world bank document...4-3 atc breakdown of working expenses, 1981-90 .44 4-4 atc sources and...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 8117

PROJECT COMPLETION REPORT

PEOPLE'S REPUBLIC OF THE CONGO

SECOND RAILWAY PROJECT(LOAN 1228-COB)(CREDIT 1047-COB)

(SPECIAL ACTION CREDIT 45-COB)

OCTOBER 25, 1989

Infrastructure Operations DivisionCountry Department IAfrica Regional Office

This document has a resthicted distribution and ma} be used by redpients only in the perfonmance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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ABBREVIATIONS AnD ACRONYMS

AfDB -- African Development BankADDB -- Abu Dhabi Development BankASHFO -- Astaldi/Holzvan/Fougerolle (Consortium)ATC Agence Transcongolaise des CommunicationsATEC -- Agence Transdquatoriale des Communications

BADEA -- Arab Bank for Economic Development in Africa

CAR -- Central African RepublicccE -- Calsse Centrale de Coop6ration Economique

CFCO -- Chemin de Fer Congo-Oc4anCIDA -- Csnadian International Development AgencyCOMILOG -- Compagnie Minibre de l'Ogooud, Gabon

DIEP -- Public Enterprises Institutional Development Project

EEC -- European Economic CommunityEIB -- European Investment Bank

PAC -- Fonds d'Aide et de CoopdrationFED -- Fonds Europeen de D6veloppement

IFAC -- International Federation of Accountants

KDF -- Kuwait Fund for Economic Development

MTCA -- Ministry of Transport and Civil Aviation

OCB -- Office Congolais des boisOCI -- Congolese Office for Computer ActivitiesOCTRA -- Trans-Gabonese RailwayOPEC -- Organization of Petroleum Exporting Countries

SAL -- Structural Adjustment LoanSFD -- Saudi Fund for DevelopmentSOPRERAIL -- Societ& Frangalse d'Etudes et de Realisations Perrovisires

TK -- Ton Kilometers

THE WORLD BANKW#shunton. O.C. 20433

US.A.

Olel dW Owwtw.GuwaOp tIsO_

October 27, 1989

MENORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on People's Republic of CongoSecond Railway ProjectLoan 1228-COBS; Credit 1047-COB; Special Action Credit 45-COBPro1ect Completion Report

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on People's Republic of Congo - Second Railway Project(Loan 1228-COB, Credit 1047-COB; Special Action Credit 45-COB)" prepared bythe Africa Regional Office. No audit of this project has been made by theOperations Evaluation Department at this time.

Attachment

Th document has a*ice dIstbuonand Wmy be _W by fecipIsn oy In tepfonne of thr oMca duteLsI. conts may n othewi be dibked withm WWd Sank ausoian

FOR OMCIAL USE ONLY

PEOPLE'S REPUBLIC OF THE CONGOSECOND RAILWAY PROJECT

LOAN 1228-COB,SPECIAL ACTIOl CREDIT 45-COB, AND CREDIT 1047-COB


Table of Contents

Page No.

Preface . .................................................. iBasic Data Sheets ......... ............................... iiEvaluation Summary ......... .............................. vii

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

II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL ........ 2

III. PROJECT IMPLEMENTATION AND COSTS ...... .................... 6

A. Project Start-up ........ ............................. 6B. Supplementary Financing ...... ........................ 8C. Project Cumpletion and Costs ...... ................... 11D. ATC's Liquidity Problems ...... ....................... 14E. Unapproved Procurement for ATC ..... .................. 16

IV. TRAFFIC, OPERATIONS AND FINANCES ..... .................... 18

A. Traffic ........... ................................... 18B. Operations ........... 22C. Finances .......... ................................... 23D. ATC's Financial Projections for 1987-90 .... .......... 26

V. ROLE AND PERFORMANCE OF THE CONSULTANTS ..... ............. 27

VI. INSTITUTIONAL PERFORMANCE AND OUTLOOK ..... ............... 29

VII. ECONOMIC REEVALUATION ....... ............................. 31

VIII. THE ROLE OF THE BANK ........ ............................. 32

IX. CONCLUSIONS AND RECOMMENDATIONS ...... .................... 33

TABLES2-0 Original and Final Financing Plan for CFCO Realignment 353-1 Increases in Cost Estimates during Project Execution

by Lot .363-2 CFCO Realignment Costs .373-3 Evolution de l'estimation du cout global

du realignement du CFCO .383-4 Evolution du dollar en FCFA .394-1(a) ATC Freight Traffic, 1975-88 .404-1(b) CFCO Passenger Traffic, 1975-90 .414-2 ATC Income Statement, 1975-90 .424-3 ATC Breakdown of Working Expenses, 1981-90 .444-4 ATC Sources and Applications of Funds, 1975-90 .454-5 ATC Balance Sheet, 1975-90 .474-6 ATC Selected Financial Ratios: 1975-90 .496-0 Compliance with Covenants as of March 31, 1985 .51

ANNEX Coments from Cofilanciers ............................... . 54

MAP ILRD 21115 Second Railway Project_

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

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SECOND RAILWAY PROJECT

LOAN 1228-COB

SPECIAL ACTION CREDIT 45-COB, AND CREDIT 1047-COB


PREFACE

This is the Project Completion Report (PCR) for the Second RailwayProject for which the following three consecutive lending operations weremade: Loan 1228-COB in the amount of US$38 million dated April 12, 1976,Special Action Credit 45-COB for US$5 million date. April 11, 1980, and IDACredit 1047-COB for US$30 million dated July 15, 1980. the two creditsprovided supplementary financing to enable The Congo to complete theproject in the face of rapidly rising costs and long delays in thecompletion of the civil works. The Loan and the Special Action Credit werefully disbursed. Approximately US$0.5 million of the IDA Credit wascancelled on March 19, 1987.

The PCR was prepared by the Infrastructure Operations Division,Occidental and Central Africa Department, Africa Regional Office, and isbased, inter alia, on the Staff Appraisal Report; the Loan, Credit, andProject Agreements; supervision reports; correspondence between the Bankand the Borrower; internal Bank memoranda; and a detailed completion reporton the execution and financing of the project prepared by the Borrower.

The PCR was read by the Operations Evaluation Department (OED).The draft PCR was sent to the Borrower and cofinanciers for comments andthey are attached to the Report (Annex).

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LOAN 1228-COB.SPECIAL ACTION CREDIT 45-COB, AND CREDIT 1047-COB


BASIC DATA SHEET: LOAN 1228-COB

KEY PROJECT DATAOriginal Actual or

Item Expectation Current Estimate

Total Froject Cost (USS million) /a 233.7 399.0 /bCost Over/Underrun (%) - 71/Financing (USS million' ,bGovernment and Co-donors 195.7 326.0 -

IBRD Loan Amount 38.0 38.0Disbursed 38.0Cancelled -- 0Repaid (09/30/88) -- 7.7Outstanding -- 30.3

Completion of Physical Components (date) 12/15/79 C6/85Proportion Astually Completed by Above Date (%) 65 100Economic Rate of Return (W) 23 0

CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS(USS million)

FY77 FY78 FY79 PY80 FY81

Appraisal Estimate 20.1 33.1 38.0 -- --

Actual /c 7.1 14.9 31.2 37.4 38.0Actual or % of Estimate 35 45 82 98 100

OTHER PROJECT DATAActual or

Item Original Amended Current Estimate

First Mention in Files 03/13/73 --

Negotiations 04/75 -- 06/75, 07/75Board Approval of the Loan 10/75 -- 03/23/76Loan Agreement Date -- -- 04/12/76

Effectiveness Date 08/76 -- 11/22/76

Closing Date 12/31/80 -- 12/31/e1

Borrower Agence Transcongolaise des CommunicationsExecuting Agency Agence Transcongolaise des CommunicationsFiscal Year of the Borrower January 01 -- December 31Follow-on Project None

jL Net of Taxes/b As no record is available as to the costs of the ports and river services components, these figures

are considerably understated./c Final disbursement made June 9, 1981.

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BASIC DATA SHEET: SPECIAL ACTION CREDIT 45-COB



Total Project Cost (USS million) N.A. N.A.Cost Over/Underrun (%) -W ^ Financing (USA million)Government

EEC Special Action Credit Amount 5.0 5.0Disbursed -- 5.0Cancelled -- 0.0Repaid -- 0.0Outstanding -- 5.0

Completion of Physical Components (date) 12/31/81 06/85Proportion Actually Completed by Above Date (%) -- 100Economic Rate of Return (%) 23 N.A.

CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS(US$ million)

FY81 FY82 FY83 FY84

Actual /a 2.2 4.0 4.9 5.0

OTHER PROJECT DATA

Actual orItem Original Amended Current Estimate

First Mention in Files 07/77Negotiations 12/79 -- 12/79Board Approval of the Credit 01/80 -- 01/17/80Credit Agreement Date -- 04/11/80Effectiveness Date -- -- 11/18/80Closing Date 06/30/82 12/31/82 06/30/83Borrower The People's Republic of the CongoExecuting Agency Agence Transcongolaise des CommunicationsFiscal Year of the Borrower January 01 -- December 31Follow-on Project None

/a Final disbursement made August 1, 1983

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BASIC DATA SHEET: CREDIT 1047-COB



Total Project Cost (USS million) / 357.2 399.0Cost Over/Underrun (%) -- 12Financing (USS million)Government + Co-donors

- US$73.0 M Loan and Credits 326.0IDA Credit Amount 30.0 30.0

Disbursed 29.45Cancelled 0 55Repaid 0Outstanding -- 29.45

Completion of Physical Components (date) 12/31/82 06/85Proportion Actually Completed by Above Date (%) 95 100

Economic Rate of Return (%) 13 (Regional) 012 (National) 0

CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS(USS million)

FY80 FY81 FY82 FY83 FY84 FY85 FY86 FY87

Appraisal Estimate 13.0 26.0 30.0Actual 0.0 8.9 18.7 21.9 26.2 28.2 29.2 29.4Actual or % of Estimate 0 34 62 73 87 94 97 98

OTHER PROJECT DATAActual or

Item Original Amended Current Estimate

First Mention in Files 07/79Negotiations 12/79 04/23-28/80Board Approval of the Credit 01/80 06/19/80Credit Agreement Date -- 07/15/80Effectiveness Date -- -- 04/24/81Closing Date 06/30/83 06/30/85 12/31/85Borrower The People's Republic of the CongoExecuting Agency Agence Transcongolaise des CommunicationsFiscal Year of the Borrower January 01 -- December 31Follow-on Project None

la Net of taxes./b US$545,316.63 was cancelled on Harc-h 19, 1987.

MISSION DAIA FOR LOAN AND CREDITS

No. of Mission

Item Month/Year Persons Composition Staff Weeka Date of Report

Preparation 05/73 5 2R, 2E, F 3.0 08/27/73Preparation Follow-up 05/74 3 2R, F 4.0 06/27/74

Appraisal 11/74 7 2R, C, F, 2E, ; .2.0 12/05/74 -

Co-donors' Conference

and Post-Negotiations E, P, F, L 2.0 07/20/75

Forestry 09/75 2 E, FE 2.0 10/20/75

Co-donors' Conference 12/75 3 P, E, F 1.5 12/23/75

Discussions 02/76 2 P, F 1.0 02/13/76

Supervision 1 06/76 1 E 2.0 07/19/76Supervision 2 11/76 3 R, E, P 6.0 12/22/76

Supervision 3 04/77 3 P, R, P 1.5 05/02/77

Go-donors' Conference 06/77 2 Rt, F 1.0 06/16/77

Co-donors' Conference 07/77 2 R, F, 1.0 07/27/77

Supervision 4 10/77 3 R, E, F 6.0 11/30/77

Co-donors' Conference 11/77 X 3 P, R, F 2.0 12/05/77

Supervision 5 04/78 4 2R, E, F 8.0 06/14/78

09/26/78Supervision 6 09/78 2 R, F 5.0 11/03/78

Supervision 7 10/78 1 R 1.5 11/09/78Supervision 8 11/78 2 R, F 2 12/06/78Supervis on 9 04/79 5 2R, E, 2F 10 04/13/79Supervision iO 09/79 4 R, E, 2F 12 10/31/79 -bSupervision 11 10/79 1 SE 2 10/02/79Supervision 12 10/79 1 SE 0.5 12/05/79Supervision 13 01/80 5 R, E, 2F, SE 6 02/28/80Supervision 14 04/80 1 SE 1 04/15/80

Co-donors' Conference 04/80 2 R, F 1 05/05/80

Supervision 15 05/80 2 R, F 1 06/03/80Supervision 16 07/80 3 P, 2F 3 N. A. /Supervision 17 I1/80 2 R, F 4 01/09/81 /Supervision 18 01/81 2 R, F 1 01/27/81 -

Supervision 19 05/81 2 R, F 5 06/05/81

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MISSION DATA FOR WMN AND CREDITS (con't)

No. of MissionItem Month/Year Persons Composition L Staff Weeks Date of Report

Co-donors' Meeting 06/81 1 F 0.5 06/17/81

Superviston 20 10/81 2 R, F 4 12/01/81

Supervision 21 04/82 2 R, F 3 06108/82

Supervision 22 10/82 3 R, 2P 6 11/23/82

Supervision 23 02/83 1 P 1 02/16/83Superviston 24 04/83 1 SE 2 05/09/83

Co-donors' Conference 04/83 1 CE 1 05/11/83

Supervision 25 06/83 3 R, E, F 5 06/28/83Supervision 26 10/83 1 P 1.5 12/01/83Supervision 27 01/84 1 F 0.5 03/08/84Supervision 28 01/84 1 SE 1 03/13/84Supervision 29 06/84 3 CE, ME, F 4.5 07/21/84

Co-donors' Conference 07/84 1 P 0.5 07/20/84

Supervision 30 09/84 1 P 1 11/01/84Supervision 31 03/85 2 ME, F 2 04/26/85Supervision 32 10/85 2 Mn, F 2 11/20/85Supervision 33 06/85 2 ME, F 2 07/02/86Supervision 34 07/86 1 R 1.5 07/16/86Supervision 35 04/88 2 CE, E 1 05/26/88

/a C - Consultant; E Economist; F Financial Analyst; R - Railway Enineer;P - Programs Division Chief;; T Training specialist; L - Layer; FE - Forestry Expert;CE - Civil Engineer; SE a Soils Ergineer; HE - Mechanical Engineer.

jb Issues Paper/c Meting in Paris to resolve tunnel problems.ld Slot available

mi

EL za v z7 7 7 1|Z 71 tI U Al a Al A EA U At IN 12laL

Prep,prula .1 10.2 159. 34.1 - 8- - - - - - - - - - - 4.0

Appraieal 11.6 - - 79. 2.2 - - - - - 9.6Nsg.tstC.n - - - 5.4 62. - - - - - - - 50.2Superw.lon - .8 - - 4.5 48.8 55.4 74.1 26.1 .s 6.? 7 .1 .4 - .0 - - 265.9Othe, - .1 .6 1.0 .2 .1 .1 - .8 .0 .1 - .0 - - - 2.6

TOrAL 11.6 10.6 190.i 110.8 69.6 48.6 68. 74.1 26.4 .8 6.7 9.2 .4 .0 .0 .0 .0 2.8

Ce..47

Prepprlal - _ - _ - - - 8.6 - - - - - - - - 8.6Appre.I - _ - _ - - - - s7.0 - - - - - - - - 87.0Wegotintlon - - - - .S - - 14.5 - - - - - - - - 14.8Srvan - - - - - - - - .1 22.2 18.1 88.2 81.7 15.7 18.9 8.2 7.1 148.1other - - - - - - - - 1.8 - .0 - .0 - - - - 1.9

TaTAL .0 .0 .0 .0 .0 .9 .0 .0 107.0 2o.1 2 6.1 U1.? 18.7 18.9 8.2 7.1 25.4

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LOAN 1228-COB,



EVALUATION SUMMARY

Objective

1. The objective of the project was to safeguard the continuing func-tioning of the existing ATC (Agence Transcongolaise des Communications) systemby improving its operations and providing increased capacity. The project, asappraised, consisted of ATC's 1974-78 Investment Plan, the principal item ofwhich was the realignment of the most critical 88-km-long railway section overa difficult mountain range. The Bank lent US$35 M, and most of the remainderwas financed by several other co-donors. The civil works contract was awardedin 1975 to a European consortium after International Competitive Bidding(paras 1.05, 2.04, 2.06, 3.01, and 3.02).

Implementation Experience

2. Implementation of the project ran into numerous and serious diffi-culties. Shortly after the contractor had mobilized, an armed commando groupattacked the site camp in January 1977, kidnapped the contractor's localmanager and two other staff, killed a number of workers, took hostages, anddestroyed most of the construction equipment. Cost of the renegotiatedcontract jumped substantially, and considerable time was lost before thecontractor resumed work (paras 3.03 and 3.04).

3. The project continually suffered from inadequate funding, and theGovernment repeatedly requesteca the co-donors and the Bank for additionalfinancing. Furthermore, payments to the consortium were so slow that, on oneoccasion, it faced bankruptcy. The Bank made two supplementary creditsavailable, totalling US$35 M, but not before seriously considering withdrawingfrom the project. Because of many problems en-ountered in building therealignment, including poor soil conditions affecting the stability of cuts,and enormous difficulties in piercing the Long Tunnel, delays mounted andcosts soared (paras 3.12 and 3.23-3.27).

4. The total cost of the civil works needed for the realignment wasestimated at appraisal at CFAF 27.6 billion or US$123 M. The final cost ofthe civil works contract was CFAF 85.4 billion or US$315 M, an overrun of 156%in dollar terms. The total cost of the CFCO realignment, including track,signalling, telecommunications, stations and supervision, was estimated atappraisal at CFAF 33.5 billion or US$148.8 M; the final cost wasCPAP 108.1 billion or US$399 M, an overrun of 168% in dollar terms(para 3.31).

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5. Meanwhile, ATC faced a critical financial situation. Despite this.however, the Government insisted on committing it to large contracts forpurchase of rolling stock and equipment which ATC neither needed nor wanted.In addition, the Government held up approval of tariff increases which wouldhave eased ATC's financial crisis. Finally, aftei the Bank suspended thesupplementary credit, the Government revoked the equipment order and putthrough tariff increases (paras 3.44-3.47).

6. ATC's profitability and financial situation are expected to progres-sively improve over the next several years because of various measures thathave been taken under the Structural Adjustment Program started since end 1986(para 4.26).

7. With hindsight, it appears that the project suffered from inadequatepreparation and planning, cumbersome and inefficient coordination among thenumerous co-donors (14 international agencies and a number of local banks),and incompetent management and supervision. Given the mountainous and diffi-cult terrain, and the length of tunnels and depth of cuts, the topographic andgeological surveys, and soils investigations were far short of that needed asa basis for detailed engineering. Better field data would have resulted inmore soundly based detailed engineering, more accurate cost estimates, and amore realistic time schedule (paras 5.01-5.03).

8. The Government frequently interfered in ATC's day-to-day affairs andfailed to meet its financial obligations to ATC, although the Congo's economicwoes sometimes made it difficult for the Government to comply fully (pa-ra 6.02). Furthermore, while the Government made strenuous efforts to seekfinancing for the realignment, it seemed reluctant to take action on matterswhich would have enabled ATC to remain financially viable. It should haveexpedited the award of timber concessions to develop traffic for the CFCOsystem and approved badly needed tariff increases, but it only did so afterconsiderable pressure from the Bank (para 6.11).

9. The Bank's performance varied widely. It did not ensure adequateproject preparation under the First Railway Project, which compromised theappratsal of the Second Railway Project. A higher, and more realistic projectcost estimate, and the corresponding reduction in the economic rate of returnfor the realignment might well have led the Bank to abstain from financing theproject. The decision to allow ATC to retain responsibility for day-to-daymanagement of the work was ill-advised. While the Bank performed its coordin-ating role as well as it co-iuld under the circumstances, this role wasapparently not accepted by all co-donors. The Bank's supervision of theproject was frequent and thorough (paras 8.01-8.06).

Results

10. Because of the unanticipated high cost of the project and thefailure of freight traffic to expand much beyond that previously carried onthe old alignment, the rate of return of the project is, at best, zero(para 7.01).

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Sustainability

11. Given the zero rate of return and the ongoing and expected diversionof a substantisl volume of manganese traffic from the ATC system to theTransgabonaise Railway (a possibility already foreseen at the time of apprais-al, as mentioned in paras 2.01 and 2.05), the project is not sustainable.

Lessons Learned

12. A number of important lessons must be learned from the SecondRailway Project: (a) only experienced owners should be placed in charge of amajor civil engineering job involving high risk civil works; (b) feasibilitystudies, design and supervision should be entrusted to experienced consultantswho are also given the full responsibility for the day-to-day direction of thework; (c) final design should be based on thorough topographic and geologicalstudies and soils investigations; (d) if co-financing is involved, fundsshould be pooled, tied procurement should be avoided, and the role of theagency (in this case, the Bank) responsible for overall donor coordinationshould be clearly defined and agreed upon by all co-donors; and (e) on anyproject involving major and complex civil engineering works in which manyco-donors are participating, the Bank should insist on the appointment of aproject coordinator, and if the Bank is selected, it should place a seniortechnical representative on site for the duration of the works (para 9.07).

13. Because project implementation spanned a decade, several of theabove lessons, such as the importance of avoiding tied procurement, havealready been applied in many other similar projects (para 9.08).

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LOAN 1228-COB,



I. INTRODUCTION

1.01 The Agence Transcongolaise des Communications (ATC) was formed in1969 as the successor to a multinational agency, the Agence Transequatorialedes Communications (ATEC). ATEC was created in 1958 by the Congo, Gabon,Central African Republic (CAR), and Chad to aanage the 2,900 km multi-modaltransport route from N'Djamena (Chad) through Bangui (CAR) to the ocean portof Pointe Noire (see map). At the time of appraisal, ATC, a Congo nationalagency under the Ministry of Transport and Civil Aviation (MTCA), stillperformed many functions of the former ATEC. ATC owned and operated: (a) theAtlantic Ocean port of Pointe Noire; (b) a railway, Chemin de Fer Congo-Ocean(CFCO), from Pointe Noire to Brazzaville (510 km); and (c) the river ports andservices on the Congo-Oubangui-Sangha rivers.

1.02 In the early 1970s, the principal traffic carried on the CFCO wasmanganese ore from Gabon, potash, timber and general cargo. Some years later,the potash mine operations were closed because of flooding. Increasing timberand general traffic had been carried partly by expanding the fleet of locomo-tives and cars, and partly by increasing their size. However, because trackand infrastructure problems between Holle and Loubomo limited the number oftrains possible, CFCO traffic had remained constant since 1971. On completionof certain improvements in 1976, longer trains were possible. This capacityincrease, however, would meet forecasted traffic to 1979 only, and would notprovide a long-term solution to the need to increase capacity or improvedifficult operating conditions.

1.03 The CFCO line was built at minimum cost between 1921 and 1934 withan infrastructure and track standards designed for light traffic. The linehad a narrow roadbed, steep gradients and sharp curves, particularly acrosstwo mountain ranges, one near the coast and the other towards Brazzaville.Traffic had increased considerably between 1955 and 1975, particularly manga-nese ore, over the 200 km between the junction of the Compagnie Miniere del'Ogooue (COMILOG) railway 1/ at Mont Bello and Pointe Noire, and furthertraffic increases were foreseen. This increased traffic was much beyond thatenvisaged when the line was constructed. Traffic was carried on long trainsand heavy axle loads, which led to failure of the track structure, high rateof rail wear, breakage of welded rail joints, and damage to the superstructureof numerous concrete arch viaducts. These failures in turn caused majorproblems with the track and equipment, resulting in frequent accidents,considerable train delays, and consequent restrictions on the traffic carried.

1/ COMILOG transports manganese from Gabon to the CFCO.

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The SAR noted that the general condition of the viaducts was also poor, whilethe Bamba tunnel (1.7 km) was in dangerous condition and needed rehabilita-tion.

1.04 In 1971/72, the United Nations Development Programme (UNDP) financeda feasibility study which was carried out by a firm of consultants. The studyfound that staged improvement of the existing rail alignment was impractical,and proposed the realignment of about 106 km. The Bank Group subsequentlyfinanced detailed engineering of this realignment by the same consultant aspart of the First Railway Project (Credit 297-COB, US$6.3 M, April 1972,increased to US$6.9 M in July 1973). According to the PCR dated Decem-ber 30, 1977, the project was reasonably well implemented although completedabout two years later than originally planned. This conclusion should bereassessed in the light of the findings of this report regarding the qualityof the detailed engineering (paras 5.01-5.05).

1.05 The Second Railway Project was based on ATC's five year investmentplan for 1974-78 which included, as the largest single component, the realign-ment of the CFCO. In addition, the plan provided for general investments inthe CFCO, completion of ongoing works and new berths at Pointe Noire, minorimprovements or extensions of the river ports and services, and needed im-provements to ATC's training methods and facilities.

1.06 According to the SAR, ATC enjoyed sufficient autonomy in its opera-tions to permit effective management. The quality of top management was notedas generally satisfactory, although it relied heavily on expatriate technicalassistance. There was a need, however, to increase the participation of localstaff in decision-making, and to provide more training in view of progressingAfricanization. Although ATC provided good basic training for apprentices andrecruits, some reorganization and expansion of facilities was needed to makethis training more effective. The project provided for this, as well as forabout 40 man-years of technical assistance.

1.07 ATC was made responsible for execution of the project. The consul-tant who had carried out the detailed engineering of the realignment was re-tained in an advisory capacity under ATC to supervise the civil works compo-nent. 2/

1.08 This report is based on information in Bank correspondence files(38 volumes), a project completion report by ATC, a review of project docu-ments, interviews with Bank staff and ATC officials, and a project completionmission to the Congo in April 1988.

II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL

Identification

2.01 The railway realignment component was identified in the late 1960s,and was prepared under the First Railway Project (para 1.04). By early 1973,the broad outlines of the railway part of the project had emerged and the

2/ Hereafter referred to as the supervisory consultant.

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interested co-financing agencies had indicated the amounts of their contribu-tions. The main concerns appeared to be (a) whether Gabon would eventuallytransfer its manganese traffic from the CFCO railway to the Trans-Gaboneserailway on which work was about to start; and (b) the scope of the realignmentworks.

Preparation

2.02 In May 1973, a preparation mission found that as a result of thesupervisory consultant's field work, the estimated cost of the CFCO realign-ment had about doubled the feasibility study estimate. The mission found thatATC was preparing a revised investment plan for 1974-78 which would update theexisting plan for 1971-75. The revised plan would cover proposed investmentsfor the ATC Administration, the CFCO, the port of Pointe Noire, and rivernavigation, ports and transport. The plan, which would be ready in November,was expected to cost about US$220 M. Full appraisal of the Second RailwayProject would only be considered by the Bank if a desk appraisal, to becarried out on receipt of the engineering and economic reports, indicated afinancially viable project.

2.03 By the end of August 1974, the Bank had completed its desk appraisalwhich indicated that (a) the cash position of ATC would be very difficultbetween 1974-76; and (b) the ERR would be in the range of 12-15%. Concernswere expressed over the then inflationary price situation and a possible largecost overrun in the light of recent bidding on the Trans-Gabonese Railway. Inthe meantime, a Bank mission had reached agreement with ATC on the 1974-78Investment Plan at an estimated cost of US$169 M. Prequalification procedureswere to start immediately so that bidders could be selected in November 1974,with tenders called in January 1975 for receipt and evaluation by mid 1975.

Appraisal

2.04 The project was appraised in November 1974 by a seven-man mission.The project consisted of the 1974-78 Investment Plan of ATC, and its totalcost was finally estimated at US$183 M. The Bank's participation was consid-ered for the financing of the realignment of the most critical section of theCFCO railway over the Mayombe mountain range between Holle and Loubomo(88 km). The cost of the realignment, including contingencies, was estimatedat about US$100 M. It was decided that bidding should be restricted to firmsor groups of firms which had the expertise to take on a single contract forthe civil works, rather than bidding on separate components, since it wasdeemed preferable to have the responsibility for the works lie with a singlecontractor.

2.05 In March 1975, when the Yellow Cover SAR was distributed, a majorproblem arose as regards the financing plan. Application of recent Bankguidelines on price contingencies had increased the total cost of the projectby US$29.4 M to US$212.4 M, and the cost of the alignment to US$112.7 M. Thetentative financing plan agreed upon in June 1974 was now insufficient, and itwould be necessary to raise the problem at a co-donors' meeting in July 1975.It was pointed out that ATC intended to start realignment works in September,before Board Presentation which was tentatively scheduled for November 1975.At the Yellow Cover Review it was questioned whether the 2.0 million tons ofmanganese traffic from Gabon should be counted upon, and whether the revenuesfrom it would be sufficiently attractive to justify the realignment. It waspointed out that the carriage of the manganese traffic would be attractive ifCFCO had surplus capacity, but not so if it was required to carry Gabonese

traffic in addition to national traffic, thus requiring the costly realignmentworks. It was also pointed out that the economic return was sensitive toinvestment cost increases, especially if the results of the tendering underwayindicated a greater increase than the +30% indicated in the sensitivityanalysis. If costs were higher, it was not only a question of a larger loanbut also the question of economic viability. The memorandum concluded that ifthe cost increase was high, the whole situation should be reassessed.

Negotiations

2.06 In June 1975, the Bank invited the Government to negotiations. TheBank pointed out that in view of problems with the economic justification andthe financing plan, it would not be able to conclude negotiations until amutually satisfactory solution was found; this was expected to occur onlyafter a July 17 donors' meeting at Pointe Noire. The Congolese delegationrequested an increase in the loan to cover higher technical assistance costs,the dollar devaluation since the preparatory stages of the project, and acontribution toward the financing gap of US$65-75 M which appeared mostly as aresult of the higher-than-anticipated bids. Bids for the realignment workshad been opened on May 27, 1975, and the lowest price amounted to CFAF 41 bil-lion or about US$160 M. The Government proposed that this might be reduced toUS$148 M by granting the bidders additional tax exemptions. Concern wasexpressed in the Bank over future inflation in the Congo and uncertainties asto the cost of the tunnels, both of which would adversely affect the justi-fication of the project which was now recognized as marginal.

2.07 The Bank mission to the July 1975 co-donors' conference concludedthat it was a successful meeting since (a) a preliminary award was made to theconsortium which was the lowest evaluated bidder; (b) the Bank's insistence onestablishing an economic justification and a firm financing plan beforestarting the works was widely supported; and (c) a more realistic timetablefor the realignment component was accepted by all concerned. It was alsoagreed that the Bank would supervise all items in the Investment Plan. Theconference ended, however, without completing the financing plan.

2.08 As the validity of the lowest bid was due to expire in Novem-ber 1975, efforts were made to have the contractor extend its validity by fourmonths to enable the Board to approve the loan before an award was made. Inthe meantime, Bank staff conferred with the donors in an effort to confirmtheir participation. The Bank's contribution was tentatively set at US$35 M.The fluctuating rate of the US dollar to the CFAF, generally downward, raisedconcern as to the amount of the Bank's participation in CFAF in the financingplan. The shortfall in the plan as of early December was about US$42 M.

2.09 The co-donors' conference in December 1975, was overshadowed by asudden change in the Government of the Congo in the preceding week. Themeeting was further surprised by the pledging of US$43 M by three Arab fundswhich enabled it to agree on a realistic financing plan. As regards timing,the Bank again had to persuade the Government not to award a contract untilafter Board presentation, despite the highly critical reaction of most donorsto the Bank's delaying proposal. It was finally agreed to ask the lowestbidder to extend the validity of his bid (already once extended from Novem-ber 23 to January 31) to February 29, 1976.

Board Presentation and Effectiveness

2.10 In February 1976, a Bank mission agreed with the Government on finalchanges in the legal documents. The Government voted a tariff increase andfinancial support for ATC which the mission concluded would put ATC on a soundfinancial footing. The project was noted as remaining fully justified with areturn of 23% for the entire project. A loan of US$38 M to ATC was approvedby the Bank's board on March 23, 1976 and signed on April 12, 1976. The loandid not become effective until November 22, 1976 because of the time requiredto coordinate the legal documentation and disbursem2nt arrangements necessi-tated by the involvement of a large number of other co-donors (Table 2-0).

Project Objectives and Scope

2.11 The objective of the project was to safeguard the continuing func-tioning of the existing ATC system by improving its operations and providingincreased capacity. The main and critical focus of the ATC 1974-78 InvestmentPlan was on the CFCO railway where immediate action was required to avoidmajor interruptions threatened by failure of the main tunnel or viaducts, orby landslides. The project comprised:

(a) CFCO Railway: improvement of 18 km and realignment of 88 km of theHolle-Loubomo section, procurement and renewal of locomotives androlling stock, track renewal, installation of signalling systems,and expansion of workshops;

(b) River Services: procurement of mechanical handling equipment,purchase of additional floating craft, expansion of Brazzavilleworkshops, and deepening of river channels;

(c) Pointe Noire Port: completion of ongoing work for an additionalstacking area for timber, construction of new berths for manganeseand general cargo, and dredging; and

(d) ATC Headquarters: improvement of training facilities and programsthroughout the ATC system.

The project was to be completed by December 15, 1979.

2.12 The project also included the purchase of railcar bogies and radioequipment for improving marshalling yard facilities. However, the Port ofPointe Moire and the river ports and services components were not financed bythe Bank, nor were they supervised by the Bank. Furthermore, neither finalcost estimates of these components nor any record of their execution areavailable in the files. Thus, the project, as referred to hereafter, consist-ed mostly of the CFCO realignment, some general investments in the CFCO andtechnical assistance to ATC. The SAR calculated the economic return on both anational and regional basis, noting the benefits of the project to neighboringcountries, including Cameroon, CAR and Chad.

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III. PROJECT IMPLEMENTATION AND COSTS

A. Project Start-up

3.01 The 88 km CFCO realignment, at an estimated cost at appraisal ofUS$148.8 M, was by far the largest single item in the project. The realign-ment works were divided into 11 lots by ATC for purposes of procurement andexecution (Table 3-1). Lot 6 comprised the civil engineering works whichultimately included over 16,700,000 m9 of earthworks, 19 bridges, 3 tunnelsand 91 km of track. At the request of the Arab banks, which wanted to financea separate project item, the tunnels were assigned to them. Rails, ties,spare parts, telecommunications, signalling, and buildings were supplied underother lots. Supervision of the realignment works was provided for underLot 10 which was financed by the Canadian International Development Agency(CIDA). Later, Lot 12 was added to finani'e additional consultants. As mightbe expected, the execution of Lot 6 turned out to be the most difficult partof the project; however, no one foresaw the enormous technical problems whichwere encountered before the realignment was completed in 1985, over5 1/2 years behind schedule, and at a cost of over two-and-a-half times theappraisal estimate. Table 3-1 also shows the increases in ATC's cost estim-ates during project execution.

3.02 A European consortium of contractors was low bidder on Lot 6 atCFAF 19.8 billion or US$88 M. The consortium at first delayed signing acontract until certain conditions were met, including compensation for thedelays as a result of the two bid validity extensions, and a change in paymentcurrencies. Solutions were found and the contract was signed on May 27, 1976.

Commando Attack and Resulting Contract Amendment

3.03 On January 15, 1977 an armed commando group reportedly from theLiberation Front of the Cabinda Enclave attacked the camp site of the mainrailway realignment tunnel. Twelve workers were killed and three staffmembers of the contractor, including the local manager, were held hostage fortwo weeks. Equipment worth about US$1.0 million was destroyed. As a result,all works on the realignment came to a halt, and the contractor requestedcancellation of its contract on March 7, 1977 invoking force majeure. Inorder to find a solution to this impasse, the Congolese Government convened a.co-donois' meeting on March 8-10, 1977. At the meeting, the contractorunderlined that the request for cancellation was intended to set a deadline offour months for renegotiation of its contract (before arbitration) in accor-dance with the general conditions which ruled this contract. They neverthe-less emphasized that they were willing to re-mobilize and undertake limitedresumption of works if adequate security arrangements, including militaryprotection, were provided, and if they would be compensated for such limitedworks program on the basis of a cost-plus formula to be approved by theco-donors. The co-donors' representatives agreed in principle to such limitedresumption of works during the four months' interim period.

3.04 At a subsequent co-donors' conference in June 1977, the Bank learnedthat the contractor had resumed limited work while at the same time negoti-ating a revised contract for the full resumption of works. Preliminaryestimates indicated a substantial cost overrun over the contracted amounts.Furthermore, it was learned that the Government was behind in payments to thecontractor and owed about CFAF 200 million to the project account. Thecontractor's estimate for the realignment was US$200 M while the ATC estimate

was US$167 M, as compared to the appraisal estimate of US$148.8 M. The Bankrecognized for the first time the possibility of having to make supplementaryfinancing available if the project was to continue.

3.05 The Bank made an independent reassessment of the economic evaluationof the realignment, which Indicated a likely rate of return in the 10X range.On the assl'mption that costs were likely to be higher, and the lack of devel-opment of timber traffic and other assumptions, the Bank's reassessmentconcluded that "in all likelihood ... the economic return could be below 2%."This reaseessment was, however, deemed to be too conservative, particularlysince the contractor was proposing lower cost estimates than those givenearlier (para 3.04).

3.06 The Bank decided to press ATC and the contractor to reach a settle-ment to enable a final project cost estimate and a firm financing plan to beestablished. Most of the co-donors agreed to increase their contributionswhile the Bank offered to consider a forestry project to boost traffic.Agreement was eventually reached, and an amendment to the contract was signedalong the lines proposed, at a total cost for the realignment ofCFAF 41.3 billion or US$169 M. The Bank approved the full resumption of workson the basis of the amended contract and resumed disbursements. Meanwhile,since traffic over the ATC network was less than forecast at appraisal, ATC'sfinancial position had seriously deteriorated. The Bank, therefore, helddiscussions with ATC to reduce the impact of servicing additlonal loans forthe realignment overrun by increasing tariffs, exercising strict control overATC's operating costs, and rescheduling loan repayments.

3.07 In March 1978, the Bank concluded that the economic rate of returnof the project would be about 13%. Therefore, the project was still economi-cally justified, but traffic development, particularly timber, although basedon realistic assessments of resources and market, was highly uncertain. IfCongolese timber production should stagnate and project costs increase, theproject would no longer be justified, which is exactly what occurred. Fourmeasures were recommended to stimulate traffic development: (a) a Bankforestry project (already in preparation stage), including changes in forestrypolicy; (b) decision to speed up timber production in Southern Congo; (c) Bankfinancing of some navigation equipment; and (d) a decision to increase produc-tion in state-owned, severely underutilized, industrial outfits throughrehabilitation of equipment and management.

ATC's Technical and Financial Problems

3.08 An April 1978 supervision mission found that ATC was not meeting itsfinancial obligations, even for such critical expenditures as locomotives,spare parts, and rails. The mission concluded that a 10% tariff increase wasessential to ensure profitable operation of the railway.

3.09 A September 1978 supervision mission noted a marked deterioration inATC's financial situation and the consequent need for a short- and mid-termrescue action. It also expressed fears that the Government would not be ableto fully pay its share of the cost of the realignment. The mission urged thata new co-donors' conference be held as soon as possible. On the Long Tunnel(No. 4), which was 4.5 km in length, the contractor had entered an unexpectedzone of poor rock where excavation was only about 1.5m per day instead of theexpected 4 to 6m, while work on Tunnel No. 1 (425m) had stopped for the samereason. The latter tunnel needed to be completed without delay as a nearbyplant would soon start prefabricating the 30m-long bridge beams which had to

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be transported through the tunnel to the various bridge sites. Tunnel No. 2had been replaced by a cut while work on Tunnel No. 3 was proceeding well. ABank railway engineer sent out in October 1978 confirmed the serious problemsbeing encountered in building tunnels Nos. 1 and 4. ATC was on the verge ofdeclaring the contractor in default if it did not remedy the situation. Thelatter had responded with a new program with an acceptable rate of progresswhich entailed bringing in additional staff, equipment and reinforcing materi-al. The Bank engineer reported that the situation had developed from a lackof supervision and poor communications between the contractor's site andheadquarters.

3.10 At the Bank's urging, a co-donors' conference was scheduled forNovember 1978 in Paris, followed by another one in Pointe Noire where the costestimates were reviewed in more detail. At the conference, the co-donors,including the Bank, were astounded by the documents prepared by ATC with a newtotal cost of the realignment of between CFAF 49.5 billion and CFAF 51.8 bil-lion. Despite the co-donors' insistence, neither ATC nor its consultant wasable to give comprehensive and satisfactory reasons for the large increase inestimates since the June 1978 estimate of CFAF 41.3 billion. Bank staffindicated that it was not possible, in view of the magnitude of the latestcost estimates, to find savings to contain the realignment's costs within theprevious estimate.

3.11 By April 1979, the financial situation of ATC had worsened. Railtraffic for the first quarter had fallen 23% less than forecast. With lowproductivity and poor locomotive availability persisting, ATC's financialsurvival was in jeopardy. It was also evident that (a) an experienced soilsexpert was needed to review the instability problems of the earthworks; (b) anindependent and highly experienced engineer was needed to settle the problemsand claims with the contractor; and (c) a review of the role of the technicalassistance to ATC was urgently needed. The above recommendations stemmed fromthe Bank's dissatisfaction with the inability of ATC and its supervisoryconsultant to properly supervise the project due to insufficient experience indealing with a project of the size and complexity of the realignment works.ATC's role under the conditions of the contract vade it responsible forsupervision, rather than the consultant, who basi'oally provided ATC withstaff. ATC also had bilateral technical assistants, but a lack of qualifiedcounterparts to the technical assistants hampered their activities. Moreover,a change in the basic attitude of ATC towards training was deemed indispens-able. As a result, a consultant was selected to carry out the improvement oftraining facilities throughout the ATC syptem.

B. Supplementary Financing

3.12 At the end of Nay 1979, the realignment was about 50% completed.The Bank had disbursed US$26.5 M or 852 of the US$31.0 M allocated to therealignment, and US$30.9 M or 80% of the loan amount of US$38.0 M. An econom-ic reassessment of the project indicated that the regional rates of return onthe basis of its full cost would be 7% assuming the Bank's most optimisticforecast, and -8% assuming long-term stagnation of the economy. On a sunkcost basis, the rates of return were 16% and -4%, respectively. The Bankdecided that completion of the project was worthy of its support. Supplemen-tary financing would be contingent on (a) payment by the Government of itstotal arrears to the project of CFAF 2.2 billion, and a commitment to meet thebalance of the original CFAF 5 billion assessment, plus interest and arrears;(b) Government and ATC commitment to a financial recovery plan for ATC;(c) Government support for operational improvements in ATC including

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restructuring of technical assistance, and other measures to ralseproductivity; and (d) appointment of an overall project coordinator to ensurethe completion of the realignment under strict financial and technicalcontrols.

3.13 At a co-donors' conference in June 1979, agreement was reached on afinancing plan to which each of the co-lenders contributed, raising the totalcost estimate to CFAF 60.0 billion, allowing CFAF 4 billion in contingencies.The Government announced a plan to inject CFAF 4.0 billion towards ATC'sworking capital. The conditions attached to the Bank's supplementary financ-ing were backed by most of the co-donors and no objections were voiced. Tobridge the gap between the present and the supplementary financing, discus-sions were also held to seek concurrence from the Arab co-donors to temporari-ly transfer their funds to the earthworks. They still had considerable fundsunused due to the late start of the tunnel works which they were financing,while the funds for earthworks would soon be fully disbursed. Later, when thecost overrun on the tunnels became so large, this arrangement had to bemodified again. During the conference, the Bank learned that the preliminaryfindings of a geological expert engaged by ATC to study the tunnels indicatedthat he anticipated considerable earthworks problems which could result in anoverrun of several billions of CFAF.

3.14 One of the co-donors requested an independent assessment of projectcosts and technical features, and the Bank agreed to finance the independentconsultant at a cost of US$150,000 out of loan proceeds and amended its loandocuments accordingly. In September 1979, a consultant 3/ was selected tocarry out the reevaluation of the CFCO realignment, and the supplementarycredits were appraised.

Supplementary Credits

3.15 The project description remained essentially the same as forLoan 1228-COB except for (a) the procurement of heavy earthwo ks equipment toenable the railway to clear slides; (b) the provision of additional consultingservices to design and supervise the earthworks and tunnels; (c) the continua-tion and completion of the management, operations and training improvementprograms already underway; and (d) the procurement of additional locomotivesspare parts and track material needed through 1980-82. The total cost of thework was now estimated at CFAF 72.8 billion or US$331 M. The estimatedjustification ranged from 16% under a growth scenario assuming successfulimplementation of a Bank forestry project, to -4% under a long-term economicstagnation scenario and no forestry development.

3.16 In the course of preparation and appraisal of the supplementarycredits, the Bank identified several reasons for ATC's inability to cope withthe earthworks problems: (a) the insufficiencies of the detailed design whichprovided for very deep cuts in unknown terrain; (b) the slowness and inadequa-cy of the decision-making process within ATC; (c) poor design characteristicsfor drainage works, absence of protective plant covering on the slopes in thecuts and lack of earth-retaining walls; and (d) the lack of sufficient experi-ence, capability, authority and leadership of both the chief of ATC's techni-cal studies division and the supervisory consultant's resident engineer to

3/ Referred to hereafter as the independent consultant.

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cope with the problems and supervise properly a project of this size andcomplexity. Lastly, the Bank examined the problems raised by the Government'sfailure to pay its contribution.

3.1- In October 1979, the Bank sent a staff Soils Engineer to review theslope problems, the progress in tunnel construction and the preliminary costestimate with ATC. Agreement was reached on a number of changes In thealignment to avoid the influence area of possible rock falls or minor slides.The Soils Engineer also reported that a major problem was to estimate thelocation and dimension of fault zones between the two working fronts of theLong Tunnel. The dimension of the fault zone had an important impact on thecost of the tunnel because tunneling in fault zones could cost five times morethan in sound rock. He concluded that it was important to reduce this uncer-tainty to obtain a better cost estimate. This required the clearing of accesstracks on the surface of the mouiitain to survey the terrain and evaluate thedimension of fault zones. The contractor at this point indicated that itwould have to stop work in March 1980 and subsequently declare bankruptcybecause of arrears in payments.

Special Action Credit

3.18 In November 1979, the Bank decided to proceed with negotiating aSpecial Action Credit with funds contributed by the European Economic Communi-ty (EEC) for US$5.0 M. The EEC Credit was negotiated in December 1979 in theCongo. A condition of effectiveness was the implementation of an immediatetariff increase on domestic traffic and strengthening the staff of CFCO'sMechanical Engineering Department. Credit No. 45-COB was approved on Janu-ary 17, 1980 and signed on April 11, 1980, but did not become effective untilNovember 18, 1980 because of delays on the part of the Government in takingthe appropriate action. The project consisted of: (a) continuation of themanagement, operations and training improvement program, and technical assis-tance to ATC's Mechanical Engineering Department (workshops), through theprovision of about 170 man-months of consultants' services; (b) financing ofequipment related to such program and assistance; and (c) provision of locomo-tive spare parts. Final disbursement under the Special Action Credit was madein August 1983.

IDA Credit

3.19 In December 1979, the independent consultant delivered his finalreport, which stressed that "to master the difficulties still ahead it wasessential that ATC provide a project management which should foremost (i) beable to take a strong stand towards the contractors and still have goodrelations with them; (ii) identify problems quickly and have a flexibleapproach to their solution; (iii) take the necessary measures or suggest thesolutions quickly; and (iv) review and, if necessary, revise the work programand the cost estimates periodically at short intervals." Since the contractfor Lot 6 had been signed several years ago, intervening events had partlyeroded the contractual basis and presented a number of problems. The Bank,aware that neither ATC nor its supervisory consultant had sufficient experi-ence and qualifications to negotiate a large and complex contract of the type,recommended, and ATC agreed, to hire competent and experienced advisors forboth technical and legal matters, to assist it in thoroughly preparing andnegotiating necessary contract amendments. ATC indicated that it proposed touse the independent consultant as its technical advisor, and would engage avampetent legal advisor. The appraisal mission also noted that, while theeconomic rate of return for the overall project was clearly below normally

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acceptable levels, it was appropriate for deciding on possible supplementaryfinancing to evaluate the project on a sunk cost basis. The ERR, calculatedon this basis, was expected to be in the range of 10%.

3.20 Although during the project review it was noted that "the proposedinvestment to complete the realignment (ignoring sunk costs) is likely to haveat best a marginal ERR on the regional basis and a low return on the nationalbasis," it was accepted that the realignment was now 70% complete and that,therefore, it was difficult to do anything else but complete the project. Itwas also noted that, at the time, the economic prospects of the Congo hadimproved dramatically and additional traffic was more likelv to materialize.The project's ERR were estimated at 12% on a regional basis and 8% on anational basis.

3.21 At a co-donors' conference in April 1980, agreement was substantial-ly reached on a revised financing plan for the project. The Bank's newcontribution was US$30 M, the contributions of other co-donors were generallyproportional to their earlier contributions, and a few new co-donors indicatedan interest in helping to cover the remaining financial gap. Total supplemen-tary financing amounted to US$167.6 M. The total cost of the realignmentcomponent was estimated at US$357.2 M as compared to US$148.8 M at the time ofthe original appraisal, an increase of 140%. Credit 1047-COB was negotiatedon April 23-28, presented to the Board on June 19 and signed on July 15, 1980.In a supplementary letter to the Credit, the Government agreed to implement anaction plan to take various measures to strengthen ATC. Delays on the part ofthe Government in approving satisfactory tariff increases, held up Crediteffectiveness for nine months.

3.22 The project was defined as: (a) the completion of the CFCO realign-ment; (b) the procurement of equipment for maintaining and repairing therealigned section; and (c) consulting services for supervision and assistanceto ATC in preparing and negotiating amendments to the civil works contract.The project was expected to be completed by December 31, 1982.

C. Project Completion.i and Costs

Problems in the Long Tunnel

3.23 In a third visit to the Congo in mid-April 1980, the Bank's SoilsEngineer found that the previous arrangements to identify critical slopes andcuts were proceeding satisfactorily. As regards the Long Tunnel, furtherdifficulties had been encountered with flooding and mud flow from faultsencountered at the working faces. Some of the crews were inexperienced andthere was the possibility of serious accidents. There were strong differencesof opinion on the part of the contractor and ATC as to how best to proceed.The real problem, according to the engineer's report, was not to determinewhich method was best, but "to select and immediately appoint an experienced,high caliber engineer to represent ATC at the site. This engineer should havethe authority and responsibility to determine the right tunneling tech-niques...." Action on these recommendations was a key issue during thenegotiations of the Supplementary Credit, and necessitated a special Bankmission to the Congo in May to resolve Government objections and agree on therole of the independent consultant in the supervision of the Long Tunnel. Theterms of reference stipulated "that the consultant would be the sole represen-tative of the owner on the tunnel site supervising and coordinating thedifferent parties involved and authorized to take, on the owner's behalf, all

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emergency decisions." A ccntract between the independent consultant and ATCwas signed on June 13, 1980 and its engineer was on the job early in August.

3,24 Towards the end of 1980, work on the Long Tunnel was still progress-ing slowly. The tunnel was on the critical path as it was not expected to becompleted until July 1982 at the earliest, while the remaining civil works,including track laying and ballasting, were expected to be completed byNovember 1981. Work had slowed to about two meters a day at the km 67 end,and almost stopped at the km 72 end due to difficult soils and water inflows.ATC had brought in a third consultant, 4/ and a dispute arose among theconsultants and the contractor as to the best technical solution for support-ing the tunnel in difficult zones. Disagreement also existed between thecontractor's head office and its tunnel engineer on site. At a meeting inParis in January 1981, agreement as to how to proceed was reached by allparties.

3.25 By mid-1981, civil works on the realignment were progressing satis-factorily except in the Long Tunnel. In addition to poor soil characteristicsencountered at both faces, progress continued to be hampered by disagreementsbetween ATC and the contractor, deficient organization on the job site andweak supervision by the consultants. The matter had been discussed with ATCand the independent consultant in recent meetings, and it was expected thatstaff changes on the part of the latter would improve the situation. By late1981, all major civil works outside the Tunnel were nearing completion and hadbeen satisfactorily executed. Progress on the Long Tunnel was still unsatis-factory. At the km 67 end, progress was only 1.65 m per working date despitenew construction techniques and equipment introduced since early September.The low rate was attributed by the Bank to inefficient work organization,inadequate staffing and equipment breakdown, rather than to adverse groundconditions. ATC did not accept the contractor's proposal for a cement injec-tion program at km 72, and took over the responsibility of managing directlythe tunnelling team. This led to collapses of the tunnel walls, water and mudInflows, and major damage to the supporting material. Excavation was now "ina state of retreat" in the face of the most adverse ground and water condi-tions yet encountered. In July 1981, ATC handed back the responsibility forexecution of the tunnel works to the contractor who accepted it on the condi-tion that the full injection program it had recommended earlier be imple-mented. A concrete shield was thus built and a grouting-drainage program wascarried out successfully.

3.26 The Bank expressed concern over the supervision arrangements, as ATChad engaged additional experts from the supervisory consultant to assist it inthe technical supervision of tunnel construction. They were also to carry outvarious studies for the completion of the tunnel, and to prepare proposals forthe settlement of possible claims from the contractor for the additional worksrequired to repair damages to the tunnel at the km 72 end. These changes hadnot been brought to the attention of the Association, and the terms of refer-ence of the various consultants needed clarification to avoid overlapping andconfusion in their respective responsibilities. In December 1981, the head ofthe independent consultant visited the site and noted that to speed up pro-gress on the tunnel, the contractor needed to (a) substantially improve his

4/ Hereafter referred to as the tunnel consultant.

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work organization; (b) provide more experienced supervising staff; and (c) im-prove the availability of tunnel excavation equipment.

3.27 By mid-1982, all major civil works outside the Long Tunnel werecompleted, and progress had improved in the Tunnel. Massive grouting wasunderway at the km 72 end, and the work organization and rate of progress hadimproved at the km 67 end with better soil conditions being encountered.Progress continued for the next four months at a satisfactory rate of about100 m per month.

Amendments to the Realignment Contract

3.28 In 1981, ATC selected, after Bank advice, legal council to assist itin negotiations with the contractor on contractual amendments and new unitprices for tunnel works which, due to unexpected rock conditions, had not beenprovided for in the original contract. ATC was advised that the Bank'sagreement was necessary prior to the effectiveness of such amendments. A Bankmission in 1982 found that ATC, assisted by its consultants and its legalcouncil, was under considerable pressure to conclude the negotiations with thecontractor before a deadline set by the Congo's Minister of Transport andCivil Aviation (April 30, 1982). The mission found that ATC's dossier w7 8 illprepared due to pressure on its advisors to come up with rough estimates, orto review hastily prepared proposals, and noted that very little attention wasbeing given by ATC to its advisors' recommendations. The mission felt thatthere was a tendency to give up considerable amounts after bargaining, and thecontractor's figures were not supported by hard Justification. Nevertheless,the Government reached agreement with the contractor in April 1982. The Bankwas given two reports: the first on the justification of the agreementsreached with the contractor on settlement of outstanding claims, and thesecond on a revised cost estimate and forecast schedule of completion of themain tunnel works remaining under the project. ATC also submitted to theAssociation formal statements from its consultants and legal council approvingthe acceptability of the proposed agreements. These statements were subse-quently found to be satisfactory, and the Association cabled its no objectionin August 1982.

3.29 Nevertheless, in July 1982, it became apparent that, once again,additional financing of the works would be required, and, in April 1983, aco-donors meeting was convened to mobilize the additional financing. It alsoserved to clarify technical issues related to the Long Tunnel, to update theproject's cost flow situation, to air concerns about ATC's financial andoperating problems, and to develop an informal consensus among the co-donorsas to how the remaining financing gap shovld be met. It was agreed thatanother meeting should be held in late 1983, following daylighting of theTunnel, when cost overruns should be more precisely known.

3.30 The Bank's Soils Engineer visited the Long Tunnel in April 1983 andfound that ATC, the consultants and the contractor had finally achievedsufficient mastery of the technical solutions to overcome any problems theymight encounter in the remaining tunnel works. The managemer.t of the workswas satisfactory and the cooperation among the parties involved was reasonablygood. The Long Tunnel was finally broken through in the upper half section inJuly 1983. Excavation of the remaining 1,425 meters of the lower half sectionwas not completed until April 1984. Tunnel lining in weak zones and tracklaying took almost another year. Installation of the ventilation system wascompleted in April 1985 and the signalling and communications systems shortlythereafter. Operations on the new line started in July 1985, more than five

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and a half years beyond the original completion date. Moreover, the old linewas never closed despite the original intention to do so, because the Govern-ment and ATC feared problems on the realignment and because there were noalternatives for serving the villages along the old line. The road to thesevillages was never improved due to low traffic volumes which did not justifytheir rehabilitation.

3.31 The total cost of the realignment construction contract for civilworks was estimated at appraisal at CFAF 27.6 billion or US$123 M. The finalcost of the contract was CFAF 85.4 billion or US$315 M, an overrun of 156%.The total cost of the CFCO realignment including track, signalling, telecommu-nications, stations and supervisiou, was estimated at appraisal atCWAF 33.5 billion or US$148.8 M; the final cost was CFAF 108.1 billion orUS$399 M, an overrun of 168% (Table 3-2). Table 3-4 shows the rise in thecost estimate for the realignment since the project was first conceived untilcompletion, while Table 3-5 shows the relationship of the CFAF to the US dol-lar over approximately the same period.

Technical Assistance to ATC

3.32 At the end of 1980, progress under the technical assistance programwas noted as satisfactory. Some changes had been made within ATC regardingtraining responsibilities. Further technical assistance was needed in theworkshops and supply department which would be provided under a programfinanced by the Caisse Centrale de Cooperation Economique (CCCE). Training inthe maintenance of machine tools was to be resumed, as well as on-the-jobtraining in the fields of operations, transport planning and permanent way.Work was continuing on establishing an accounting system, an automated orderprocessing and billing system, and the development of a new personnel statuteas well as setting up a personnel data base.

3.33 By mid-1981, on-the-job training in the Operations Department of ATChad started. A program for the maintenance of rolling equipment had beenprepared which included the training of supervisory staff, locomotive drivers,maintenance staff and the construction of classrooms. The implementation of atransport plan had been delayed while the financial experts completed thedesign of a new cost accounting system. Further work was required to installthe system. The new personnel statute had been approved by the Government,and work on the preparation of ATC's manpower plan had started.

3.34 All but two of the team of experts on personnel management andtraining in the Operations Department had completed their work by the end ofNovember 1982. A mission at the time noted that while on-the-job training wascarried out satisfactorily, the quality of the work on transport planning andmanpower planning appeared below average, mostly because of lack of commitmentof ATC's management. About 97% of the spare parts had been delivered and therest was expected early in 1983.

D. ATC's Liquidity Problems

3.35 By mid 1980, the operational efficiency of CFCO appeared to haveimproved and all transport demand was being satisfied. The backlog of timberat Brazzaville had been shipped to Pointe Noire. At the end of 1980, the Bankconsidered that further improvement in CFCO's operations was necessary fortraffic planning and rolling stock management. It was expected that the CFCOwould meet the operational targets set forth in the Project Agreement. In1980, CFCO's freight traffic had reached the maximum attained in the past

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(1971), and passenger traffic had resumed a growing trend. Comilog trafficwas stable and timber traffic was ahead of forecasts by 45%. Project financesremained satisfactory to date due to advances provided by ADB, Government andFED. The overall financing plan was almost fully firmed up, and ATC's finan-cial situation was considered healthy due to improved 1980 budget performance.An increase in tariffs was necessary, according to -he Bank, in order toimprove the difficult financial situation of CFCO, and this was made a condi-tion of effectiveness of the new Bank lending operation. CFCO tariffs wereraised in January 1981 and Credit 1047-COB became effective on April 24, 1981.

3.36 ATC had selected a French organization to act as its procurementagent for purchasing spare parts for locomotives, etc. By mid-1981, procure-ment of spare parts was progressing satisfactorily, the Bank was satisfiedthat the procurement agent was complying with its guidelines, and CFCO'soperating performance was improving. Overall turnaround time of freight carshad been reduced. The annual build up of the backlog in timber from Brazza-ville was seen as a seasonal phenomenon, and the situation would be back tonormal by the beginning of the next season. Total timber traffic had reached668,700 tons against 483,400 tons in 1979, a 38% increase.

3.37 By October 1982, additional financing amounting to CFAF 14.5 billionwas ieeded to complete the works. One co-donor had suspended disbursementsbecaise of ATC's failure to communicate adequately with the co-donor, andother co-donors were disbursing very slowly. As a result, payment arrears tothe contractor had reached CFAF 7 billion, and its lenders were threateningforeclosure unless rapid steps were taken to reduce the debt. ATC's financialsituation had deteriorated considerably in 1982 because of an eight months'delay imposed by the Government on the introduction of the previously approvedtariff increases, and a promised subsidy to ATC to compensate it for the delaywas still outstanding.

3.38 Despite this serious financial situation, ATC was proposing anexpenditure of several hundred million US dollars for various works outsidethe project despite a total lack of feasibility studies to justify such majorinvestments. The Association approved the purchase of some urgently neededrailway equipment, but urged ATC to send details of its 1983-86 investmentneeds together with TOR for feasibility studies of new major infrastructureworks. The receipt of the information was a minimum condition for the releaseof US$2.0 M by the Association for the realignment works. Moreover, althoughATC was supposed to enjoy autonomy in developing its data processing activi-ties, requirements set by the Congolese Office for Computer Activities (OCI),on the selection of computer software, were hampering ATC's development ofadequate accounting systems and improvement of management controls.

3.39 At the end of 1982, the personnel statutes approved in principle byATC's management aud the Government in March 1981 were still under discussionwith the unions and party representatives. There was little hope that theposition of ATC and the unions could be reconciled in view of the unacceptableclaims put forward by labor, not only regarding wages and benefits, but alsoin terms of union and party officials interfering in day-to-day management ofATC. ATC's management at all levels, suffered from interference. The situa-tion was worsening to the extent that it was jeopardizing ATC's viability. Itwas clear that ATC was not managed within normal comercial guidelines.

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Further Setbacks

3.40 A mission in February 1983 noted that ATC's operations and financeshad deteriorated. ATC was still experiencing severe liquidity problems as aresult of the non payment of the 1982 tariff subsidy of CFAF 2 billion whichhad been promised for early 1983. As a consequence, ATC was in default of theCredit Agreement. ATC's 1983 budget had not been finalized, and no steps hadbeen taken to ensure the early introduction of the 14.4% tariff increaseprovided for in the budget. This constituted a second default. The missionreport recommended that strong pressure should be put on the 'overment totake corrective action.

E. Unapproved Procurement for ATC

3.41 In April 1983, a supervision mission found that the Government hadauthorized several major commitments mostly without the concurrence of ATC'smanagement, or prior consultation with IDA. This included (a) an order forexpensive rolling stock with quantitative standards, far exceeding needs, at acost of US$30 M; (b) a contract to a subsidiary of the contractor, withoutcompetition, for track rehabilitation costing US$12 H; and (c) direct purchaseof locomotives in numbers in excess of ATC's needs. The Government indicatedthat it did not intend to consult IDA on such investment decisions. The Bankpromptly telexed its objections to the Government.

3.42 Regarding the rolling stock purchase, ATC said that the Ministry ofTransport and Civil Aviation (MTCA), which had placed the order, had no suchauthorization from ATC, nor did ATC's statutes allow it to unilaterally takesuch steps. Furthermore, ATC indicated that the order was not part of anyinvestment plan since its needs had already been filled by two limited inter-national tenders. The Central Government acknowledged that ICB procedures hadnot been used nor the required consultations been held with the Bank, and thatthe order had been placed with the authorization of the Prime Minister. Inresponse to the Bank's views, the Government had decided to reduce the orderby about 25%. The Bank felt that this was not enough as ATC's financialsituation was sufficiently precarious and its further debt carrying capacityambiguous enough so as to warrant further analysis and discussion. Further-more, a reasonable consensus among ATC, the Government and the Bank on ATC'sneed for rolling stock did not yet exist, largely due to the absence of anup-to-date inventory of its equipment and to disparate views about furthertraffic demands.

3.43 The Bank telexed the Government on May 24, 1983 conveying its graveconcern with regard to ATC finances. It noted that the Government intended toreduce the order for rolling stock but that this step was still not satisfac-tory. By the end of June, the Government had not taken any action on raisingtariffs in 1983, or changed its decision regarding the acquisition of rollingstock. ATC's financing situation was noted by the recent supervislon missionas critical. As a result, ATC was unable to respect most of its financialcovenants. The Government replied on June 30 that it would make a consider-able effort to meet its financial obligations to the project and to ATC, andthat a possible tariff increase was under study. However, there was noindication as to the size or timing of the increases, nor any compensation forits late introduction. The Government confirmed its earlier reduction of therolling stock order, but did not offer to further reduce or defer the order.The Bank believed that the reduction of the order was insufficient, priceswere still too high, and the order still included material ill adapted toATC's needs.

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Credit Suspension

3.44 On August 19, 1983, the Bank informed the Government and all otherco-donors that it would suspend disbursements unless the Government agreed toa substantial tariff increase and deferred a substantial portion of therolling stock order, until an independent reassessment of ATC's investmentrequirements could be made. The Government replied that it was taking actionon the matter of the tariff increase, but requested a month's deferment of thedeadline set by the Bank. As regards the rolling stock, it agreed to againreduce the order and put the remainder on option. On November 30, the Govern-ment informed the Bank that it had submitted a proposal for a 15 to 18%increase in tariffs to take effect January 1, 1984 to its Political Bureau forapproval. On December 2, the Bank informed the Government (a) that it had noobjection to its proposal for the rolling stock order provided that theoptional status of the remainder of the order involved no financial commit-ment; and (b) that the level of tariff increase proposed was insufficient andthus an increase of at least 30% was necessary, half by January 1984 and theremainder by July 1, 1984. The Bank again extended the deadline for suspen-sion to January 3, 1984. Following further negotiations during which someprogress was made, the deadline was extended twice to February 10, 1984.

3.45 In March 1984, the Government confirmed it's intention to approve anincrease in ATC's tariffs by an overall 18%, and compensate ATC for an amountequivalent to the increase until the decision became effective. There was noindication in the Government's latest response that it was prepared to againincrease ATC tariffs later in 1984. The Bank concluded that in view of aParty Congress in July (the first in five years) it was unlikely that theGovernment could be persuaded to do so. It therefore decided to modify theterm of the conditionality, or renewal/suspension of disbursements. TheGovernment was informed on April 6, that:

(a) in recognition of its actions to modify ATC's rolling stock orderand to significantly increase tariffs, the Association would dis-burse against outstanding withdrawal applications currently held byit since last October amounting to US$3 M on confirmation that:(i) the tariff increase had been published; (ii) the subsidy due toATC for January and February 1984 had been paid to ATC; (iii) theoptional status of the remainder of the rolling stock order involvedno financial commitment; and (iv) the Government and ATC agreed toprepare and implement a recovery plan for ATC;

(b) with an exception of disbursements required for consulting services,the Association formally suspended withdrawal rights on the remain-ing balance of approximately US$3 M; and

(c) the Association would resume normal disbursements of the remainingfunds once (i) the Government had agreed to the 1984 tariff; and(ii) a recovery plan had been adopted.

3.46 The Prime Minister replied on April 26, 1984 that the Government haddecided on (a) a tariff increase of 33.6% excep. for passengers and eEsantialgoods; (b) the payment of all Government arrears to ATC before e'.d 1984;(c) the reduction of ATC's operating cost and import budget; and (d) theestablishment of a CFAF 1 billion ceiling on ATC's deficit. Accordingly, theBank proceeded to disburse against outstanding applications, but decided tomaintain the suspension until it was able to assess the extent to which the

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proposed measures were sufficient to restore ATC's financial viability. Fulldisbursements were resumed on July 17, 1984.

3.47 According to a supervision report in early 1985, 1984 was anotherbad year financially for ATC with expected operating losses of around CFAF 4billion. These were caused by: a) the late authorization of tariff increases;b) poor operating performance by the CFCO; and c) inadequate financial manage-ment to curb the continuing escalation of operating costs. ATC's liquiditysituation, already severely afflicted by the lack of profitability, was beingrendered precarious by continuing delays in Government payments of commitmentsto ATC in response to commercial debt compensation and its financing share ofthe realignment project. ATC's weak financial management and poor budgetingwas largely the result of a policy of excessive centralization of managementand controls, and insufficient delegatior. of responsibility to departmentalmanagers.

IV. TRAFFIC, OPERATIONS AND FINANCES

A. Traffic

4.01 The major commodities handled by ATC are timber, most of which ishandled successively by each of ATC's modal departments; manganese ore trans-ported over 200 kilometers of the CFCO line for export shipment at PointeNoire; and general cargo.

Freight

4.02 The following table shows appraisal projections and actuals of ATC'sfreight traffic broken down by department and major commodities for the keyyears 1976 (project start), 1979 (appraisal-assumed completion date), and 1985(actual completion date). Details are in Table 4-1(a).

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Tons '000

-- 1976 ------ ------- 1979 ------ ------ 1985 ----Item Appraisal Actual Appraisal Actual Appraisal Actual

River Transport

General Cargo 60 50 81 48 80 98Timber 137 148 582 124 1,245 170Total 197 198 663 172 1,325 268

River Port.

General Cargo 275 190 340 110 407 227Timber 233 310 780 367 1,750 300Total 508 500 1,120 477 2,157 527

CvCO

General Cargo 1,372 1,209 1,560 703 2,760 712Timber 500 448 1,130 483 2,100 498Manganese 2,220 2,252 2,600 2,288 2,600 2,362Total 4,092 3,909 5,290 3,474 7,460 3,572

Port of Pointe Noire

General Cargo 780 1,026 1,065 958 1,250 1,277Timber 455 361 1,130 400 2,100 452Manganese 2,250 2,151 2,600 2,280 2,600 2,223Total 3,485 3,538 4,795 3,638 5,950 3,952

During appraisal of Credit 1047-COB, timber traffic projections were reviseddownwards to 360,000 tons for the river transport link, 548,000 tons at theport of Brazzaville, and 858,000 tons on the CFCO and the Port of Pointe Noirein 1985.

4.03 The most striking fact disclosed by the above table is that actualtraffic on each of the four departments of ATC remained stagnant or evendecreased during project implementation while traffic projections anticipatedthat (a) river transport traffic would increase threefold over the period1976-79 and double again over the next five years, 1980-85; (b) river portstraffic would double during each of these two periods; CFCO transports wouldincrease by 30% over 1976-79 and by an additional 40% over 1980-85; and(c) Pointe Noire Port cargo handling would increase 37% and 25% during each ofthe two periods.

General Cargo

4.04 General cargo consists mainly of goods imported at Pointe Noire fordomestic consumption, petroleum products, and food. General cargo trafficrepresents about 30% of river transport and ports traffic and about 25% of thecombined railway and ports freight handling over 1976-85.

Manganese

4.05 Manganese ore traffic handled by the CFCO and the Port of PointeNoire has been consistently about 15% below the 2,600 million tons anticipatedat appraisal. Also, as anticipated at appraisal, this traffic, which iscarried will, within the next few years, be transferred to the recentlycompleted Gabonese Railway. About 50% will be transferred in 1989.

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Timber

4.06 Appraisal forecasts for timber traffic on the CFCO were based on thefollowing data and assumptions: (a) during the period 1962-73 world wideimports of tropical hardwood had grown at about 12% per annum; (b) Africantimber exports had not kept pace with the growing European demand; (c) theEuropean import demand for African timber was expected to grow from 15.3 mil-lion ms in 1973 to about 25 million ms by 1985, while African export capacitywas only about 10 million m3 in 1972; (d) the estimated combined exportcapacity of the four countries in the ATC service area could reach 5.2 to6.1 million tons; and (e) the ATC share of the anticipated export capacity wasestimated at 2 million tons of which 1.2 million would originate from Congoand 0.4 million each from Cameroon and CAR.

4.07 An important assumption of these ambitious traffic projections wasthat the Government would take legal and administrative action to raise Congotimber production to the required level. To this effect, it was agreed atnegotiations of Loan 1228-COB that the Government would (a) grant operatingrights in the South Congo forestry zone not later than December 31, 1977;(b) undertake an inventory and prepare an exploitation plan for forestryzone II in Northern Congo; (c) upgrade the forestry related lease system, lawsand regulation; and (d) report annually to the Bank on action taken, startingin 1976. The Bank cooperated with the Government in implementing the forestryinventory and legal action and prepared a forestry study on the northern Congoforestry potential. The conclusions of this study provided the basis forappraising the River Transport Project (Credit 1179-COB, 1981), designed tomeet the needs of ATC's river transport operations, and the Ouesso WoodProcessing Project (Loan 2298-COB, 1983) which includes a substantial forestryexploitation component.

4.08 Despite these measures, even the revised projections proved far toooptimistic as shown by the following data:

Tons '000

Traffic Emanating From 1979 1985

Northern Congo 75 170

Cameroon 7 130

Subtotal Brazzaville Port 367 300

South Congo 177 198Gabon 40 -

Total CFCO and Pointe Noire 484 498

4.09 ATC's inadequate operational performance is one of the reasons forthe disappointing results with respect to timber originating from the CAR,Cameroon and Northern Congo. However, the evolution of the timber market inEurope, the Government's slow action in awarding timber exploitation conces-sions in Northern Congo and inefficient commercial policies were also contrib-uting factors. The following table compares appraisal projections and actualsfor 1987 of timber exports of the four countries in the ATC service area.

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----- Million Tons --- ^Countrv Appraisal Estimate Actual

(1988) (1987)

Gabon 2.4 - 2.6 1.1Cameroon 1.3 - 1.6 0.7Congo 1.1 - 1.3 0.3CAR 0.4 - 0.6 0.1

Appraisal proiections were based on the assumption that demand emanating fromFrance and the Federal Republic of Germany, the two main importers of timberproduced in the four countries, would increase. These expectations did notmaterialize as shown in the follow_ng table of sawlogs and sawtimber importsover 1977/85 in France and the Federal Republic of Germany:

Mi llion Tons---- France --- --- Germany --

Year Logs Sawn Logs Sawn

1979 1761 3203 1283 54681980 1776 3429 1201 55761981 1462 2601 862 44361982 1335 2600 793 43191983 1364 2365 910 49461984 1293 1926 881 44531985 1138 1969 866 3954

4.10 The declining demand did not encourage the Government to make goodon earlier commitments to grant forestry exploitation concessions, at least aslong as the market for hardwood timber did not recover from its presentweakness. Despite its commitments under the project, the Government has actedmuch slower than anticipated in awarding forestry exploitation permits inNorthern Congo. Reasons for this have not been clearly defined. It is,however, likely that foreign timber companies were reluctant to invest in theCongo because of unfavorable legislation and/or difficult access to operatingareas. Local timber companies were most likely short of funds to exploitlarge areas for which they had obtained concessions. Considering the declinein demand, it is difficult to be critical of this performance over the projectperiod.

Passengers

4.11 Contrary to freight, passenger traffic on the CFCO, the sole ATCdepartment handling a substantial passenger traffic, has substantially exceed-ed appraisal projections (Table 4-1(b)), mainly because rail is the onlyaffordable means for travelling between Brazzaville and Pointe Noire. Ascould be expected, passenger traffic peaked over 1980-85 in parallel with thegrowth of GDP during the oil boom period. However, this traffic generatesheavy losses because tariffs have been kept low by the Government.

Conclusion

4.12 Overall, ATC was far from achieving appraisal traffic projections,mainly because the anticipated economic growth rate, which would have generat-ed additional traffic and the anticipated increase in demand for Africantimber, did not materialize. In addition, ATC will loose in 1989 at least 50%of COMILOG's manganese traffic which will be carried over the Trans-GaboneseRailway. Prospects for full utilization of the additional capacity resultingfrom the CFCO realignment are thus not good.

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B. Operations

1976-78

4.13 To measure ATC's progress towards better operating efficiency neededfor anticipated traffic demand at the lowest possible cost, the Government,ATC, and the Bank agreed on a set of operating targets for 1978 for each ofATC's departments. However, precise information on the degree of achievementof the operating targets of the River Transport and Ports departments is notavailable. The operating targets, however, could Lot have been met since the1978 river traffic was only 40% of appraisal forecasts, and actual 1978 porttraffic was 35% below estimates.

4.14 CFCO also failed to reach some of its operating targets. Average1978 freight cars turnaround time averaged 11 days while targets were 5.5 daysfor lumber cars and eight days for general cargo cars, mainly because ofinadequate maintenance of rolling stock as a result of a chronic shortage inspare parts and inadequate utilization of technical assistance. Locomotiveavailability was better than anticipated at 76% against a 61% target. Withhindsight, the targets set were too high. These targets were set to allow ATCto meet anticipated traffic demand rather than based on realistic criteria.Overly optimistic projections, mainly with reference to timber, were reviseddownward during negotiations of Credit Agreement 1047-COB.

1979-85

4.15 The revised Plan of Action defined for the Supplementary Credits(para 3.15) recognized the lack of realism of the previous plan and loweredtargets except for the CFCO: on river transports the average turnaroundtargets on the Brazzaville-Bangui line was increased from 26 days in theearlier plan to 30 days over 1980-84; no performance target was set for thePort of Brazzaville; annual tonnage of cargo per berth objectives for the Fortof Pointe Noire were reduced from 170,000 tons for general cargo berths and250,000 tons for timber berths, in 1978, under the earlier plan, to 90,000 and100,000 in 1980, and 115,000 and 130,000 tons in 1984. For the CFCO, the 197876% average locomotive availability target under the 1976 plan was revised to70% in 1980, and 60% in 1984, while freight cars turnaround times were kept atthe same level under the two plans.

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4.16 The following table shows the main action plan targets and actualresults:

-- 1980 - -- 1982 ----- ------ 1984 ---Item ApDraisal Actuals Appraisal Actuals Appraisal Actuals

River Transports

Turnaround of Convoys --Brazzaville-Bangui (days) 30 49 30 52 30 /a

Annual Tonnage Transportedper Micro Pusher (tons '000) 4,500 3,608 5,000 3,821 5,500 La

Port of Pointe Noire

Berth Occupancy Rate % 70 74 70 76 70 63

CFCO

Main Line LocomotiveAvailability % 70 54 65 65 60 61

Turnaround Time forFreight Cars (days)

General Cargo 10 9 9 9.5 8 14Timber Cars 10 6 8 6 6 8

Staff Productivity1,000 TK MI Staff Member 280 268 300 242 337 216

/a Results not comparable with targeted performance due to exceptionally low water levels on theCongo-Sangha and Oubangui Rivers.

The table shows that (a) river transport was far behind appraisal targets;(b) the Port of Pointe Noire exceeded targets in 1984; and (c) the CFCOMi) met locomotive availability objectives over 1980-84; (ii) exceeded thetarget for timber car rotation in 1980 and 1982 but could not repeat thisperformance in 1984; and (iii) was not able to meet turnaround target forgeneral cargo cars (in fact, the rotation time increased from 9 in 1980 to 14in 1984). The contradiction between the CFCO satisfactory motive power avail-ability ratio and the inadequate car rotation over 1982-84 is mainly explainedby the loss of several locomotives as a result of landslides caused by twosuccessive heavier-than-usual rainy seasons, in addition to slow car load-ing/unloading by customers.

C. Finances

4.17 The following analysis comprises three sections: (a) the overalleffect of project implementation on ATC's financial performance and situation;(b) the financial results of ATC as a whole and each of its four departmentsover 1976-86; and (c) ATC's financial results and situation over 1987-90. Theanalysis is supported by Tables 4-2 -- Income statement, 4-3 -- Breakdown ofworking expenses, 4-4 -- Sources and application of funds, 4-5 -- Balancesheet, and 4-6 -- Selected financial ratio. Although ATC was short of meetingappraisal financial targets (Table 4-6), its overall financial performance wasmuch less disappointing than indicated earlier. The crises referred toearlier reflected generally ATC's shortage of funds to pay for its share inthe financing of the realignment and/or the related debt service. Given thesize of the realignment's cost overrun, ATC would not have been able tofinance its share in the latter's cost even if it had fully met appraisal

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objectives. The 1.1% average annual rate of return on fixed assets in use itachieved over 1976-86 is better than most African railways.

Overall Considerations

4.18 The following table summarizes appraisal forecasts and actuals ofATC's (a) income statement cumulated over 1976-86, the project implementationperiod; (b) sources and applications of funds over the same period; and(c) balance sheet at the opening and closing of the period, i.e., January 1,1976 and December 31, 1986.

Income Statement(CFAF Billion)

Item Appraisal Actual

Sales Revenue 369.4 277.3Working Cost 245.4 213.5Depreciation 52.5 49.9Net Operating Revenue 71.5 13.9Interest Charges 19.6 30.2Net Profit (Loss) 51.9 (16.3)

Working Ratio % 66 77

Average Annual Rate of Return 5.3 1.1on Fixed Assets in Use % 1

Source and Application of Funds

- Source ------ --- Application ---Item Appraisal Actual Appraisal Actual

ATC Cash Generation 127.5 73.1 Investments 77.1 201.6Borrowing for Investments 8.0 150.1Borrowing for Working Capital --- 10.4 Debt Service: Interest 19.5 30.7Subsidies for Investments 2.7 31.1 Debt Service: Principal 22.1 35.8Subsidies for Operations --- 8.3 Debt Service: Total 41.6 66.5

Totals 138.2 273.0 118.7 268.1

Increase in Working Capital --- --- 19.5 4.91976-86

Balance Sheet as of: 01/01/76 Balance Sheet as of: 12/31/86Item Appraisal Actual Appraisal Actual

Working Capital (1.6) (0.9) 17.9 4.0of which Receivables 3.5 5.1 12.4 19.4

Net Cash (1) (1.5) 0.8 6.7 (2.2)Net Fixed Assets 42.5 44.0 218.9 192.4Total Assets 40.9 43.1 236.8 196.4

Long-term Debt 9.8 10.5 21.3 64.1Equity Equivalent 31.1 32.6 215.5 132.3Total Liabilities 40.9 43.1 236.8 196.4

Current Ratio (times) 0.7 0.8 3.4 1.1Liquid Ratio (times) 0.4 0.6 2.6 0.8Debt to Equity Ratio 24/76 24/76 9/91 33/67

4.19 Analysis of the tables leads to the following conclusions on theimpact of project implementation on ATC's financial performance and situation:

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(a) ATC suffered an accumulated net loss of CFAP 16 billion instead ofthe anticipated 52 billion profit estimated at appraisal. This Ismainly due to lower-than-expected sales revenues (-25%) because oflow traffic levels, insufficient productivity and Government reluc-tance to authorize timely tariff increases, and interest charges 52%above appraisal estimates. These charges were a result of addi-tional borrowing to meet project cost overruns, and additional,sometimes unwarranted, investments.

(b) The reduced cash income and high investment cost obliged ATC todeplete its working capital and resort to heavy borrowing(CFAF 160.5 billion) to meet its funding needs, which, in turn, ledto increased debt service despite the provision by the Governmentof subsidies more than 15 times higher than the CFAF 2.7 billionanticipated at appraisal. The analysis of the source and applica-tion of funds shows that the CFAF 4.9 billion increase in workingcapital over the project period, represents the unused part of theCFAF 8.3 billion subsidy and the CFAF 10.4 billion borrowing by ATCto make up for the shortage in working capital. Had it not been forthese two sources, ATC's working capital would have been a negativeCFAF 13.8 billion.

(c) ATC's net worth increased fourfold from CFAF 32.6 to CFAF 132.3 bil-lion. The 33/67 debt to equity ratio is an acceptable long-termsituation. However, the CFAF 4 billion in working capital barelyamounts to one half of ATC's monthly 1986 working expenses since itincludes a negative cash position and receivables amounting to about50% of 1986 sales revenue. Appraisal projections provided forCFAF 17.9 billion in working capital which represented about sixmonths of working expenses.

ArC's Consolidated and Departmental Profitability, 1976-86

4.20 Timewise, ATC's financial performance during project implementationmay be divided into two periods, 1976-81 and 1982-86. During the first ofthese, ATC's consolidated net operating revenue improved gradually fromCFAF 1.8 billion in 1976 to CFAF 3.7 hillio- in 1981. In 1976, ATC achieved anet CFAF 0.9 billion profit mainly because interest charges were low since themobilization of project loans started slowly. This situation deteriorated toCFAF -0.4 billion in 1977 in parallel with loan mobilization, and then pro-gressively improved to CFAF + 600 million in 1980 and 1981. ATC's profitabil-ity rapidly deteriorated over 1982-86 with net operating revenue falling fromCFAF 3.4 billion in 1982 to CFAF -1 billion in 1986, and net profit droppingfrom CFAF +0.3 billion in 1982 to CFAF -4.7 billion in 1986. In addition tothe inadequacy of tariff increases, the main reason for this decline in ATC'sprofitability was the severe drop in traffic, mainly on the CFCO, which wasnot matched by a decline in operating costs, because of the high proportion ofATC's fixed costs, mainly staff and overheads. ATC suffered a net operatingloss of CFAF 0.1 billion and a net loss of CFAF 18.3 billion accumulated over1982-86 versus profits of CFAF 14.1 and 2.1 billion, respectively, over1976-81.

Breakdown of Profits (Losses) by Department

4.21 Tl- following table shows a breakdown of sales revenues, net operat-ing revenues and net profits (losses) for each department of ATC over each ofthe above-mentioned two periods.

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----------------------------------- (CFAF million) -----------------------------------

Net Operating Revenue (Loss) Net Profit (Loss)

1976-81 1982-86 1976-81 1982-86 Total

TotalDepartment Sales Sales Revenue (Loss)

River Transport 9,993 (1,315) 23,139 (3,132) (4,447) (1,732) (4,009) (5,721)River Ports 2,074 195 4,646 (1,036) (841) 44 (1,118) (1,074)CFCO 57,544 9,969 112,409 (6,742) 3,227 (1,032) (23,517) (25,459)Port of Pointe Noire 12,766 5,224 29,504 10,775 15,999 4,170 10,375 15,145

ATC 82,317 14,073 170,098 -135 13,938 2,050 (18,269) (16,219)

4.22 Since project appraisal, sales revenues earned by these departmentswhich merged in 1985, have been barely sufficient to cover working costs,i.e., did not provide any contribution to renewals, investments and/or therelated debt service. Reasons for tlis unsatisfactory performance wereidentified as structural, organizational, and operational.

4.23 While falling short of reaching appraisal projections for operatingratio (averaging 78% over 1976-81), CFCO sales revenues were sufficient tocover working cost, and 90% of depreciation over 1976-81, a performance seldomreached on African Railways. Over 1984-86, freight traffic substantiallydecreased due to (a) the country's economic problems; (b) the erratic evolu-tion of the timber market; and (c) a decrease in transport capacity consecu-tive to the loss of several locomotives in derailments. Because of ATC's highproportion of fired cost, the decrease in traffic was not paralleled with adecrease in operating cost. In addition, the Government was unduly slow inimplementing necessary tariff increases. CFCO, consequently, suffered aCFAF 6.7 billion net operating deficit, i.e., it covered only 70% of deprecia-tion over the five-year period and could not contribute to the coverage of theCFAF 16.8 billion in interest charges facing it.

4.24 Most of these interest charges were caused by the additional borrow-ing required to finance the cost overrun of the realignment and unplannedinvestments. To assist ATC to fulfill its obligations, the Government decidedon annual subsidies equivalent to the debt service contracted to finance thebasic infrastructure of the realignment. To this effect, the Government gaveATC CFAF 5.1 billion in 1985 to cover CFCO's 1982 and 1983 interest charges,but has not made any payment since.

4.25 The Port of Pointe Noire has increasingly generated substantial netoperating and net profits totalling CFAF 16 billion in net operating revenueand CFAF 15 billion in net profits on sales of CFAF 42 billion over 1976-86.Thanks to these profits, ATC was able to generate CFAF 2 billion net profitcumulated over 1976-81 and to balance its income statement at the net operat-ing level over 1982-86. However, this occurrence was not repeated during1982-86 mainly because of the high interest charges incurred by ATC's otherdepartments.

D. ATC's Financial Projections for 1987-90

4.26 Thanks to (a) traffic demand resulting from an improvement inCongo's economy; (b) the additional capacity provided by the realignment andother investments under the project; and (c) implementation of structural and

- 27 -

cost saving measures, ATC's profitability and financial situation is expectedto progressively improve over the next years as shown by the following consol-idated data and ratios (1986 data are given for comparison purposes).

Item 1986 1987 1988 1989 1990

Working Ratio % 71 69 66 67 67Net Operating Revenue (CFAF billion) - 0.9 2.8 3.6 2.3 2.8Operating Ratio % 102 93 90 94 92Net Profit (CFAF billion) - 4.7 - 8.8 - 0.2 - 1.8 - 1.4Current Ratio 1.1 1.1 1.0 0.9 0.9Debt to Equity Ratio 33i67 31/69 29/71 28/72 27/73

Consequently, project implementation will have a beneficial effect on ATC'sfinances.

V. ROLE AND PERFORMANCE OF THE CONSULTANTS

The Realignment Component

5.01 The role played by the consultants in the execution of the realign-ment works should be examined in the light of the quality of the detailedengineering actually carried out. As noted in para 1.04, the First RailwayProject financed the detailed engineering of the realignment. The draft termsof reference for the final engineering survey included in the staff appraisalreport confirm that detailed e4gineering based on adequate soils investigationwas specifically called for. However, an examination of the drawings indi-cates that, while detailed engineering was in fact carried out, the boringsand test pits on'which the detailed engineering was based were infrequent andnot always to an adequate depth. For example, only two borings were carriedout for the Long Tunnel, one at each end. The Bank's Soils Engineer, whoparticipated in the supervision of the project, concluded that the resultingdetailed engineering was based on inadequate soils investigation, topographicwork and geological study. Furthermore, the mission which appraised thesupplementary financing of the project (Credit 1047-COB) commented on theinefficiencies of the original design. The fact that the quantity of earth-works turned out to be double the consultant's estimate and that none of thesoils or tunnel problems was foreseen, confirms the above views of the design.

5.02 The inadequate field work and the resulting deficient design led, inturn, to further difficulties. The alignment had to be revised by the con-tractor once the site was cleared. This did not pose a particular problem forthe contractor for, in accordance with French practice, it is customary forthe contractor to do the detailed design in the field. However, it did delayprogress of the work as many local variants to the alignment had to be exam-ined and approved. Furthermore, the substantial underestimation of theearthwork quantities led to greatly increased cost.

5.03 Another serious shortcoming in the engineering was the allowance ofinsufficient contingencies. The consultant's contingency allowance was 10%for the earthworks and 15% for the tunnels. Given the inadequate soilsinvestigations, the contingency allowances for earthworks were far too low,while the allowance for tunnels was grossly underestimated. For tunnel work,contingency allowances of 100 to 200% are not uncommon. Thus, originalcontingency allowances estimated by the consultant were too low, and continuedto be so every time the estimated costs were recalculated for the co-donors'

- 28 -

conferences. Moreover, the time allowed by the consultant and confirmed bythe Bank staff to complete the work was substantially underestimated, evenwhen allowing for such unforeseeable factors as the armed raid on the site,and the delays in drilling the Long Tunnel.

5.04 The selection of the same consultant who designed the project tosupervise the work is normal practice. However, the supervisory consultantwas not given executive authority to supervise the project but was engaged inan advisory role by ATC as noted in para 1.07. Given the complexity andmagnitude of the work, this was a major flaw in the management of the project,as pointed out in para 8.03.

5.05 While this report is critical of the quality of the detailed engi-neering, it should be pointed out that the funds allocated by the Bank fordetailed engineering under the First Railway Project were woefully underesti-mated. Only US$1.6 M was allocated under that project for detailed engineer-ing, or less than 0.5% of the final cost of the realignment. Given the scope,complexity and remoteness of the project, an allocation of roughly 5% or morewould not have been unreasonable.

5.06 The independent consultant's performance is more difficult toevaluate. Although it was assigned a leadership role on the Long Tunnel, ATCnever gave the consultant full authority to act on its behalf. Besides, itwould appear from the correspondence that the consultant's earlier personnelon site did not fully meet the challenge of the Long Tunnel. It was not untilthe appointment of the tunnel consultant that appropriate techniques werefinally devised to cope with the rapid changes in soil conditions that materi-alized as the work proceeded. The independent consultant's performance, aswell as that of the legal council, in negotiating the amendments to the ASHFOcontract, was satisfactory. However, the consultant was handicapped in thiswork by the poor site records kept by ATC and its advisors. The tunnelconsultant is credited with presenting acceptable technical solutions to thetunnel problems which finally led to agreement on the part of all concerned asto how to proceed.

Technical Assistance

5.07 The performance of the technical assistance consultant appears tohave been uneven. It took considerable effort on the part of the Bank topersuade this firm that it wanted a well managed and coordinated team on siterather than a loose group of individuals. The consultant finally did field asatisfactory team, but ATC did not benefit as much as it might have, becauseof its failure to provide counterparts, and by its poor attitude to training.The procurement firm, on the other hand, performed satisfactorily. Theconsultant engaged by FED kept the co-donors well informed, and was helpful inproviding assistance to ATC management and to Bank supervision missions.

I

- 29 -

VI. INSTITUTIONAL PERFORMANCE AND OUTLOOK

ATC

Structure and Organization

6.01 In 1974, the Bank appraisal team found that (a) ATC's administrationby its Board was carried out in a satisfactory manner; (b) the General Managerhad adequate freedom to deal with ATC's normal business; and (c) the manage-ment and development planning of ATC was competent.

6.02 After five years of supervising the project, and ATC's managementand operations, the Bank's appraisal team for the supplementary creditsarrived at a less positive appreciation of ATC's structure and management thanwas made by the original appraisal team (para 1.06). It noted that ATC'sefficiency in dealing with day-to-day operations was hampered by (a) in-consistent application of its statutes and frequent interferences from outsideauthorities; (b) frequent changes of Congolese management staff; (c) lack ofadequate rules in the relationship between ATC's management, the unions andlocal political leaders as regards labor policies; and (d) inadequate person-nel management and administration based on an out-of-date personnel statute.

6.03 To make up for the above mentioned inadequacies and restore opera-tional and managerial efficiency the Government, ATC and the Bank agreed on aplan of action providing, in addition to the operating targets, for a reorgan-ization of ATC's financial management and accounting, decentralized decisionmaking, measures for improving ATC's commercial organization and for improvingthe technical organization in each operating section. In addition, theGovernment agreed to prepare a manpower plan for 1982-86 and to adopt arevised personnel statute by mid 1981.

6.04 During preparation of the Structural Adjustment Program (SAL Loan2866-COB) and the Pilot Public Enterprise Institutional Development Project(DIEP Loan 2886-COB), the Government and the Bank reached the conclusion thatthe measures included in the plan of action could only be efficiently imple-mented if they were included in a full restructuring program for ATC. Thisprogram became a component of the SAL agreement started in 1987. Its majorobjective is to improve the efficiency of ATC's operations and its financialperformance by increasing sales revenues and improving control over operatingcost. To this effect the quality of ATC's management should be enhanced by areorganization of ATC.

6.05 To prepare for ATC's reorganization, the Government, ATC, and theBank started in 1986 to implement a plan comprising (a) a reorganlzationalstudy of ATC, including a review of relations between the Government and ATC;(b) a study for the decentralization of ATC's managerial and accountingresponsibilities; (c) measures for reducing staff costs; (d) a technicalassistance and training program for improving financial management, accountingand data processing in computer centers in Pointe Noire and Brazzaville,partly financed from Bank loans; and (e) a tariff study. The full reorganiza-tion of ATC is expected to be effective by the end of 1989.

6.06 The main results expected from implementation of this plan are (a) amore decentralized organization of ATC in a close to privatized-like environ-ment; (b) focussing ATC's activity on the transport function; (c) improvedmanager's and staff morale and professional conscientiousness, by increased

- 30 -

delegation of responsibilities; and (d) a better and faster information systemincluding financial information. The quality and efficiency of ATC's opera-tions would be enhanced as a result of improved organization, increasedawareness of technical improvements, and staff will to increase ATC's produc-tivity.

Supervision of Realignment Construction

6.07 ATC, supported by its expatriate technical assistants and advisors,was not fully competent to manage civil works of the scope and complexity ofthe realignment. With hindsight, an experienced and independent entity shouldhave been placed in charge of the works from the beginning. The need for thiswas recognized by Bank supervision missions in 1979 and 1980, but the originalsupervision arrangements would have been difficult to change as they wereestablished in the contract documents of both ASHFO and the supervisoryconsultant. Furthermore, it appeared that ATC was reluctant to delegateauthority to its consultants. The result was that there was no one in chargeof the works on site who could speak or act authoritatively on behalf of ATC.

6.08 An experienced supervisory consultant with the authority to act forATC on technical matters, would have promptly negotiated the cost of works forwhich no unit prices existed in the ASHFO contract at the time the new itemsarose. The consultant would have kept accurate site records and would nothave waited for months or years until the contractor's negotiating positionwas strengthened because the work in question had already been started or evencompleted. Furthermore, while no engineer can fully predict what will beencountered in a civil engineering job involving large earth works and tunnelwork, it would not be unreasonable to expect that an experienced consultantwould have anticipated some of the soils and terrain conditions encounteredand would have included prices or other provision for such works in the biddocuments. All this put ATC and its technical and legal advisors at a greatdisadvantage in negotiating ASHFO's new prices and claims.

6.09 Moreover, concerning training, ATC did not take full advantage ofthe presence of the technical assistance consultant, and thus its staff didnot obtain the full benefits of the training offered. However, progress wasmade in the areas of the workshops, right-of-way maintenance, procurement andaccounting.

The Government

6.10 As shown in Table 6-0, the Government's record in complying with thecovenants for Credit 1047-COB, which was essentially a continuation ofLoan 1228-COB, was poor indeed. This was especially so during the later yearsof the project when cost overruns escalated, and ATC's operating performancedeteriorated.

6.11 While the Government made strenuous efforts to seek financing forthe realignment, it seemed reluctant to take action on matters which wouldhave enabled ATC to remain financially viable. It should have expedited theaward of timber concessions to develop traffic for the CFCO system and ap-proved badly needed tariff increases, but it only did so after considerablepressure from the Bank. The Government also frequently failed to meet itsfinancial obligations to ATC. In all these matters, the Government providedlittle support to ATC.

- 31-

6.12 Furthermore, the Government frequently interfered in ATC's manage-ment of its day-to-day affairs, particularly during 1982-84. The placing oflarge purchase orders for railway equipment without ATC's knowledge or approv-al is the most glaring example of this practice. It took a suspension of thecredit to persuade the Government to observe the credit conditions to which ithad agreed.

VII. ECONOMIC REEVALUATION

7.01 Because of the unanticipated high cost of the project and thefailure of freight traffic to expand much beyond that previously carried onthe old align&ent, the rate of return of the project is at best zero. Whileat appraisal, the rate of return was considered adequate (para 2.05), by thetime of negotiations, the ERR had become marginal (para 2.06) because ofhigher than expected cost of the construction contract. There were widelydifferent views at regards traffic growth (para 3.07). As it turned out,traffic remained stagnant or even decreased during project implementation insharp contrast to the optimistic growth forecasted at appraisal (paras 4.03and 4.14).

7.02 The Bank made repeated efforts to encourage the Government to openup new forestry areas to exploitation in order to increase freight traffic,but it was unsuccessful in this regard. Similarly, the Bank was relativelyunsuccessful in persuading the Government to increase railway tariffs on aregular basis. It only did so belatedly and reluctantly. Thus, revenuesrarely caught up with ever mounting costs.

7.03 Perhaps the key economic issue is whether the existing line shouldhave been improved rather than building the new line. This issue was consid-ered by the co-donors, some of whom favored the former, while the Bank sup-ported the latter alternative. The Bank's position was based on the assump-tion that the bridges and the Bamba Tunnel were not safe and that a collapseof this tunnel would close the line and block imports and exports to the Congoand neighboring countries. The concern over the condition of th, existingline (para 1.03) was obviously overstated in the SAR, as neither the bridgesnor the tunnel have failed, as was originally feared. While, undoubtedly, theexisting bridges and the tunnel could have been repaired, it is very doubtfulwhether the existing sharp curves and steep grades could have been improvedthroughout, as any changes in these standards would necessitate the buildingof a new alignment under conditions that would presumably have been just asdifficult as the realignment works. In hindsight, given the tremendous costoverrun of the realignment, and the eventual loss of the Gabon manganesetraffic which was not fully anticipated at the time of appraisal, improvementof the existing bridges and track with acceptance of higher operating costwould probably have been the better solution.

7.04 Consideration might have been given to building a road betweenPointe Noire and Brazzaville in place of the railway. However, at that time,in the light of heavy mineral traffic and the almost complete reliance in theCongo on rail and river modes of transport, it is understandable that such aproposal would not have been well received either by the Government or itsfinancial backers abroad.

7.05 There is no evidence as to whether an assessment was ever made ofthe enormous cost of the long delays in building the realignment. One very

- 32 -

rough estimate is that the realignment might have cost 20X less if it were notfor the delays and price increases beyond the time which the project mightraasonably have been expected to be completed. This estimate does not takeinto consideration the cost to ATC of having to prolong its use of the exist-ing line, and the return foregone in not being able to use the new line muchearlier.

VIII. THE ROLE OF THE BANK

8.01 The Bank's performance in preparing, seeking financing, and super-vising the project varied widely as discussed below.

Preparation

8.02 As pointed out in para 5.01, the detailed engineering was not basedon adequate field data. This, in turn, led to the preparation of cost esti-mates which were not well founded. A higher, and more realistic, project costestimate and the corresponding reduction in the economic rate ci return forthe realignment might well have led the Bank to abstain from financing theproject. As noted in paras 2.05 and 2.06, the cost, and thus, the justifica-tion, of the project were key issues at the time of appraisal andnegotiations.

8.03 As regards the execution of the work, certain Bank decisions exacer-bated the difficulties which arose on the execution of the work. The decisionto allow ATC to retain responsibility for the day-to-day management of work ofthis magnitude was ill-advised, and was to have the gravest consequences onits efficient execution. This arrangement resulted in the consultants beingplaced in an advisory role in a situation which called for a strong andindependent engineer on site. Failure to ensure proper supervision of thework led ATC to the brink of financial collapse.

Financing

8.04 For over a decade, the Bank took the lead in seeking financing forthe project, keeping co-donors informed of developments, and in cajoling anintransigent Government to meet its obligations under the various lendingagreements. This was a demanding and arduous task which must have heavilytaxed the staff assigned to the project. Not only were there frequent mis-sions to be made to the Congo, but also to co-donor conferences and to theheadquarters of most of the co-donors, to keep them informed and coordinatetheir financing to ensure a steady flow of funds to the project. Finally,there was an unusual amount of reporting and documentation to be done to keepnot only the Bank management informed, but the co-donors as well. The filesindicate that these tasks were well done. Timely and repeated intervention bythe Bank in the face of many obstacles is credited in good part for theproject's successful conclusion.

8.05 The Bank's role of "Chef de File" of the co-donors (para 2.07) wasnot made easier by the fact that each co-donor was an independent institutionwith its own rules and regulations. The Bank's leadership role was notnecessarily accepted by some co-donors who had been involved in the project atan earlier stage than the Bank. At least one co-donor placed a representativeon the project who, the contractor assumed, was the project coordinator. Thesheer number of co-donors greatly increased the Bank's task of coordinating

- 33 -

the financing of the work. This problem was also exacerbated by the desire ofsome co-donors to finance specific lots, and to tied procurement. Thus, whensevere cost overruns arose, an imbalance in the availability of funds occurredresulting in a shortage of funds for some lots, while funds for other lotswere still available. If possible, these types of financing arrangementsshould be avoided in future, and the funds pooled rather than allocated tospecific works.

Supervision

8.06 The Bank's supervision of the project was frequent and thorough.Thirty-five missions were sent out, including four visits by a soils special-ist. The problems were correctly identified. Despite the frequent staffrecommendations that an experienced and independent engineer be placed onsite, the Bank did not appear to have insisted forcefully enoueh on thecontract amendments to bring this change about. Admittedly, such changeswould have been difficult to accomplish when works were underway and organiza-tions were in place. The Bank, on the other hand, took appropriate action insuspending the credit when every effort to persuade the Government to meet itsobligations had failed.

8.07 It is not clear from the files why, after the appointment of theindependent consultant, the Bank considered engaging the services of yetanother firm to review the prices which had been negotiated with ASHFO. It isknown that site records were not adequate, which may have raised questions asto the reasonableness of the new prices. Towards the end of the project, KDFengaged an additional firm to check on costs. It would appear that, in thecase of consultants, the Bank and the co-donors did not always act in unison.

8.08 The Bank took an active role in persuading the Government to approveincreases in CFCO's tariffs and to minimize its interference in ATC'sday-to-day affairs, and displayed unremitting determination in forcing theGovernment to act on these matters. This was done at a time when the Bank'sleverage appeared small, but with the support of co-donors, the Bank's willprevailed.

8.09 From the beginning of the project, the Bank made sustained effortsto encourage the Government to develop and expand traffic of the CFCO. TheBank worked for years to encourage the development of the forestry industryand increase its output in order to bolster CFCO's revenues. This effort wascontinued under the River Transport Project (Credit 1179-COB).

IX. CONCLUSIONS AND RECOMIENDATIONS

9.01 The detailed engineering of the realignment was not soundly based.As a result, the cost estimates were far too low, contingencies were inade-quate, and the time allowed to execute the work was badly underestimated.

9.02 The decision to allow ATC to be fully responsible for the executionof the realignment component was a mistake which contributed much to the longdelay in completing the project and the enormous cost overruns. An indepen-dent entity assisted by experienced consultants should have been placed incharge of the day-to-day site operations with full authority to direct theworks. They should have been directly responsible under ATC for cost controland any negotiations with the contractor involving technical matters.

- 34 -

9.03 Because of the unanticipated high cost of the project and littlegrowth in freight traffic, the rate of return of the project is at best zero.

9.04 The Bank's performance was mixed. It accepted detailed engineeringwhich was not soundly based, and the resulting cost estimates were far toolow. More realistic cost estimates, including appropriate physical contingen-cy estimates, might have led the Bank to abstain from financing the project.On the other hand, the Bank performed well in seeking and obtainingco-financing, in coordinating the financing of the large number of co-donorsinvolved, and in keeping all concerned well informed of developments. TheBank's timely and repeated intervention in the face of many obstacles, includ-ing large and generally well staffed and focussed supervision missions, mustbe credited for the project's successful conclusion. Supervision missions andspecialists sent out by the Bank repeatedly identified technical and manage-ment problems, but the contractual arrangements made with the consortium andthe consultants were difficult, if not impossible, to amend.

9.05 The Government generally did not comply with the loan and creditcovenants requiring it to provide full financial support to ATC. Only afterconsiderable persuasion, did it take some steps to raise tariffs and developtimber traffic to help ATC. The result was that throughout most of the periodwhen works were under execution, ATC was far behind in paying for the work,which consequently weakened its negotiating position with the contractor, andran up costs.

9.06 The CFCO is a reasonably well run railway with relatively highdesign standards and with a much improved line between Pointe Noire andBrazzaville. These characteristics should enable it to compete on a cost andservice basis with railways in neighboring countries for regional traffic.The Government should make every effort to persuade these countries to givethe CFCO an opportunity to demonstrate that it can move regional traffic at afair price, thus bolstering its revenues and financial viability.

9.07 The important lessons to be learned from the Second Railway Projectare: (a) only experienced owners should be placed in charge of a major civilengineering job involving high risk work; (b) feasibility studies, design andsupervision should be entrusted to experienced consultants who are also giventhe full responsibility for the day-to-day direction of the work; (c) finaldesign should be based on thorough topographic and geological studies andsoils investigations; (d) if co-financing is involved, funds should be pooledand tied procurement should be avoided, and the role of the agency (in thiscase, the Bank) responsible for overall donor coordination should be clearlydefined and agreed upon by all co-donors; and (e) on any project involvingmajor and complex civil engineering works in which many co-donors are partici-pating, the Bank should insist on the appointment of a project coordinator,and if the Bank is selected, it should place a senior technical representativeon site for the duration of the works.

9.08 Because project implementation spanned over a decade, several of theabove lessons, including the importance of avoiding tied procurement, havealready been applied in many similar projects.

- 35-

Table 2-0



LOAN 1228-COB,

SPECIAL ACTION CREDIT 45-COB. AND CREDIT 1047-COB


Original and Final Financing Plan for CFCO Realignment(US$ Million)

FinalUS$

Contributors Original FCFA Equivalent

Bank and IDA 31.0 16.8 61.0Saudi Fund for Development (SFD) 20.0 13.8 51.0

Congo Government 17.8 24.9 92.0

Fonds Europden de Developpement (FED) 17.3 11.0 41.0 -

Kuwait Fund for Economic Development (KDF) 13.6 10.8 40.0

Canadian International Development Agency (CIDA) 12.7 4.5 16.0

African Development Bank (ADB) 12.4 5.0 18.0Fends d'Aide et de Cooperation (FAC) 11.1 4.8 17.0Arab Bank for Economic Development in Africa (BADEA) 10.0 4.2 15.0Caisse Centrale de Cooperation Economique (CCCE) 4.4 2.1 7.0Abu Dhabi Development Bank (ADDB) -- 4.0 14.3Organization of Petroleum Exporting Countries (OPEC) -- 2.9 10.7

Italy -- 2.6 9.0

Commercial Banks (Congo) -- 2.0 7.0

Total 150.3 107.4 399.0

The foreign costs for the other items of the 1974-78 Investment Plan were covered byadditional contributions from ADB, CCCE, FAC, FED, Government, and the Bank, augmentedby the participation of Compagnie Frangaise de Crddit pour l'Exportation (COFACE),Compagnie Miniere de 1'Ogooue (COMILOG), European Investment Bank (EIB), Congo banks,and ATC. The Bank loan of US$38.0 M consisted of US$31.0 M towards the CFCO realign-ment, US$3.8 M for ATC training facilities and technical assistance, US$0.2 M forretroactive financing of rail car bogies and radio equipment for the CFCO, and US$3.0 Mfor capitalization of interest on the loan.

/a According to FED, it originally contributed 34,865 million ECUs, together with anexceptional contribution of 5 million ECUs.

Source: Staff Appraisal Report and ATC's Completion Report of September 1987.

AF1IN, November 1988

-36-Table 3-1

PEOPLE'S REPU8LIC OF TIE C0NtOSECOND RAILAIY PROJECT

LOAN 1228-BsSPECIAL ACTION CREDIT 0.CB. AND CREDIT 1047-COB

PROJECT COMPLITON RPRT

Increases In Cost Esttmates durtnt Pro1ect Execution by Lot

''-'---------'----------------'-- (en millions FCFA)

Estimtton de Esttmtton de Estmatton de Estimation de Estimation deLot Designation des Lots juillet 1975 novembre 1977 fevrler 1980 juillet 1982 jsnvier 1984

1 & 2 Pourniture et tratte,eot des traverses 769,0 769,0 769,0 769,0 937,0

3 -Pourniture d'aPPareils ds vote 105,0 113,0 148,0 U5O,O 154,0

4 Fourniture d'attachea 612,0 637,0 674,0 684,0 789,0

5 Fourniture de rails 1 054,0 1 054,0 1 076,0 1 068,0 1 204,0

6 Travaux 4e g4nie civil et travaux annexes 27 231,0 36 001,0 64 386,6 83 580,0 85 722,0

7 Stgnaltsation 200,0 137,0 230,0 578,0 921,0

8 T4ldconmnications 312,0 312,0 730,0 1 328,0 1815,0

9 BDlttmnta et logements 300,0 100,0 822,0 1 985,0 3 719,0

tO Surveillmnce des travaux 1 785,0 1 785,0 4 098,0 5 250,0 6 209,0

U Ptste d'acces 430,0 422,0 422,0 422,0 426,0

12 Consultants -- -- 400,0 1 222,0

Horslots Intdrets aoratoires et Depenses API -- - -- 2 91S,0 3 902,0

TOTAL GENERAL 32 798,0 41 330,0 73 355,6 99 129,0 107 020,0

Sources AXC's Rapport d'Ach4vement du Projet, September 1987

November 1988

- 37 -Table 3-2


LOAN 1228-COBt

SPECIAL ACTION CREDIT 45-COB AND CREDIT 1047-COB


CFCO Realignment Costs(CFAF Billions)

Item 1976 Cost 1986 Cost

A. CIFCO Realignment -- Civil Works (Lot 6)Earthworks, Bridges, Structures 11.3 20.7Tunnels and Ventilation 6.1 20.0Track Laying and Welding 1.7 2.7

19.1 43.4

Price Escalation 8.5 34.6Indemnities, Claims, Etc. --- 7.4

Total 27.6 85.4

(in USS M)

B. CFCO Realignment -- All WorksCivil Works (Lot 6) 27.6 85.3Other Lots 5.9 16.8 aConsulting Fees --- 1.2 /bInterest on Arrears --- ---Job Site Protection --- 3.7 /c

Financial Charge --- 1.1 /d

Total 33.5 108.1

(in US$ M) 148.8 399.0

/a Including supervisory consultant's fees and local expenditures, ties, rails,turnouts, signalling, telecommunications, stations, and access roads.

/b Other consultants./c Paid by Government./d Unknown purpose. Apparently, it was to be paid by the Government to ASHFO.

SOURCE: Bank Supervision Report

AFlIN, November 1988

- 36 -Table 3-3

PEOPLE'S REPUBLIC OF THE CONGO - -

SECOND RAILWAY PROJECTLOAN 1228-CO0, SPECIAL ACTION CREDIT 45-COB

ANDCREDIT 1047-COB


Evolution de P'estimation du coOt global

.du raltignement du CFCO

_{i ~~~~~~~~~~~~* X~ ; ~- i..r ~. * -. t.* -

K0 K : < ~~~~~~~- 79 03 .

A-~~~~~~~~~~~~~~~~--

Source: Le Nouveau Congo -- 9FanAgence Transcongolaiae des Comunications

AF1IN, May 1988

- 39 Table 3-4


LOAN 1228-COB, SPECIAL ACTION CREDIT 45-COBAND

CREDIT 1047-COB


Evolution du dollar en FCFA

k_*~

°opy -3 19 low 1978 1919 1980 1981 1982 1983 1984

Source: Le Nouveau Congo -- OcdanAgence Transcongolaise des Communications

AF1IN, May 1988

SECCND RAALWAV PROJECT

46AECE !RASCOOLAISE DES Ctl8CATI0S (ATC'FRE1607 TRAFFIC iTD8 Woo

1973 1976 1977 1978 1q79 1q80 1qel 1982 lq3q 1984 193 1986 A 198-- ----- - - ---- ---- - -- - - ---- ---- ---- ---- --- ---- ---- ---- ---- -_ -- ---- ---- --- --- ---- ---- ---- -- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --- ---- _- ,--- ----- ---- - - ---- -_-,,-,----- ---

n ISA. ACTUAL aPSAL ACTUAL APAISAL ACTUAL APISAL ACTUAL APPRAISAL ACTUAL APRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL APAISAL ACTUAL APAISAL ACTUAL ACTUAL CLOSE ESTISE mmET

RIMA T SP T 9 97 197 198 296 238 419 1T7 663 172 80s 22^ 890 27' 982 253 108b 294 1200 301 1325 268 232 202 241OF *HICH 1Tl8 38 38 137 198 231 141 344 12S S82 124 725 130 BOB 183 905 120 1003 130 1120 142 1205 170 is3 1 19

8319 PORTS 32) 323 S0E 500 644 3 034 s07 1120 450 1447 0x 1566 562 1696 s38 1833 S90 1997 633 2157 527 436 419 475OF ItIC TINER 106 106 233 310 34 34U S3o 330 780 340 1100 331 1207 394 3325 311 1494 301 1596 363 1730 300 303 31 353

CFCO TOTAL 3773 3773 4092 3909 4681 3178 49n3 2972 290 3474 5218 3537 6095 2883 6393 2804 6811 293 7076 325b 7460 372 3362 3m38 3620OF MIHIC TINDER 3so 372 so 448 630 553 86 363 1130 483 1430 668 1J62 634 16J2 530 l181 437 191 505 2100 48 532 469 549

W NESE 21@0 21@1 2220 2252 2600 1883 2600 1702 260 2288 2600 2117 2700 149t 2600 S1l0 2600 18ZT 2600 2108 260 2362 2350 2280 2400

PRT OF POITE NOIRE 3376 3528 M38 3538 4138 s310 4405 3024 4793 363 10 370S I3s1 3181 5495 32b4 3644 3370 37%b 3M9 3900 32 4Ds3 387 393sOPF NIACH TIM 350 350 455 361 650 400 8 410 1030 400 14S0 56' 1362 S01 1682 468 l811 3 1931 4s9 2100 452 474 450 460

NANS E 2229 2200 223 2131 2600 1870 2600 1694 2600 2280 2600 2100 2600 1450 2600 Io3 2600 180 2600 2100 2600 2223 2300 23X 2350

CFCO TRAFFIC IN TON/RILONITERS HILLIOt

CFCD TOTl 907 907 954 951 116b 877 1257 832 1457 923 It3 969 1313 839 1293 812 1337 t0S 1424 904 2188 994 1006 962 945 NOF NN1aR Tl99fR 161 031 187 084 272 231 368 202 5IE 22e 890 275 748 263 8D0 219 876 t81 950 208 1028 220 239 213 24 "ASAESE 436 436 444 455 520 37? 520 340 520 458 520 431 320 299 520 307 520 363 320 422 320 476 470 47`3 48

-- ------------------------------------ --------- ------------------------------------------------------ ---- ---- -- ---- - - --------

- 41 -Table 4-1(b)


LOAN 1228-COB,SPECIAL ACTION CREDIT 45-COB, AND CREDIT 1047-COB


Agence Transcongolaise des Communications (ATC)CFCO Passenger Traffic

----- -- Appraisal ----------- --- Actuals

Year Numbers ('000) PR (million) Numbers PK

1975 1,600 213 1,664 223

1976 1,700 228 1,844 229

1977 1,810 244 1,903 260

1978 1,900 266 2,109 298

1979 1,955 274 1,899 286

1980 2,010 281 2,301 337

1981 2,064 289 2,33i 356

1982 2,121 /b 297 2,497 3901983 1,036 259 2,396 381

1984 1,060 265 2,550 408

1985 1,100 275 2,725 436

1986 1,128 282 2,850 4561987 --- --- 2,5_0 4001988 --- --- 2,313 370

1989 --- --- 2,313 7 370

1990 --- --- 2,313 - 380

/a PK Passenger Kilometers/b Assumed date for opening the Brazzaville/Pointe-Noire Road

Ic Estimated

AFlINNovember 21, 1988

- 42 - Table 4-2

COMY6 StCOID RAILWAV MOJECI 1. 1228-COBIC. 1047-C08l Page 1 of 2---. .... . , _ - ---- -......................... - --- _

AtMB I8RISCOMSAISE Dt COUWNICATIONS AlPC

cUSOIoAIEO INCWl STAICEINT 1975 - 19S0lILLIN CFAFI

-- -- -- -- -- -- - - .-- - - - - - - -- - - - - - - - - -- - - - - - - - - - - -- - - -- - - -- - - - - - - - - ._ -- -- -- - -- -- - -- -- -

I t, I 1 9 ? 6 I S 1 7 1 9 7 9 1 979 1 9 5 0 1 9 9 I

QWP19tl .AlUAL AMRAISAL ACILUAl APPRAISAl ACTUAL APPRISRL ACTUAL APPRAISAL ACTWUL APRAISAL ACTUAL APPRAISAL ACTIAL

$~ ~ ~ ~ ~ ~~ ~~~~~---- --- --- --- ------ ----- ----- -tt -~ --- ------ -------~~ ----- , -- - --- ------~ ----~---

KIV.I' IAR4SPnflq fill 1211 1465 1667 2572 IS24 3619 2110 5008 1932 6947 2392 7360 2743.7wlVEp pwIPrC .""' ?35 106 $44 439 548 571 405 105 439 944 539 1010 6t9.SMFI.1J 1103 1386 88Ub 9491 11213 9604 14170 10536 16162 12349 20385 15564 21937 1?3012910 l.1Q0 Y613 1049 2095 223n 2323 2672 2181 2970 2699 3373 3478 3512 *I?9.0tQIAI 994 10445 12495 13597 16519 14099 21032 15240 24743 17408 31649 21973 33827 24925.?

MIl6 EUSI

RIVFP IF96 sQ1 1510 13SS 1976 1543 2526 169I 3331 2002 3768 1939 4286 2504 4868 2506.9RIVER PollS IR7 217 254 233 312 229 373 239 426 280 497 312 557 425.3CFCU 6119 6141 6919 6947 7916 806 9315 7522 10507 9551 1153 10930 13520 12331.1PPl 8Ml 1415 11?5 1314 1411 1229 1680 977 1876 1356 2104 1912 2361 1991.1

9670 81'S 10224 10037 12165 11217 146t 10739 16577 12126 19730 15558 2130 17255.0

ol.^v IQ671; !1~~~"') b /t S 8 170 300 270 4797 327 5 33 8S I.Of)?? f&nI(CP.i9l~~ ;'I'f lab 116 192 28 31 0 7 49 37 65 353 829 491.6

O,.*r* ' , sc? 77I 9-' III 92 123 9l 129 1339 19 13S 211 139 253 182.9'C'" I "i 1070 197 1084 117e 1234 3277 3415 1967 2072 2689 2063 2756 2742.0

ON 4?L (9t 4r 391 541 442 566 462 934 45t 965 692 1046 603.0Wpt 1?11746 I '9 1914 1759 2128 1937 2272 2296 3576 298 4530 3247 4894 4020.3

"14" F199Wnt "I'v I lel 1585 2092 1715 28% :so; 5631 2272 4241 2266 4951 2857 5697.0 2998.5PT.- " Ot p: t.l Sb5 *75 453 320 502 177 622 41* 68 451 810.0 6.8.2

7168 112 6("1 803 9094 9300 10592 0937 12474 10U3 14542 12"3 16276.0 15073.9Pu rt'!hI -'nlP. II,! I96 1665 1705 1058 1671 2246 1439 2810 1t07 3069 2504 3407.0 2594.,

11'191 Ir'317b I"562 12139 11796 14293 13154 169I1 13025 20153 15114 23260 19905 26190 21215.3

fIl 1'P.!1IW6 PP.16110

RIVER IFRfISP'fRIS -603 -374 -627 -68 -234 -39 -12 -154 761 -334 3996 -465 1663 -254.8'ivER PtP015 -47 -74 -59 19 3 29 69 28 el 20 246 se 203.0 11.6tFcl -65 -5926 649 1460 2179 304 3579 3599 3689 1126 543 2571 56I 2309.3PORT fiF 90U3111 I4l1f 199 621? 194 390 219 652 426 742 60 092 304 974 105.0 1594.31lfg 526 -57 347 1001 2226 945 4063 2215 4590 M4 9389 3168 7637 3650.4

11131P3S! 'f!RP°!S

PI19R, IPtIPFIA I' 6b 97 129 649 145 339 134 76.7PIYEVf POIS 35 62 54 4 42 33 27 10.0fFf'* 525 732 1051 1644 2046 2026 1909 2927.9PI1: t2 71 70 72 68 63 60 102.7.A,fd tS6 '05 962 10 1304 1309 1913 1749 2301 2429 221 2551 2130 3111.3

*I"FF'l " I!'!i.7'' h | )'/4 -3 o. -161 616 1857 1529.0 -331.54!'SP"I1931 -92 -121 -St 21 39 213 181.0 1.6

-5°0 III 1128 1934 3642 3017 3752.0 -639.6PPlt . !." 13 208 154 -8 241 45.0 1493.6'I'!PW -f/lV -.t6 -635 931 922 -363 2348 467 2289 -135 6128 617 5501 533.1

IPAM "941P t1 op ;'If; 11'S! l46' -54 /35 -96 90o -85 950 -l55 to1o -357 -364 -596.0ROM PPlFff lOSS, .Is -86 2uu 935 1922 -44u 309 -94 32 -492 6326 253 5507 -62.9

-_- - - -- -- -- -- -- -- -- -- -- - -- - - - - -- -- -- -- ----

I DF1794 tAlIION OF PEIVAIIIA1I1 RESERVE 4300F'MCIATION OF EQuIFJW s8910? 600

4900FSS fRIItE OFF OF CFDITORS

1997 193 3989 199 O

-- I

- 43 -

LOW 8ttT kAILWAt PfOJiLI l.H.ILU 01QiEFT.lul4?LOB Tiblb 4-2Page 2 of 2

AMU T_U SAE OE CDE IUICATIO (IATC3

cWISIOATEO I(E STATEi1 1975 - Y1.0

0313±ION C6AFI

I 393l 19 9 4 1985 1986 1997 1998 I989 3990

OPIrnlRl ACilAL APPRAIS. ACTUAL RAISALACTUL APPRAISAL. ACTUAL RISAL ICTiPL CLOSE £91111618 810T11 PROJECTION FORECAST

LI34W1 FF H 'Wt 9659 ts 179.9 9544 315.1.3 10727 4431.1 11909 7628.3 12147 655.7 6347.5 6621.2 7219.1 77?4.4S- F1M 119Z IV. 1I09 805.3 14?2 1059.8 1589 - 1618*Fif, M49 7909(.4 2M7t2 30162.2 39359 22289.5 3M3 24264.5 31502 26092.2 25477.1 23931.7 22939.2 2314'0.0

,07? 516¶.6 4195 4-195.9 4574 5626.6 4759 7378.5 4319 6536.6 1379.3 5112.3 5190.0 5300.030121 MOlM.I 4aOiM 28216.? 47132 33407.0 50.479 37071.3 49586 39214.5 38202.9 36165.2 35349.3 36214.4

------------

PIYEP '3i5SP3ISR1 5523 Mtt6.3 6304 3565.1 7169 4291.6 8158 7792.1 9948 6230.4 6395.8 5341.4 594;.9 eS7E.9" 89 9 1ORIs3 5 523.0 129 622.9 932 615.1 952 1052

tfLo 15221 16175.8 36u65 19334.4 s8136 21335.7 20807 20567.7 23059 19340.0 36920.9 36003.3 15738.0 15633.0POIl 7644 2283.6 2969 2640.2 3327 3079.t b Ube 2695.9 4054 2512.9 3181.2 2332.3 2362.0 2362.0fOlAl ?4h9 22146.7 26967 26161.6 50343 29311.0 33585 33045.7 37113 27893.3 2637.9 23756.9 24047.9 24373.9

L93 l ON

PWIFi loANSPOolS 943 504.2 1064 388.6 1394 507.4 3353 1039.9 2096 2276.0 1738.3 1575.0 1660.9 1660.9S9FP PO3I5 253 193.2 153 399.5 253 468.7 263 474

1 'li 2725.9 2912 2252.7 3025 4621.1 3193 4869.4 6352 9329.0 6390.3 6354.0 6354.0 6354.0!"96 9'9.1 1133 562.1 1176 1062.2 1266 1093.2 2286 3843.8 3125.6 1130.0 1230.0 3230.0

"f!¢l o091 4392.4 5359 3402.9 5648 6659.4 6075 6990.5 33009 32249.9 9034.0 98B9.0 ?044.9 9044.9

P464M.0 U!.5 73te.o 3953.7 8362.0 4789.0 9513.0 8932.0 11044 8506.4 9104.1 6916.4 7608.8 9039.B5! EF- TS R89.0 116.2 992.0 922.4 3095.0 3003.8 t235.0 15263" 38I1026.0 18903.d 197?1.t! 21597.1 21841.0 25956.9 24000.0 25437.1 29233 27269.0 23011.0 22237.3 21892.0 21787.0p,r:: I'I3it ' F 11 N,FF P30l0 3250. t 99. 320M. 4)0.0 4340.8 4934A. 3777.3 6340 4356.7 4306.8 3442.3 3592.0 3592.0''1*1 133O 2b539.1 32226 29565.5 35791 35970.4 39660 38026.2 48121 40132.1 35421.9 32595.8 33092.8 33413.9

1l4I OPP" 1114 RFVEIrIE---- --_-_ -- --- --

RIVER It,lISPOIRS 2192 -490.6 2176 -200.4 2365 -35.9 2397 -3383.7 3303 -3920.7 . -1756.6 -295.2 -389.7 -265.4RIVER PORTS 304.0 26.0 311.0 -1?.1 387.0 -24.0 374.0 921fC1 7822 1999.7 7395 -2724.9 e518 -3667.3 8223 -1172.6 2291 -1176.8 2446.1 1594.6 1047.2 1353.0PORT OF POINT3E NOIRE 293.0 2114.9 96.0 3593.6 71.0 1485.9 -375.0 3401.4 -2021.0 2179.9 2071.5 2270.0 3599.0 1709.0101AL 1063 3650.0 9974 -349.8 113141 -2563.4 3039 1045.3 3465 -917.6 2781.0 359.4 2255.5 295.6

I3TERCSr CITIAROI

PRIIEP IPANtsPP!R 326 86.0 116 123.5 107 167.9 97 226.9 86 304.8 347.2 563.6 631.6 631.6RIVEP PORTS 22 8.0 39 7.3 12 32.6 to 8cFru 1757 3151.5 I3OO 3937.1 1460 SII5.O 1470 1166.9 1559 3395.7 3395.4 3191.0 3364.0 3547.0PPN 53 300.1 46 77.7 39 54.9 32 51.1 24 314.5 73.9 65.0 50.0 50.0I0111 39 R 352.2 1790 4145.6 3638 5313.3 3609 1444.8 3677 3835.0 3636.5 3$17.6 4045.6 4229.6

NF! 91Pt111 lIPFICITI

P399 ft lF193.0'I0 2066 -576.6 2060 -323.9 2259 -525.7 2300.0 -3430.6 3037 -2225.5 -3903.9 -95t.8 -3023.3 -897.0PI30P PORTS 292.Q 18.0 299.0 -24.4 375 -56.6 364.0 84.0(Ifi 60695.0 -1157.8 5795.0 -6662.0 7058 -9785.3 6753.0 -2339.4 732.0 -4572.5 -929.3 -1596.4 -2316.9 -2194.0'-. W?4"." '01t4.7 40.' 355.9 32.0 1430.9 -207.0 3350.3 2045 2065.4 I991.6 2205.0 1548.0 1658.0"iull! PRA', w'9 7.8 a 394.. -5494.4 9723 -743e.1 9210 -3W.,7 -212 -4732.6 -935.5 -249.2 -1790.3 -3433.0

0t1 Oi8ER96INS PROFItl 1OSSI 5.'.0 iw.5 1183.R W23'O.. 4,0.3 4o.0 3900.u 3400.0 3400.0MW fJFi:t titP SSI 9653 374.e 8194 -5231.9 9723 -752.9 9210 1811.0 -212 -645.3 3164.5 3653.8 309.9 1967.0

1' 333M'Pi0MIONF REv03ALUATI RES 4300DEPREEIAIiN 1 fE fE14tT S1B0 6I 0

49F00LES 0RI3110FF OF 088E1I09

- 44 -cmgmRIILIAY PROJECT (LN. 228e ICR.1047-C091 Table 4-3

ICE T ISE E MONICATIS (ATCI

BREaKOa OF momIc EIPERSES

(WILLION CFAFI

1 9 a 1982 1 9 8 3 1 9 8 4 1 9 B S 1 b 9 B 97 9 a B I S E 9 : 9 9APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL APPRAISAL ACTUAL CLOSE B.SMET FORECAST FORECAST

ESTIMATESTAFF --------------------- ----- s------ - - …

RIVER TRANSPORT 1487 1025.0 1670 1326.0 1876 1511.0 2108 1721.8 2368 1473.4 2661 !856.5 1426.8 1563.4 !K1.3 :491.8RIVER PORTS 194 178.3 219 237.0 * 24 233.9 275 233.1 30 261.4 347 374.8 279.0 211.0 212 7 21L.7CFCO 6995 5071.7 7747 6092.1 9704 6622.2 979 749.3 109oe 7640.3 1234! 7186.5 7449.9 6t90.0 655.0 6450.0PPm 1049 772.6 1179 987.5 1324 1021.8 1488 1129.7 l671 1114.6 1876 1130.0 944.3 1034.1 1C26.0 1(00.OTOTAL 9625 7047.6 10814 8642.6 12149 9388.9 13650 0583.9 15335 10489.7 17229 10547.9 20100.0 9708.5 919.2 014.5

RATERIALS, FUEL AND LUBRICANTRIVER TRAWSPORT 509 583.0 585 568.0 678 794.0 781 900 9s6RIVER PORTS 13.0 22.0 27.0 17.0CFCO 1695 1942 2148 2429 3145.5 2672 3143.2 2952 2277.6 2809.0 2781.0 2781.0 27el.0P98 117 132 154 175 197 222SUB TOTAL 2321 2659 2980 3385 3769 4160

RATERIALS: OTHERRIVER TRANSPORT 397 70.0 451 141.0 524 223.0 596 680 737RIVER PORTS los 44.0 122 60.0 142 79.0 165 66.0 191 210CFCO 2565 2991 31to 3408 4920.5 3665 3104.7 3958 936.6 2826.1 2315.0 2325.0 2325.:Pi' 291 325 36! 407 442 479su2B TOTAL 3358 3779 4139 4576 4986.5 497 3104.7 5384 936.6 2826.1

IATERIALS TOTALRIVER TRtAN T 906 653.0 1036 709.0 1202 1017.0 1377 1131.8 1580 2848.9 1723 1009.8 1528.9 1099.5 1:30Q7 1327.9RIVER PORTS 105 57.0 122 92.0 142 106.0 165 83.0 191 594.9 210 140.3 74.5 73.(. 81.0 81.0CFCO 4260 3978.5 4023 5413.6 5258 7269.5 5837 7966.0 6337 6247.9 6910 32!4.2 5635.1 5106.0 5106.0pW 408 414.4 457 473.3 517 571.0 582 69.9 639 292.2 701 94.4 558.0 574.7 600.0 620.0TOTAL 5679 5002.9 6439 6677.9 7119 8963.5 7161 90.7 9747 983.8 9544 4458.7 7796.5 6653.2 1411.7 71.4.8

SERVICESRIVER TRASPORT 165 405.0 2125 536.0 2433 396.0 2790 702.6 3190 1357.5 3447 1619.9 1557.5 1559.6 1083.: 2356.7RIVER PORTS 132 114.0 is5 98.0 175 147.0 201 154.0 233 66.7 255 294.0 734. !51.0 173.0 :73J.CFO 1225 2216.7 1394 3204.2 1529 3510.3 1694 3350.2 1963 4212.9 2056 6902.3 2360.8 3519.9 3520.0 3520.0-.-= 633 644.2 707 610.3 792 792.4 884 941.6 956 950.2 1040 1071.6 1536.6 643.3 662.0 662.0TOTAL 3855 3379.9 4367 4448.5 4929 493.7 5559 5148.4 6232 6597.2 6798 9986.7 6109.6 5974.0 6338.3 6711.7

HEADQUARTERSRIVER TRANSPORT 610 423.9 692 595.3 793 641.1 903 725.4 1030 951.5 1117 749.9 627.5 546.7 558.9 558.9RIVER PORTS 126 76.0 144 IV0.0 167 136.0 191 145.0 219 237.9 240 197.2 156.9 137.0 177.0 177.0CFCO 1140 1164.2 1273 1465.9 1374 1932.4 1506 2520.2 1620 2466.7 1750 1937.0 1375.1 557.2 557.0 557.2PII 271 160.5 301 210.5 336 265.0 373 307.4 402 329.9 435 2!6.9 142.3 80.2 90.0 80.0TOTAL 2147 1924.6 2420 2377.7 2610 2974.5 2973 3698.0 3271 3s95 3542 2990.0 2301.8 1321.1 1372.9 1173.1

TOTALSRIVER TRASPORT 4968 2506.9 523 3166.3 6304 3565.1 7169 4281.6 9159 6631.2 994B 5234.0 5140.7 4769.4 5304.2 535.2RIMVR PORTS 557 425.3 635 523 729 622.9 032 615.1 952 1160.9 1052 996.3 1245.1 572.0 643.7 643.7CFCO 13520 12331.1 15227 16175.9 16865 19334.4 lB916 21335.7 20907 20567.7 23059 19140 16820.9 16093.1 15739.0 15633.0PPM 12730 10990.0 14394 14491.6 16042 t7795.5 17981 3079.6 1921 2695.9 21762 2512.9 3181.2 2332.3 2362.0 2362.0RAND TOTAL 21306 17255.0 24029 22146.7 26967 26162.6 30143 29311.0 33e59 31045.7 37113 27983.2 26387.9 23756.9 24047.9 24373.9

I

Cknet Sacoud Railsaip PtrJectApce Trmnscouloalaige ds ConuIcatlios

Consolidated sources and pplication of funds (Currant CFAF eillianl

1975 1976 1977 (978 1979 1980 (981Aersaisal Attual Aupraisal ctual bpraiual ktul Apraisul kAtul Appraiual Actual Apraisal kctoal Appail. kctua

ras bnOPratiunFree vopeatinn renue 9990.0 10445.0 12485.0 13597.0 16519.0 14099.0 21032.0 15240.0 24743.0 17408.0 316".0 21973.0 33827.0 2492.7

Murtiino mtensen 8670.0 e773.0 10224.0 10037.0 12165.0 11217.0 1469.0 10739.0 16577.0 12126.0 18730.0 M159.0 21306.0 17M.O

Cash nnration frott aeratiou 1320.0 1672.0 2261.0 3560.0 4354.0 2882.0 6373.0 4501.0 8166.0 5282.0 12919.0 6415.0 12521.0 7670.7

Excaotional renue 460.0 -54.0 735.0 -96.0 900.0 -85.0 950.0 -551.0 1000.0 -351.0 -364.0 - O0

. lotat sh etion 1780.0 1618.0 2996.0 3464.0 5254.0 2797.0 7283.0 3950.0 9166.0 49.0 12919 6051.0 12521.0 M774.7

BerrwineuBilaterals lons tow spare parts 149.0 600.0 416.0 380.0 132.0 (666.0 112.0

St. loan for wtrtino capital 400O.0

Fot tnvestwute realionast 4718.0 2069.0 10941.0 7870.0 6168.0 60ILO

other 2766.0 2426.0 .3814.0 2907.0 3250.0 3201.0 594.0 1422.0 342.0 524.0 (420

Canitaliued interest loan 1220-C_8 (B5.0 340.0 176.0For other assst 100.0 -110.0 -385.0 800.0 -000

lotal Gerrmnna 2766.0 2675.0 3814.0 5395.0 3250.0 5S4.0 894.0 13083.0 0.0 9320.0 0.0 11558.0 0.0 ° .0

SubmdiesFnM mti'nvItn-t s rputtinment 2705.0 996.0 4224.0 4444.0 4717.0

lth,r 195.0 (529.0 300.0 414.0 670.0 318.0 965.0 285.0 900.0 625.0 19.0 208.0

%tblatn 195.0 1529.0 300.0 3119.0 670.0 1314.0 965.0 4509.0 800.0 625.0 0.0 4602.0 0.0 4925o

maw,nt antm,tl" Inmess 1533.0for dp4t cn,virtne 123.0

Intel S-,kidies 195.0 3062.0 300.0 3242.0 670.0 1314.0 SU5.0 450.0 800.0 625.0 0.0 4602.0 0.0 425.0

Mlm rfpr;'cq 4'41.0 7355.0 7110.0 15101.0 9174.0 9657.0 9142.0 21542.0 9966.0 14870.0 12919.0 22211.0 12521.0 ROUL?

(rmestmn(s realiunawnt 7503.0 3065.0 15165.0 7244.0 10729.0 1072S.0

Olbn 3?1b.0 4872.0 450.0 4466.0 4940.0 5145.0 2954.0 3674.0 4690.0 2662.0 4117.0 2143.0 6321.0 3S97.0

total liwestents 3716.0 4972.0 4500.0 11969.0 4940.0 8210.0 294.0 (9839.0 469.O 906. 0 4117.0 12972.0 6327.0 146260

Other assets 281.0 109.0 6o2.0 -152.0 56.0 398.0

Fuchemne loss lorofitiothr adiustants In

ired nssets'caoital acounts 122.0 -277.0 -770.0 -832.0 -525.0 -205.0 490.6

Debt ServicinoInterest, reationaent' 18.0 274.0 750.0 1021.0 2261.0 1409.0 216.0

Other 689.0 705.0 962.0 852.0 1304.0 1034.0 1913.0 998.0 2301.0 1408.0 1142.0 2130.0 88.0 4t

Sg,btotal interPst 689.0 705.0 962.0 870.0 1304.0 1300.0 1913.0 1748.0 2301.0 2429.0 2261.0 M5.0 2130.0 3157.0 *

Prinrmoal (297.0 (093.0 1307.0 2007.0 1321.0 2215.0 145.0 2267.0 1385.0 (867.0 2245.0 277.0 3001.0 2723.0

total Mp6t Sersvce 198.0 17(D.0 2269.0 2877.0 2625.0 3523.0 3398.0 4015.0 3686.0 4296.0 4506.o 5348.0 5131.0 608.0

Hll!ll nuel tls 5702.) 7063.A b769.0 14678.0 7565.0 11575.0 6352.0 21870.0 8376.0 13733.0 8623.0 18413.0 11459.0 21196.6 Ih,s,: tr1jam 'f1rit--ie -1 twEtn ' 'ptit vt1.*tii illo W4.U 4Z Il0.1 -11lol8, 17'OO 5 32e.0 15SO.0 It3A .4296.0 S7t 8 o l3.0 -tO7.9

W1,: kmi . o Ut n":1ih ',.r.r -645 0 -1197." 6IOA.1 -900.0 -1265.0 -477.0 344.0 -2395.0 3134.0 -2723.0 4724.0 -1586.0 S020.0 2212.0 '

'.,tHn b. -r:$'. AI r-nd ' r A I bi7. 0 '000.0 -(265.0 -477.0 344.0 -2395.0 3134.0 -2723.0 4724.0 -1586.0 9020.0 2212.0 10093.0 (604.1

Can3o SUtond Rati way ProjectaerEce lrmcnSCOfol A1ss deB COuMaIcatioos

Consolidated sorces and ePulication of funds (Ctrrent CFAF million)

*MfB2 ISBS ISS4 1985 1986 19B7 1999 M 1990tacraisal rtotual doraisal Actual Aeeratsal kctual Appraisal ctual Aoprdisal kctual Close estimate Buduet Projection Foercuat

: -h "pneratzliFro.* norttrnn !V-mtile 39721.0 30199.1 42200.0 29216.7 47132.0 33407.0 50479.0 39071.3 49586.O 39214.5 39202.9 36165.2 35348.3 36214.4Li..: ::.I - 2Y4 -? 9.4 24146.7 29b '.9) 26162.6 30143.0 29311.0 33595.0 31045.7 37113.0 27189.3 26397.9 23756.0 24047.9 243.9'i-h PrOinn frrn 'p,ritirnm IM.92.0 8042.4 35333.0 2054.1 i69B9.0 4096.0 69,94.10 025.6 12473.0 11331.2 1115.0 i2409.4 11300.4 11940.5t?.~'1 r :r.tr' v-,r "7.0 262.5 4323.8 2'10.7 409?.) 4000.0 3900.0 3400.0 3400.0lt.3il Lash ' rt113i. 0 93119.4 15333.0 2316.6 36939.0 9219.8 B6894.0 10236.3 12473.0 15419.5 15915.0 16309.4 14700.4 15240.5

F. rt *xins

%ltatf* 03. inrm fcr s rarts 1872.0 219B.0 1255.0St 13o3 *0?r Kfelin1 fnsi9l 3310.o 3060.0fer ir..stwalsn1 rpalianMent Ib146.0 20780.0 8672.0 108.bOthp: 5376.0 12100.0 11458.0 bO03.3 1101.0 2027.0 2292.0 2253.0Lapitalized irtprest loan 1220-rDtFor 0t0t6r assets

lotal BorrDoino 0.0 43394.0 0.0 38378.0 0.0 24445.0 0.0 11636.2 0.0 6111.9 1103.0 2027.0 2292.0 2253.0

SlssftdiesFor in-pslments reationnent 4274.0 5677.0 3783.0atllstr 1428.0 963.0Subfitat 0.0 4274.0 0.0 5677.0 0.0 5211.0 0.0 0.0 0.0 1772.0 2004.0 1969.0Anuimst otnersliq lonssesfrnt ebtI rtit non 5097.0

i-O. e- 3t$1im 0. 6 4i}4.0 0.e 5677.0 0.0 5211.0 0.0 5097.0 0.0 963.0 1772.0 2004.0 1969.0"1O llI"G, 5194Z.0 797.4 15333.0 46371.6 Ib69l9. 37975.9 16994.0 26969.5 12473.0 21530.4 11979.0 20107.4 18996.4 19462.5

In rBe:5^ !- r Si:-n rst zt420.o ib457.0 ~~~~~~~~11818.0. -. qES.! 99 g . 151Q7.7) 9S3Q. 14559.0 10172.0 13401.Q 9855.6 4954.0 5435.0 614.0 6041.0rt- !: m-. s .9;t?t9.0 97ett.;. 41564.0 9St0.0 26377.0 30172.0 19634.0 13401.0 8855.6 4954.0 5435.0 6)48.0 6041.0

t-rttz:-P zr-. rtrtX- t9~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6.2 9"r.4

t *...rnt atrniiAi %s ! -[V)100.3 17S0.9 4954.1 -4033.2 -904.2 4996.0 4900.0 4900.0 4900.0lot't SneriCloq

IotpreKt: reallonornt 1560.0 29S6.0 33I81.0St!Our 3959.0M 1491.! 178.0 122S.0 1618. 1060.0 16os.0 1444.8 e 6t7.O 3815.0subtotal In mPt l19t.0 385J.0t 12U.0 4182.0 WMJ8.0 5350.0 Ji0'.0 1444.B J677.0 3015.0 3bit. 3987.6 4045.6 4228. e9, I nr I a I I ?M-3 225 W.0 N844.' 74M0.0 2b40.0 5422.0 1401.0 3785.6 1440.0 614t.1 64J0).0 8"0.0 6431.0 4965.0lottl pbtl SerticP 4893.i 67?2.9 4622.0 7652.0 4258.0 10772.0 3090.0 5230.4 3117.0 9960.1 10016.5 625.6 10476.6 9393.6 'a

In! 11 11i l It 'cs 111459.1) 35340.? 1444.0 530925.9 13808.0 42103.1 1S2. .1 497?9.4 1518.09 l6I1.1 19lt?6.5 24960.6 21524.6 20134.6 T

rmn.w trnat -4 .r. a too wrkioii rautatl 413.-. 446.7 931.b -4554.3 3103.0 -4227.3 36312.0. 090.1 -4045.0 461. -199?.5 -853.2 -2529.2 -672.1 °

1t SIr . " o. z. ! .... . .... .Iie . < '4' !---t1.- ' 4' ":6 a4 i )b 1 *4 .1 i i 4$ -t.1 916' 3 9 5. 19 -15.329!z^zdFTt.::: - ¢ i s-flt ti ! S / @+5, li tti * ~~~~~~~. ¢'.'.t z e: -: *q* | * t .* {a!¢ l 113Z.t? -Ise5.3 70t'.43 X167.

cm.SMhD RIAILiM PROECT

Agate TransceInsplase desn Ctuicatis Atici

~~~~~....... .... _.____861t.C 86.1 ICerreot CFPV Iillitm)

-1975 -- --- - ---- ---- - - ----- --- - --- 1978- -------- - 9------1M------ ------- 81---

Appraisl Aktual Appraisal Actua ippraisl ktul Appra"ial Atul Appraisl Actual Appraiml Actul raisal Actual

ASSETS

Current Assets

Cash ioaicit) (1,4971 400 01,656 a8t (1,2M2 535 m 625 89* L,O :,77 m ,396 3,39 1,t16.2

Stares 1,S0 1,720 1,600 2,252 1,050 2,536 2,200 2,797 2,709 2,560 3,400 2,678 35,S9 3,1310.8

Receovablus 3,500 2,945 3,745 3,306 4,460 4,106 5,250 4,332 6,105 6,612 7,912 9,190 8,417 80,92.5

Sub-total 3,50t 5,065 3,689 6,119 5,010 7,177 7,740 7,744 9,775 10,212 15,039 13,272 15,755 13,6t9.5

Lni Curretnt Liabilztis

SupplirsCreditors 3,802 2,473 3,633 2,386 3,189 4,205 3,221 4,119 2,806 6,250 3,010 5,973 2,M S,899.&

Loar Tares 1,307 2,251 1,321 2,875 1,485 3,497 1,385 4,6 2,245 3,91 3,001 3,485 2,935 3,080.5

Sank Overdrafts 1,241 1,335 1,070 2,002 ,557 1,602 3,035.3

Sub-tatAl 5,109 5,965 4,954 6,596 4,674 9,572 4,606 10,467 5,051 11,798 6,019 t1,060 5,672 12,015.4

brhog Capital (t,606) M9000 0,265) t4771 344 (2,395) 3,134 (2,7M2 4,724 tl,58b) 9,020 2.21? 10,083 1,64.1

Fixd Assets

In csP 6rSos Value 62,96 65,104 68,0106 6,602 71,936 77,058 115,M 92,630 122,409 95,235 158,897 112,864 164,014 114,215.9

LKS Depreciation 28,219 28,085 30,133 29,538 32,260 32,336 5,535 37,586 56,111 42,236 60,641 50,730 65,525 2,574.3Iot Value 34,727 37,099 37,73 3,0134 39,675 44,7m 63,220 55,044 66,209 52,999 98,25t6 62,134 98,489 61,641.t

Vtws to Proqres 7,729 6,446 7,069 13,356 8,179 13,270 6,979 29,898 38,50 36,560 6,129 44,784 7,339 64,68.2

Sb-total 42,456 43,545 45,042 52,490 47,054 57,992 70,199 04,942 104,793 09,560 004',5 106,9108 lOS,t 126,324.0

Other Assets 454 563 I,175 1,023 1,079 1,477 3,878.1

TOtAL ASSETS 40,850 43,09 43,777 52,576 48,198 56,M n7,33 83,242 009,522 89,053 113,405 110,60 115,911 131,807

L048tLIES

Lon Capital 9,796 00,464 12,303 16,853 14,232 20,104 13,641 31,000 37,091 50,457 35,646 47,214 32,b45.0 56,1=2

EqlUOt9 Equasalee0t

Capital 13,260 13,260 03,260 1t,260 13,260 1t,260 13,260 23,888 13,260 23,808 13,26b 23,880 t3,260 13,200.0

Subsiesi for Ienttentst 3,937 5,221 4,237 8,340 4,907 9,654 5,872 04,163 14,522 14,163 14,522 1,764 14,522 29,447.3

Rtaylt:on ReAer"e 11,922 10,606 00,92 10,628 1,922 10,62 .3,585 11,220 33,505 10,078 33,5e5 18,017 33,55 28,44.5AcCutL lted Rtnults (tOsssi 606 1,005 090 t,840 913 3,047 3,061 2,963 5,350 2,471 11,478 2,724 1695 766.3

Subsidies against Ogeratiog losses 40t 1,533 1,195 1,655 2,095 (10 3,045 -- 4,045 - 4,045 - 4,04 -

Pron,s3ens fow Debt ob Rlsks 069 -- 869 -- EH 869069 -- 86S69 _- _6ewres 3,8.9 I.

Total Equity Equivalent 31,054 32,635 31,474 35,723 3,966 36,588 59,692 52,242 71,631 50,600 77,759 63,793 83,266 21,285.9 1f

TOAL LOASIUTIES 40,050 43,099 43,m 52,576 48,198 56,772 n,3M 03,242 109,522 89,053 113,405 110,607 1l5,911 13l,807.2

S1 P MilSIt FCT

mce TraoawKglaia. in tauoicatim (Alt)

kliac Sgost ttCurt CFlf tioiU )

----- 1992--- --- 1993-----es t984-------- -IS999--- -- 1996--- -1t-- -19- -1919- -"D1--apraisa ktAutl Araial Actual WrIsl Actua AWrial Actual Aprais Actual lme Estiuats Ddget Frojatims frKut

ASSETS

Currut Asuts

Castb Wict)t 6,485 2,55.2 6,922 2,269.3 9,B9S 909.6 t1m 943.0 6,715 1,051.3 996.3 1,132.9 1,604.7 93.Stores 4,400 3,63.6 4,900 5,459.8 5,300 7,984.2 5,900 9,351.7 6,3S0 9,372.6 9,500. 0 11,000.0 10,000.0 10,000.0ReMeiabIels 9,330 12,798.6 10,550 15,293.3 i,790 1I,901.9 12,620 18,979.0 12,396 19,429.0 21,000 14,000.0 9,000.0 9,000.0

Su-total 20,215 19,957.4 22,172 23,012.4 25,B6 24,695.6 30,192 2s,273.7 25,411 29,951.9 31,486.1 26,132.9 20,604.7 19,932.6

Lass Curast Liabilitias

SuppliersCreditors 3,t57 9,076.2 4,285 11,99N.4 6,057 14,014.5 6,772 19,240.2 6,076 17,530.1 18,600.0 16,600.0 15,000.0 14,000.0Loan Terms 2,942 4,044.6 2,640 7,713.7 1,481 10,969.6 1,440 5,325.1 1,400 5,024.9 7,000.0 6,400.0 5,000.0 5,000.0BDnt Overdrafts 3,785.8 5,813.9 6,443.3 5,349.1 3,319.3 3,900.0 2,000.0 2,000.0 3,900.0

Sub-total 6,4"9 16,906.6 6,925 25,515.9 7,530 31,426.4 5,212 28,914.4 7,476 25,874.3 29,500.0 25e000.0 22,000.0 22,000.0

torking Capital 13,716 2,050.9 15,247 12,503.51 19,348 36,730.93 21,910 (640.71 17,935 3,977.6 1,916.1 1,132.9 (1,395.3 (2,067.4)

Fixed Assets

In out gross Vaue 169,240 116,040.0 178,720 255,335.3 18@,B¢0 259,157.2 371,79 306,364.3 393,271 306,835.9 312,547.4 317,992.4 324,130.4 30,171.4Less DePrKcitiQo 70,606 55,734.1 75,965 102,220.0 81,613 109,968.6 163,90 116,121.2 174,809 125,300.3 134,334.3 143,173.3 152,219.2 163,263.1

at ValDe 98,634 60,305.9 102,755 153,315.3 107,137 150,189.6 207,987 199,243.1 28,462 191,535.6 178,21331 174,809.1 171,9122 t68,909.3larts tn Prgress 9,6179 ",88.0 8,979 120,314.9 8,52B t54,537.7 9,471 5,51.6 10,389 10,757.5 10,000.0 10,000.0 O1,00.O 10,000.0

Sub-total 07,313 151,123.9 311,734 273,430.1 115,716 304,726.3 216,458 194,824.7 219,851 192,293.1 18B,213.1 184,909.1 1B1,912.2 171,908.3 lOther Assets 4,17.2 372.8 172.7 172.8 172.8 172.8 172.8 172.9 172.3

ITPTL ASSETS 121,029 157,551.9 126,991.0 271,299.4 134,064 299,168.2 239,438.0 394,356.9 234,796 196,443.5 19,72.0 tu,114.9 390t689.7 M,013.7

L1A8ILITIES

Lon Capital 2n,7i0. 76,399.5 26,9.0 103,305.6 24,228 12t,427.1 22,747.0 56,9632 21,307.0 64,074.0 58,775.0 53,994.0 49,5.0 47,143.0

EqitY E4oivlut

Capital 33,260 13,260.0 13,260 13,260.0 1,260 13,260.0 13,260 13,260.0 13,260 U,260.0 13,260.0 13,260.0 13,260.0 13,260.0Subsidin fwr lntsets 34,52 33,520.3 24,52 ,945.4 14,522 39,57.9 14,522 14,339.9 14,522 13,790.9 14,143.9 15,3159 16,719.9 18,089.9Revolution ar'ws 33,95 28,644.4 33,395 315,135.B 33,358 110,764.3 130,230 306,451.2 130,230 102,152.0 97,992.0 93,552.0 89,252.0 84,952.0Accuulated Results (losses) 25,63 1,141.6 33,832 (4,090.93 43,555 (4,942.5) S2,765 (3,022.7) 52,553 (645.23 2,519.3 6,171.1 7,781.0 9,7480Subsidies against Opratigo lotse 4,045 - 4,045 - 4,045 - 4,045 - 4,0t5 - - - _ _ .4Provisicos for Bad Debt aid Rsb. 969 - 969 - 869 - 969 904.9 869 1,291.1 1,291.1 1,291.1 1,291.1 1,21.t &Rere 4,58.3 4,863.4 13, 4 5,56L 2,530.7 2,530.7 2,530.7 2,530.? 2,50.?

Total Equity Equisalent ",929 83,152.4 00,113 167,993.8 209,836 170,741.1 215,691 17,33.6 215,4n 132,35.5 131,597.0 132,120.9 13,834.? 19,101.1

1OTL LIA91LITIES 121,1 157,551.9 126,991 21,299.4 134,064 299,161.2 238,458 394,356.9 216,796 196,443.5 199,372.0 186,114.8 190,689.7 177,013.7 wS

a

v~~~~~~~~~~~~~~~~~~~~~~~~~~~.

gmW UBIUIY UJE

apoce TreIfOK polaO dni CauicatiOms IATC)

Selected Fioawils Ratios

------ IS75----- -IS7- ---- t977---- ----- 1518------- ----- 1~~~~~----- --- ------- 9E0-- -1E- -------

Appraisal ktul Awaisl ktutl Apprais ktul AW,raskal ktL Appratual kctul Appraial Atual Apaas1 ktual

Ratting Ratio 1)

Riw TraYtsport A 135 I22 97 92 it 59 5e

a 1S5 itt 12E 93 9S 93 92 75 n100 62 105 6A 91

River vPts A 57 7E To 66 57 5D 49

B 57 92 eS 68 71 66 65 59 6t 64 52 5E 55 t9

CFt3 A 76 82 69 66 61 56 56

8 76 83 7B 73 70 84 66 71 6U 69 5B 70 62 1t

PP9 A 53 70 62 63 61 60 L.) I

e 53 63 64 63 63 53 63 45 65 50 62 52 67 4c

Ctosolidated A 75 85 73 70 63 57 57 5

9 75 84 82 74 74 s0 70 70 67 70 59 71 U 13

peratiag Ratio

bnr Iramuport B 154 131 143 104 109 102 tO0 tO7 85 1I7 71 119 109

River Prts B 119 ISI 119 94 99 92 BE 93 E 95 74 84 79 98

CFCI B 101 98 90 eS 81 97 75 a5 77 86 71 83 74 7

998 B EB 87 90 El so 72 84 66 SB 67 90 72 97 12

Consolidated B 1O5 lto 97 E7 87 93 E1 B5 SI 8e 73 86 77 e5

DeOt to Equit Itusnsolidated) a 24/76 24/76 2B/72 321t6 30/70 35165 19181 S2 371/63 35t6U (3I 43157 31/69 (3) 4U157 281E2 (31 "57

-enagre Rt Fixed Astets in use B 34,750 35,937 38,350 38,117 38,824 41,928 51,447 t21 49,B (21 64,757 54,022 92,275 57,567 98,372 bl,7.b

Met Operating Renue (526) (575 347 1,B01 2,226 945 4,061 2,215 4,590 2,294 8,39 3,16 7,6?7 3,650.4

RAte of Rbturn o Avrqe aet

FaseJ Assets si use (2) At

-- --------- ------ a 11.5) tO.2) 0.9 4.7 5.7 2.3 7.9 4.4 7.1 (21 4.2 10.2 5.5 7.8 iS' 5.9 t

Corrent batio B 0.7 0.8 0.7 0.9 l.1 0.7 1.7 0.7 I.9 0.9 2.5 1.2 2.9 1.1 1Liquid Ratio B 0.4 0.6 0.4 0.6 0.7 0.5 1.2 0.5 I.4 0.6 l.9 1.0 2.1 O.'

111 LUme A bsed on Constant 1975 Rvenus and CostsLion 9: Based an Current Re noe and Costs

12) After revaluation of Fixd Assets13) Including ta1eover tr ATC of full Coat and Debt Srvice o CFt0 realignment

14) Mter tateOver by Borentent of debt service on infrastructure cponmot of realigneent.

5t maui FWET

hum YrafmosWIse ds slcatlums tUI

SelKtd filouoal ltih

--- 1992--- -InS--- -1994- -198- -1996- --- 19B7- -1 -199 t

Appraiul Actul pitsul Actual Aprdaul ktual A aisal etail Aprul ktual Cler Etiutb Bdgt ProjeAtUIs Fo st

_ _rm , 3.1 t

R^etraesport 4 59 57 57 5 54

11 U4 1 b66 95 && 97 N l6 97 U 99 9n

lm Parts A 49 4 U3 48

11 53 70 56 77 6 U 5 103 56 109 129 57 0 57

1110 a 55 54 53 51 51

1 59 7n h2 le0 62 9 U2 Is 65 is 6 a aFF A 60 6fi 62 61 9

a 66 43 70 55 To £t 70 7 74 3 50 41 46 45

tONS01idated a 56 51 54 53 5

9 b0 73 64 93 64 a 64 79 74 n1 69 66 a a

Cedpustl9 Rtle

Rivr lranwrt a 75 115 7 105 77 10 77 10 27 115 11 15 107 106

Rver Prts 0 n 96 76 102 74 102 76 130 17 105 110 110 15

CFMl 70 73 114 12 11t 74 l1s 92 l05 0 IS Is

PRM 3 61 97 67 99 74 to 5a 110 7 Go 0 69 U

Cesolidated B 7s Be 76 105 76 108 79 97 97 102 93 0 2

ebt to Eqty Itaselidated) 9 24nb via2 21179 3162 1U92 43157 101f0 l2b 29111 (4 91t 1t Z3167 SIIH 2917l 21M t7m

kerap"* t Fisted A ts to age 9 99,52 61918 100,6" 106,710 1t 1 to4,m U51,652 157,97 169,715. 208,224 l95,st 39,874 176,11 17,361 170,410

llt Opstint l i 10,611 36,50 9,914 13,48I 11,341 12,563.4) 1,919 (1,045.11 t,465 917.51 27.1 3U9.4 2,255.5 52,M5.

Rate of Return o Awerqte Noet

Fied kuts iro uu II9 10.9 6.0 9.9 (12.6) 10.9 1.71 6.9 121 (0.6) 0.7 (0.5O 0.2 2.0 .S 7.5

Curret Ratio a 3.2 1.1 3.2 0.9 3.4 0.6 L.7 1.0 3.4 1.1 l.l 1.0 0.9 0.9

Lquid Ratio t 2.5 0.9 2.5 0.6 2.7 0.3 3.0 0.7 2.6 L.9 0.7 0.6 0.5 0.5

its Uio At basd an Constat 1975 Reveu ad Cuts Usn hS Iased o utrrnt w ne and Ctests

2) iMter realuatioo of Fied hilts(3) Including taevfer by ATC of fell Cot ad Mbt lervice of UCD rullmt (4 After taleosm bh Eornnt of debt rvice on intrastrawe coqbet of raig,ot. e.

,,~~~~~~~~~~~~~~~~~~~~~~~~~~o

^ 51 Table 6-0Page 1 of 3

PEOPLES REPUBLIC OF THE CONGOSECOND RAIUMAY PROJECT. CREDIT 1041-COB


Comptiance with Covenants(as of March 31, 1985)

PROJECT AGREEMENTSect ionNumber Covenant Comnents

Covenants not Complied with

3.07 By December 31, 1982 ATC shall complete Not complied with. To coincide withthe first phase of the track rehabilita- completion of realignment between Loubomotion between Mount Belo and Brazzaville and Bilinga. This is linked to the rec-

ommendations of the investments studyfinanced under Credit 1179-COB.

4.02 (b) Furnish to IDA financtal statements and Not complied with due to delays tn theaudit report wtthin six months of year external processing of ATC's accountingend. tnformation by OCI, the national

data-procesasng agency. mhis delay Isexpected to be respected by ATC from 1985when tts own data processing departmentwill be fully operational.

4.03 ATC shall furnish a cost-based tariff Postponed to December 31, 1985 due tostudy to IDA by June 30, 1981, and sub- delay in implementatton of ATC's datasequently tmplement such tariffs. processtng facilittes ftnanced under the

River Transport Project, Credit 1179-COB.

4.04 ATC shall not incur any debt unless tte Not complited with. Complitance precludednet revenues are not less than 1.25 times by ATC's present loss-making situation.maximum debt service requirements.

4.05 ATC shall not, wtthout prior consultation Not complied with on a consistent basis.wtth IDA, undertake any investments ex-ceeding CFAF 400 million.

4.06 ATC shall forward to the Government (the Not complied with. Proposala not regu-Borrower) by July 31 each year, proposals larly submitted to Government by July 31for tariff increases for the following each year.year; such proposals to be also forwardedto IDA for comment.

4.07 ATC shall earn an annual rate of return Not complied with. For 1983, ATC had aof at least 51%, and matntain working ex- net operating deficit and its workingpense percentages of not more than 65% expenses amounted to 87% of operatingfrom 1982. revenues. A similar situation ts

expected for 1984.

4.08 ATC shall maintatn the following rattoswithin its working capital fromDecember 31, 1981:

(a) Accounts receivable: not more than Not complied wtth. Ratto was over 1/3 at1/6 gross recetpts for previous December 31, 1983.months;

(b) Inventortes: (i) diesel fuel lubri- Information not available.cants not more than half a month'ssupplies; (it) other materials notmore than 66% of previous years'supply requirements;

(c) Accounts payable: not more than 25% Not complied with. Percentage was 82% atannual operating expenses. December 31, 1983 and no improvement is

expected for 1984.

- 52 -

Table 6-0Page 2 of 3

Compliance with Covenants (con't)

PROJECT AGREEMENT (con't)

SectionNumber Covenant Comments

Covenants not Complied with (con't)

4.09 ATC shall maintain a positive working Not complied with since 1982.capital from December 31, 1980.

4.10 After January 1, 1984, ATC's overdraft Not complied with. At December 31, 1984,and borrowing facilities shall not exceed these amounted to CFAF 4.0 billion.CFAF 1 billion.

Covenants Partly Complied with

3.04 ATC shall by January 1, 1982, establish a Bidding has commenced and tenders havemaintenance brigade for the realignment. been received for equipment for the

brigade which is expected to be opera-tional at the commissioning of the re-alignment.

3.06 ATC shall (a) carry out its Action Plan; Partly complied with, See Annex 3.(b) take 811 measures necessary to meetagreed operating targets.

t

3.05 Until June 30, 1985, ATC shall maintain Extensive work was carried out in earlythe track between Bilinga and Loubomo in 1983 to rehabilitate the section of trackgood condition. after heavy rainfalls and consequent

landslides had caused multiplederailments.

4.01 ATC shall maintain satisfactory account- No material weakness disclosed by theing records. auditors.

4.02 ATC shall have its accounts audited by Audits are carried out on a regular basisauditors acceptable to the Association. in accordance with IFAC guidelines.

4.08 (i) ATC shall maintain within its working At December 31, 1983, cash held repre-capital cash in hand equivalent to at sented 1.6 months' requirements.least 1/12 annual personnel expenses.

.t I...

- 53 -Table 6-0Page 3 of 3

Compliance with Covenants (con't)

DEVELOPMENT CREDIT AGREEMENTSectionNumber Covenant Comments

Covenants not Complied with

4.01 To ensure that ATC shall maintain a posi- Not complied with since 1982.tive working capital.

4.03 The Government shall agree with ATC, not The Government promised payment of alllater than December 31, 1980, on a plan sums due in 1984 (Prime Minister's letterfor the settlement of all outstanding of April 26, 1984). However, no paymentaccounts in arrears. had been received by ATC at the date of

the mission'a visit (February 1985).

4.05 The Government shall take all measures Not complied witb. To be included asnecessary to enable ATC to complete the part of independent review of ATC's in-first phase of the rehabilitation program vestments program financed under 1179--COBbetween Mont Belo and Brazzaville. (River Transport Project).

4.06 The Government shall take all necessary Not complied with. A 3'.6% tariff in-measures to effect a tariff increase crease was, however, awarded on May 1,satisfactory to IDA as of January of each 1984 for all traffic other than passen-year. gers and essential goods. The Government

continues to refuse to authorize in-creases for passengers and priority goodstraffic.

Article IV, Other Covenants Covenants Complied with

4.01 The Government specifically undertakes:

(a) To provide ATC, or cause ATC to be Complied with but usually with a certainprovided with such funds as are delay.needed to service ATC's debt.

(b) To ensure that ATC maintains a gen- Complied with.eral manager assisted by a technicalgeneral manager for each of itsthree operating sections.

4.04 To enter into forestry agreements for the Complied with.development of new concessions nearOuesso in northern Congo.

Source: Bank Supervision Report dated July 11, 1984

AFIINNovember 21, 1988

- 54 -

Annex

Comments from Cofinanciers

- CIDA, Canadian International Development Agency, page 55

- EEC, European Economic Community, page 56

- Kuwait Fund for Arab Economic Development, page 57

- OPEC Fund, Organization of Petroleum Exporting Countries,page 58

55 Annex

l a CANADIAN INTEMRTIONAL8 O DEvELoPMN AGEltCY

-a 200 Promenade du PortageI Hull, Quebec, Canada ZIA 004

" , May 5, 1989

* *BUI, e Mr. Graham Donaldson

.3 1 * Division Chief} c~ I COperations Evaluation Department

World Bank1818 H Street, N.W.Washington, D.C., 20433USA

Dear Sir:

I thank you for the copy of the draft project completion report on^ I ^ S the railroad project in Congo.

- ' * It was a very complex program undertaken in a difficult political{ and technical context, and it is good to have a synthesis of the variousd ,. * aspects of this project.

viewsaof It is regretable that the report was written without obtaining theviews of the other aid agencies and the Consultant. This leaves in doubtthe objectivity of the statements or conclusions contained in the report.I have therefore transmitted your report to the Consultant and you willfind his Coamments attached to this letter.

°.~ * ' I.It is true, as stated in the report that the major problem was8 the0 4e S J overwhelming responsibility assigned to ATC which had neither theh g - experience nor the personnel to manage a project of this size, and which

IC, " furthermore often ignored the recomnendations of its advisors. This didI 6 Q not facilitate the task of the Consultant who was therefore in a awkwardposition. But this does not take away from the efficiency of the company,

'e , e and its so-called lack of experience is, in the view of the Agency experts,3 S a .~ s2 without grounds.

'While pondering on the report which could have had a less emphatic* .2 - tone, it is certain that the Bank played a coordination role in an

e 1.r " efficient manner, which contributed to the completion of this project, andi § @ for which we are grateful.

a t ] § Sincerely,

Pierre Racicot4 C4 ^Vice-President

Prancophone Africa

-56- Annex

COMMISSION DES COMMUNAUTES EUROPEENNES (LI) BRUXELLES. MAY 30 16:49

B-OF-ENWFROM: CCE 1362 JPGTO: 1 UORLDBSUBMISSION-TIME: 30/5/89 16/42/43SUBJECT: RAILUAYBODY-TYPE: POE-OF-ENV

a.1 UORLDB

OUREF : VIII/P/3 15542

FOR : GRAHAM DONALDSON, CHIEF OEDDLRE : CONGO : PROJECT COMPLETION REPORT SECOND RAILUAY PROJECTREF : YOUR LETTER OF 17/3199 AND TELEX 846 21877 OF 12/5/89

At " j !t UE HAVE READ DRAFT REPORT WITH INTEREST, BUT CANNOT HAKE¢5 . DETAILED OBSERVATIONS GIVEN NEED FOR EXTENSIVE VERIFICATION IN

ARCHIVES BACK OVER TUENTY YEARS. HEREUITH NEVERTHELESS ONEGENERAL COMMENT AND THREE MORE MINOR POINTS :

414M ol~ ° ° 1) THE REPORT CONCENTRATES ON THE ROLE OF THE IBRD IN REFERRDNG

HOUEVER TO SOME OF THE BANK'S PROBLEMS OF APPRAISAL (UNETHER* * * AS REGARDS TECHNICAL DIFFICULTIES, THE POTENTIAL FOR2 0 Z < INCREASING TIMBER EXPORTS, ATC MANAGEMENT COMPETENCE* OR

GOVERNMENT TARIFF POLICIES ... ): NO MENTION IS MADE OFo la V 3UARNINGS GIVEN TO THE BANK BY OTHER DONORS ON THESE ISSUES.

HOST NOTABLY, THE CHOICE OF A NEU TRACK CONSTRUCTION IN11111 | | PREFERENCE TO IMPROVEMENTS ON THE OLD TRACK, REFERRED TOBRIEFLY IN PARA 7.03, UAS MADE BY THE BANK DESPITE STRONERESERVATIONS OF THE FAC. CEC ETC.

to 3 o w 2) REGRETTABLY NO REFERENCE OR EVALUATION IS HADE OF THE ROLEHo A A A PLAYED BY THE CONSULTANT FINANCED BY EDF (M. PHILIPPART OF

* ] M ] TRANSURBCONSULT) UHO UAS RESPONSIBLE FOR THE SUPERVISION OFMORKS ON BEHALF OF THE DONORS GROUP.

a ̂ 0 ^ ^ 3) NO REFERENCE IS MADE TO THE CONGO-GABON AGREEMENT ON THEg U U | | TRANSPORT OF MANGANESE. TO UHAT EXTENT HAS THIS BEEN

RESPECTED?

* , . s 4) IN THE PRESENTATION OF THE FINANCING PLAN (PAGE 45). PLEASENOTE THAT THE TOTAL EDF CONTRIBUT'ION OF 34.865 MILLION ECU ISNOT INCLUSIVE OF THE EXCEPTIONAL EC CONTRIBUTION VIA AID OF-5MILLION ECU AGREED IN 1979 (POINT 3.18). NO OTHERCONTRIBUTIONS UERE HADE BY THE EDF NOR BY THE EID CONTRARY TOSTATEMENT ON PAGE 45.

J. DELORNEHEAD OF DIVISION CONEUR

21877 COMEU B248423 UORLDBANK

- 57 _

IWAI FUND FOM AM ECONOMK DEOPME

l0 MaRef KFIGenI6gc 6/_3y 1ay 4, 1989

OSZ

X Iwo Mr. Graham Donaldson, Chief& 8 Agriculture, Infrastructure,.6 and Ruman Resources Division'I,

I Operations Evaluation DepartmentV ^ The World Bank

* o 1818 H Street, NW.a A Washington, D.C. 20433

a BU.S.A.

Dear Mr. Donaldson:

Re : Congo - 8econd Railways Project3 -i Project Completion Report

We would like to thank you for your letter dated 173 U March, 1989 and the accompanying Project Completion Report. Our

*45 staff have reviewed the said report and found it to be mostM5 o interesting. However, they have informed me that they wish it

has given a more detailed analysis of the inadequate handling ofo project studies, design, technical supervision and contractingI t which they consider to be the primary cause of most of thea problems that beset the project. They have also informed me_ o that the record of the famous Brussels co-financiers meeting

would show that the Kuwait Fund requested the appointment of the£ r independent consultant (para 3.14), an action that led to theN 0 discovery and resolution of most of the technical problemsA facing the project at the time. It also led to the final

recognition of the enormus cost of completing the project.

X i We hope that the above brief points are helpful."4 500

v r ] With best regards,

tours sincerely,

Hishasm Al-WoqayanDirector of Operations

P. o. x f1 - Sid / Ckble: ALSUNDUK - KUWAT - J,&1: .M 1060 - &U.-n -

Tdx : 22 ALSUNDUK 22613 KFAED KT1 22890 KFAED KT ,as

WORLDBANK TMSS -58- Annex

ZCZC OERP0145 UBW6236OEDD1.TCP TF

* OEDDI *

B9.04.18.1026 6236 89.04.18.1026

197688 WORLDBANK

131734 FUND AREF.NO. 2609/18APR.18.89FROMN:OPECFUND VIENNATO:MR. GRAHAM DONALDSON, CHIEF, AGRICULTURE, INFRASTRUCTURE$AND HUMAN RESOURCES DIV., OPS EVALUATION DPT., UORLD BANK, UASH. DC.

PLSD TO ACKNOWLEDGE RECEIPT WITH THANKS OF URLET OF 17.3. ANDXXXXXXXXX DOCUMENT ATTACHED THERETO ON CFCO RAILUAY PROJECT INTHE CONGO. UR POST-EVALUATION OF THE PROJECT UAS REVIEUEJ VITHGREAT INTEREST AND UE WOULD APPRECAITE RECEIPT OF REPORT'S FINALVERSION IN DUE COURSE. WE HAVE NO COMMENTS ON CONTENTS OF URREPORT.

WITH BEST REGARDS

M. KIMOUNIDIRECTOR, AFRICA REGIONOPS MOTOPECFUND

131734 FUND A197688 UORLDBANK

=04181042

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_____GRAVEL OR EARTH ROADS

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k 6< j §,Mbi.d. § fiJ } ( \7 1 1 1 1 1 I4 ATC ICFCOI RAILWAY

_ -. DJy OTHER EXISTING RAILWAYS

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Po________ CFCO RAILWAY REAIGNMENT

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ANGOLA i#; ,2 ANOA*

ET8DAGIOME 19E

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