMalawi's external trade historically has been by two railway lines throughMozambique to the ports of Beira and Nacala on the Indian Ocean. In thepast two years, however, problems on the Mozambique lines have led toconsiderable diversion, at significantly increased cost, of export/importtraffic to alternative routes, particularly through Zambia, Zimbabwe andthe Republic of South Africa.

Highways

1.07 The highway network is discussed in Chapter II.

Railways

1.08 The main railway line extends from the southern border northwardthrough Blantyre to Lake Malawi and then westward through Lilongwe to theZambian border. At the southern border this line is linked to the

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Mozambique rail line serving the port of Beira. An extension of the MalawiRailway to the eastern border connects with the Mozambique rail lineserving the port of Nacala. Rehabilitation of the southern part of theline within Malawi has been underway during the last several years withBritish aid and is expected to be completed by 1985. The extensionwestward in recent years from Salima to the Zambian border (210 km),financed by a grant from the Canadian Government, will soon be extended toChipata in Zambia (about 25 km). The Malawi Government would like to seethis line linked to the main railway line of Zambia but the construction ofsuch a costly 390 km link is unlikely in the foreseeable future.

1.09 Traffic carried on the railway in 1982 amounted to about 890,000tons of freight or about 182 million ton-km. Traffic in terms of ton-kmhas been declining by 7% p.a. since 1975 because of the slowdown inimports since 1975 and exports since 1977, decreasing Zambian transittraffic, and declining capabilities of the Mozambique rail lines. TheMalawi railway is operated more efficiently than many African railways anduntil 1982 earned a modest net operating surplus. The number of passengerscarried on the railway increased to 1.5 million in 1982, the highest levelever attained. Recently, however, it has experienced operating losses asoverall traffic has declined.

Lake Transport

1.10 Freight and passenger transport on Lake Malawi is provided by asubsidiary of Malawi Railways, Lake Services Limited, which principallyserves the remote northern areas of the country. Twenty-one ports orlandings are served by the Lake Service fleet which consists of fivecargo/passenger vessels, six barges and oil pontoons, five tugs and onetimber pontoon. Traffic volumes are relatively light, amounting to about37,000 tons of freight and some 111,000 passengers in 1978. The mainproducts transported by lake are petroleum products, rice and fertilizers.At present, nearly 70%O of the traffic moves northbound from Chipoka, theonly port served by the railway; this pattern may change in the future as aresult of ongoing rural development projects in the north. In most years,the Lake Service has incurred operating losses.

Air Transport

1.11 Air transport within Malawi accounts for far less traffic thanother modes, and only four airports (Blantyre, Lilongwe, Mzuzu and Karonga)have scheduled services. Even air traffic over long distances between thenorth and the south is quite low, despite the poor quality of roadconnections and slowness of lake transport. Until recently, Chilekaairport near Blantyre was the only airport that could accommodate mediumsize, long-range jet aircraft. Chileka accounted for nearly 60%a of Malawi's355,000 recorded passenger movements in 1978 and 80%o of passenger movementsat Chileka were international. In 1982 the Government completedconstruction of a second international airport at Lilongwe. Fullinternational operation there was scheduled to begin in November 1983. AirMalawi, a Government-owned airline, provides international services and allscheduled domestic services. Several foreign airlines also provideinternational services, and one local company and Air Malawi provideunscheduled domestic services.

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1.12 Air Malawi's passenger traffic of about seven millton passengerkilometers in 1981 was about the same as in 1978. Air freight traffic, onthe other hand, has increased during the past few years because ofcongested ports and poor rail service in Mozambique, and difficulty ofusing other modes to transport goods between South Africa and Malawi.

C. Transport Policy and Coordination

1.13 A transport crisis arose in 1982-83 when Mozambique rail lineslost their ability to handle the normal level of transit traffic forland-locked Malawi. As a result, the Malawi Government has faced a majorproblem of facilitating the movement of export/import traffic overalternative routes. The high cost of transport by these alternative routeshas had far-reaching economic consequences and therefore the Governmentappointed in 1983 a transport specialist in the Ministry of Transport andCommunications to monitor internalional transport concerning Malawi'sexternal trade and to take appropriate steps to expedite movement of thegoods. He is also to make recommendations for achieving, over the longerterm, improved means of transport, such as developing a more economicalroute between Malawi and Indian Ocean ports (para 1.16). Included in theproject are funds to finance a continuation of this specialist for a twoyear period beyond an initial year- financed by UNDP and, possibly, USAID.

1.14 Since the beginning of the seventies, Malawi's transport policyhas had three broad aims: (a) to improve the administrative, social andeconomic integration of the country by linking all three regions withreliable all-weather connections; (b) to support rural development byimproving access to rural areas; and (c) to provide efficient links withtransport routes to the Indian Ocean seaports for exports and imports.Substantial progress has been made on all of these objectives. In the caseof (c), however, as noted above great difficulties have been experienced ontransit services through Mozambique, problems beyond the control of theMalawi Government. Within Malawi, Government ]Ls undertaking an extensivetransport development program; a number of transport studies have beencarried out or are in progress, and investments are either planned orunderway in all transport modes.

1.15 Government's overall sector priorities are given in its"Statement of Development Policies 1971-1980," and are determined in moredetail in a 3-year rolling public sector investment program which isrevised annually during budget preparation. Investment in the transportsector has been high during the last four years, representing an average of34%/O of total Government capital expenditure. Pk large part of thisinvestment is represented by the railway extensions and development of theLilongwe International Airport. Although the Elank expressed reservationsabout these projects, they were undertaken by Government, with theassistance of external donors.

1.16 The Government has been deeply concerned about the vulnerabilityof its principal route of access to the sea through Mozambique,particularly in view of recent events which halted or substantially reducedtransit traffic. The same concern has prompted Government to requestfinancing under the present project for upgrading a portion of theNorth-South road which links Malawi to Tanzania (para. 3.06). The EuropeanDevelopment Fund (EDF) recently financed a study of the internationaltransport routes available to Malawi; the study examined the transportconstraints to the development of the country as well as future changes infho rnmnnqifinn snnri rirprfinn nf -rnd' :: nnl mnrp rgonmmrondld-innc nn

improved transport routes in northern Malawi. Ihe need for Malawi to havemore reliable access routes to the sea has been shown by a UNDP/UNCTADregional study1/ of transit transport in eight southern African countries,including Malawi. The project includes funds for a transport system studyof a northern access route, which will include a new road link betweennorthern Malawi and the TAZARA/TANZAM2/ corridor (para. 3.09). Theplanning and construction of such a link and the efficient use of theinternational route will require cooperation between the Malawi andTanzania Governments. The study will, inter alia, evaluate the viabilityof the split between transport modes in both countries, for example, ofusing lake services for international traffic between the northern lakeport of Chilumba and other ports to the south, especially Chipoka. Thestudy will also consider other aspects of transport on the route, such ascustoms procedures, and facilities in Dar es Salaam and at/or near theMalawi-Tanzania border. Availability of truck and railway capacity willalso be studied. The Malawi Government has prepared an action program onsteps to be taken to open up the proposed route. As one of the first keysteps in the program, the Malawi Government has already in August 1983reached agreement with the Tanzania Government on the proposed terms ofreference for the study. During negotiations, the Government and the Bankreached agreement on the terms of reference and the action program (ItemIII. J in Annex 8).

1.17 The Government's 3-year plan for FY1979-81 allocated 40%O of totalplanned capital expenditures to the transport sector (Table 1.1), mainlyfor the railway extension from Lilongwe to the Zambian border, the LilongweInternational Airport, and main road construction. Although various donorsassisted with most of the new projects under the plan, some of theseprojects were delayed or scaled down during the 3-year period due toGovernment's inability to provide the required local funds (only 63%0' of the

Table 1.1: Public Investment in the Transport Sector 1977-1983(M million)

Financial Year 1977 1978 1979 1980 1981 1982 1983

Transport 21.0 31.4 58.2 41.2 66.6 48.0 35.3Roads 12.3 14.9 21.1 17.4 22.0 27.1 27.3Total Investment 55.9 76.6 113.5 127.9 174.9 124.0 142.8

, of Total InvestmentRepresented by Transport 38 41 51 32 38 39 25

A of Transport Invest.Represented by Roads 59 47 36 42 33 56 77

Source: Malawi Statistical Yearbook 1980;Econonic Report 1981 and 1982; and the Roads Departmnt March 1983.

1/ Transit Transport Improvements in the Landlocked Southern AfricanSub-Region, UNDP/UNCTAD Project RAF/77/017. Countries included are:Zambia, Malawi, Tanzania, Mozambique, Botswana, Lesotho, Swaziland andZimbabwe.

2/ TAZARA: Tanzania-Zambia Railway.TANZAM: Tanzania-Zamhia Hinhwav

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amount planned for 1979/80 was actually allocated) and the Lack ofcompleted feasibility studies for some of the proposed projects. Thepercentage of total public investment represented by transport has declinedsharply from 51% in 1979 to about: 25% in 1983. This decrease wasattributable mainly to the completion of the railway and airport projects.At negotiations, the Government and the Bank reviewed the proposed 1984-86pubLic investment program, which was found to be reasonable in terms ofoverall level of financing (around 30% of the development budget for thetransportation sector) and subsectoral allocations (roads about 80% ofexpenditures followed by rail ancl aviation wi;:h about 10% each).

1.18 Coordination of transpcirt investmenl: plans is the responsibilityof the Transport Planning Unit (TPU) of the Economic Planning Division(EPD) of the Office of the Presiclent and Cabinet which reviews proposalsput forward by the Ministry of Works and SupplLies (MWS) for roads and bythe Ministry of Transport and Communications (:MTC) for all other modes. Inpractice, however, such coordination has not been satisfactory because ofEPD's Limited staffing (TPU is presently staffed by two professionalsonly), and as a result the development of each mode has proceeded almostindependently of the others. This is becomingI a problem since roadtransport increasingly competes with the railways and lake transport. In1980, Government therefore requested assistance in strengthening itstransport planning and coordination capability, and accordingly the FourthHighway Project provided EPD with technical assistance (one expert) fortransport planning as well as overseas training for local staff. Thetechnical assistance is helping Government, inter alia, to define andestablish an adequate system of transport planning and provide on-the-jobtraining for Malawian professional staff. Uncler the project, furthertechnical assistance will be provided to the 1ransport Planning Unit andfor various purposes including preparation of a future highway project(para 3.09). The loan agreement for the proposed project contains acovenant requiring that, prior to the adoption of the annual budget duringthe project period, Government will discuss with the Bank the transportinvestment program (para. 5.01(a).

D. Previous Bank Group Involvement in the Sector

1.19 The Bank Group has been involved in Malawi's transport sectorsince 1966 when Credit S-2-MAI was approved tc help finance detailedengineering of the Zomba-Lilongwe road (290 kmi). This was followed by theFirst Highway Project (Credit 112-MAI, 1968, UIS$11.5 million) comprisingthe reconstruction and bituminous paving of that road, the refinancing ofCredit S-2-MAI, and a consultants' study of road transport licensingregulations and road-rail coordination. A Performance Audit of the Project(No. 946, December 15, 1975) concluded that all of the project's objectiveswere achieved. Construction costs were within appraisal estimates,although the road was completed about one year behind schedule3 /. Trafficwas greater than projected at appraisal, and the rate of return wasconservatively re-evaluated at l3%, compared with the appraisal estimate of12%. The consultants' study recommended deregulating road transport,raising axle load limits to 9 tons, improving transport statistics, andrelating rail tariffs more closely to economic factors, all of which havebeen implemented, although there is scope for further refinement of railtariffs. The study expressed misgivings about planned rail projects, but

3/ The first contractor selected for the Zomba-Lilongwe road section wasunsatisfactory and had to be replaced, leading to the delay in

Government did not share IDA's reservations and proceeded with theseinvestments. Both the consultants' study and the Audit Report agreed thatthe country might soon have an oversupply of transport services in theBlantyre-Lilongwe-Zambian border corridor. The major recommendations ofthe Audit called for closer project supervision by Bank staff andrectifying the neglect of lower class roads--although the Audit did notquestion the composition of the First Highway Project, noting that the"Zomba-Lilongwe road . . . is undoubtedly the most important highway inMalawi." Both of the recommendations made in the Audit Report are beingaddressed under the Second, Third, Fourth and the present Fifth HighwayProjects and in the agricultural projects financed by the Bank Group.

1.20 The Second Highway Project (Credit 523-MAI, 1974, US$10million) originally comprised construction of the Lilongwe-Kasungu road(113 km) and a pilot scheme for the improvement and maintenance of districtroads serving rural development in the Kasungu District. Both componentshave been completed, the construction in March 1978, a few months behindschedule, and the pilot scheme in September 1978. Substantial cost savingswere made on the construction component which were used to financecompletion of the pilot scheme in Kasungu district and extension of thescheme to three other districts, following the recommendations of aconsultants' study which evaluated the results of the pilot program. Ihefour districts made up the first phase of a District Roads Improvement andMaintenance Program (DRIMP) planned to cover all of Malawi's 24 districtsin three phases. This first phase was completed in September 1981.According to the Project Completion Report, the economic rate of return isnow estimated at 23 percent compared with 14 percent at appraisal.

1.21 The Third Highway Project (Credit 758-MAI, 1977, US$10.5 million)comprised construction of the Kasungu-Jenda road (85 km) and a feasibilitystudy and detailed engineering of the Jenda-Mzuzu road. The roadconstruction was completed in October 1980, a few months behind schedule,and the detailed engineering in September 1980. The Project CompletionReport indicates that the quality of the physical components wassatisfactory, but due to the general deterioration in Malawi's economy inrecent years, the economic rate of return is now estimated at 8 percentcompared with 14 percent at appraisal. However, with the increased trafficgenerated by linking Malawi to the TANZAM corridor, the traffic flows andrate of return are expected to improve significantly.

1.22 The Fourth Highway Project (Credit 1099-MAI, 1981, SDR 25.9million or about US$33.0 million equivalent) comprises construction of theJenda-Luwawa Turnoff road (32 km), the Mbowe-Mzuzu-Ekwendeni road (32km)and spot improvements on the Luwawa Turnoff-Mbowe road (about 100 km), thesecond phase of DRIMP extending the scheme to 10 additional districts, acomprehensive study of Malawi's road maintenance needs, provision of minorroad maintenance equipment, construction of a new training facility forroad personnel, technical assistance in transport planning for the EconomicPlanning Division (EPD) of the Office of the President and Cabinet, andoverseas training of two of EPD's transport economists. The maintenancestudy is complete and implementation of all of the other improvements iswell underway.

1.23 Finally, transport components have been included in IDA projectsin other sectors (Annex 1). Credit 5-17-MAI, 1974, provided US$2 million

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for planning and engineering of infrastructure for the proposed Viphyatimber exploitation scheme. In addition, agricultural projects in theLower Shire Valley (Credits 114, :563 and 823-MAI), the Lilongwe (Credits113, 244 and 550-MAI) and the Karonga (Credit 282 and Loan 1286-MAI) areas,as well as the more widespread National Rural Development Project (Credits857-MAI) have included improvement and construction of about 4,000 km offeeder and crop extraction roads, while the Karonga Rural DevelopmentProject also included port improvements at Chilumba and Chipoka on LakeMalawi as well as procurement of a self-propelled barge for the lakeservice.

1.24 The strategy for highway subsector development followed by theMinistry of Works and Supplies over the past several years has been aimedmainly at (i) construction of a basic road network with particular focus ondevelopment of a main north-south road; (ii) irnprovement and maintenance ofdistrict roads; and (iii) strengthening of maintenance of the main andsecondary road system. The Bank'S Highway Projects I through IV haveaccomplished much with regard to items (i) and (ii). The present projectwill contribute significantly to the realization of all three objectives(para. 3.01).

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II. THE HIGHWAY SUBSECTOR

A. The Network

2.01 The classified road network totals about 13,280 km (Table 2.1) ofwhich some 2,520 km (about 19%) are paved, and 390 km are of engineeredgravel standard; the rest are earth roads and tracks. In addition, thereare about 2,000 km of as yet unclassified feeder and crop extraction roadsconstructed to minimum all-weather standard under agricultural developmentprojects and an undetermined length of unclassified earth roads and tracks,including about 800 km within forestry plantations and reserves and about800 km within the national parks. Road density is about 141 km per 1,000sq km or 2.2 km per 1,000 inhabitants, which is above average for EastAfrican countries. The coverage of the network is adequate for thecountry's present needs, but its standards and conditions are notsatisfactory. Although some improvement has been made, principally byupgrading roads to paved standard (Table 2.2), low standard roads prevail,resulting in high transport costs. About 85%o of the paved and improvedroads are located in the southern half of the country, reflecting thegeneral pattern of regional imbalance.

Table 2.1: Highway Network by Administrative

Classification and Surface Type - 1982(km)

Main Secondary District Other a/ All0IRoads Roads Roads Roads Roads °

Bitumen 1,792 212 5 513 2,522 19Gravel 143 120 - 127 390 3Earth 898 2,406 5,001 2,063 10,368 78

Total 2,833 2,738 5,006 2,703 13,280 100

a/ Classified as either branch, estate, township, agricultural orprivate roads.

Source: Ministry of Works and Supplies, March 1983.

Table 2.2: Development of the Road Network(km)

1975 1976 1977 1978 1979 1980 1981 1982

Bitumen 1,448 1,572 1,749 1,870 2,361 2,410 2,447 2,522Gravel 616 594 594 594 381 381 381 390Earth 8,890 8,812 10,267 10,211 8,569 10,455 10,423 10,368

Total 10,954 10,978 12,610 12,675 11,311 13,246 13,251 13,280

Source: Economic Planning Division and Ministry of Works and Supplies,March 1983.

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2.02 Some 1,790 km, or 63°% of the main roads, connecting principalcities and towns, are paved. Dur:Lng the last Few years, construction ofpaved roads has been concentrated on the 1,100 km north-south spine road,the most important road in Malawi, running from Bangula in the deep southto Karonga in the far north (see Map 17177). '#hen ongoing projects arecompleted in 1984, some 1,010 km of that road will have been paved to asatisfactory standard. The project would increase this length to about1,060 km. Government has also started reconstruction of old, narrowpavements; over 100 km of main roads were reconstructed during 1976/79, andabout 110 km of secondary roads connecting smaller communities to the mainroads, are under reconstruction. Further improvements of the secondarynetwork are being prepared (para. 2.22). Some 1,100 km of the longneglected district roads were improved under the first phase of DRIMP(para. 1.20) and some 2,400 km are being covered under the program's secondphase. The third, and last, phase is included in the project.

B. Road UseVehicle Fleet

2.03 In 1981, the latest year' for which complete vehicle fleetinformation is available, the vehLcle fleet (excluding motorcycles, farmtractors, trailers and self-prope:Lled, pneumatic-tired constructionequipment) totalled about 27,600 or 4.6 vehiclies per 1,000 inhabitants,much lower than the 32 vehicles per capita in Zimbabwe but about averagefor East Africa. The fleet includes about 14,100 passenger cars, 300 busesand 13,600 goods vehicles, with the balance made up of 6,700 motorcyclesand 7,200 other vehicles. About 175% of all vehicles are registered in theSouthern Region, reflecting the general pattern of economic development.Over the period 1978-82, the tota-L fleet increased with the number of goodsvehicles growing much faster than cars. One positive development withregard to fuel efficiency is that motorcycles have become a popular meansof private transportation. Motor vehicle registrations over the period1978-1982 are shown in table 2.3; these are thie best available statisticssuggesting changes in the size of the motor vehicle fleet. Unfortunately,the data do not accurately reflect. the actual Fleet because some vehiclesare registered twice a year and for other reasons. The Government ispresently seeking to improve its statistics on the motor vehicle fleet.

2.04 More than two-thirds of the goods vehicles have less than a 3-toncarrying capacity, a large portion of which are 4-wheel drive vehicles.Only 3%' of the goods vehicles, ma:Lnly owned by companies involved ininternational movement of freight, have more than a 10-ton capacity, andtruck-trailer combinations are corimon on the main routes. Ninety-sevenpercent of goods vehicles over 3 tons have a relatively low averagecapacity of 7 tons, partly because most shipmenits of agricultural produceare relatively small.

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Table 2.3: Motor Vehicle Registrations, 1978-19821/

Growth Rate1978 1979 1980 1981 1982 1978-1982

Passenger Cars 13,843 13,474 11,196 14,102 14,022 1.0°oGoods Vehicles 2/ 13,088 13,786 13,272 13,561 15,264 3.9°oBuses 318 273 275 268 289 2.2%°0Motor Cycles 4,235 5,184 5,480 6,723 5,908 8.7%oOther3/ 7,024 6,691 6,743 7,215 N.A. 0.9° 4/

1/ Including both Government and privately-owned vehicles which arelicensed annually

2/ Including trucks, landrovers and minibuses.

3/ Including tractors, trailers and construction equipment

4/ Growth 1978-81

Source: Road Traffic Department.

Traffic

2.05 There were no systematic traffic counts in Malawi until 1974when, following an agreement reached during negotiations of the SecondHighway Project, Government instituted a system of automatic countssupplemented by periodic manual counts at a number of strategic points onthe road network. The counts are conducted by the Transport Unit of theNational Statistical Office in Zomba. The census indicates that between1974 and 1978 traffic increased by about 3%0. The census should be usedwith caution, since results of the automatic and periodic countings areoften inconsistent, indicating a need for improved counting operations.From 1979 onwards available traffic data indicates no clear trend in Malawibut the number of registered vehicles was almost static, fuel consumptionfell and GDP growth was restrained. It is concluded, therefore, that therehas been little or no traffic growth since 1978. Traffic volumes on mainroads vary considerably between the south, where traffic is mostly in therange of 200-600 vehicles per day (vpd) (although parts of the mainnorth-south road and the Lilongwe-Salima road have over 1,000 vpd), and thenorth with far lower traffic levels, mostly in the 40-130 vpd range.Traffic on secondary and district roads averages about 30 vpd. Overalltraffic on Malawi's roads is lower than that in Kenya and comparable tothat in Zambia, where traffic on paved roads is about 400 vpd and on earthroads about 20 vpd.

Road Transport

2.06 The great majority of trucks are owned by various private andpublic agencies for transport of their own goods. Among transportcompanies hiring out their vehicles, about 470 companies operate anaggregate fleet of some 1,400 trucks of 3 ton capacity and over. Morethan 60%0 of these trucks are owned by small operators, and 34°o by 9 largeoperators with over 30 vehicles each. The average size of the for-hire

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fleet operated by small operators is 3 vehicles with an average capacityof 7 tons, compared to 9 tons operated by the 'Large companies.

2.07 Road transport licenses are awarded by the Road TrafficCommissioner's Office within MTC, and are given for specific routes. Intheory, freight rates are regulated by MTC, and at present maximum ratesare 13.6 tambala per ton-km for paved roads and 17.8 tambala per ton-kmfor earth and gravel roads; the Aciricultural Development andMarketing Corporation (ADMARC) is not bound to pay these rates for bulkshipments on the Blantyre-Lilongwe!-Mzuzu road. In practice it appears thatthese rates serve as maximum tariffs, and on most routes competition amongroad transporters leads to charges lower than the regulated rates.However, maximum rates are established since transporters on a number ofroutes are in a monopoly situatior. Government tries to ensure thatregulated maximum rates are kept at a reasonable level by periodicallyrevising rates, based on costs kept by one of the larger companies, UnitedTransport (Malawi), and research into vehicle ciperating costs.

2.08 Road passenger services are provided by United Transport(Malawi), and a few small local operators. Of the total fleet of over 200buses, 170 are licensed for public service and these operate on over 150routes. The services are mainly concentrated in urbanized areas and alongthe main roads with long distances between scheduled stops, and untilrecently large buses with passenger capacity of 40-50 people were beingused. In the early 1980's the Government allowed the introduction ofmini-buses with 15-20 passenger capacity on an experimental basis in threeurban areas, and limited to a 25 km radius from the urban center.Provision of public transport services along secondary and district roadsis virtually non-existent. The Government is now considering to hastendevelopment of low-cost transport services in rural areas, using cheap,fuel-efficient small vehicles of the pick-up type commuter to accommodateboth passengers and goods. The Government wishes to conduct a briefconsultants study of the various financial, operational, technical, androad safety aspects associated with the introduction of this kind ofservice. The study will be combined with a bus management study for UnitedTransport (Malawi), for which the Government will receive financial andtechnical assistance from Germany. This study is scheduled to begin in mid1984.

Vehicle Regulations

2.09 Vehicle dimension and we:Lght regulations are adequate (maximumallowable axle load being nine tons), but enforcement by MTC's Road TrafficCommissioner's Office and the national police was generally lax up to 1976when pavement failures noted at that time on thte Lilongwe-Zomba road wereattributed to overweight Zambian trucks, then carrying considerable freightto and from the railhead at Balaka. IDA missions thereafter emphasized theimportance of adequate enforcement, as required under the Credit Agreementfor the Second Highway Project. Government subsequently opened threeweigh-bridges installed at strategic points in the South and CentralRegions, and enforcement improved considerably. While the much reducedZambian truck traffic now terminates at the new railhead at the Zambianborder, Malawian firms increasingly use large trucks on paved trunk roads.Strong enforcement of axle load limits should therefore be expanded toother parts of the country; toward this end, appropriate regulations arebeing developed and the project will help strencthen enforcementcapabilities by provision of mobile scales and vehicles for police patrols(nara 3.10).

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Road Safety

2.10 The toll of road accidents in Malawi is heavy. Some road accidentdata, compiled from reports prepared by the Malawi Police Force, are givenin Table 2.4.

2.11 Available information on road accidents suggests someinconsistencies between the numbers of accidents reported and the numberswhich actually occur. The most reliable of the statistics are those forfatalities, but even these probably understate the extent of vehiclefatalities. Some general conclusions can be inferred:

(a) in relation to population and road use, the number of roadfatalities in Malawi is about the norm for the developingcountries;

(b) the rate of fatalities per 1,000 vehicles decreases withincreased vehicle ownership (number of vehicles per 10,000inhabitants).

(c) between 1969 and 1982 road use has approximately doubled. Overthis period the number of vehicles reported to be involved inaccidents has increased by less than 50%. But the number ofroad fatalities, a somewhat more reliable statistic, hasincreased by over three times; and

(d) the ratio of fatalities to injuries, normally 1 to 10 or morein most developing countries, has increased rapidly over theyears; it was about 1 to 10 from 1967 to 1971, increased to 1 to8 during 1977, to 1 to 4 during 1978 and 1979, and to 1 to 2.6 in1982.

2.12 The increase in the rate of fatal accidents over the last severalyears is probably due to the rapidly increasing length of the bituminizedroad system. This is of considerable concern to Government, which isplanning to address the problem by improved education and enforcement ofregulations as well as identification of "black spots" (short sections ofroad with high accident occurrence) and the improvement of roads in theseareas.

2.13 Road use and traffic regulations are contained in the RoadTraffic Act of 1969, with several amendments and expansions of the Acthaving been made over the years. The Act contains the usual regulations onvehicle sizes and axle loads, speed limits, driving instruction schools andlicences, insurance, road service permits, regular inspection and testing.Licensing and vehicle inspection, annually for all goods vehicles and forall other vehicles over 10 years old, are the responsibility of MTC's RoadTraffic Commissioner's Office; enforcement of traffic regulations is theresponsibility of the Police Force's Traffic Section who patrol trunkroads, but lack capacity for strict enforcement.

2.14 Government established a National Road Safety Council (NRSC) in1978 to coordinate road safety measures and activities at the nationallevel. Members of NRSC are drawn from the Ministries of Transport andCommunications, Trade, Industry and Tourism, Health, Justice, Education and

Table 2.4: Road Accident Statistics, 1966-1982

__ oad Accidents per 1000Vnlajbgr WIii~-Ic..Road Accident Statistics - licensed vehicles

Est.l Niamber of I icon sed-__ ____ _pop.- vehicles per 1000 Vehicles VehiclesYear (O000) licensed p.ersons Accidents Deaths Inj..rt.±s involved Deaths lajuries involved

1966 4040 16.I 03 4.1b n.a. 153 1283 3066 9.1 7a 182

1967 4159 17.687 4.25 n.a. 148 1521 3324 8.4 86 188

1968 4281 18,471 4.11 n.n. 149 1525 3788 8.1 83 205

1969 4409 20,230 4.59 n.a. 184 1882 3993 9.1 84 202

1970 4538 21.467 4.73 n.a. 196 2040 4562 9.1 95 213

1971 4672 23,527 5.04 n.e. 185 1894 4660 7.9 80 198

1972 4309 23,903 4.97 n.a. 218 1921 4993 9.1 80 212

1973 4951 24.744 5.00 n.c. 269 2191 5118 10.9 89 210

1974 5097 27,080 5.31 n.n. 271 2370 5242 9.9 88 | 194

1975 5248 27.219 5.19 3844 278 2324 5397 10.2 85 198

1976 5403 29,474 5.46 3957 268 2339 5632 9.1 79 191

1977 5562 34,490 6.20 3991 305 2342 5702 8.8 t. 165

1978 5762 34,148 6.66 4601 582 2402 5649 15.3 63 174

1q79 5895 39,407 6.68 4531 64 9 2551 6522 16.5 63 166

1980 6000 33.387 5.56 4470 574 2520 6375 17.2 75 191

19d1 613I) 38.675 6.31 4211 576 2164 5925 14.9 56 151

| 19a2 6255 38.825 6.21 n.a. 577 1505 n.a. 14.9 39 r.

1/ Estimated on the basis of the 1966 and 1977 census.2| Preliminary data for 1982.

Source: Ministry of Transport and Communications, March 1983.

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Works and Supplies as well as from non-governmental organizations. Fundsallocated to NRSC have been limited, and its activities to date have mainlyconsisted of twice weekly radio broadcasts on road safety. The Council isplanning increased propaganda activities, e.g., seminars and film shows aswell as the introduction of traffic education in primary and secondaryschools. In addition, the Finnish Government, according to the MTC, willsoon sponsor a road safety study and provide assistance in implementingrecommendations of the study. During supervision of the project, theBank1 / will monitor the situation and maintain a dialogue withGovernment. If proposed measures do not produce adequate results, we wouldseek to define more clearly how IDA resources can be usefully employed infuture projects to assist the Government in reducing the toll of roadaccidents.

Road User Revenue

2.15 Road users contribute to Government revenue through taxes andduties on fuel, lubricants, vehicles and spare parts, and through licenseand registration fees. At the time of appraisal in February 1983, the pumpprice of petrol was 91.9 tambala per liter and of diesel, 88.2 tambala perliter; equivalent import prices are 38.5 tambala and 38.3 tambala,respectively. Shown in Table 2.5 is a comparison of wholesale prices offuel (including duty, special levy and surtax) in December 1980 andFebruary 1983; retail prices are 5% higher. Petroleum product prices,including taxes, more than cover CIF costs and internal distribution costs,as indicated in table 2.5. Government has traditionally followed arealistic and sensible policy with regard to pricing these products2 /.

Table 2.5 Wholesale Prices of Fuel (tambala/liter)

December 1980 February 1983

Petrol % Diesel Fuel I%D Petrol %O Diesel Fuel %

Import Prices 34.53 45 32.65 47 38.5 44 38.3 45Duties 21.50 29 18.50 26 21.5 25 18.5 22Special levy 7.30 10 6.83 11 14.0 16 14.9 18Surtax 12.40 16 11.30 16 13.5 15 12.3 15Total 75.73 100 69.28 100 87.5 100 84.0 100

Source: Government of Malawi, Economic Planning Division.

Duties on vehicles range from 5°o for buses and trucks up to 40%o for highvalue cars. There are surtaxes of 24°o on fuel and 18%o on all vehiclesexcept buses and trucks over 3 tons. As shown in table 2.6 total revenuefrom road users was about US$20.2 million in FY 1978 and is estimated atabout US$ 59.0 million for FY 1981.

1/ For purposes of this project, the Term "Bank" in this report refers toboth Bank and IDA.

2/ World Bank "Malawi: Issues and options in the Energy Sector" August1982.

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Table 2.6 Revenue from Road User ChargesTMT 1Millions)

FY1978 FY1981

Duty Surtaix Total Duty Surtax Total

Taxes and Duties on 4.58B 5.752 10.340 26.838 17.891 44.729Fuel and Lubricants

Import Duties on 4.202 2.596 6.798 3.967 2.996 6.963Vehicles and SpareParts a/

Vehicle Registration 0.035 0.018Fees

Vehicle Licensing and 0.897 2.512Other Fees

Total 18.070 54.222

Equivalent (US$ 20.2 million)b/ (US$ 59.0 million)b/

a/ Including tires and tubesb/ Based on exchange rates in effect in years indicated.

Source: Road Traffic Commissioner

Present expenditures on administering and maintaining the road network,including the costs of the Road Traffic Commissioner's Office, amount tosome US$ 6.5 million. Thus, road user revenues are satisfactory as theymore than cover maintenance expenditures and the capital costs of thenetwork.

C. Administration and Training

2.16 MWS is responsible for all classified roads except districtroads, which are the responsibility of the district councils. MWS is alsogradually taking over responsibility for maintenance of 2,000 km of feederroads being constructed under several agricultural development projects;these roads are expected to become the districts' responsibility as thedistrict councils gain sufficient road maintenance capacity. The Ministryof Forestry and National Resources is responsible for the 1,600 km offorestry and national park roads ancl tracks. No authority is responsiblefor the undetermined length of unclassified earth tracks (para. 2.01), butthe most important of these, tracks Eire expected to be classified asdistrict roads over the next few years. MWS is organized according to itsthree functions (see Chart 1): administration is carried out by departmentsfor administration, finance, personnel, stores and auditing; engineering isdone by the departments for design, building and roads; and development,the most recently established department, still has rather vagueresponsibilities but will increasingly be concerned with planning. Roadplanning and overall supervision are handled by the headquarters' staff atLilongwe. MWS has offices in each of the three regions, which are directlyresponsible for field operations for roads and other works. In addition,

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these regional offices have 4 branch offices, 14 district depots and 48subdistrict depots for road maintenance. The Ministry has a Plant andVehicle Hire Organization (PVHO) with workshops in all regions and in inosLdistricts with a central workshop in Blantyre for major repairs.

2.17 MWS has some 100 professional staff, about 400 subprofessionaland supervisory staff and about 1,300 other salaried staff; its RoadsDepartment has 14 civil engineers, one electrical engineer, and twoeconomists. The Ministry has in the past been administered by seniorexpatriate staff, financed by ODA of UK; these are gradually being replacedby Malawians as they acquire the education and experience needed. Thepresent salaried staff of about 1,800 includes 67 expatriates; in 1980 thenumber of expatriates was 105 and in 1977 it was 135. Of the 50 mostsenior posts filled by expatriates in 1980, 23 are now filled by Malawians;and only 7 of the Road Department's 17 professional staff are expatriates.The Roads Department has recently increased its number of posts forprofessionals to 25, in preparation for increased emphasis on roadmaintenance and planning; the new posts are expected to be filled byMalawians graduating from the Malawi Polytechnic during the next few yearsor temporarily by expatriates. For experienced engineers and othertechnical personnel, the private sector offers better salaries and thusGovernment has some difficulty competing with private firms.

2.18 Until about 1978 the rate of localization was relatively slow andexpatriates were replaced only when well-qualified Malawians had acquiredsubstantial experience; this ensured the long-standing high standard ofefficiency of all departments of MWS. Since 1978 ODA has been reducing itsfinancial assistance for expatriate staff in MWS and the accelerated rateof localization has imposed an increasing burden on management of many ofMWS's functions; planned expansion of road maintenance, more attention toplanning and the administration of DRIMP until about 1990 will strainmanagement still further. The proposed project will therefore providesubstantial technical assistance to MWS (para. 3.09).

2.19 Although each of the 24 district councils has a road foreman onits staff and a few councils have a core of road employees, theiradministration for road improvement and maintenance has been weak. DRIMPwas designed to overcome this problem by providing for the establishment ofan organizational framework, training of key staff, and the provision ofequipment and depot facilities. The concept was successfully tested under apilot scheme in Kasungu District (para. 1.20) where the maintenanceorganization is now fully operational under the full responsibility of theDistrict Council.

2.20 The Government has an active program for selecting, educating andtraining nationals for professional positions, but the program has not yetmet the demand for qualified personnel, mainly because of the scarcity ofsuitable candidates. Training abroad is provided with external assistance,mainly from the U.K., the European Economic Community (EEC) and the UnitedNations Development Programme (UNDP). For instance, during 1978 about 220trainees in all categories returned to Malawi, 25 with professional degreesand 30 from post-graduate training; at the end of 1978 about 600 Malawianswere studying overseas, 65 for professional degrees and 95 in post-graduatecourses. Opportunities for training overseas are sufficient for the numberof suitably qualified candidates, and as the University of MalawiPolytechnic develops its capacity in the technical fields, the need for

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overseas training of engineers will gradually diminish except forpost-graduate courses. Good progress has also been made in training lowerechelon personnel, such as road supervisors, foremen, equipment operatorsand mechanics, at the Ministry's fully localized Training Branch in Zomba.While the training program, the quality of training, and the availabilityof staff to be trained are adequate, the capacity of the Traininq Branch isnow fully utilized. In Lilongwe, MWS is developing a new training centerwhich will ultimately replace the center in Zomba. This change is neededbecause of convenient MWS supervision of training activities in Lilongwe aswell as the opportunity to use MWS's professionals as part-timeinstructors. The Lilongwe center also will permit the use of existingfacilities (design and surveying divisions, materials and soils laboratory)in Lilongwe for training purposes. Initially, the center will providefacilities for the training of road construction and maintenancepersonnel. The Fourth Highway Froject is assisting in financing facilities(class-rooms, dormitories and staff housing) required for the training ofabout 50 Roads Department staff annually. The present project will financefurniture, teaching aids and equipment (item III. A in Annex 8), the costof which could not be covered urnder the Fourth Highway Project because thebids for civil works were higher than estimated (para 3.08). The firstphase of the new training center is expected to be in operation in early1984.

D. Planning and Financing

2.21 As stated in para. 1.18, MWS is responsible for road planning buthas limited capacity for this wcrk. All major projects are, however,preceded by feasibility studies carried out by consultants. Most of thiswork is done by international consultants as local consulting services arein an early stage of development. Government's need for assistance intransport planning, including that for roads, will be addressed under theproposed project by the provisinn of technical assistance and training(para. 3.09).

2.22 A summary of current and planned road projects is presented inTable 2.7. Most of the projects are in the Central and Northern Regions,reflecting Government's general strategy of promoting development in thoseregions. Main road projects, accounting for over 50%O of current andplanned road expenditure, are mainly devoted to improvement of thenorth-south and lakeshore roads, and roads linking Malawi to Mozambique andZambia. Road improvements are being carried out under DRIMP (for districtroads), a small Key Rural Road F'rogram (for all classes of roads), and anUpgrading of Secondary Roads Program. The latter, financed by the CanadianGovernment, began with a study of the secondary road system which wascompleted in early 1983.

2.23 Government is planning, with UNDP assistance, a Village AccessRoad Program including construction/improvements of 1,134 km of villageaccess roads, 286 road bridges, 234 footbridges and 32 km of footpaths fora total cost of some US$5.5 million to be financed by United NationsCapital Development Fund (UNCDFK together with UNDP but executed on aself-help basis. The program i.s designed to relieve problems of accesswhere no classified road connects villages with local markets, healthcenters and schools. Execution of the program is expected to start in1984, covering the Northern Region in the first stage, and take severalyears to complete.

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TABLE 2.7 CURRENT AND PLANNED ROAD PROJECTS

Approx.Eength Estimated Cost From Construction

Current KM Total Cost 80/81-82/83 Period Remarks- - -(MK '000) - -

I a) Jenda_4uwawa 32 9,000 Approx 60% complete early 1983.

b) Ekwendeni-Mbowe 32 9,000 14,635 1981/84 IDA Financing under fourth

highway project.

2) Salima-Benga 57 22,434 15,320 1981/84 60% completed end 1982. KfWfinancing.

3) Liwonde-Nsanama 22 7,090 7,008 1981/82 Completed December 1982 KfW

financing.

4) Nkhotakota-Dwangwa 57 8,000 8,000 1978/81 Completed October 1981 U.K.financing.

5) Ekwendeni- John Mzumara 37 10,178 10,178 1979/80 Completed December 1980 AfDBfinancing.

6) Nkhotakota-Benga 52 2,700 2,700 1981/82 Substantially completed December1982 KfW financing. Work consistedof extensive patching and singlesurface dressing with some re-construction.

7) Drimp Phase 11 -- 6,058 6,058 1981/83

8) Mzuzu-Nkhata Bay 40 1,500 1,200 1982/83 Substantially completed early1983 with UK financing. Workmainly as 6 above.

9) Village Access Roads -- 4,157 -- -- U.N.C.D.F. funded study completed

and Bridges end 1982.

Planned

10) Lirangwe-Mwanza 80 35,000 272 1983/87 Detailed engineering and tender

Mozambique Border documentation. ConstructionscheduLed to start early 1984 with EDFfinancing.

11) Karonga-Chitipa-Nakonde 190 47,000 -- -- Feasibility study completed 1982with EDF financing.

12) Dwangwa-Nkhata Bay 140 NA Pre investment study undertakenlate 1982 with KfW financing.

13) Kasungu-Nkhotakota 122 34,500 -- -- Feasibility study and preliminaryengineering completed early 1982with AfDF funds.

14) Upgrading of Selected 300 30,000 -- -- Feasibility study completed earlySecondary Roads & Bridges 1983 with CIDA financing.

15) Blantyre-Mulanje 100 -- -- - S.A.T.C.C. Project 1.4.1. Feasibilitystudy and engineering design beingcompleted by Australian DevelopmentAssistance Board.

16) Mangochi-Chiponde 45 -- -- -- S.A.T.C.C. Project 1.4.2 As for

15 above.

17) Highway V Project -- -- -- --

1R) Karonaa-Tanzania 48 11.000 -- -- PrefeasibiLity study compLetedJanuary 1983

19) Champhoyo-Mbowe 45 13,000 -- -- FeasibiLity study compLetedDecember 1982.

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2.24 Highway expenditures are financed from the general budget or, fornew construction, from the development accoun't which is largely made up ofgrants and credits from bilatera:L and multilateral aid programs.Expenditures on construction have averaged about US$ 25 million equivalentannually over the past four years (para. 1.17), while MWS's maintenanceexpenditures have averaged about MK 4 million in recent years (Table 2.8).Maintenance funds prior to 1983 have been insufficient to maintain theaging network (para. 2.29). Thev have been increased for 1983 and will befurther increased in the future (para 3.05).

Table 2.8: Annual Highway Expenditures, FY 1970-83

MK'000 (in Current Prices) US$ MiFiscal Year Administrationa! C(onstruction Maintenance Total Equival

1974 370 3,959 1,378 5,707 6.41975 440 5,995 1,562 7,997 9.01976 440 10,988 1,882 b/ 13,310 14.91977 520 12,307 2,295 t/ 15,122 17.01978 530 14,934 2,003 17,467 19.61979 550 21,103 2,763 b/ 24,416 29.31980 570 17,372 3,530 21,472 26.91981 600 21,874 3,063 25,537 27.81982 630 27,090 3,975 31,695 29.3

1982/1983 650 27,280 6,219 34,149 31.6

a/ Estimated on the basis of total MWS administrative expenses.b/ Includes amounts allocated retroactively for emergency maintenance,

mostly because of severe fLood damage.

Source: Economic Planning Division and Ministry of Works and Supplies,Roads Department, March 1983.

E. Engineering

2.25 The Design Department of MWS is staffed by 12 civil engineers and25 technicians and surveyors. The Department has a well-equippedlaboratory for materials and soils testing and is primarily engaged indesign of structures; it carries out preliminary investigations and roadand bridge designs, but engineering for major road projects is done byconsultants. The design standards adopted by the MWS (Annex 2) areappropriate for the country's topographic and traffic conditions.

F. Construction

2.26 For major road projects, the Roads Department employscontractors, following suitable prequalification and tendering procedures;contracts are generally let on a unit-price basis. In recent years, theRoads Department has undertaken several minor force account roadconstruction projects (about US$3 million equivalent annually) with threeroad construction units (one in esach region) and one bridge constructionunit; the performance of the uniis has been satisfactory withlabor-intensive methods generally employed for construction of culverts,drains and structural excavation. In addition, MWS operates three unitsfor the improvement of district roads under DRIMP; the first phase of DRIMPconcerning improvements of 1,100 km of roads in four districts began in

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1979 on the basts of intermediate technology but have increasingly, andwith good results, involved labor-intensive methods, presently with about3,500 laborers employed. The second phase of DRIMP covers nine distfictsand about 2,600 km of roads; work has been completed in five districts andis underway in another four. The third and last phase of DRIMP, coveringthe remaining 11 districts and about 1,900 km or roads, will be financedunder the present project (para. 3.03).

2.27 The developing domestic contracting industry is nearly fullyemployed on buildings, small structures, estate and other minor roads, aswell as resealing of short sections of main roads and of runways of minorairfields. Domestic contractors lack the capacity for major road works,but would be capable of carrying out some rehabilitation work on earth andgravel roads (para. 3.16). Foreign contractors have shown considerableinterest in working in Malawi and all major construction works have beenundertaken by foreign firms. Private Malawian firms have lately beenacquirinq holdings (up to 49°0) in local branches of foreign contractingfirms. Senior domestic contractor personnel are largely drawn from MWS,whose training facilities (para. 2.20) therefore perform a useful functionin indirectly training contractor personnel. Construction supervision iscarried out by the Roads Department or by consulting engineers acting asits representatives. Supervision is satisfactory, payment procedures areprompt, and, in general, the experience of MWS in dealing with contractorshas been satisfactory.

G. Maintenance

2.28 The Regional Divisions of the MWS are responsible for maintainingthe classified road system with the exception of district roads. Each ofthe regions has a small but well trained cadre of maintenance personnel.Maintenance operations are largely mechanized, although extensive use ismade of labor for routine maintenance. The Roads Department rentsequipment from the Plant and Vehicle Hire Organization (also under MWS),which is responsible for procuring and maintaining all Government-ownedequipment and vehicles; rental rates are based on the cost of purchasingand maintaining the equipment. Equipment availability and utilizationrates have been deteriorating but are expected to improve as new equipmentand technical assistance provided in the project are implemented.

2.29 Until a few years ago maintenance of main and secondary roads inMalawi was fairly good, much better than in most other East Africancountries. However, while the funds allocated to MWS for recurrent roadmaintenance have increased by about 10% annually, the current highinflation rate and the rapid increases in the length of the improvednetwork have now caused the funds to be barely sufficient for routinemaintenance and therefore periodic maintenance has been neglected. Theproposed project will assist the Government in improving road maintenancesubstantially (para. 3.05).

2.30 A road maintenance study was carried out by consultants RenardetS.A. (Switzerland) in 1982 covering all of the classified network of mainand secondary roads as well as township roads and streets. The mainconclusions of the study were:

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(a) the regular routine and periodic maintenanceactivities of MWS were found deficient both inquantity and quality and would require substantialincreases of funds and improvements in operationsand management;

(b) due to the inadequate regular maintenance asizable backlog of periodic maint;enance had beenaccumulating in recent years and many roadsections are now beyond repair by suchmaintenance. The st;udy identified 663 km of pavedroads that would recluire reconstruction/rehabilitation/resealing and over 1,730 km ofgravel and earth roads that needed improvements.

2.31 The consultants made recommendations of actions required toarrest the deteriorating maintenance operations and to overcome thebacklog. For this purpose they developed a 5-year comprehensive maintenanceprogram which includes the following main items:

(a) improved routine anci periodic maintenanceoperations by inter alia increased budgetallocations; improved equipment availabilitythrough provision of not only new equipment butalso technical assistance to MWS' PVH0 to improveits management and operations; irnproved fieldoperation through better planning and preparationby provision of technical assistance to MWS'sregional offices and improved equipmentutilization and increased training;

(b) a program for the 663 km of paved roads comprisingresealing by double bituminous surface dressing(DBST) of 138 km; asphaltic concrete (AC) overlayson 23 km; new base course and DBST on 439 km; newbase course and AC overlays on 365 km; and fullreconstruction of 27 km; and

(c) a program for the 1.733 km of gravel and earthroads comprising: full regravelling of 429 km andspot gravelling of about 1,200 krn; and improvedside and cross drainage and formation work on1,733 km.

The consultants have prepared design and tender documentation for the workincluded in the first year rehabilitation program. In addition, theconsultants have prepared specifications and bidding documents forprocurement of equipment, and stanclard documents suitable for localtendering of rehabilitation work on earth and gravel roads.

2.32 Due to the difficult economic and fiscal situation in Malawi theconsultants' program has to be somewhat constrained and scaled down. Afterdiscussions with Government and Bank officials it was decided that thelevel of regular maintenance in FYB3/84 would be agreed at about BO°o of

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that recommended by the consultants and that budget allocations would beincreased in real terms by 3MO for each of the three following years and by5%,0 thereafter for the following two years, thus reaching the recommendedlevel in about five years. These increases were confirmed by theGovernment during negotiations. It was also decided that the resealing/rehabilitation/reconstruction of paved roads would be stretched over sevenyears instead of the five years recommended and that the rehabilitation/improvement of gravel and earth roads would be completed in four yearsinstead of the planned five years.

2.33 Although Government has traditionally supplemented the districtcouncils' limited funds for recurrent maintenance by providing an annuallight grading to the most important district roads, the major portion ofthe district roads network was neglected prior to the start of DRIMP underthe IDA-financed Second Highway Project. Under an initial pilot project inthe Kasungu District, an improvement and maintenance unit was establishedwhich assumed responsibility for all maintenance operations of the Kasungudistrict council and trained its roads staff as well as introduced roadforemen from all 24 districts to the scheme. The pilot scheme wassuccessful and was subsequently extended to three additional districts.This first phase of DRIMP, also financed under the Second Highway Project,and completed in September 1981 included the establishment of maintenanceunits in each district, improvement of about 1,100 km of district roads toa maintainable but minimum all-weather standard, and the training of keydistrict council staff both on-the-job and at the Zomba training center.It also included the establishment of three improvement units equipped withheavy graders, which supplement the maintenance units in each districtduring the improvement phase. Improvement works were mostly carried out byintermediate technology but labor-intensive methods were used on a 50 kmdemonstration project and proved successful. Ihese methods are beingincreasingly used under the ongoing second phase of DRIMP, financed underthe Fourth Highway Project, which extends the program to ten additionaldistricts with improvement of another 2,400 km of roads (para. 3.03).

2.34 The establishment of DRIMP and the improvement works are beingimplemented by MWS with some assistance from consultants because of MWS'sstaff constraints. As this stage is completed in each district, thefacilities and trained staff are turned over to the district councils sothat they can improve their mostly labor-intensive effort to effectivelytake over full responsibility for the district roads. MWS, however,supervises maintenance operations in each district during the first threeyears of improved maintenance. Recurrent maintenance costs aresupplemented by the Government as district councils' revenues are verylimited. The Fourth Highway Project is assisting Government by providingfinancing on a declining basis for the incremental portion of the recurrentmaintenance costs during the project period. This assistance will continueunder the present project (para. 3.04).

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III. Ihe Project

A. Objectives

3.01 The main objectives of t:he project are to assist the Governmentin (a) further achieving a balanced pattern of economic and social growthby continuing to provide for improvements and nnaintenance of districtroads; (b) improving the maintenance of main and secondary road networks;(c) further promoting the general strategy of dieveloping the economicpotential of the northern half of the country; and (d) assess alternativeroutes for handling Malawi's export/import traffic. More specifically, theproject is designed to:

(a) extend DRIMP, which was initiated under the SecondHighway Project and continued under the FourthHighway Project;

(b) redress the country's deteriorated roadmaintenance performance;

(c) continue the upgrading of a section of thenorth-south road to paved standard;

(d) strengthen the management capabilities of MWS;

(e) study a proposed northern access route to theIndian Ocean; and

(f) strengthen the Transport Planning Unit in the EPD.

B. Project Scope

3.02 The project consists of:

(a) the third, and last phase of DRIMP;

(b) implementation of a four year maintenance programfor the main and secondary road networksincluding:

(i) resealing/rehabilitation/reconstruction ofpaved roads;

(ii) rehabilitation of earth and gravel roads; and

(iii) provision of maintenance equipment for MWS'sRoads Department;

(c) construction of a two lane bituminous-paved roadbetween Luwawa Turnoff and Champhoyo (50.1 km);

(d) provision of weighbridges and vehicles for axleload control;

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(e) provision of furniture, training aids andequipment for MWS's new training center inLilongwe;

(f) consultancy services for:

(i) assistance to MWS in preparing and carrying out (a)above;

(ii) assistance to MWS to prepare and carry out (b)above, including the design and supervision ofb (i);

(iii) design of (c) above (through PPF);

(iv) supervision of (c) above;

(v) transport system study for a northern accessroute;

(vi) preparation of future projects;

(vii) assistance to Transport Planning Unit of EPD.

(viii) assistance to PVHO in strengthening equipment fleetmanagement.

C. Detailed Project Description

Third Phase of DRIMP

3.03 The project will extend the ongoing second phase of DRIMP to theremaining eleven districts of the country (map II), one of which (ThyoloDistrict) has been transferred from the Fourth Highway Project to theproposed project because of insufficient funds in the earlier project.Selection of roads for improvement and planning for maintenance units inthese remaining districts were carried out by the consultants, Scott WilsonKirkpatrick and Partners (UK). Depots and facilities to be provided and alist of roads to be improved during the first year of the program wereagreed with Government at negotiations (para. 5.01 (c)); the work programfor subsequent years is to be agreed with Government not later than fourmonths before the beginning of each fiscal year until the completion of thecomponent (para. 5. 01 (c)). The project provides for the establishment ofmaintenance units in each district including the provision of a depot, sub-depots where necessary, housing for key staff and light equipment (ItemIII. B in the project file, Annex 8). An extension of MWS headquarters toaccommodate the new rural roads division will also be constructed under theproject. In addition, it will provide for the improvement of some 1,900 kmof district roads under the jurisdiction of the district Councils in theselast eleven districts. Lists of roads to be improved are in the projectfile (Item III. C in Annex 8). These works are to be carried out by thethree improvement units established under Phase I of the programme and theeleven maintenance units to be set up under Phase III of DRIMP.Implementation of the third phase should start immediately followingcompletion of the second phase in mid to late 1984. In order to avoid

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disruptions in implementing road improvement works, depots and housing forkey staff in the first 2-3 districts of the third phase should be completedat that time, thus work on depots and housing must start as soon as theLoan/Credit become effective.

3.04 Maintenance of the district roads, subsequent to improvements,is to be undertaken by the district councils using the facilities provided,and staff trained, under the project. While Government has in the pastprovided the district councils with some assistance for recurrentmaintenance (para.2.33), regular maintenance of the improved networkrequires substantial and increasing Government, assistance. Under DRIMP'ssecond phase the Government agreed to assist the District Councils byproviding grants to supplement the Councils' revenues available for roadmaintenance, in amounts sufficient to bring the total up to the recurrentmaintenance cost for each district as annually assessed by MWS. Governmentdisbursements are tied to output which in turn requires supervision byMWS's regional offices. Because of the country's difficult economic andfiscal situation and because Government concurrently needed to increase itsallocations for recurrent mainterance of main and secondary roads, theFourth Highway Project is providing financing on a declining basis for theincremental portion of the recurrent maintenance costs of roads that havebeen improved under the first two phases of DRIMP. As the economicsituation is still difficult this assistance will be continued through theperiod of the project; the system of assistance and the appropriateallocations needed during the project period (Item III. D in Annex 8) wereagreed with Government during negotiations, while the appropriateness ofthe agreed allocations would be discussed annually by Government and theBank on the basis of MWS' updated estimates of funds required by thedistrict councils (para. 5.01 (d)).

Maintenance of Main and Secondary Roads

3.05 The project will assist in financing the following high prioritymaintenance activities and related items during the first four years of thefive year constrained program (para 2.32):

(a) equipment (including spares and workshop tools andequipment) for routine and periodic maintenance;

(b) a resealing program of single bituminous surface treatment(SBST) for about 400 km of paved roads as part of MWSperiodic maintenance activities;

(c) a rehabilitation program for 67 km of paved roadsincluding:

(i) resealing by DBST of 5 km;

(ii) AC overlays oF 46 km;

(iii) new base course and DBST of 4 km;

(iv) new base course and AC overlay of 3 km; and

(v) full reconstruction of 9 kin;

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(e) provision of furniture, training aids andequipment for MWS's new training center inLilongwe;

(f) consultancy services for:

(i) assistance to MWS in preparing and carrying out (a)above;

(ii) assistance to MWS to prepare and carry out (b)above, including the design and supervision ofb (i);

(iii) design of (c) above (through PPF);

(iv) supervision of (c) above;

(v) transport system study for a northern accessroute;

(vi) preparation of future projects;

(vii) assistance to Transport Planning Unit of EPD.

(viii) assistance to PVHO in strengthening equipment fleetmanagement.

C. Detailed Project Description

Third Phase of DRIMP

3.03 The project will extend the ongoing second phase of DRIMP to theremaining eleven districts of the country (map II), one of which (ThyoloDistrict) has been transferred from the Fourth Highway Project to theproposed project because of insufficient funds in the earlier project.Selection of roads for improvement and planning for maintenance units inthese remaining districts were carried out by the consultants, Scott WilsonKirkpatrick and Partners (UK). Depots and facilities to be provided and alist of roads to be improved during the first year of the program wereagreed with Government at negotiations (para. 5.01 (c)); the work programfor subsequent years is to be agreed with Government not later than fourmonths before the beginning of each fiscal year until the completion of thecomponent (para. 5. 01 (c)). The project provides for the establishment ofmaintenance units in each district including the provision of a depot, sub-depots where necessary, housing for key staff and light equipment (ItemIII. B in the project file, Annex 8). An extension of MWS headquarters toaccommodate the new rural roads division will also be constructed under theproject. In addition, it will provide for the improvement of some 1,900 kmof district roads under the jurisdiction of the district Councils in theselast eleven districts. Lists of roads to be improved are in the projectfile (Item III. C in Annex 8). These works are to be carried out by thethree improvement units established under Phase I of the programme and theeleven maintenance units to be set up under Phase III of DRIMP.Implementation of the third phase should start immediately followingcompletion of the second phase in mid to late 1984. In order to avoid

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disruptions in implementing road improvement wiorks, depots and housing forkey staff in the first 2-3 districts of the third phase should be completedat that time, thus work on depots; and housing must start as soon as theLoan/Credit become effective.

3.04 Maintenance of the district roads, subsequent to improvements,is to be undertaken by the district councils using the facilities provided,and staff trained, under the project. While Government has in the pastprovided the district councils with some assistance for recurrentmaintenance (para.2.33), regular maintenance of the improved networkrequires substantial and increasing Government assistance. Under DRIMP'ssecond phase the Government agreed to assist the District Councils byproviding grants to supplement the Councils' revenues available for roadmaintenance, in amounts sufficient to bring the total up to the recurrentmaintenance cost for each district as annually assessed by MWS. Governmentdisbursements are tied to output which in turn requires supervision byMWS's regional offices. Because of the country's difficult economic andfiscal situation and because Government concurrently needed to increase itsallocations for recurrent mainterance of main and secondary roads, theFourth Highway Project is providing financing on a declining basis for theincremental portion of the recurrent maintenance costs of roads that havebeen improved under the first two phases of DRIMP. As the economicsituation is still difficult this assistance will be continued through theperiod of the project; the system of assistance and the appropriateallocations needed during the project period (Item III. D in Annex 8) wereagreed with Government during negotiations, while the appropriateness ofthe agreed allocations would be discussed annLually by Government and theBank on the basis of MWS' updated estimates of funds required by thedistrict councils (para. 5.01 (d)).

Maintenance of Main and Secondary Roads

3.05 The project will assist in financincl the following high prioritymaintenance activities and related items during the first four years of thefive year constrained program (para 2.32):

(a) equipment (including spares and workshop tools andequipment) for routine and periodic maintenance;

(b) a resealing program of single bituminous surface treatment(SBST) for about 400 km of paved roads as part of MWSperiodic maintenance activities;

(c) a rehabilitation program for 67 km of paved roadsincluding:

(i) resealing by )BST of 5 km;

(ii) AC overlays of 46 km;

(iii) new base course and DBST of 4 km;

(iv) new base course and AC overlay of 3 km; and

(v) full reconstruction of 9 kin;

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(d) a rehabilitation/improvement program includingimprovements of road formation and drainage on thetotal length of 1,733 km of gravel and earth roads,spot regravelling on about 1,200 km and fullregravelling on 431 km.

The maintenance component will include technical assistance as detailed inpara. 3.09. During negotiations Government and the Bank agreed on budgetallocations for road maintenance during the project period, on a list ofmaintenance equipment and a list of roads and road sections to be improvedduring the project period (Annex 8, Item III. H) as well as on terms ofreference for the technical assistance (Annex 8, Item III G) (5.01 (e)).

Road Construction

3.06 The road construction component is for a 50 km section, betweenLuwawa Turnoff and Champhoyo, of the main north-south road which links theNorthern Region with the more developed Central and Southern Regions. Theroad has, in recent years, been constructed from the south with IDAfinancing under the First, Second, Third and Fourth Highway Projects (about530 km from Zomba through Lilongwe, Kasungu and Jenda to Luwawa Turnoff),and from the north with financing from the EDF, the Kreditanstalt furWiederaufbau (KfW), the African Development Fund (AfDF) and IDA under theFourth Highway Project (about 250 km from Karonga through Chiweta, Rumphiand Mzuzu to Mbowe). Construction of this section would leave a gap ofonly some 45 km of unpaved road out of a distance of some 1,100 km betweenBangula in the deep south and Karonga in the far north. The detailedengineering for this section of the road financed by a PPF advance, wascompleted in July 1983.

Axle-Load Control

3.07 In order to improve MTC's operation of the three existingpermanent weighbridges and to operate them on a 24 hour basis, the projectprovides for construction of six houses for operating staff. To furtherexpand the enforcement of legal axle load limits and other vehicleregulations, the project provides for procurement of five mobileweighbridges, of a type developed by TRRL of UK for tropical conditions,and five vehicles for control patrols. MTC is presently training anadequate number of staff to carry out the expanded enforcement program.

Training Center at Lilongwe

3.08 The Fourth Highway Project provides for construction of thefirst phase of a training center for MWS in Lilongwe in preparation forexpanded maintenance activities; the buildings and housing for key staffwill be completed by the end of 1983. In order to begin trainingactivities in early 1984, the project provides for procurement offurniture, teaching aids and equipment. A detailed list of items to beprocured was reviewed by the appraisal mission (Item III. A in the projectfile, Annex 8) and agreed with Government at negotiations (para. 5.01 (f)).

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Technical Assistance

3.09 The project provides consulting services (totalling 648man-months) for the following purposes:

(a) technical assistance (50 man-months) forimplementation of the third phase of DRIMP, theestablishment of the necessary maintenance units,the training of local staff, the road improvementsand subsequent maintenance;

(b) design of rehabilitation works (30 man-months) forpaved roads in the maintenance program, after theinitial year, and the subsequent supervision ofthe work (48 man-months), which would be carriedout by contractors;

(c) technical assistance (220 man-months) for MWS toprepare and implement the expanded routine andperiodic maintenance program and the force accountworks of the resealing of paved roads and therehabilitation of earth and gravel roads includedin the maintenance program (Item III. H in Annex8);

(d) design of the road construction (30 man-months)from Luwawa Turnoff to Champhoyo, initially financedthrough PPF;

(e) supervision of the construction of the LuwawaTurnoff - Champhoyo :oad section (90 man-months);

(f) transport system study (75 man-months) concerninga proposed route to 1the north (para. 1.16)including the TANZAM/TAZARA Corridor toDar-es-Salaam and the design of recommendedinfrastructure. This component also includestechnical assistance to strengthen the capabilityof the planning unit in the Ministry of Transportand Communications to monitor conditions on theexisting import/export routes and to takeappropriate action promptly. The terms ofreference for the technical assistance are in theproject file (Item I]I. I in Annex 8). Aconsultant is already in the post financed by UNDPfor a six months period; the project includesfunds to continue this service;

(g) preparation of future highway projects (45man-months) includinq detailed engineering for theChampoyo-Mbowe road;

(h) strengthening of the Transport Planning Unit (IPU)in EPD (24 man-months), including the execution ofseveral transport stLldies, and continued trainingabroad of TPU staff (para. 1.18); and

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(i) strengthening of equipment fleet management (36man-months) through improvements in managementsystems, financing, equipment maintenance andreplacement within PVHO, and determination ofthose equipment services which might moreeconomically be obtained from the private sector(terms of reference for the services are in theproject file, Annex 8, Item III. K).

During negotiations agreements were reached with Government: (i) thatselection of a firm of consultants to provide technical assistance to MWS(item (c) above) would be completed as a condition of effectiveness of theloan/credit; (ii) that consultants will be employed on terms and conditionssatisfactory to the Bank; (iii) on terms of reference for feasibility andengineering studies; and (iv) that Government will consult with the Bank onthe recommendations of feasibility studies before proceeding withengineering studies (para. 5.01 (h)).

Cost Estimates

3.10 The total estimated financing required for the project, includingcontingency allowances and the capitalized front-end fee on the Bank loan(US$18.0 million) is estimated at about MK 105.1 million or US$84.1million. Total cost includes: (a) physical contingencies of 10% of basecost on all items; and (b) price contingencies amounting to about 24% ofbase cost on all items, including physical contingencies. The foreignexchange component is estimated at MK 65.4 million (US$ 52.3 million).Identifiable taxes and duties are about MK 6.9 million (US$5.5 million),and the total project cost net of taxes and duties is MK 98.2 million (US$78.5 million). Details are provided in Table 3.1.

3.11 The base costs are estimated as of October 1983 and have beenderived as follows:

(a) DRIMP The costs of establishing the maintenance units andof improvement works and subsequent maintenance are basedon actual costs incurred for these activities under thesecond phase of DRIMP. The implementation period wouldextend from about mid to late 19B4 until late 1987;

(b) Road Maintenance: The costs of implementing themaintenance programs were based on consultants' estimateswhich in turn are based on MWS's force account operationsand on recently let contracts for similar works in Malawi;

(c) Road Construction: The cost estimates for construction ofthe Luwawa turnoff-Champhoyo road section were based onquantities derived from detailed engineering and on theconsultants' conservative estimates of unit costs, in turnbased on considerable experience from similar constructionworks adjacent to the location of this road section. Theforeign exchange component is assessed at 73% of totalcosts and includes all elements except labour and taxes.

(d) Axle Load Control: The cost of the mobile weighbridges,vehicles and related equipment was based on recentquotations to MTC. The price of houses to be built at thesites of the permanent weighbridges is based on actualcosts of such houses built by MWS's force account units.

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Fifth Hiqhwy Pro,t

Table 3.1 Estimated Pro,ject Costs

Estirrated Project bsts

W miallion _ LS$(million)Local Foreign lotal Local Foreign Total % Foreign

A. CRIMP III

(i) Inrprovefwits 3.70 1.82 5.52 2.% 1.45 4.41 33(ii) tepots, Hoising, b5d1 HIequarters 1.32 1.01 2.33 1.06 0.81 1.87 43(iii) Eqiipnent ard Tools 0.05 1.01 1.06 0.04 0.81 0.85 95(iv) MIintera ce Operations 5.17 3.20 8.37 4.14 2.56 6.70 38

Subtotal A: 10.24 7.014 17.28 8.19 5.63 13.82 41

B. Road Mainte,Ewce

(i) Rdabilitation of Paved Roaos 3.33 8.91 12.24 2.66 7.13 9.79 73(i) PeseaIing of Paved RFaso 2.16 5.78 7.94 1.73 4.62 6.35 73( R) Fehabilitation of Earth a-o Gravel

Ftids 4.91 6.87 11.78 3.93 5.50 9.43 58(iv) Equipnent ano Spares 0.28 6.21 6.49 0.22 4.97 5.19 96

Sdbtotal B: 10.68 27.77 18.45 8.54 22.22 30.76 72

C. oead Construction

(i) LLawaa Turmff-Dxfforya 3.81 10.20 14.01 3.05 8.16 11.21 73

0. Axle Load Control

(i) Mobile Weighbridges ano Vehicles 0.01 0.20 0.21 0.01 0.16 0.17 94(ui) Housing at Penrarent Weigiricges 0.05 0.05 0.10 0.04 0.04 0.08 50

SFbtotal D: 0.06 0.25 0.31 0.05 0.20 0.25 80

E. Training Center at Lilongqw

(i) Fumiture 0.02 0.01 0.03 0.01 0.01 0.02 50(ii) Trairnrg Aios and EquipTent 0.01 0.19 0.20 0.01 0.15 0.16 94

Subtotal C: 0.03 0.20 0.23 0.02 0.16 0.18 89

F. Coasultaxcy Services

(i) Ternical Assistance for A 0.13 0.50 0.63 0.11 0.40 0.51 79(ii) Design ard Stpervision of 8 (i) 0.19 0.74 0.93 0.15 0.59 0.74 79(iii) Technical Assista-ce for B (ii-iv) 0.56 2.14 2.70 0.45 1.71 2.16 79(iv) Design of C (i) (through PPF) 0.08 0.30 0.38 O.D6 0.24 0.30 79(v) Sipervision of C (i) 0.18 0.67 0.85 0.14 0.54 0.68 79(vi) Study of Northern Pcess lbute 0.21 0.74 0.95 0.17 0.59 0.76 79(vii) Desiqn, 0Dwq±uyo-MGwe Road 0.10 0.40 0.50 0.05 0.32 0.40 79(viii) Tech. Psst. for Transport Plarning 0.11 0.45 1.56 0.09 0.36 0.45 79(ix) Tech. Asst. for PVHD 0.10 0.37 2.47 0.05 0.30 0.38 79

Subtotal F: 1.66 6.31 7.97 1.33 5.05 6.38 79

Base Cost1/, Slbtotal A-F 26.48 51.77 713.25 21.18 41.42 62.60 66

G. Coitirgncies

(i) Pnysical: 10% A-F 2.65 5.18 7.83 2.12 4.14 6.26 66(ii) Price 2/ 10.60 8.34 1B.94 8.48 6.67 15.15 44

Subtotal G 13.25 13.52 26.77 10.60 10.81 21.41 50

Total Project CEost 39.73 65.29 105.02 31.78 52.23 84.01 62

Front-end Fee an Bak Loan - 0.06 tl.06 - 0.05 0.05 100

lotal Firwning Reqiqred 39.73 65.35 105.05 31.78 52.20 84.06 62

1/ October 1983 prices

2/ Ex,ected price increases CS):

1983 1984 1985 1986 1987

Local 15 15 14 13 12

Foreigm 8 7.5 ,' 6 6

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(e) Training Center at Lilongwe The estimated costs offurniture, equipment and training aids is based on MWS'sdetailed assessment of requirements and price quotationsfrom local suppliers.

(f) Consultancy Services: The technical assistance forpreparation and implementation of the third phase of DRIMPwill require about 50 man-months of consulting services(US$510,000); the design of the rehabilitation of pavedroads will require about 30 man-months and supervision ofthese works about 48 man-months (US$740,000); technicalassistance to implement and supervise the expandedmaintenance program will require some 220 man-months(US$2,160,000); the design of the road construction elementwill be paid for on a lump sum basis but includes about 30man-months (US$300,000); the supervision of thisconstruction will require some 90 man-months (US$680,000);the study of emergency routes is estimated to require some75 man-months (24 man-months technical assistance, 16man-months feasibility study, 27 man-months for possibleroad design and 8 man-months for possible design of portfacilities) (US$760,000); preparation of future hiqhwayprojects, including the detailed engineering of theMbowe-Champhoyo road, about 45 man-months (US$400,000); andtechnical assistance (including staff training) for TPU,about 25 man-months (US$450,000), and technical assistancefor PVHO, about 36 man-months (US$380,000). The averageman-month cost, including salary, fees, internationaltravel, subsistence and other applicable charges isestimated at about US$10,000 for the technical assistancefor DRIMP and for TPU in EPD, US$9,000 for design andsupervision of rehabilitation of paved roads and fortechnical assistance for the expanded maintenance program,US$7,500 for supervision of construction works, US$10,500for the study of the northern access route, and for thetechnical assistance for PVHO, and US$8,500 for detailedengineering work. These costs are in line with recentexperience in Malawi. In addition to these personnel coststhe contract costs include local transportation costs,local office operating expenses, report printing and otherminor expenses.

D. Financing

3.12 The total project cost (net of taxes and duties) of US$78.5million includes financing of recurrent maintenance costs of district roads(para.3.04) amounting to US$9.61 / million (net of taxes and duties). In

1/ Item A (iv) in the cost table (US$6.7 million) plus US$2.9 millioncontingencies.

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view of the severe domestic resource constraints, the Government'scontribution to the project financ:Lng will be limited to 10°O of the capitalcost of civil works2/, to about 80"o (on average) of the maintenance costfor district roads and 10%o of consulting services. The Government'scontribution will thus be about US$17.6 million or US$13.8 million iffinancial assistance can be secured also for the last two years of theresealing program. The project requires external financing of aboutUS$60.9 million to cover the foreicjn exchange component of US$52.3 millionand a share of the local cost amounting to US$8.6 million. The externalfinancing will be provided through an IDA credili of US$26.9, of whichUS$13.8 million will be provided from the IDA Special Fund, a Bank loan ofUS$18.0 million, and a loan from the African Development Bank (AfDB) ofabout US$16.0 million. During negotiations, assurances have been obtainedthat the Government will take timely action to :Ldentify sources forfinancing the gap of US$3.8 million for the resealing program or,alternatively, provide for this from its own resources (para. 5.01 (g)).The external financing from Bank/IDA, IDA Special Fund and AfDB, will beused in parallel financing of various components as shown in Table 3.2.

2/ With exception of resealing work (Item B (ii) in cost table) for whichthe Government will provide 100%zo financing for the last two years(1986/87 and 1987/88) of the program unless other sources of financingcan be identified.

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MALAWI

FIFTH HIGHWAY PRDJECT

Table 3.2 Project Finarcing Plan

(Cost in US$ million)

IDATotal IaA,/Ba-k Special Furd AfDB GoverrmentCosta/ ,°% of %, of °0 of %0 of

-U$ Total US$ Total US$ Total US$ total

(A) DRIMUP III

(i) Iffprovanents 6.35 5.72 90 0.63 10(ii) Depots, Hbusing, *65 Hqts. 2.38 2.14 90 0.24 10(iii) Eqiipmet aid Tools 1.11 1.11 100 - 0(iv) Maintenr-ce Operations 9.58 1.92 20 7.76 80

Sibtotal (A) 19.42 10.89 56 8.53 44

(B) Road Maintenatce

(i) Rehabilitation of paved roads 11.86 10.67 90 1.19 10(ii) Resealing of paved roacs 7.72 3.15 (90b/) 4.57 (10)(iii) Rehabilitation of earth

ard gravel roads 11.69 10.52 90 1.17 10(iv) EqLiprrent, tcols, ard spares 6.31 2.68 42 3.63 58 - 0

Sthtotal (B) 37.58 13.20 44 13.82 28 3.63 10 6.93 18

(C) Road Construction 12.87 11.58 90 1.29 90

(D) Axle Load Control 0.30 0.27 90 0.03 10

(E) Training Center at Lilong 0.21 0.19 90 0.02 10

(F) Consulta-cy Services

All consultancies exceptSupervision of (C) 7.20 6.48 90 0.72 10

Supervision of (C) 0.88 0.79 90 0.09 10

Subtotal (F) 8.08 6.48 80 0.79 10 0.81 10

Front-end fee of Bark Loan 0.05 0.05 100 - - - 0

Total 78.51 31.OB 40 13.82 18 16.00 20 17.61 22

a/ Including contmwqncies but. net of taxes ard duties.

b/ For the first heo years (1984/85 and 1985/86) of program; for the last two years, see para 3.12.

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E. Implementation and Procurement

3.13 MWS will be responsible for project execution apart from thecomponents for axle load control and the technical assistance to MTC'splanning unit For which MTC will be responsible, and the study of thenorthern access route and the technical assistance for transport planningfor which EPD will be responsible. These agencies are capable of carryingout these responsibilities. Road construction, costing some US$12.9million (net of taxes and duties), will be executed under unit pricecontracts awarded after international competitive bidding (ICB) inaccordance with guidelines of AfDB. The rehabilitation work on pavedroads, costing some US$11.9 million, will also be executed under unit pricecontracts awarded after ICB in ac-ordance with the Bank's guidelines forprocurement but with special procurement eligibility criteria for the IDASpecial Fund.

3.14 Because of the small scope and scattered location of works thedepots and housing for the third phase of DRIMP, including the extension ofMWS headquarters totalling about IJS$2.4 million, and housing for axle loadcontrol, costing some US$0.1 million, will be constructed by localcontractors, following local competitive bidding procedures which aresatisfactory, or if this proves unsuccessful by force account as underprevious phases of DRIMP. In order to train local staff in the elevendistricts, improvement and maintenance works under the third phase,amounting to a total of some US$15.9 million will be by force account withconsultants providing technical assistance in line with experience underthe previous two phases of the program.

3.15 Resealing of some 400 km of paved roads, to a total cost of aboutUS$7.7 million, will be carried out by MWS force account units in order tomaintain a minimum capacity for resealing in MWS. The proposed projectwill strengthen one or two existing MWS units through provision of financesfor materials and operating expenses during the first two years of the4-year program3/. The annual capacity of the MWS units will amount toabout 100-150 kim, while over the next few years the annual requirement forresealing of the paved network is expected to gradually increase to some150-200 km.

3.16 The rehabilitation works, costing some US$11.7 million, on earthand gravel roads are mostly of small size and in scattered locations, andwould generally be best suited for implementation by force account.Hovever, the Government intends to create an opportunity for furtherdeveloping the local construction industry through provision of workcontinuity and has therefore decided to group about 30 percent (at a totalcost of about US$3.5 million) into small packages (estimated to cost lessthan US$300,000 each) suitable for construction by contractors. The workwill be tendered through local competitive bidding under Governmentprocedures satisfactory to the Ban<. The remainder of the program will becarried out by force account, and the project will strengthen the existingMWS maintenance units with new equipment (including spares) and providefunds for materials and operating expenses.

3.17 Design and supervision of road construction and overlays forpaved road rehabilitation as well as technical assistance for the road

3/ New equipment for the resealinq units will be provided in 1983-84 andfinanced by the Overseas Development Administration (UK), which alsomight finance materials and operating expenses during the last twoyears.

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maintenance program, the third phase of DRIMP, the study of the northernaccess route, the technical assistance to EPD and PVH0, and the preparationof future projects will be carried out by consultants employed under termsand conditions satisfactory to the Bank at the total cost of about US$8.1million; this was agreed with Government at negotiations (para.5.01 (h)).Cost will not be a consideration in the selection of the consultants.

3.18 In view of the diversity of types and the small number of eachtype of equipment, tools, furniture and other minor items for the Lilongwetraining center, costing about US$0.2 million, and for axle load control,costing some US$0.2 million, procurement of these items will be throughlocal shopping. In order to maintain standardization andinterchangeability between districts as well as with MWS's PVHO, which willundertake repairs and overhauls, equipment (including spares) for thedistricts' maintenance units under the third phase of DRIMP, costing atotal of about US$1.1 million (including some US$0.2 million for equipmentto strengthen the existing improvement units), will be obtained either frommanufacturers supplying such items to the previous phases of DRIMP, byextending existing contracts if still in effect at the time of Credit/Loansigning, or by local shopping and limited international tendering.

3.19 Road maintenance equipment, including spare parts, for routineand periodic maintenance of main and secondary roads as well asrehabilitation of gravel and earth roads, amounting tQ about US$6.3million, will be procured following international competitive bidding inaccordance with guidelines of the Bank Group and AfDB as appropriate(para. 2.31).

3.20 All documentation for equipment procurement under ICB andfinanced by the Bank Group will be subject to Bank Group review prior toissuance of tenders. Bidding packages for civil works estimated to costUS$500,000 or more (that is, about 50% of the total Bank Group-financedcivil works to be procured under competitive bidding) will be subject tothe Bank's prior review of bidding documents. The bidding packages forcivil works estimated to cost less than US$500,000 equivalent and all othercontract documentation will not be routinely reviewed but MWS will maintaincopies of bid evaluations and final contracts which will be subject to spotreview by Bank Group supervision missions.

3.21 An implementation schedule is presented in Chart 2, the detailsof which was agreed with Government at negotiations (para 5.01 (i)).

F. Disbursements

3.22 The credit funds will be disbursed on the following basis:

(a) 90%9 of expenditures on civil works under the thirdphase of DRIMP, including:

(i) district road improvements;

(ii).depots, housing, and MWS headquarters extension.

(b) 80%O of total expenditures for civil works for mainand secondary roads in the rehabilitation programfor paved roads, and for earth and gravel roads;

(c) 90%0 of expenditures on civil works for housingfor the axle load control;

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(d) 100%O of foreign expenditures and 90%O of localexpenditures for equipment, vehicles and spareparts;

(e) 100%0' of foreign expenditures and 90%0 of localexpenditures for weighbridges and associatedequipment, and imported items to be provided forthe Lilongwe training center;

(f) 90%O of total expenditures for locally produceditems to be provided for the Lilongwe trainingcenter;

(g) 100%o of foreign expenditures and 50%0 of localexpenditures for consultants' services;

(h) for incremental maintenance expenditures ondistrict roads: for each district being broughtinto the maintenance program, subsequent tocompletion of road improvements, 75%0 ofincremental costs during the first year ofmaintenance; 50%0 during the second year ofmaintenance; and 25°% during the third year ofmaintenance; and

(i) 100%O of foreign expenditures for training abroad ofEPD staff.

IDA financing of the incremental total cost of maintenance, declining from75%O for the first year of maintenance to 50%O for the second year and 25 forthe third year, would be matched to Government's financial assistance tothe district councils in accordance with targiets agreed with Government(para. 5.01 (c). The AfDB loan would finance 80%o of total expenditures forthe construction of the Luwawa Turnoff-Champhoyo road, 90%O of expenditureson consulting services for construction supervision, and 100%O of foreignand 90%' of local expenditures for maintenance equipment (vehicles andgraders), including spare parts.

3.23 All disbursements will be fully documented except forexpenditures under force account for civil works included in parts A, B,and D(ii) of table 3.1, which wiLl be made against certificates of workperformed, to be issued by the technical assistance consultants. Thedocuments supporting these staternents of expenditures will not be submittedfor review but will be retained by MWS for inspection by the Bank duringproject supervision missions.

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3.24 An estimated schedule of disbursements is given in Table 3.3

Table 3.3 Estimated Schedule of Disbursements

Cumulative DisbursementsBank Fiscal Year at End of Quarterand Quarter ending (US$ million)

FY 1984

March 31, 1984 0.000June 30, 1984 0.400

FY 1985

September 30, 1984 0.400December 31,1984 8.740March 31, 1985 11.2B0June 30, 1985 13.900

FY 1986

September 30, 1985 16.310December 31, 1985 18.840March 31, 1986 21.380June 30, 1986 24.140

FY 1987

September 30, 1986 26.550December 31, 1986 28.990March 31, 1987 31.260June 30, 1987 33.340

FY 1988

September 30, 1987 35.240December 31, 1987 36.600March 31, 1988 38.050June 30, 1988 39.140

FY 1989

September 30, 1988 40.300December 31, 1988 41.180March 31, 1988 42.130June 30, 1989 42.850

FY1990

September 30, 1989 43.500December 31, 1989 44.010March 31, 1990 44.550June 30, 1990 44.900

Closing date: September 30, 1990

Source: Mission Estimates March 1983.

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This schedule is in line with disbursements under previous highway credits.

G. Accounting, Auditing and Repirting Requirements

3.25 Project accounts, including statements of expenditures, will bemaintained by MWS with separate accounts for each component. In previousIDA projects, accounts have beer audited by the Auditor General; as thisarrangement has proved satisfactory, it woulcl also be followed for theproposed project. During negotiations, Government agreed to have allproject accounts audited by the Auditor General and to have auditedaccounts together with the auditors' report submitted to the Bank not laterthan six months after the end of the fiscal year (para. 5.01(j)). Atnegotiations, Government also agreed on progress reporting requirements,which include indices for measuring implementation, (Items III. E and F inAnnex 8) and the submission of a project completion report, in a formsatisfactory to the Bank, not later than six months after the closing date(para. 5.01 (j)).

H. Environmental Impact

3.26 In general the project would have beneficial effects on theenvironment by reduction of vibration, dust and noise; and improveddrainage will reduce the danger of soil erosion. During road construction,however, there is a risk that migration of wild animals may be hindered byconstruction activities, including noise. This risk is only temporary andis considered minor.

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IV. ECONOMIC EVALUATION

A. Economic Evaluation of Project Components

General

4.01 The project is consistent with sectoral development objectives ofthe Government (para 1.15) and represents a continuation of work done underprevious IDA-financed transport projects. Various components of theproject are expected to have significant favorable effects on the economyof Malawi. Extension of DRIMP to the remaining districts will enable ruralpeople in large areas of the country to benefit from improved access tomarkets, sources of supplies and public services. The road maintenancecomponent will improve road conditions on the major routes, thus reducingtransport costs, enhancing the reliability of transport and preventingprogressive road deterioration. The road construction component willcontribute toward economic integration of the northern and central regionswhich presently lack a paved road link and will provide a significant linkin an international route for Malawi's export/import trade. As a result ofthe improved transport to be realized under the project, general economicdevelopment should be stimulated, particularly in rural areas.

4.02 District roads to be improved under the project were selected inaccordance with socio-economic criteria (Annex 3) and have rates of returnof at least 121%. The road maintenance component of the project will havean economic return of 62%C'. Construction of the 50 km of paved road willyield an economic return of 29%O. No calculation of rates of return hasbeen attempted for other project components representing, in the aggregate,less than 5%' of total project investment; these small components arenonetheless well justified.

1. District Road Improvement and Maintenance Program (DRIMP)

(a) Main Benefits and Beneficiaries

4.03 The extension of DRIMP to the remaining districts will establish,in all eleven districts, appropriate units to improve and maintain about1,870 km of roads. The following types of benefits are expected from thiswork:

(a) savings of vehicle operating costs in thetransport of non-agricultural goods, although suchtraffic alone will not be sufficient to justifyimprovements on many of the roads, and

(b) increases in agricultural production made possibleby better access to farms and markets.

Improved access to agricultural extension services and markets are expectedto induce farmers to not only increase productivity on land alreadycultivated but also increase somewhat the area under cultivation.

4.04 Significant project benefits are also anticipated ininstitution-building in the district councils as capabilities for roadmaintenance are expanded through the provision of training, equipment and

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depots under the project. Other expected benefits are reduced spoilage ofproduce and improved access to heEilth, education and other social andadministrative facilities for people residing in the influence area of theproject roads.

4.05 Most of the benefits from the reduction in transport costs willaccrue to (a) the road transporters, since ADMARC pays them fixed rates fortransport of goods to and from rural market centers, and (b) the farmersliving within the roads' influence area, because of the competitive natureof the road transport industry. The main beneficiaries from the increasedagricultural production and improved access to social services will bethose residing in the vicinity of the roads.

(b) Economic Analysis

4.06 Selection of the district roads to be improved during the threeyear period covered by the third phase of DRIMP has been based onsocio-economic criteria, and all these project roads have an estimated rateof return of at least 120. The ec3nomic analysis of the roads includesconsideration of benefits from not only vehicle operating costs savings butalso incremental agricultural production, the latter estimated on the basisof farm models representative of farms in the areas of project roadinfluence. Details of the methodoLogy employed are given in Annex 3. Theselection criteria and methodology for calculating the rates of return wereagreed with Government during appraisal. In 1982, Government appointedconsultants to select all roads to be included in DRIMP III, Government andthe Bank have agreed on roads to be improved during the first year of theprogram, and roads to be improved in subsequent years will be agreedannually not later than four months before the beginning of each fiscalyear (para 5.01 (c)).

2. Road Maintenance Program

(a) Main Benefits and Beneficiaries

4.07 The road maintenance component of the project will overcomesubstantial deficiencies in the capacity of the Ministry of Works andSupplies to maintain its road netwcrk. The principal benefits from theroad maintenance program will be savings in vehicle operating costs.Additional benefits will be derived from the avoidance of both roadclosures caused by poor road conditions and the premature rehabilitation ofpoorly-maintained roads. The benefits will accrue largely to the roadtransporters and farmers living in the areas of road influence, as in thecase of the DRIMP (para. 4.05). Since the road transport industry is quitecompetitive and -the users of the main and secondary roads are diverse,transport cost savings from the project component. should be realized byvirtually all economic groups in the country.

(b) Economic Analysis

4.08 The economic justification of the project component is based onan assessment of economic costs and benefits with and without the projectover the estimated seven year average economic life of the equipmentinvolved. A basic tool employed in the analysis was the Highway Design andMaintenance Standards Model (HDM) and related computer programs (a systemdeveloped with the cooperation of the Bank). The costs and benefits of theroad maintenance program are as follows:

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Costs and Benefits of the Road Maintenance Program(MK 000)

Increases Increases Savings in Savings inin Capital in Road Vehicle TravelConstruction Maint. Operating Time Other Net

Year Costs Costs Costs Costs Benefits Benefits

1984 6,217 3,229 0 0 0 -9,4361985 6,413 6,569 12,565 642 0 2211986 5,306 6,233 20,192 810 326 9,7891987 4,467 4,900 25,308 928 802 17,6711988 2,885 3,146 30,027 1,037 838 25,8701989 1,544 3,218 33,913 1,126 875 31,1511990 973 3,391 37,159 1,205 913 34,9231991 0 3,551 40,458 1,286 954 39,1471992 0 3,704 43,509 1,264 996 42,0661993 0 3,491 46,865 1,240 1,040 45,654

Source: Consultants Report, 1983

As indicated in the table, the incremental costs are increases in capitalconstruction costs and road maintenance costs while the principalquantified benefits are savings in vehicle operating costs and travel timeof road users. It is apparent that the benefits are very large in relationto costs and therefore the economic rate of return (ERR) is high, that isabout 62°o. For individual unpaved roads in the program (Annex 8,ItemIII.H) the ERRs vary considerably but none is below 36°o. For specificpaved roads (Annex 8, Item III. H) all but one of the ERR's are above 25°o.

4.09 The basis for the savings in vehicle operating costs are the dataon vehicle operating cost factors shown in Annex 7, road deteriorationparameters (roughness, depth of ruts and depth of loose materials), usercost relationships and traffic estimates. For paved and unpaved roads,traffic estimates are shown in Annexes 5 and 6, respectively. Assumedtraffic growth rates for paved roads range from 5 to 8°% p.a. but tendingtoward the low side, while the rates for unpaved roads are 4 to 5%0 p.a.

4.10 The value of savings in travel time constitute only about 3%0' oftotal quantified benefits. They were calculated on the basis of estimatesof the unit values of passenger time as shown in Annex 7 and estimates oftime saved.

4.11 Selection of the particular roads included in the roadmaintenance program was based on economic analysis of a large number ofcandidate roads. Economic return was the key factor in the selection ofparticular program roads. Another factor was the practicability oforganizing the work on the roads in an efficient manner.

4.12 The ERR for this project component is so high that even if thecosts were substantially higher or the benefits much lower than estimated,or both, the ERR would be acceptable.

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3. Upgrading of the Luwawa Turnoff-Champhoyo Road (50 km)

(a) Main Benefits and Beneficiaries

4.13 The main project benefits from this road construction arereductions in transport costs for a portion of Malawi's export/importtraffic which will be transported between centers in Malawi and the port ofDar-es-Salaam via Karonga (about 1,500 km from Lilongwe to the Tanzaniaport) rather than over the longer and more costly routes to the sea viaLusaka -- either to Dar-es-Salaam (about 2,600 km) or to Durban (about2,800 km). While the most economical routes from land-locked Malawi to thesea are two railway lines through Mozambique to the ports of Beira andNacala, the ability of these lines to carry Malawi traffic has declinedsharply in recent years thus for2ing substantial amounts of traffic to betransported at high cost via Lusaka and either Durban or Dar-es-Salaam(para 1.13). The outlook in Moz3mbique regarding guerilla attacks on therailway lines and deterioration 3f those lines is not promising.Therefore, Malawi's need for an economical alternative route to the sea isevident and the best choice for this purpose is a northern access routeincluding the main north/south road and the TANZAM corridor (both road andrailway) to Dar-es-Salaam. The economy of Malawi would benefit greatlyfrom the reductions in transport costs and the beneficiaries would includevirtually all elements of the population.

4.14 Additional benefits from the road construction are reductions invehicle operating costs for normal domestic traffic. Benefits derived fromthe impact of the road on the area of influence, in terms of increasedagricultural production, have been included in generated traffic. Savingsin personal travel time have been included for passengers and owner-driversof cars, landrovers and buses but excluded for passengers on trucks.Benefits representing savings in road maintenance costs have not beenquantified. Similarly, benefits from accident reduction have not beenincluded in the economic analysis.

4.15 In the first instance, the major beneficiaries of reductions intransport costs on both international and domestic traffic will be thetruck owners and operators. However, in view of the competitive nature ofthe road transport inductry (para 2.07) and the fact that Government-prescribed rates take account of road conditions, it is expected that thesavings in vehicle operating costs and time wiLll be passed on as lowerfreight rates to the shippers ancl receivers of freight. Farmers andconsumers in the area are also expected to benefit from the reducedtransport costs.

(b) Area of Influence of the Project Road

4.16 The Luwawa Turnoff-Champhoyo road forms part of theBangula-Karonga highway, the backbone of the country's road network. Muchprogress has been made on the development of this road which is not onlyimportant for internal trade and for achievincg unity among the regions butalso will in the near future, form part of an international route to Dar esSalaam. The latter role of the road has assumed increasing significance asthe rail routes through Mozambique have become less reliable. The LuwawaTurnoff-Champhoyo segment to be constructed under the project extends theexisting paved road northward into the Viphya area which is now beingdeveloped as a source of wood and wood products and for agriculture.

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4.17 The Viphya area contains the largest forest resources in thecountry, many thousands of hectares having been planted with ODA assistanceduring the past two decades. A sawmill was built at Mazamba in 1979; also,preparation is far advanced for the development of a new plywood andblockboard mill in the area served by the road. Viphya timber resourcesare sufficient to support substantial growth of wood processingindustries. However, the economic analysis of the road constructioncomponent takes into account only a modest future growth in trafficattributable to wood products industry.

(c) Economic Analysis

(i) Approach

4.18 Since the justification of constructing the LuwawaTurnoff-Champhoyo section rests to a substantial extent on the transport ofexport/import traffic over the road, it is necessary to consider theeconomic impact of building not only this section but also the adjacentsection between Champhoyo and Mbowe, which would be required forexport/import traffic to move on the international route. As previouslyindicated (para. 3.09) detailed engineering has not yet been done for therecently selected alignment of the Champhoyo-Mbowe section and thereforefinancing of construction of this segment cannot be included in the projectbut this civil works is expected to follow as soon as possible.

4.19 The economic analysis also takes into account the fact thatanother gap exists in the international route to Dar es Salaam, that is,between Karonga and a point on the paved Mbeya-Itungi road in Tanzania.since the completion of this 48 km road is dependent on and essential tothe effective use of the international route, the cost of building has beenincluded in the economic analysis. The road is assumed to have littledomestic traffic and therefore any benefits based on such traffic are notreflected in the analysis.

(ii) Savings in transport Cost on Malawi Export/Import Traffic

4.20 One factor which has not been taken into account in the economicanalysis is the exogenous effect of security which this northern routewould bring to Malawi's export/import traffic. A study on the impact ofthe recent transportation crisis in Malawi (para. 1.16) found that directand indirect cost to the economy (cost incurred from the shortages of fueland other essential industrial and consumer inputs) in 1983 will be atleast 3.5% of GDP, or about US$ 45 million, including a net loss ofapproximately US$20 million in foreign exchange. The construction ofLuwawa Turnoff-Champhoyo section will minimize the cost to the generaleconomy incurred through shortages of essential imported goods and latedelivery of exports.

4.21 As previously noted (para 4.13) the most economical routes forMalawi's export/import traffic to and from Indian Ocean sea ports arethrough Mozambique but the inability of the Mozambique rail lines to handleall of the traffic available has required the use of costly alternatives.Following is a comparison of alternative road routes in terms of distanceand transport cost:

- 44 -

Lengtli Transport Cost per tonRoute (Km) (MK)

Lilongwe to Durban via Lusaka 2,835 207Lilongwe to Dar-es-Salaam via Lusaka 2,630 192Lilongwe to Dar-es-Salaam via Karonga 1,500 109

Clearly, the shortest and least costly route is that to Dar-es-Salaam viaKaronga (Karonga international route) and the savings per ton, as comparedwith the next best route, is a substantial MK 83. The reason for the largecost difference is, of course, the substantially greater length of theroute to Dar-es-Salaam through Lusaka.

4.22 Large tonnages of export/import traffic would be diverted fromother routes to the proposed Karoncia international route. In recent normalyears some 750,000 tons of Malawi traffic transited Mozambique. In 1983,this traffic is expected to decline by about 300,000 tons or 40%0, and todecrease further in subsequent years. For purpcises of the economicanalysis of the road construction component, it is estimated that at least150,000 tons per year of export/import traffic will be transported in 1988over the Karonga international route, or 20%O' of the current annual tonnageof Malawi's foreign trade. It is further estimated that this tonnage willincrease at the rate of 5%O p.a. over the economic life of the road. Theinternational traffic will be transported in relatively large trucks of25-30 tons capacity and therefore the estimated 150,000 tons ofinternational freight would represent vehicular traffic of only 15 trucksper day. The road, railway, and port facilities in Tanzania would be ableto handle Malawi traffic of this magnitude without new major infrastructureinvestments1/. However, if the Mozambique routes remain problematic amuch higher Malawi traffic through Tanzania would be expected to develop.The Bank is currently planning to assist Tanzania in the port of Dar esSalam, on the TANZAM highway and on the TAZARA railway. Through suchassistance the Bank will also be helping Malawi alleviate its problems ofcostly and time-consuming international transport. The transport systemstudy (para 3.09) will determine the required investments in transportinfrastructure in relation to various levels of Malawi's transit traffic.

4.23 The 150,000 tons of traffic would be transported over the Karongainternational route at a cost savings of MK 13.7 million in 1988 based onthe MK83 cost savings per ton indicated in para 4.20. Over the economiclife of the road these savings would increase moderately, reaching someMK 36 million annually after 20 years.

(iii) Traffic

4.24 Traffic on the Luwawa Turnoff-Mbowe road is assumed to grow at 5%0p.a. in accordance with traffic counts during recent years. This growthrate is slightly higher than the actual traffic (rowth over the past yearor two when economic activity has been somewhat depressed; however, theassumed 5°% rate is considerably lower than actuaL growth rates during theseventies. Specific estimates were made of traffic related to the Viphyawood industry project which is assumed to begin operations in 1987. In

1/ The throughput in the Port of Dar es Salaam in 1981 was 4.3 milliont nnc; -

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addition, the traffic estimates reflect a small amount of generated trafficfor passenger movements equal to 20% of the normal traffic of cars andother light vehicles. 2/ By 1987, when construction of the road iscompleted, total traffic on the road, as shown in table 4.1, will averageabout 159 vpd.

Table 4.1 Projected Traffic Levels in 1986(vpd)

Local International TotalCar 43 - 43Landrover 45 - 45Bus 5 - 5Light Truck (7 ton) 33 - 33Medium Truck (14 ton) 9 - 9Heavy Truck (27.5 ton) 9 15 14

Total 144 15 159

Sources: Scott Wilson Kirkpatrick and Partners, Feasibility Study ofLuwawa-Mbowe Road, December 1982, and mission estimates.

(iv) Vehicle Operating Costs

4.25 Vehicle operating costs (voc) for the road to be built wouldincrease significantly on the earth road as traffic increases, particularlywhen traffic exceeds 100 vpd. This increase occurs even with a modest risein road maintenance expenditures since the roads involved were notoriginally designed and constructed for a high level of traffic. Table 4.2gives voc's for representative vehicles on the Luwawa Turnoff-Champhoyoroad and the potential savings in vehicle operating costs if the road isupgraded.

Table 4.2 Vehicle Operating Costs*(MK per km)

Vehicle Type Earth Bitumen Difference

Car .41 .23 .18Landrover .71 .34 .37Bus 1.40 .86 .54Light Truck (7 ton) .66 .46 .20Medium Truck (14 ton) 1.03 .71 .32Heavy Truck (27.5 ton) 2.47 1.54 .93

* Net of taxes and duties in mid 1983 prices.

Sources: Scott Wilson Kirkpatrick and Partners,Feasibility Study of the Luwawa Turnoff-Mbowe Road, December1982, and mission estimates.

2/ Generated traffic benefits are valued at only half the unit rateapplied to normal traffic in the economic analysis.

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(v) Cost of Construction

4.26 The construction cost estimate of MK 16.3 million for theLuwawa-Champhoyo road is net of taxes and based on October 1983 prices; itincludes the cost of supervision and 10%O physical contingencies. Costscover construction of the road to paved standard and assumes that the roadwill be built under contract. Theo estimated economic costs of constructingthe Champhoyo-Mbowe section is MK 18.5 million. To build theKaronga-Tanzania section would involve an additional economic cost of MK14.0 million.

(vi) Economic Return

4.27 Economic analysis of the project road shows that the constructionis justified with an overall rate of return of 29%. The economicjustification of the road construction is baseci on an assessment ofeconomic costs and benefits with End without the project component over theestimated 20 year economic life of the road. Since construction of threeroad sections (Luwawa Turnoff-Champhoyo; Champhoyo-Mbowe; andKaronga-Tanzania) will be requirec to realize the benefits frominternational traffic, the costs cf constructing these three sections aretaken into account in the economic analysis. It is assumed that the twosections not included in this project will be built during the period1983-87, as the Government plans. Details of the economic evaluation arepresented in Annex 4. Consideration was given to improving the road to anengineered gravel standard rather than a paved standard but this was notfound justified due to the very high cost of regravelling (gravel sourcesin the area are scarce and rock-crushing would be necessary) and theeventual need to construct the road to paved standard.

(vii) Sensitivity

4.28 The sensitivity of the economic return to variations in theestimated costs and benefits was determined and the results indicate thateven with a 30%C increase in construction costs the ERR would be asubstantial 25%0'. A 50%o decrease in transport cost savings on internationaltraffic would result in a 19%o ERR. If both of these variations areconsidered the ERR is still satisfactory at 14%o.

B. Risks

4.29 The principal risk associLated with this project is that theinternational route via Karonga and Dar-es-Salaam may not become availablefor Malawi's international traffic because of lack of the eventualagreement between the Malawi and Tanzania Governments on construction of aroad link between the two countries or the conditions affecting use of theroute. The two Governments, however, recognize the benefits that may berealized by both countries from use of the route. As already noted (para.1.16), Malawi officials have prepared an action program for development ofthe route and reached preliminary aigreement with the Tanzania Government onvarious relevant issues. The development of this international route isquite consistent with the objectives of the Southern Africa DevelopmentCoordination Conference of which bcoth Malawi and Tanzania are members.

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4.30 Another risk is that the necessary financing for theinternational road link may not be obtained. This possibility seemsunlikely, however, given the interest already shown on the part of certaindonors in developing this important regional artery.

4.31 There is some possibility that the transport problems inMozambique restricting transit handling of Malawi's export/import trafficmay be quickly solved thus eliminating the need for the proposed routethrough Karonga and Dar es Salaam. Such improvements would be fortunatefor Malawi but seem unlikely. The guerilla problem affecting the Beirarail line seems as intractable as ever and the deterioration of facilitieson both the Beira and Nacala rail lines is so severe that, even with amplefinancing, several years would be required to achieve satisfactoryoperations. Overall, it appears prudent for Malawi to undertake theproposed investments in the new international route to avoid potentiallyheavy economic penalties in the years ahead.

4.32 A risk for both DRIMP III and the maintenance program to beagreed under the project is the possibility that Government's financialresources for maintenance of both the national and district road networksmay be inadequate. To minimize this risk, agreement was reached onGovernment financing of maintenance costs (para 3.05). The Bank will helpcushion the burden on Government by financing incremental maintenance costsfor DRIMP on a declining basis. However, the Government's eventual abilityto uphold these agreements will depend on the strength of the economy andGovernment's continued responsiveness to the needs of the road subsector.Possible serious weakness in the general economy over the next severalyears is, of course, a risk that could affect the project adversely.

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V. AGREEMENTS REACHED AND RECOMMENDATION

5.01 During negotiations, agreement was reached with the Government onthe following:

(a) a covenant that prior to adopticin of the annualbudget during the project periocd, the Governmentwill discuss with the Bank the transportinvestment program (para. 1.16);

(b) a list of facilities (depots, hcusing, equipment,tooLs) to be provided, and a list of districtroads to be improved during the first year of thethird phase of DRIMP; the work program forsubsequent years wilL be agreed not later thanfour months before the beginning of each fiscalyear until completion of this project component(para 3.03);

(c) a system of financial assistance for recurrentmaintenance to be provided by Government to thedistrict councils and the allocations neededduring the project period. The appropriateness ofaLlocations will be discussed annually, not laterthan four months be-fore the beginning of eachfiscal year, by Government and the Bank on thebasis of MWS's updated estimates of the fundsrequired by the district councils (para 3.04);

Cd) Ci) maintenance allocations for M1WS for theproject period (para. 2.32) the appropriateness ofwhich will be discussed with the Bank annually notlater than four months before the beginning ofeach fiscal year; (ii) a list of maintenanceequipment to be procured; (iii) a list of roadsand road sections tc be improved during theproject period; and the terms of reference for thetechnical assistance to be provicled to MWS (para.3.05);

(e) equipment and supplies to be provided for MWS'training center in Lilongwe Cparai. 3.08);

(f) that selection of the firm of consultants toprovide technical assistance to MSW would becompleted as a condition of effectiveness of theloan/credit;

(g) that timely action will be taken to identifysources for financing of the Last two years,1986/87 and 1987/88, of the resealing program, or,alternatively, that the Government will providefor this from its own resources (para.3.12);

(h) Ci) that consultants will be employed on terms andconditions satisfactory to the Bank; (ii) on terms

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of reference for feasibility and engineeringstudies; and (iii) that Government will consultwith the Bank on the recommendations offeasibility studies before proceeding withenqineering studies (paras 3.09 and 3.17);

(i) a project implementation schedule (para. 3.23) aswell as progress reporting requirements, and thesubmission of a project completion report (para.3.25); and

(j) that all project accounts will be audited by theAuditor General and that the audited accountstogether with the auditor's report will besubmitted to the Bank not later than six monthsafter the end of the fiscal year (para. 3.27).

5.02 The project is suitable for (a) an IDA Credit of SDR 12.4 million(US$13.1 million equivalent), (b) an IDA Special Fund Credit of SDR 13.1million (US$13.8 million equivalent), and (c) a Bank Loan of US$18.0million equivalent, all on standard terms, to the Government of Malawi.

-50- ANNEX 1Page lof 6

MALAWI

FIFTH HIGHWAY PRO)JECT

Transport-Related IDA Projects in Malawi

A. HIGHWAY PROJECTS

Approximate StatusYear Credit Amount Main Purpose Length (% complete)

(US$ Mil) (km)

1966 S-2MAI 0.49 Detailed engineering for - 100main roads.

1968 112-MAI 11.5 Main roads construction; 290 100study of road transportregulati3ns and road/railcoordination. Refundingof Credit S-2-MAI.

1974 52 3-MAI 10.5 Main roads construction; 113 100pilot scheme for theDistrict Roads Mainte-nance and ImprovementProgram (DRIMP): 300 100First Phase extension ofDRIMP. 1,100 65

1974 S-17-r4AI 2.0 Design of- infrastructure - 95requirements for exploit-ation of the Viphyaforest re!sources.

1977 758-MAI 10.5 Main roacLs construction; 85 100feasibility study anddetailed engineering ofmain roacs.

1981 1099-MAI 33.0 Main road constructiorL 63 50Main road. improvement 100 7Second phase DRIMP.Comprehensive study of 2,400 65maintenance needs.

-51- ANNEX 1

Page 2 of 6

Approximate StatusYear Credit Amount Main Purpose Length (% complete)

(US$ Mil) (km)

B. AGRICULTURAL PROJECTS

1968 113-MAI 6.0 The Lilongwe Land Develop- 1,900 1001971 244-MAI 7.3 ment Program included a1975 550-MAI 8.5 component for construction

of feeder roads.

1968 114-MAI 3.7 The Shire Valley Develop- 430 70363-MAI 10.5 ment Project included a

1978 823-MAI minor component for con-struction and rehabilita-tion of main, secondaryand feeder roads.

1971 282-MAI 6.6 Karonga Development 130 50 (roads)1976 1286-T- 9.2 Project included a minor 100 (ports)

MAlI/ component for rehabili-tation of freight serviceson Lake Malawi, includingport facilities.

1978 857-MAI 22.0 National Rural Development 1,600 10Project includes a roadcomponent, cofinanced byEDF, to construct andrehabilitate roads inproject areas.

1/ Third Window Loan.

Source: IDA appraisal reports and department files.

March 1983.

-52- ANNEX 1Page 3 of 6

MALAWI

FIFTH HIGHIRAY PROJECT

Status of Government's ComnpliLance withMajor Covenants in Previous Credits

Credit 523-MAI, Second Highwav Project

Section of CreditAgreement Commitment Action

Section 3.01, (b) Consulit with IDA from time to Has been done duri'ng all super-time on the desirability of vision missions. Construction isusing a cement stabilized base complete and no stabilization wasfor highway construction. needed.

Section 3.07 By December 31, 1976, discuss Report has been submitted andwith IDA, the Borrowers' eval- discussed in ccnnection withuation report on dislrict road proposed externsion of programmaintenance pilot program. to other districts.

Section 4.01 Keep records to adequately Has been complied with.reflect operations, resourcesand expenditures of the Project.

Section 4.02 Take necessary steps to ensure Weighbridges in three strategict:hat dimensions and axle loads locations have recently been madeof vehicles shall be consistent operative. Existing legislationwith structural and geometric is being enforced; amendments tostandards of national, highways. increase penalties are under

preparation.

Section 4.03 Establish and maintain a suit- Program of periodic countingsable traffic survey system. covering all of the country

started in 1974. Continuouscounting in selected locationsalso started in 1974.

Section 4.04 Adequately maintain national Maintenance of main and secondaryroads in accordance with sound roads has been adequate over theengineering and financial last few years. Budget alloca-practices and provide funds tions have increased by 10% annualland other resources as needed. (grants to District Councils for

maintenance of district roads in-creased by 50% in the 1978/79budget), while allocations to publihworks in general have been stagnantor decreased. However, budget for1980/81 does neither take fullaccount of inflation nor of rapidroad development and maintenance,particularly periodic maintenance,is deteriorating.

-53- ANNEX 1Page 4 of 6

Credit 758-MAI, Third Highway Project

Section of CreditAgreenment Commitment Action

Section 3.04 (b) Report to Association quarterly Has not been complied with but(revised to semi-annually) on preparation of reports underway.progress of project includingmonitoring indices.

Section 4.02 Construct Kasungu-Jenda road Design of both roads compliesand improve sections of Zomba- with covenant. Conistruction ofLilongwe road to standards in Kasungu-Jenda road (95% complete)Schedule 4 of Agreement. complies. Improvements of Zomba-

Lilongwe road (85% complete)comply.

Section 4.03 Employ contractors for con- Has been complied with.struction and improvementswhose qualifications and termsof employment are satisfactoryto the Association.

Section 4.04 Take measures to regulate di- Weighbridges operated in threemensions and axle loads of strategic iocations. Existingvehicles in conformity with legislation being enforced; amend-structural and geometric ments to increase penalties understandards of road network. preparation.

Section 4.05 Maintain suitable traffic data Efforts are being made to comply.collection system.

Section 4.06 a) Continue to maintain main See under Action for Section 4.04and secondary roads in accor_. of Second Highway Project.dance with sound engineeringpractices and provide necessaryfunds and resources requiredfor that purpose.b) From time to time exchange Is being complied with on aviews with Association on continuing basis.programs and budget for main-tenance of other classifiedroads.

Section 4.07 Consult and exchange views with Has been complied with.Association on results of feas-ibility study of Jenda-Mzuzucoridor prior to startingdetailed engineering.

ANNEX 1

Page 5 of 6

Credit 1099-MAI, Fourth Highway Project

Section of CreditAgreement Conmmitment Action

Section 3.01 (a) Make available, on a grant: Has been complied withbasis, to eac.h District for FY1981/82 andCouncil the funds necessary FY82/83.for road maintenance to theextent such Council's ownrevenues are insufficientto cover required expendi-tures; and

Section 3.01 (b) not later than four months Has been complied withbefore beginning of each for FY1982/83 andfiscal year of the Borrower FY83/84.until completion of project,review with IDA amountsproposed to be made avail-able to the D.istrict Councilduring such fiscal year.

Section 3.02 Employ not later than Has been complied with.December 31, 1L981, atransport economist toprovide technical assis-tance to the EconomicPlanning Division.

Section 3.06 Carry out road construction Contract documents comply.and improvemenLts inaccordance with agreedstandards.

Section 3.07 Agree with IDA on annual Has been complied withwork programs for DRIMP. for FYsl981/82, 1982/83

and 1983/84.

Section 3.08 Complete the maintenance Compliance was delayed bystudy by May 31, 1982. about 9 months.

Section 3.09 Select first EPD candidate for Has been complied with.overseas training by June 1,1981 and remaining candidatesby December 31, 1981.

-55-

ANNEX 1

Page 6 of 6

Section of CreditAgreement Commitment Action

Section 4.01 (c) Have project accounts for each First audit was due byfiscal year audited by auditors October 1982, but wasacceptable to IDA; provide received in October 1983.certified statements ofproject accounts and the reportof the audit.

Section 4.02 (a) Adequately maintain roads of Being complied with.all classes.

Section 4.02 (b) Upon completion of the main- Has been compLied with.(i) and (ii) tenance study establish, in

consultation with IDA, afive-year road maintenanceprogram; and

Section 4.02 (b) thereafter, not later than Has been compLied with for(iii) 4.03 four months before the be- FY 1984/85.

ginning of each fiscal yearuntil five years after com-pletion of the projectreview with IDA the annualupdating of such program.

Section 4.04 Take measures to ensure that Is being complied with.dimensions and axle-loads ofvehicles are consistent withroad design standards.

Maintain a suitable traffic Is being complied with.data collection system.

November 1983

-56-Annex 2

MALAWI

FIFTH HIGHWAY PROJECT

STALF APPRAISAL REPORT

Road Design Standards Adopted by the MWS

1. Speed (mph)

Terrain

Type of Road Normal MountainousDesirable Minimum Desirable Minimum

Class 1 60 50 50 40Class II 60 50 40 30Class III Each project treated individually

2. Sight Distance, Minimum Radius, Maximum GradientSpeed (mph)

30 40 50 60

Stopping visibility (ft) 2C0 275 350 475Passing visibility (ft) 800 1,300 1.700 2,000Minimum radius (ft) 239 477 716 1,146Maximum gradient normal 6% 5.0% 4.5% 4.0%Maximum gradient mountainou3 9% 7.0% 6.5% 6.0%

3. Cross Section

Type of Road Roadway Width (ft)Carriageway plus shoulders

Class I 22 + 2x5 - 32Class II 18 + 2x7 - 3

2

Class III 16 + 2x4 - 24

4. Pavement Structure Design TRRL Road Note 31

5. Construction Materials

Layer Description Specifications

Subgrade Top. 6 in depth (cut) FIL 30, 95% mod.Top 12 in depth (fill) AASHO - Compaction

Subbase Natural gravel or 10 4PI <15crushed stone CBR 25% at 95%

mod. AASHO compactionafter 48 hrs. soaking

Natural gravel PI <6 LL <30

CBR 85% at 98% modAASHO compaction after48 hours soaking

Base Crushed stone Aggregate crushing

value-" 30

Stabilized gravel PI 415 LL<40

Unconfined compressive

strength 250 lbs/sq in

Surfacing material depends on traffic volume and ggneral conditions.

6. Bridges

Bridge width = Carriageway widthFootpath 2 2 x 2 feetLoading: according to BS 153 with 0.8 HA

Source: Ministry of Works and Supplies, Roads Department, March r983.

-57-

ANNEX 3

Page 1 of 4

MALAWI

FIFTH HIGhiWY PROJECT

STAFF APPRAISAL REPORT

Terms of Reference for the Economic Analysis and SelectionCriteria for Improvement of District Roads under DRIMP

Introduction

1. The Third phase of DRIMP provides for improvement of all districtroads in the ten districts proposed for inclusion in the program. However,since improvement of some of these roads will not be justified, at leastduring the program period, a selection process is necessary to eliminatethose roads not justified on socioeconomic grounds. This will leave capa-city under the program to improve important rural roads which are not des-ignated as district roads, but which have already been identified by theDistrict Councils as high priority roads in need of improvement.

2. All district and other rural roads will be screened as outlinedbelow and, if they pass the screening criteria, will be subject to economicevaluation. In addition, some roads will be subject tc further social evalua-tion procedures. Although all roads to be improved will be identified beforePhase III of DRIMP begins, the program will be flexible and provide for up-dating of the list of roads whenever necessary.

Screening

3. It is important to screen the list of district and other roadsrecommended for inclusion in the program at an early state in order to avoidcostly and unnecessary project preparation work. The screening criteriaoutlined below will be applied after all the roads proposed for the programhave been marked on an appropriately large-scale map of the area (in itselfa screening device):

(a) all roads to be improved should connect with: existing roadsin good and maintainable condition; roads to be constructed atabout the same time as the proposed roads are to be improved;or with a facility such as a local market;

(b) there should be no other economically viable transport alter-native within a distance of about 2 km of the proposed roador other reasonable distance in the case of physical barriers,such as a river;

-58- ANNEX 3

Page 2 of 4

(c) the area to be served by the proposed road should be coveredby a development program,, such as an agricultural extensionservice, credit facilities, or an agri.cultural cooperativeprogram. The program should preferabLy have already beenestablished; however, if there is a definite commitment byGovernment to a planned program which is already at an ad-vanced stage of preparation, the proposed road should not beexcluded from the program; and

(d) all roads should be below a maximum per kilometer cost unlessabove-average benefits are expected from improvement of the road.One of the first tasks of consultan-ts carrying out the selectionprocess will be to determine the per kilometer maximum cost,after estimating the maximum number of' kilometers to be improvedwith the given resources available. The inclusion of roads withsignificantly higher costs than average will mean that the totallength of roads to be improved under the program would be reduced;only i.f the benefits of such roads are particularly high will itbe justified to include t'hem.

Those roads that pass screening should be subject to the following evalua-tion process.

Evaluation

4. Previous DRIMP studies indicate that a significant proportion of districtroads will have traffic levels of over 10 vpd. which bas been found sufficient toyield an economic return of at least 12% based on. savings in vehicle operating costs.A number of roads may therefore meet the minimum rate of return criteria on the basisof vehicle operating cost savings alone, without the need for further analysis ofother benefits. It will therefore be very important to obtain reliable trafficcounts on such roads.

5. For other roads it will be necessary to estimate the increase inagricultural producer surplus due to improvement of the road and associateddevelopment programs. It is a common practice to evaluate agriculturalprojects on the basis of farm models which are typical of the local crop-ping patterns and representative of the area. S:Lmilar models should bedeveloped for the areas of influence of the proposed roads. More than onefarm model may apply in any given district, depending on the variety ofcropping patterns. The farm models should not only be based on patternsof production but also on the developmental level of the area (subsistencefarming, level of farm technology and market orientation, etc.), and anassessment of the capacity of the population to develop the potential foragricultural development. Once the farm models have been developed, theirsuitability will be reviewed and revised, if necessary, by the appropriateagricultural agencies, as this will not be within the purview of the RoadsDepartment.

-59-ANNEX 3

Page 3 of 4

6. Each area of influence of the proposed road (estimated at approxi-mately 4 km) should be examined to determine the following:

(a) the area of cultivated and cultivable land;

(b) the fertility and suitability of the land, taking intoaccount such factors as soil characteristics, climate,topography, water availabilitv, etc.; and

(c) the farm model which is most representative of the area.

When the above data have been collected, the increase in agricultural produc-tion after improvement of the proposed road can be estimated on the basis ofapplication of the farm models. Some indication of the magnitude of suchbenefits can be obtained from at least one evaluation study, which has beencarried out in Malawi's Lilongwe District, where the increase in producersurplus has been estimated after roads have been improved, without expansionof agricultural extension programs. All costs associated with realizing thepotential benefits should be estimated and included in the economic analysis;this should include not only incremental costs of improved inputs but alsothe costs of improved methods, i.e., labor and extension service costs.The potential incremental producer surplus that will result from improvementof the road should then be correlated with development potential, cultivatedand cultivable land, and fertility/suitability of the land, to arrive at areasonable estimate of benefits given the above factors. This may mean thatwhere the development potential or fertility/suitability of the land is low,only half of the potential increase in producer surplus will be realized, orwhere they are high, nearly all potential benefits will be realized.

7. It will not be necessary to calculate economic rates of return forevery road, but rather for representative roads serving reasonably homogenousareas. The level of benefits yielding a 12% rate of return should be decer-mined, using the average cost of road improvements in each area, so that roadsfalling below this rate can be excluded from the program unless justified onother grounds (para. 8). For roads with improvement costs above the average,minimum rates of return can be estimated for each band of costs, i.e., 1-25%,26-50%, 51-75%, etc., over the average cost. Roads which are marginal can beexamined in more detail. All benefits should be net of incremental costs, notonly for increased inputs such as fertilizers and seeds, but also additionalagricultural extension costs or the costs of extending credit facilities,cooperative or mechanization programs, etc.

8. The distribution of project benefits between farmers, middlemen(including transporters) and consumers needs to be examined tu ensure thatfarmers will recoup at least a significant portion of the benefits. Also,there should be an indication of the size of farms to be served by the road,so as to ensure that most of the benefits of the program are going to thesmaller farmers. In addition to size of landholding, such social criteriaas income level of inhabitants within the area of influence of the road, and

-60-

Annex 3Page 4 of 4

average distance to educational, health, and other social and administrativefacilities should be evaluated for roads that are economically marginal.The importance of social considerations and improved accessibility shouldbe given in as quantified terms as possible (e.g., estimated change in schoolattendance ratios, delivery of health services in terms of visits to healthclinics, etc.). Where the social indicators show a significant impact onthe community as a result of improving the road, but the economic evaluationis marginal, a separate case can be riade for including the proposed road inthe program.

March 1983

-61-

Anex 4

MALAWI

FIFTH HIGHWAY PROJECT

Ecoromic Evaluation of Luwawa Turnoff-haphoyo Road1/

InternationalUnit Local traffic Traffic Total

Lengthi KA 50.1

Traffic

(i) Volure in 1988 vpd 144 15 159

(ii) Amnual Growth1986-2006 °0 5 5 5

Econ. Cost of Construction3 /

Cost per kn of Project Road M< 000 325Total cost of Project Road MW 000 48,8005/

Benefits (Selected Years)4/

19882/ MW 000 1,260 14,063 15,3231993 M<K 000 1,608 17,949 18,5571998 W 000 2,052 22,907 24,9592036 < m0o 2,887 33,844 36,731

Life of Project Years 20

Economic Return 0O 29

1/ Mid 1983 prices, net of taxes.

2/ First full year open for traffic.

3/ Includes 1Qo' physical contirgencies and supervision cost.

4/ Includes savings in transport costs on diverted international trafficaid savings in voc for noml traffic and generated traffic.

5/ This cost for total irnludes not only the cost of Lu4awa-ChaTphcyoRoad (ME 13.2 million) but also ChaTphoyo4vboe Road (W 15.0 million)and Karorna-Tanzania Road (MW 11.4 million).

-62-

Annex 5

MALAWI

Fifth Highway Project

lraffic and Traff.c Growth Rates for Paved Roads

Range of % of Growth RateAverage

Category Daily Traffic Vans and LandDesignation 1982 Period Cars Pick Ups Rover Busses Trucks

P 1 0-300 1982-87 5 5 5 5 519B8-93 6 6 5 7 7

P 2 301-600 1982-87 5 5 5 5 51983-93 6 6 5 7 7

P 3 601-1200 1982-87 5 5 5 6 61983-93 6 6 5 8 8

P 4 Over 1200 1982-87 5 5 5 5 5198f3-93 6 6 5 7 7

Source: Consultants Report, 1983.

-63-

Annex 6

MALAWI

Fifth Highway Project

Average Traffic Levels for Unpaved Roads

la of Composition

CategoryDesignation ADT Cars Vans Land Rovers Busses Irucks

E 1 7 14 26 25 6 29E 2 19 16 31 20 5 28E 3 39 12 30 21 3 34E 4 73 11 24 24 6 35E 5 128 14 29 21 4 32E 6 183 16 21 21 2 40

Note: Iraffic growth rates applied in the economic analysis are (i) 4°,'p.a. for road categories El, E2 and E3 and (ii) 5%O p.a. forcategories E4 and E5.

Source: Consultants Report, 1983.

MALAWI

FIFTH HIGHWAY PROJECT

VEHICLE OPERATING COSTS

(June 1982 Prices)

Vans & 4 Wheel 7-Ton 15-Ton 40-TonVEHICLE GROUP Cars - Pick-ups Drive Veh. Buses Lorry Lorry Lorry

TYPICAL MAKE Datsun Toyota Land- Guy Bedford Leyland M. Benz1204 Hilux Rover Countryman TJ 1090 Reiver 2624

Vehicle Cost D.P. (K) 12,000 12,900 26,900 64,400 23,200 43,913 125,540Vehicle Cost D.F. 7.000 16,600 16,600 44,000 21,332 39,597 113,520Discount (On D.P. Only) % 5 5 5

Tyre Cost D.P. (K/Unit) 40 54 108 295 288 282 421Tyre Cost D.F. (K/Unit) 31 42 84 230 224 224 337No. of Tyres (Including Spare) 5 5 5 7 11 23

Fuel Type Petrol Petrol Petrol Diesel Diesel Diesel DieselFuel Cost D.P. (K/Litre) 0.886 0.886 0.886 0.842 0.842 0.842 0.842Fuel Cost D.F. (K/Litre) 0.507 0.507 0.507 0.501 0.501 0.501 0.501Lubricant Cost D.P. (K/Litre) 2.83 2.83 2.83 2.42 2.42 2.42 2.42Lubricand Cost D.F. (K/Litre) 1.89 1.89 1.89 1.61 1.61 1.61 1.61Brake Horsepower NA NA NA 85 80 140 240Gross Weight kg 900 1,640 2,470 12,000 10,920 21,340 37,800

Equiv. Annual Reg. & Insp. 11.2 11.5 11.2 10.7 11.0 16.0 15.9Annual License Fee (k) 48 115. 102. 466. 504. 982. 1,739.Total Reg. & Insp. 59.2 126.5 113.2 477. 515. 998. 1,755.

Maintenance Labour Wage (K/NR) 7.0 7.0 7,0 8.0 9.0 9.0 9.0Enterert Rate (Z) 16 16 16 16 16 16 16Value of Passenger Time (K/HR) 1.07 0.22 0.75 0.08 0.22 0.22 0.22Overhead Cost (% of Veh. Cost) 0 200. 300. 5,500. 3,000. (Average)

Average No. of Passengers 3 3 3 50 4 4 4Annual Operating Hours 2,500 2.500 2,500 2,500 2,500 2,500 2,500Annual Kilometres Driven 25,000 50,000 38,000 70,000 40,000 (Average)Average Vehicle Life (YRS) 5 4 5 9 5 6

D.P. - Duty PaidD.F. - Duty Free

June 1983

Annex b-65- Page 1 of 2

MALAWI

FIFIH HIGHWAY PROJECT

STAFF APPRAISAL REPORT

Related Documents and Data Available in Project File

I. Reports Related to Iransportation

A. Government of Malawi, Statement of Development Policies 1971-1980.

B. Government of Malawi, Development Program 1981/82-1983/84.

C. Government of Malawi, Economic Reports 1974-1982.

D. Government of Malawi, Malawi Statistical Yearbooks 1970-1981.

E. Government of Malawi, National Statistical Office, Reports on NationalIraffic Cencus 1974-1981, Road Traffic.

F. Transport and Road Research Laboratory, 1976, Origin-Destination Surveyin Malawi.

II. Reports and Studies Related to the Project

A. Road Maintenance Study Draft Final Report, March 1983 by Renardet S.A.District Roads Improvement and Maintenance Project.

B. Phase III Final Report, March by Scott, Wilson Kirkpatrick andPartners, March 1983.

C. Study of the Lilongwe-Mchinji-Border Road and Lilongwe-Mzimba Road ofMarch 1975 and Feasibility of Mzuzu-Muhuju Road of February 1976, bothby Scott, Wilson Kirkpatrick and Partners.

D. Jenda-Mzuzu Road Feasibility Study of March 1979 by Scott, WilsonKirkpatrick and Partners.

E. District roads Development and Maintenance Study, November 1978, Scott,Wilson Kirkpatrick and Partners.

F. District Roads Improvement and Maintenance Project, An EconomicAppraisal of District Roads in Mangochi District (Pilot Study) January1980; Scott,Wilson Kirkpatrick and Partners and Coopers and Lybrand.

G. Feasibility Study-Luwawa-Mbowe Road by Scott, Wilson, Kirkpatrick andPartners December, 1982.

H. DRIMP II, An Economic Appraisal of District Roads in nine Districts,SWKP and Coopers and Lybrand, 1980.

Annex 8-66- Page 2 of 2

I. DRIMP III, SWKP, March 1983.

III. Project Working Papers

A. Equipment and Supplies for Training Center.

B. DRIMP III: Program for Procurement of Facilities and Equipment1984-1987.

C. DRIMP III: Program for District Roads Improvement 1984-1987.

D. DRIMP III: Government Financing and Accounting of DRIMP MaintenanceExpenditure.

E. Project Progress Reporting Requirements.

F. Project Monitoring Indices.

G. Terms of Reference for Technical Assistance to MWS.

H. Road Maintenance Program.

I. Terms of Reference for 1echnical Assistance to MTC.

J. Terms of Reference for the Northern Access Route Study (TransportSystem Study of the Blartyre-Dar Es Salaam Corridor).

K. Terms of Reference for Plant and Vehicle Hire Organization ManagementStudy.

MALAWIAPPRAJSAL OF RFFH HIG4WAY PROJECT

OtrgnItaio d the Ministy ofdWbks and SuppNm

I F r

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-68-

MALA'11FFIFT HIQ4IA-Y 9O3FU

P9831CI ThRLF 4NI Al It1 50-1U) JL

191 198/4 199519 9

MIAIN ACIIVTfIES CoLPf 10151 4 2 23 4l ~ l H23 4 1 213Tj

Ruaro Pre~tAT eer ent oveal et Bariliprpo reci ol reesd (oe I dB

Effect vmrss LDate fCei

I. OrD rip 1`h&e II ISelecttire of District RoalIs 141 aid DoajtantsConstruct iji of De~pots adRroc,jtaret of tep?frmuit 1-

Roal [i'Tprue,wantsa*1Road! lb itnt esiLe 6&Ds.ruc l

Tectyical Assistance Cronsltarts

II. Roiad Vlsintenianie, Reeitire Mainteriarce,Road Rababi1Litjtion ProraPrepar2t ion, Review aid Aproval of Bid Etocueavts M15,ConsultartE, PetiPreqaatifistiom of Cotractors F+15 & ConsultartsBiddoing adl Bid Evaluat ior Contractor & Cenailt.RE, iew, Approval aid Award of Contract 14S,Consnltant, Pai<

CorLrnst tic ContractorTert-nic~al Assistar-e Consulitant

Raved' Road Resealing PreprartPreparation, Revi,ew ad Aproal of Bad %afietrrets

For ttpoipanttM ,T

Prrcrjoont KM13, LIDAEtqhipTent Deslivery St-WI i ersConwt nct icn by Force Account *lSTedonical Assistare Coarnitant

Laesd Roads Rehab ilitat ion ProgranPieparation, Review a-d Approval of Bid Dirresit

for EtopTanot 1415 Rasi,ProcuriaT,et M1 aiCEquprTent DelLivery SippliersCorltrirt ire by Force mArcut 141Tecfuiical Aasiatace Cnutn

Li-paved Roalis Refrabilitatamn PrograanPreparatime- of Standard DecreTenta 141, ConsuiltaitPreparationa of biddingp ad3urarta *1, ConsiltaitsPreqAli ficat ion of oxitractors 415, CDntractorsLocal bidding and bid evaluation 415, toitractor-eCrtrnst jtior by raxLractora *1, ContractorsTectinical Assiata-neCoslat

Proreufreint of_*1ta acE EqopTentProcre,ireaat Sippoliers, 415, 3anlt,

AfiRBtquiptertt Delivery S4poliersSturdy a-d Tecrtnical asista-ce for PM11 Cor-ailtant, W45, Bari<

Ill. Road CoanstrortionPreparation, R~eview a-d Approavl of Bid DDcuTents *15, Crrisritant, AfiRBPreqLalifrcsoatr of Contractors 1415 CorsultaitBirdding a-d Bid tEvaluat irn Contractor & Conselt.Review, Approval and Award of CODntrawt *5, Consutant, AfDBeConstructionr Contractor

IV. Clo-strLrctiin 5Spervision5-lection of CDnsultaits 141, AfDBeSqperviseio Consultanita

V. Axle Load ControlHtoble WeictbridgesProcurearet Sqppliers, M-fC a-d

BarkEpworrert Del ivery Suppliiers

V1laiq1 station -ResiraConstriuct ion of Htbsea mi-C, *1

VI. Lilong~e Treimii Center

Procureernit of Firrirture, lraininp Aids adc fEcpipTentProcurTenart Sippliera, *1 adx

Bali<EprjipTent Set ivery SLWIi ers

VII. Stidy and DSeslim of Nirthaem Access RaLiteSelect ion of Consultaita tfst (OI15)haork of Corranltarta Consultant

118. [ELtaled ng3rwrrt of IIaRtny-'boa RoadSlcirof Cmx jtants 15

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MALAWI

/X f it 8 9 FIFTH HIGHWAY PROJECTc,1 *}~tp .N -TRANSPORTATION NETWORK

Project rood, design

1 l t iPrPo ject rood,construction 10KlLOIEtERS 0 20 40 6 080 100 r h - : . E E :. ; v E :: ;f. d _ Rocds constructed under Credits 112-MAI,ZO ' 0 '~ 8 ,0 '90 | ~i._ t \: * ,523-MAI,758-MAI ttnd 1099-MAI

MILES 0 20 40 60 7 y Payed rocds

I \ C h r zx ff i i lv oria _ Principal grovel ond earth roads.......... Roads being studied

-*---4Railways

J \ Llnrtgstonio . - - --- t - - . Railway under construction

i LATEAU ............. Steoter routesi LTA N R T/ H E , -- ; - D Airports with scheduled services

( ,4,r t R U M P,/q71 ti: t; . sc Risers_4L ~~~~~~~~~~Notional caito-r Rurp ( j District odministrative centers

District bound-ree

Regional boundaries-A, lae-nea. -Lak-

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Second phase areos (CR1099-MAI)Third phase orecs

Vile Cobral

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