Document of

The World Bank

FOR OFFICIAL USE ONLY

LN . z4l63-CtO

Report No. 4964-JO

JORDAN

STAFF APPRAISAL REPORT OF

A ]MULTI-MODE TRANSPORT PROJECT

May 21, 1984

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

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CURRENCY EQUIVALENTS

Currency Unit = Jordanian-Dinar (JD)US$1 = JD 0.365JD 1 = US$2.74

FISCAL YEAR

January 1 - December 31

WEIGHTS AND MEASURES

1 meter (m) = 3.281 feet (ft)1 kilometer (km) = 0.621 mile (mi)1 kilogram (kg) = 2.205 pounds (lbs)1 metric ton (m ton) = 0.984 long ton

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

AASHTO - American Association of State Highways andTransportation Officials

ARC - Aqaba Railway CooperationBPR - Bureau of Public Roads (USA)CIF - Cost, Insurance ana FreightER - Economic ReturnFYBR - First Year Benefit RatioFYP - Five-Year PlanGE - General ElectricHJR - Hejaz-Jordan RailwayICB - International Competitive BiddingJFI - Jordan Fertilizer IndustriesJPMC - Jordan Phosphate Mining CompanyKfW - Kreditanstalt fur WiederaufbauMOF - Ministry of FinanceMOI - Ministry of InteriorMOT - Ministry of TransportMPW - Ministry of Public WorksNPC - National Planning CouncilNTS - National Transport StudyRoRo - Roll-on/Roll-offTEU - Twenty-feet Equivalent UnitTPC - The Ports CorporationTRRL - Transport and Road Research Laboratory (UK)

JORDAN FOR OMCIAL USE ONLY

STAFF APPRAISAL REPORT OF

A MULTI-MODE TRANSPORT PROJECT

Table of Contents

Page

I. THE TRANSPORT SECTOR 1

A. The Transport System . . . . . . . . . . . . . . . . . . . . 1B. Transport Planning, Policy and Coordination. . . . . . . . . 2C. Transport Sector Objectives and Issues . . . . . . . . . . . 3D. Previous Bank Involvement. . . . . . . . . . . . . . . . . . 5

II. HIGHWAYS, RAILWAYS AND PORT SUBSECTORS 7

A. Highways . . . . . . . . . . . . . . . . . . . . . . . . . . 7B. Railways . . . . . . . . . . . . . . . . . . . . . . . . . . 12C. Ports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

II. THE PROJECT 20

A. Background . . . . . . . . . . . . . . . . . . . . . . . . . 20B. Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 20C. Description . . . . . . . . . . . . . . . . . . . . . . . . 21D. Engineering . . . . . . . . . . . . . . . . . . . . . . . 24E. Cost Estimates and Financing . . . . . . . . . . . . . . . . 25F. The Loan, The Borrower and Beneficiaries . . . . . . . . . . 29G. Implementation . . . . . . . . . . . . . . . . . . . 29H. Procurement . . . . . . . . . . . . . . . . . . . . . . . 31I. Disbursements . . . . . . . . . . . . . . . . . . . . . . 33

IV. ECONOMIC EVALUATION 34

A. General. . . . . . . . . . . . . . . . .a . . . .a . . 34B. Project Costs and Benefits. . . . . . . . . . . . . . . . . 35C. Economic Return . . . . . . . . . . . .. . . . .. . .a . 36D. Project Risk . . . . . . . . . . . . . . . . . . . . . . . . 40E. Environmental Impact . . . . . . . . . . . . . . . . . . . . 40

V. FINANCIAL EVALUATION 41

A. General. . . . . . . . . . . . . . . . . . . . . . . . . . . 41B. Aqaba Railway Corporation (ARC). . . . . . . . . . . . . . . 41C. The Ports Corporation (TPC) . . . . . . . . . . . . . . . . 48

This report is prepared by Messrs. M.K. Ganguli (Transport Economist),M. R. Payne (Highway Engineer), D. Perfrement (Port Engineer),P. 0. Cheryan (Financial Analyst) and U. Marggraf (Railway Engineer)on the basis of an appraisal mission to Jordan during November/December 1983.

This dowent has a restrted distibution and may be used by recpients only in the perfonane ofthir offical duti Its contents may not otherwise be dbsosed without World Dank authorization.

Table of Contents- Continued)

Page

VI. AGREEMENTS REACHED AND RECOMMENDATIONS 51

ANNEXES

1. ARC Action Plan .. . . . . . . . . 542. Accounting Activities to be Introduced by ARC . . . . . . . 563. Highway Routine and Periodic Maintenance Activities . . . . 574. Railway Track Standards . . . . . . . . . . . . . .. . . . 595. ARC Training and Technical Assistance Programs . . . . . . 606. Highway Design Standards . . . . . . . . . . . . . . . . . 617. Related Documents and Data Available in the Project File. . 628. Assumptions regarding ARC's Sources and

Applications of Funds . . . . . . . . . . ....... 65

SUPPORTING TABLES

1. Expenditures on National Highway Network, 1966-82 ... . . 672. Primary and Secondary Highways Kilometrage. . . . . . . . . 683. Status of 1981-85 Highway Investment Plan . . . . . . . . . 694. Registered Vehicles, 1978-81 and 1982 . . . . . . . . . . . 705. Railway Operational Data and Targets. . . . . . . . . . . . 726. Railway Monthly Operating Statistics, 1982-83 . . . . . . . 737. Railway Traction and Rolling Stock. . . . . . . . . . . . . 748. Railway Operation Plan for Freight Wagons . . . . . . . . . 759. Railway Investment Plan, 1984-87 . . . . . . . . . . . . . 7610. Railway Investment Forecasts, 1984-87 . . . . . . . . . . . 7711. Railway Financial Sensitivity Analysis . . . . . . . . . . 7912. Port Traffic and Projections.. . . . . . . . . . 8013. Container Import Traffic through Aqaba Port . . . . . . . . 8114. Highway Component Implementation Schedule . . . . . . . . . 8215. Railway Component Implementation Schedule . . . . . . . . . 8316. Railway Items on which the Loan will be disbursed . . . . . 8417. Estimated Schedule of Disbursements . . . . . . . . . . . . 8518. ARC Projected Income Statements . . . . . . . . . . . . . . 8619. ARC Projected Statement of Sources and Application of Funds 8720. ARC Projected Balance Sheets. . . . . . . . . . . . . . . . 88

CHARTS

1. MPW Organization . . . . . . . . . . . . . . . . . . . . . . 892. MPW District Engineer Organization . . . . . . 903. ARC Organization . . .. . . . . . . . . . . . 914. TPC Organization . . . . . . . . . . . . . . . . . . . . . . 92

MAPS

IBRD 17523 - Multi-Mode Transport ProjectIBRD 18002 - Road Traffic Assignment: Wadi YutumrWadi 2

and Spur to Container PortIBRD 17937 - Aqaba Port Layout

JORDAN

STAFF APPRAISAL REPORT OF

A MULTI-MODE TRANSPORT PROJECT

I. THE TRANSPORT SECTOR

A. The Transport System

1.01 Jordan's transport system comprises highways, railways, ports andairports. The main transport corridor connects Amman with Syria to thenorth and with the Gulf of Aqaba to the south. The corridor is servedmainly by highway and to a partial extent by railway. The only seaport,Aqaba, is located at the northern tip of the Gulf of Aqaba, an arm of theRed Sea. Air transport serves the two main towns, Amman and Aqaba and issignificant primarily for international passenger traffic to and from Amman.

1.02 The major centers of population and domestic production are rela-tively close to each other, therefore, only limited domestic transport isrequired. The situation is quite different for imports, exports and tran-sit traffic, which generally involve long distances.

1.03 Highways are the main mode of transport. In general, the dif-fe-rnt sub-sectors have admirably adjusted in the recent past to unexpectedand significant expansions in traffic flows, including transit traffic toIraq. However, this success has been achieved at high cost. The majorportion of the transport network, particularly the main desert highway, hasshown clear signs of distress. While there are obvious transport pro-blems-highway pavement deterioration, axle load control, heavy truck con-gestion in Aqaba, and under-utilization of railway capacity-in the mainsub-sectors now, over the next few years pressures on all transport facili-ties will multiply as the planned expansions of major centers of productionare realized. Unless timely action is taken, bottlenecks on the country'smain export/import routes would prove a serious impediment to the movementof such key commodities as phosphate, potash, fertilizers, cement andgeneral cargo, which are vital for the economy of Jordan as well as itsneighboring countries.

1.04 The bulk of the transport sector investments during the 1980'swould be designed to cater to the mining, export and manufacturing indus-tries like potash, fertilizers, cement, etc. Roads and road transportwould continue to play a major role on the country's main export/importroutes particularly for the movement of general cargo, potash, cement andtransit traffic. Jordan's main export commodity is rock phosphate and

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priority is being given to increasing production. The bulk of this produc-tion is being planned to be moved from the mines by rail to Aqaba, takinginto account cost effectiveness, bulk handling potentialities and relativeefficiency in energy utilization of that mode. With these points in mind,there is urgent need to increase rail capacity.

1.05 During the last few years, Jordan experienced an unusual upsurgeof transit traffic through the port of Aqaba as a result of the outbreak ofhostilities in the Gulf. There has been substantial expansion of Aqabaport facilities to cope with the Iraqi transit traffic through foreignloans from the Iraqi Fund on attractive terms. The port facilities atAqaba are now adequate. Transport accounted for about 15-20% of Jordan'stotal investments during the last decade.

B. Transport Planning, Policy and Coordination

1.06 The responsibility for administering the transport system is dis-persed amongst a number of authorities: the Ministries of Transport (MOT),Public Works (MPW), and Interior (MOI), the National Planning Council (NPC)and to a lesser extent, other Government bodies such as the Ministry ofMunicipal and Rural Affairs and Environment. The MOT is responsible forthe railway, Aqaba port and aviation. The MPW is in charge of the nationaland rural road networks. Regulations concerning axle loads, vehicle weightlimits and dimension of vehicles are issued by the MPW with inputs from theMOI. The MOI prepares the regulations governing construction standards forvehicles and their operations. The responsibility for overall planning andcoordination rests with the MOT. The MOT commissioned a comprehensiveNational Transport Study (NTS) in 1982/83 to provide the basis for trans-port investment and a coordinated transport development strategy. TheDraft Final Report of this study prepared by the Consultants, DorschConsult, Hughes Economic Planning and Deutsche Eisenbahn Consulting GMBHwas presented to the Government in July 1983. Investments, in transport asin other sectors, are coordinated by the NPC.

1.07 Central and Local Traffic Committees have been coustituted toreview applications for the licensing of freight vehicle operators, bus andtaxi operators and to consider the services to be provided and the routesto be served. The Minister of Interior chairs the Central Traffic Commit-tee whose members are the Head of the Traffic Management department in theMOI, delegates from the MOT, MPW, Industry and Commerce, Municipal andRural Affairs and Environment and representatives from the operators. EachLocal Traffic Committee is chaired by a Governor with members who are theHead of Police in the Governorate, the Head of the District Office of theMPW in each Governorate and delegates from the Public Transport Corpora-tion, and the Ministry of Municipal and Rural Affairs and Environment. Allapplications are routed through the Local Traffic Committees. There islittle regulation of goods movements in the transport market; both therailway and the trucking industry are encouraged to set cost-based ratesand adopt market policies. The expanding road transport industry has

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attracted most of the traffic. At present the Aqaba Railway Corporation(ARC) is a single commodity (phosphate) freight carrier and has been ableto compete successfully for the transport of phosphate.

1.08 The 1971 Law of the MOT is specific in requiring the MOT to exer-cise full responsibility for coordinating all transport matters. Further-more, it states that in order to participate in general transport policyand to coordinate transport activities in Departments and Corporations, aHigher Council for Transport shall be established. So far, this Councilhas not been activated. A high level inter-ministerial coordinatingcommittee is urgently needed (including representatives of MOT, I'W, NPC)to consider and resolve problems relating to movement of key commodities,including phosphate. During loan negotiations, the Government undertook toestablish an inter-ministerial coordinating committee by the end of 1984.

C. Transport Sector Objectives and Issues

Objectives

1.09 The Government's primary objectives for the transport sector areto build the infrastructure needed to support the development taking placein other sectors of the economy, to enhance operational efficiency of thekey operating agencies through modernization, to conserve energy by promot-ing rail transport and to improve manpower planning. The Governmentattaches higthest priority to the improvement of international trade routescarrying suostantial quantities of phosphate, potash, fertilizers, cementand general cargo vital for the economy of Jordan and the neighboringcountries.

1.10 Tne proposed transport project would contribute to the three majorthemes of Jordan's development strategy: (a) promotion of internationaltrade including transit traffic; (b) modernization and technology transfer;and (c) manpower planning and institution building. Bottlenecks havealready developed on the principal trade routes in Jordan, their elimina-tion is of great urgency for the Government and the proposed project wouldensure significant improvements on international trade routes (paras. 2.11,2.13, 2.37 and 2.55). The project would also encourage technology transferparticularly for the railway through an Action Plan (Annex 1). The Bankhad already made an important impact on the ARC's operational efficiencyduring project preparation and ARC has attained record transport levels inmoving phosphate to Aqaba. Furthermore, the proposed project includestechnical assistance and training as an important component to improveinstitutional development and staff training, especially for lower levelworkers (paras. 3.08, 3.16, 3.18 and 3.19). Completion of civil worksenvisaged in the proposed project and other on-going works would meet mostof the urgent needs of international trade including transit traffic withinthe project period. However, assistance for institutional development,manpower planning and improved technology, would be needed even after thecompletion of the project.

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1.11 The Bank's role in developing the multi-mode transport project andproviding the needed lead in its financing is considered by the Governmentof Jordan as catalytic for obtaining recognition, support and financialassistance from other financing institutions. Based on the Bank's involve-ment in the preparation and appraisal of the project, the Government ofJordan has made significant progress towards identifying and attractingparallel co-financing (paras. 3.31 and Annex 8).

Issues

Diesel and Aviation Fuel Subsidy

1.12 The transport sector accounts for about 50% of the energy consump-tion of the country and uses about 75Z of the imported petroleum. Atpresent diesel oil and aviation fuel are subsidized. In 1979, the Govern-ment decided to phase pout the subsidies for petroleum products. Sincethen, domestic prices have been increased on six 1/ occasions by a totalof about 180%. Presently, the weighted average domestic price is above theweighted average border price for petroleum products. However, the lighterfuels are cross-subsidizing diesel and aviation fuel. The prices of dieseloil (US$230 per ton or about 80 cents per US gallon) and aviation fuel(US$248 per ton or about 90 cents per US gallon) covered about 75% and 80%of border prices respectively in early 1983. Currently, there is a slidein crude oil spot market prices and prices of several types of crude arebeing quoted $1 to $2 per barrel below official price. In the circumstan-ces, the prices of diesel and aviation fuel are now closer to the borderprices and the issue of subsidies on these products is now of marginalsignificance. Furthermore, the Government in the Memorandum of Under-standing with the Bank dated October 27, 1983, on a recent Energy Develop-ment Loan, has reaffirmed its intention to continue its review of domesticprices of petroleum products with the object of phasing out the subsidyover the medium term (1984-89).

Road User Charges

1.13 The estimated income in 1981 from road user charges amounted toabout US$70 million compared to a total expenditure of about US$60 millionon inter-urban roads for the same year. Thus it appears that overall roadtransport costs are being covered on a pay-as-you-go basis. However, atpresent the large fleet of heavily laden trucks does not pay adequately forthe wear it causes to the road network. If this situation is allowed tocontinue, undue advantage will accrue to heavy trucks which do not coverdirectly the costs of provision and operation of their infrastructure ascompared to the railway. The NTS has recommended that for freight vehicles,registration and licensing fees should be appropriately related to maximumgross vehicle weights in accordance with the vehicles' maximum permissible

1/ March, July 1979, February 1980, February and November 1981 andFebruary 1983.

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axle loads. Furthermore, the NTS has made many other related recommenda-tions for revising user charges such as annual license fees, import duties,diesel fuel prices, transit fees, etc. particularly for trucks, to coverthe resource costs of operations. However, users of service vehicles aremore sensitive to changes in charges than, in many cases, to the absolutelevel of charge. This is particularly relevant for the heavy transit traf-fic to Iraq, on which Jordan does not directly recover all costs from thespecific road users, but Iraq grants considerable economic privileges andfinancial assistance to Jordan in recognition of its goodwill. Thus formu-lation of charges requires political flexibility and commercial acumen toensure optimum benefits for Jordan. During loan negotiations, an under-standing was reached with the Government that it would appoint a workingparty by the end of 1984 to consider revenue measures recommended in theNTS and would initiate actions on selected measures by the end of March1985. This issue is one which cannot be resolved by a single action and itwill be necessary for the Bank to carry out continuous dialogue with theGovernment on the matter of road user charges.

Axle-load Control

1.14 Unregulated axle loads of the large fleet of heavy trucks haveseverely damaged the primary roads in Jordan. If highway overloadingremains unrestrained, the road network will continue to deteriorate rapidlyand total transport costs, including the cost of the infrastructure willremain unduly high. The Government has recently enacted a Bill limitingthe axle load to 13 tons per axle. The Government should ensure effectiveenforcement of current legislation regarding maximum permissible axleloads, gross vehicle weights for particular vehicular configurations andvehicle dimensions. In particular, the Ministries concerned should ensurethat the present permissible overloadings should be reduced in stages from25X in 1984 to no overloading by the end of 1986. Furthermore, in view ofthe relative damages done by the different types of vehicles, the Govern-ment aims to discourage the importation and use of 2-axle trucks andencourage the purchase of multi-axle vehicles by proper fiscal incentivesand more favorable licensing policy and will prepare an action plan to anagreed timetable. The enforcement of axle load policy and related matterswas discussed further with the Government during loan negotiations and atimed program of enforcement agreed (para. 2.10).

D. Previous Bank Involvement

1.15 The proposed project would be the second in the transport sectorand the first for rail/port development. In June 1971, the Associationapproved a Credit (262-JO) in the amount of US$6.0 million equivalent, toassist in the construction of a highway from Amman to Zarqa (18 km) and tofinance related consultancy services, the purchase of road maintenanceequipment and an urban transport study of Amman. The credit was closed andfully disbursed in December 1974. The road construction component was com-pleted two years later than expected with a 30% cost overrun.

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1.16 In general, the main problems encountered in the project wereinefficiency of the contractor (a British/Jordanian joint venture), andslowness in arranging for the clearing of obstructions (buildings and mili-tary installation6) and relocation of utilities from the right-of-way. Theland acquisition related difficulties were not unique to this project(Audit Report No. 1762 dated October 18, 1977) and several other projectsinvolving road construction passing through densely populated areas experi-enced similar problems. The delays in obtaining the right-of-way, togetherwith delays in contractor mobilization because of a closure of theJordanian/Syrian border, gave rise to a substantial claim being paid to thecontractor; this claim was the main reason for the cost overrun. In thecurrently proposed transport project, land acquisition problems will notarise as all the rights-of-way are over Government-owned land.

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II. HIGHWAYS, RAILWAYS AND PORT SUBSECTORS

A. Highways

Organization

2.01 The MPW is responsible for the constructon and maintenance ofroads. The Under-Secretary for Public Works is the senior coordinatingofficial to whom the Director of Highways reports (Chart 1). The highwaysheadquarters is adequately staffed with some positions filled by individualJordanian consultants.

2.02 The MPW engineering districts correspond to the eight governoratesinto which Jordan is divided for administration purposes; three of thesegovernorates are on the west bank of the Jordan river (Map 17523). Each isunder the control of a District Engineer who is responsible for all road-work activities in his governorate (Chart 2). The district organizationsneed reinforcement for the purposes of more effective road maintenance(paras. 2.14-2.19, 3.05-3.07).

Planning

2.03 Highway planning is a function of the NPC which evaluates andranks planning proposals mainly from MPW, MOT, MOI and from city adminis-trations. MPW undertakes feasibility studies through consultants togenerate the basis for proposals for investment decisions for highwaydevelopment.

Engineering

2.04 The Director of Major Roads in MPW is responsible for executingroad development projects; his headquarters organization is adequatelystaffed with engineers to fulfill this function, although consultants, bothlocal and expatriate, are often employed when engineering design and con-struction supervision requirements exceed the Directorate's capacity.

2.05 Highway design standards in Jordan were originally recommended in1965 by the then U.S. Bureau of Public Roads (BPR) (now Federal HighwayAdministration - FHWA) and are satisfactory. Pavement design is based onAmerican Association of State Highway and Transport Officials (AASHTO)standards.

Construction

2.06 Highway construction is normally executed under unit price con-tracts awarded after competitive bidding. Construction activities haveincreased significantly from 1975 onwards (Table 1). The domestic contract-ing industry has expanded considerably since the First Highway Projectbegan in 1971. There are now 18 local contractors in the top class for

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works valued up to US$33 million and 3 local contractors in the secondclass. The majority of large highway construction contracts are undertakenby national contractors in joint venture with expatriate firms. Large con-struction projects are controlled by a Projects Department of MPW which wasset up in 1982.

Network

2.07 MPW is responsible for Jordan's national highway network (Table 2)which for the East Bank now comprises 2,004 km of paved primary highways(29Z of total network) and 867 km of paved secondary highways (12Z).Village and feeder roads, 2,304 km paved (33Z) and 1,775 km unpaved (26Z)have recently been transferred from the jurisdiction of the MOI to MPW.

2.08 The paved highway networks has expanded by about 2% per year since1970 (Table 2). Major emphasis has been given to improvement of the exist-ing network by reconstruction and pavement strengthening, in particular,the main north/south route from the Syrian Border at Ramtha via Amman andMa'an to Aqaba Port on the Red Sea. A total of about 520 km (26%) of theprimary network is under reconstruction under the 1981-85 Five-Year Planand most was completed by the end of 1983. About 460 km (23%) of similarworks is planned for completion by 1986.

2.09 The highway system, given the improvements underway and planned,adequately connects all populated areas of the country. Paved connectionsexist to Syria, Iraq and Saudi Arabia. A special purpose road has beencompleted from Aqaba to Safi, where a potash industry has been established(see Map IBRD 17523).

2.10 Regulations and legislation governing maximum dimensions and axleloading of vehicles have not been enforced effectively and the resultantsevere road damage has necessitated a major reinvestment in highway infra-structure (para. 2.15). The 1983 legislation specifying a maximum singleaxle load of 13 tonnes has been amended by Government in response to pres-sure from the trucking industry to permit 25%, 15% and 10% above themaximum respectively during the next three years and no overloading fromSeptember 1, 1986. Actions are to be taken so that the weighing stationsat Jordan's international borders, the phosphate mines at Ruseifa, El Abyadand El Hassa and at Aqaba Port would be utilized rigorously to enforce thelegislation and protect the highway system from accelerated deterioration.During loan negotiations, an assurance was obtained from the Governmentthat it will enforce and continue to enforce regulations controlling vehicledimensions and axle loads and phase out overloading before September 1, 1986,(para. 6.01(iii)).

Investment Plan

2.11 The 1981-85 highway investment plan of 33 items, including theproject highway construction component, was estimated to cost aboutJD 197 million (US$540 million equivalent) and has the general objective of

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meeting urgent transport requirements and public safety by the construction/reconstruction/improvement of 2,240 km (600 km primary, 240 km secondaryand 1,400 km rural and agricultural roads) of the 1980 network. The high-way investment plan has adopted a balanced approach towards the developmentof international routes connecting neighboring Arab countries, the primarynetwork serving mining and export oriented industries and agriculturalroads in and around the Jordan valley region. The highway investment planis sound and comprehensive.

2.12 Sources of finance for the 1981-85 highway investment plan areshown below:

Table 2.1: Source of Finance for Righway Investment Plan, 1981-85(JD million)

i81 1982 1983 1984 1985 Total

General Budget 10.7 26.3 27.9 28.4 22.9 116.2General Bulget andForeign Loans - - - 3.5 7.5 11.0

Municipal Resourcesand Loans - 0.2 0.9 1.0 0.4 2.5

Foreign Loans 3.7 16.7 23.4 16.4 7.3 67.5

Total ( JD million) 14.4 43.2 52.2 49.3 38.1 197.2

(USt million) 39.5 118.4 143.0 135.1 104.4 540.4

2.13 Implementation of the 1981-85 highway investment plan is wellunderway and by the end of the plan period it is estimated that most of themajor projects will have been completed or be under construction (Table 3)and the spillover to the next plan period will be about 15-20X, whichincludes the project highway construction component.

Maintenance

2.14 The MPW undertakes routine and some periodic highway maintenanceworks by force account through the District organizations; other periodicmaintenance such as asphalt overlays and some resurfacing is carried out bycontract. Present day levels of maintenance have become ineffectual and,recognizing the resultant deterioration of the network, the NPW has begunto improve all aspects of highway maintenance.

2.15 The maintenance efforts made by the MPW through its District opera-tions have been unable to cope with the demands. Over a short time, heavy,often overloaded trucks, have severely damaged highway pavements andshoulders to the extent that maintenance efforts are totally inadequate tosustain the service level of the highways at or near their original

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condition. Highway damage has been so severe that the Government hasembarked on major capital expenditures to reconstruct/rehabilitate largesections of the highway network (paras. 2.11, 2.13 and Table 1).

2.16 District maintenance operations need to be improved and expandedto cope with the increasing demands arising from heavy traffic. Shortagesof competent equipment operators must be alleviated if maintenance effortsare to be realistic and efficient. Training methods must be reinforced toprovide the number of maintenance staff required.

2.17 Maintenance equipment used by the District Engineers was origin-ally obtained on a hire basis from the centralized plant and equipment poolin Amman (Wadi Sir), where good workshop facilities used to exist, havingbeen constructed in the late 1950's/early 1960's with the advice of theU.S. Bureau of Public Roads (BPR) under USAID financing . Then, the policywas to undertake all major repairs and overhauls in Amman and reissue recom-missioned equipment to the District Engineers; now, the central workshopsin Amman have become so rundown that they only handle some minor repairs tolight vehicles and act as a dumping ground for unserviceable earthmovingequipment and heavy trucks, which are beyond the District Engineers' capa-bilities to repair. The reasons for the deterioration of the workshopservices in Amman are poor management, insufficient and underpaid staff andbudget constraints, which over time have brought the mechanical engineeringservices to a virtual standstill.

2.18 Effectiveness of highway maintenance efforts, especially the avail-ability of adequate, serviceable maintenance equipment and plant to carrythem out, have followed a "sawtooth" pattern over the last two decades withpeaks arising during 1953-1965 and again during 1972, both with USAIDparticipation.

2.19 The Government and MPW recognize the urgent need to revitalizehighway maintenance activities and are taking steps towards that goal by(a) utilizing bilateral technical assistance from USA, U.K., and Sweden toplan, manage and operate a highway maintenance system based on the recom-mendations of the 1983 NTS for a strategy aimed at urgent reintroduction ofefficient highway maintenance; and (b) providing 25% government participa-tion in a commercial plant-hire corporation that is being set up and wouldlease to MPW equipment and plant for highway maintenance purposes. Duringloan negotiations, understandings were reached with the Government that;

(a) it would discuss and review with the Bank the maintenancesystem which would be derived with bilateral technicalassistance and the arrangements for ensuring the avail-ability of adequate equipment and financing for theplanned maintenance operations; and

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(b) it would submit to the Bank a plan for improving thefunctioning of the plant-hire corporation and implementthe plan according to a timetable agreed with the Bank.

Traffic and Road Transport

2.20 The conflict in the northern Gulf, and the subsequent closing ofthe ports there, has diverted traffic destined for Iraq via Basra to AqabaPort and then overland by road to Iraq. This has caused a big surge intraffic volumes along the Aqaba-Amman-Iraq highway corridor. Road haulageto Iraq amounted to about 4.2 million tonnes in 1982. In 1982, the highesttraffic flows were on the access roads to Amman (6,000 to 12,000 vehiclesper day) and the main road via Jerash and Ramtha to the Syria border (5,000to 6,000 vehicles per day). International traffic to Syria, Iraq and SaudiArabia were 1,800, 1,300 and 500 vehicles per day, respectively. In 1982,traffic along the 335 km long Aqaba-Amman highway was about 2,500 vehiclesper day, of which 70% were heavy trucks. Secondary roads typically carryabout 500-800 vehicles per day.

2.21 Jordan's trucking industry consists of numerous small companies,typically with fleets of up to ten vehicles and a large number of individualoperators. Ninety (90) percent of freight vehicles are privately owned andabout 60% operate for hire and reward. Two major companies, in which theGovernment has a half share, handle transit movements to Iraq and Syria;these are the Iraqi-Jordanian Land Transport Company (IJLTC) and theJordanian-Syria Land Transport Company (JOSYCO), both of which are grantedby the Government immunity from import duties and annual license fees fortheir vehicle fleets, which number 750 and 350, respectively. IJLTCoperates by leasing trucks from two German suppliers under an agreementwhich includes driving staff and mechanical maintenance; JOSYCO vehiclesare operated directly by the company. The Arab Potash Company (APC) ownsa puirpose-built fleet of 9 axle trucks and trailers (gross vehicle weight75 tonnes; payload 52 tonnes) for the haulage of potash from Safi to theJordan Fertilizer Industry Co. Ltd (JFI) at Wadi 2.

2.22 The domestic vehicle fleet has grown at about 15% per year during1972-82 to reach 177,849 vehicles. Annual growth rates during the period1978-81 were 21% for trucks and buses and 16% for passenger cars and lightvehicles (Table 4). Trucks form 24% of the domestic vehicle stock and pas-senger cars and taxis 70%.

Budgets, Accounts and Audit

2.23 MPW prepares annual budgets for its recurrent and capital expendi-tures, which are consolidated with those of other ministries by the Ministryof Finance (MOF) and are approved first by the Cabinet and then by Par-liament. The approved budget is closely controlled by MPW and the budgetdepartment of MOF through monthly statements of budget performance and cashposition. MOF establishes disbursement ceilings for each ministry for eachmonth on the basis of the liquidity position of the government.

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2.24 A MOF representative is located in the MPW finance department andchecks all financial certificates and vouchers. The Accounting Council,which reports directly to Parliament, conducts audits through auditingpersonnel permanently assigned to each ministry. A joint auditing com-mittee from the Accounting Council and MOF performs the annual audit of theactual expenditures and checks all cash transactions. The above budgetingand accounting systems and auditing arrangements are satisfactory to theBank.

B. Railways

Network

2.25 Jordan's railway system is based on the Hejaz Railway, which wasconstructed between 1900 and 1904. Today, the section Syrian border-Amman-El Qasr (94 km) is operated by the Hejaz Jordan Railway (HJR), whilethe sections Amman-El Abyad (about 130 km), Batn El Ghul-Saudi Arabianborder (about 68 km) and the branch line Ma'an-Ras En Naqb (about 40 km)have been out of operation since 1973. All major fixed assets of the HJRdate back to the early part of the century and are fully depreciatedalthough still allowing limited operations. Two passenger trains and twofreight trains run weekly with the help of about 20 staff, 4 locomotivesand a limited number of coaches and wagons. The present level of low keyoperations of HJR is of little economic and financial significance for thecountry and the main source of income for the HJR is the rent paid by theARC for the section of the Hejaz Railway over which it operates. HJR hasno plans for expansion within the project period.

2.26 This report deals only with the ARC, which operates on the oldHejaz Railway over 294 km of single track between El Abyad and Batn El Ghuland on the new line Batn El Chul-Aqaba (see Map 17523). Two branch linesconnect the phosphate mines with the main line; these are El Abyad (3.4 km),built in 1981/82, and El Hassa (5.1 km), built in 1975. All the lines witha gauge of 1,050 mm have been designed and built for a 16-tonne axle load.Temporary and permanent speed restrictions, mainly imposed due to sharpcurvature and bad track conditions, limit the efficient use of the ARC line.

Organization

2.27 The Corporation was established under the ARC Law of 1972. Pre-sently it is only operated to haul phosphate from the mines at El Abyad andEl Hassa to Aqaba Port. ARC is governed by a Board of Directors consistingof seven members under the chairmanship of the Minister of Transport. Theorganization is shown in Chart 3.

Role of the Railways

2.28 Operating since 1975, the ARC is still an infant railway with anumber of problems. While traction and rolling stock are relatively new,ARC now faces necessary major overhauls of high priority. Recruiting staff

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became more difficult when the ARC headquarters were moved from Amman toMa'an in 1980. Little was done in the past to train staff because therailway was facing the problem that employees who received training andacquired skills left the railway and went abroad or to the private sectorin Jordan, which both offer more lucrative job opportunities.

2.29 ARC tried with increasing success to raise its share of phosphatetransport. Recent studies carried out show that ARC's task in the nextyears is clearly to further its role as the major transporter of phosphatefor export. Plans to diversify into grains, containers and other generalcargo should be pursued only after ARC has solved the above-mentioned pro-blems (para. 2.37), has successfully completed a substantial technologytransfer, has further improved its operational efficiency and has increasedits capacity to meet possible phosphate transport forecasts.

Management

2.30 The Director General is responsible for the efficient managementof the ARC and for planning its development under the direction of theBoard of Directors. Seven Chiefs of Departments and a Chief of Planningreport to the Director General (see Chart 3).

Staff

2.31 At the end of 1983, ARC employed 797 staff. More staff will berequired in certain sections to meet the forecast increase in traffic. Thestaffing and annual targets are given by ARC in a manpower plan, which issubject to annual review. Productivity, measured as traffic units peremployee, is forecast to increase by 12% over the period 1983-87. Staffnumbers and productivity forecasts are shown in Table 5. The externaldemand for Jordanian labor has decreased in recent years, and it is expectedthat more manpower will be available to ARC and that, like many otherinstitutions in Jordan, staffing problems will subside.

2.32 To improve the ability of ARC to operate the railway with currentavailable manpower, 70 railway staff from Rail India Technical and EconomicServices (RITES-India) were engaged under contract. The team members aredeployed as engineers and supervisors in all departments but accounting.

Traffic

2.33 The ARC is a single purpose railway for the carriage of rockphosphate for export. Rail-borne phosphate traffic from the mines to Aqabafor export has registered a significant increase in recent years, risingfrom 1.15 million tonnes in 1979 to almost 2.6 million tonnes in 1983(Tables 2.2 and 6). The Jordan Phosphate Mining Corporation (JPMC) fore-casts that its total production from all three mines now working would beat least 6 million tonnes in 1986 of which 4 million tonnes would be forexport. Considering the cost effectiveness and energy conservation of bulk

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transport by rail, the Government proposes that this 4 million tonnes ofphosphate be moved to Aqaba Port by rail. The projected traffic eroe-th isrealistic provided that exports develop as expected and the ARC will beable to increase its transport capacity commensurately through the plannedinvestments and higher operational efficiency.

2.34 The figures below show the actual traffic growth during the1971-83 period and the traffic projections up to 1987.

Table 2.2; Phosphate Traffic and Traffic Projection, 1979-87(million tonnes net)

AnnualGrowth Rate

Year Actual Traffic Projected Traffic %

1979 1.151980 1.301981 1.64 22.5 (1979-83)1982 2.151983 2.591984 2.71985 3.01986 3.7 11.5 (1983-87)1987 4.0

About two-thirds of the above phosphate traffic originates from El-Hassamines and one-third from El Abyad Mines.

Operations

2.35 The ARC has 25 main line locomotives and 247 phosphate wagons inoperational condition (Table 7) and presently operates about 7 phosphateunit trains per day almost every day of the week, a marked improvementcompared to 1979 and 1980 when the railways were running only 3 trains aday. To carry the projected 4 million tonnes in 1987, the number oftrains has to be increased to 10 to 11 trains per day, an operationallevel attainable with the existing infrastructure improved by the proposedinvestments shown in para. 2.37. Operational efficiency also needs to beimproved, according to an Action Plan (Annex 1) by increasing the numberof wagons per train from 30-32 to at least 35, reducing the turnaroundtime for the unit trains and reducing day to day traffic variations(Table 8). The latter aspects would require co-ordination of activitieswith the mines and the port (para. 3.18).

Tariffs and Costs

2.36 Tariffs for the transport of phosphate from the mines to Aqabaare proposed by ARC to HOT which has to ratify them before becomingeffective. Tariff rates in the recent past have been as follows;

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El Hassa to Aqaba El Abyad to Aqaba

Distance 271.7 km 289.0 kmOct. 31, 1980 JD 1.600/tonne JD 1.800/tonneJan. 1, 1982 JD 2.050/tonne JD 2.200/tonneJan. 1, 1983 1/ JD 2.200/tonne JD 2.400/tonne

1/ Proposed by ARC's board but not yet approved by the MOT.

In 1983, the railway carried 2.59 million tonnes of phosphate at estimatedoperating expenses and interest costs of JD 5.50 million, i.e. JD 2.12 pertonne. The main thrust of ARC should be to improve utilization of railwaycapacity by carrying increasing volumes of traffic, supplemented to theextent necessary by tariff adjustments, so that higher contributions couldbe made towards fixed costs and debt service requirements, thereby pavingthe way towards the railways' financial viability. The proposed projectaims at achieving this objective (paras. 3.02 and 3.36).

Investment Plan

2.37 ARC's Investment Plan (Table 9), which is an update of the 1981-85plan extended to 1987, covers the period 1984-87 and consists of threeparts; (i) Spillover Investments; (ii) New Investments covered by the pro-ject; and (iii) Other New Investments. Spillover Investments compriseeither on-going project items or those for which firm investment commit-ments were made prior to preappraisal of the proposed project. The projectinvestments were selected to achieve the principal objective of the Invest-ment Plan, which is to increase the operational efficiency of ARC to enableits greater utilization as an energy-efficient transport mode for phos-phate, its exclusive commodity. The investment proposals are realistic andare responsive to the needs of Jordan's economy. More than 80% of the newinvestments form an important part of the proposed project. Detailedinvestment costs and their yearly breakdown are shown in Table 10.

Financing

2.38 The Five Year Plan for 1981-1985 provided for railway investmentsduring the period totalling JD 11.1 million (US$30.4 million) to befinanced from the General Budget (JD 7.4 million (USM2O.3 million)) andthrough external loans from the Kuwait Fund and the Saudi Fund for Develop-ment (JD 3.7 million (US$10.1 million)). During loan negotiations, theGovernment has agreed that the ARC would implement and annually review itsaction and financing plans before the start of each fiscal year and preparenecessary revisions in consultation with the Bank.

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Budgets, Accounts, Audit and Insurance

2.39 ARC prepares annual budgets for its cash working and capitalexpenditures, which are first cleared by MOT and then incorporated into thenational budget by MOF before approval by the Cabinet and Parliament. Theapproved budget is tightly controlled by MOT and the budget department ofMOP through monthly statements of budget performance prepared by ARC fromthe receipts and expenditure accounts mentioned below (para. 2.39).

2.40 ARC's accounts are kept on the same basis as the Governmenttreasury system of accounting and budgeting; the emphasis is on cash move-ments. ARC's financial department does not attempt to assess activity-basedoperating results through accrual accounting. However, starting fromJuly 1981, ARC's auditors have reworked the outward billings and incominginvoices on a commercial basis to determine the financial position andresults before certifying the annual balance sheets and the statements ofrevenue and expenditures for 1981 (part) and 1982. No subsidiary accountsor controls exist for the fixed assets, related depreciation and the storesinventory. ARC needs, and the proposed project provides, technical assist-ance and training (paras. 3.16, 5.06 and 5.15) for the introduction of newand improved methods of accounting to establish and maintain satisfactorybases for its accounting activities as shown in Annex 2.

2.41 ARC's accounts are audited by a local firm of public accountantsin accordance with generally accepted auditing practices which are adequatefor purposes of reporting to the Bank.

2.42 ARC maintains adequate insurance coverage of its rolling stock andother insurable risks.

C. Ports

organization & Management

The Port Corporation (TPC)

2.43 The Royal Decree of 1952 established TPC as an independent publiccorporation. The Corporation is managed by and acts through its Boardconsisting of five designated members, two of whom are Government represen-tatives. The Board is presided over by the Minister of Transport, theDirector General of TPC who is responsible for the day-to-day running ofthe port is Deputy Chairman, and representatives from the port users andother relevant sectors are appointed by the Council of Ministers. TPC islegally empowered to operate the port of Aqaba and to levy dues and chargesfor the use of the port and its facilities. The structure is being revisedand the new proposed structure is shown in Chart 4. TPC proposes toimprove its financial, administrative and planning capabilities, and theoverall status of its cargo handling equipment through a technical assist-ance and training program included in the project (paras. 3.18 and 3.19).

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Staff

2.44 Of about 4,500 staff employed, 500 cover the administration, work-shops and warehouses functions with which the project is concerned. About25Z of port workers (mainly Egyptian) are employed on a two-year contractbasis.

Training

2.45 TPC operates its own training school with up to 10 instructorsavailable to run training courses of eight weeks duration for mechanics,drivers, shed master and tally clerks, labor foremen, electricians andintroductory labor. The school operates efficiently and has a reasonablequantity of training aids.

Main Port Facilities

2.46 The Port of Aqaba was established in 1952 by Royal Decree and hasdeveloped through various phases to its present seven general cargo mainberths, and with two shallower cargo berths (Nos. 9 and 10) and two lighterberths - see General Plan (IBRD 17937). The six main berths are 1,060meters in length with a depth alongside of 11 meters, Berth 7 is 150 meterslong with 7 meters depth, Berths 9 and 10 are 150 meters long with 6 metersdepth. The lighter berths have about 6 meters depth. The berths and asso-ciated sheds and storage areas are generally in satisfactory condition.None of the berths carries any portal cranes, all non-bulk cargo beinghandled by ships gear, which appears to work effectively.

2.47 Immediately south of Berth No. 1 are two phosphate loading berths,"A" and "B", constructed in 1960 and 1969 respectively. Berth "A' is nowbeing used for the imports of mineral and edible oils, and can take vesselsup to 18,000 dwt. Berth "B" is 180 meters long with 15 meters depth along-side and is capable of taking vessels up to 100,000 dwt. There are twoshiploaders on the berth of 2,100 tonnes/hr nominal capacity served byconveyors from four sheds onshore (two of capacity 73,000 tonnes each, andtwo of capacity 80,000 tonnes each). With the expected increase in phos-phate exports, TPC should initiate an investigation of the likely advan-tages of restoring the phosphate loading facilities at Berth "A" forloading smaller ships to optimize availability of both berths for bulkexport of phosphate (para. 3.18). Two rail unloading bins and two roadtruck unloaders are located in the port on the landward side of the sheds.

Container and RoRo Berths

2.48 In 1977, TPC provided two floating berths (150 meters long and 35meters wide) about 5 km south of the main port for handling container,cement and RoRo traffic to minimize congestion in the main port area. Onepontoon handled containers and has a RoRo ramp on the northern face, andcarried 4-5 tonne portal cranes, while the second had a bulk cement

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unloader, and also handled RoRo traffic. Nearby, TPC has constructed acontainer berth 280 meters long with a depth alongside of 15 meters and areproviding 2-40 tonne container cranes. A new 80 meter RoRo berth was con-structed simultaneously just north on the same quay line as the new con-tainer berth, one pontoon has recently been removed, and the secondcontainer berth will be completed in 1984 in the intervening 220 meters toprovide 580 meters of continuous berths.

Potash/Fertilizer Jetty

2.49 Some 15 km south of Aqaba there is a new jetty for the import ofraw materials such as sulphur, and the export of potash and fertilizers.The berth has 2 loaders and 2 conveyors for handling di-ammonium phosphate(DAP) fertilizer, potash and other fertilizers for export.

Traffic

2.50 Import traffic handled through the port of Aqaba increased drama-tically in the years 1980, 1981 and 1982 as a result of transit cargos,mainly for Iraq. In 1983 Iraq began diverting imports for northern Iraqthrough Mersin (Turkey) and southern Iraq through Saudi Arabia with con-sequent reductions in throughputs at Aqaba of about one million tonnes in1983 (Table 11).

2.51 The traffic statistics for imports and exports through Aqaba1979-83 and projections for 1984, 1985 and 1990 are shown in Table 11. Thecontainer traffic has increased from 4,557 Twenty feet Equivalent Units(TEU) in 1977 to about 37,000 in 1933 (Table 12) and is expected to reachabout 100,000 TEU by 1987.

Operations and Productivity

2.52 General cargo operations in the port are satisfactory and open andcovered storage space appears adequate. Labor productivity is generallygood averaging 18 tonnes per gang hour for general cargo, and 35 tonnes pergang hour for bagged cargo.

2.53 TPC has two container yards in the main port area totalling140,000 square metres and further yards in the area of the new containerberth totalling 200,000 square metres. Container handling is by straddlecarriers and forklift trucks but the overall operation could be consider-ably improved and provision of technical assistance e. i training to achievethis is included in the project (para. 3.18).

2.54 The maintenance workshops are too small and lack sufficientcovered area and workshop equipment and trained technicians to carry outeffective preventive and breakdown maintenance. TPC aim to correct theseshortcomings by appropriate self-financed investments in workshops andtraining activities (paras. 3.18 and 3.19). Site preparation has begun forthe workshops extension.

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Investments and Financing

2.55 The Five Year Plan for 1981-1985 provided for investments duringthe period of some JD 43.3 million (US$118.6 million) for the constructionof new container and RoRo berths and a slipway and a new industrial berthto handle imports and exports of fertilizer and potash industries, acquisi-tion of equipment, and ship-loading systems for the industrial berth,acquisition of marine craft, and rehabilitation and increase in capacity ofshiploading at phosphate Berth A. These are to be financed to the extentof JD 6.6 million (US$18.1 million) through self-financing by the PortAuthority, JD 13.8 million (US$37.8 million) from the General Budget andJD 22.9 million through external loans from the Saudi Fund for Development,the Islamic Bank and the Iraqi Fund for External Development. The Plan isproject-specific and aims to develop the port capacity in order to meet theexpected increase in transport requirements for imports and exports. Allthese works are well underway or completed. No new major investments areenvisaged or required during the project period beyond 1985 through 1987other than the completion of the ongoing works and the provision of techni-cal assistance and training component included in the project (para. 3.19).

Budget Accounts and Audit

2.56 TPC's budgets are controlled in the same manner as those of ARC(see para. 2.39). TPC's accounts are commercially-based, follow theaccrual system, and are audited by Jordanian public accountants in accord-ance with professional standards.

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III. THE PROJECT

A. Background

3.01 In recognition of the seriousness of the mounting congestion pro-blems on the country's trade routes, the increasing problems of maintainingthe highways under heavy traffic and the urgency to improve the railwayoperations in an era of energy consciousness, Government commissioned inearly 1982 a comprehensive NTS covering the entire transport sector toprovide the basis for transport investments and a coordinated transportdevelopment strategy. This study has been completed and provides forcefulevidence of priority investment needs in the transport sector. Based onthe study's findings, and supplemented by the Bank assessment of the sectorneeds, a multi-mode transport project has been proposed which forms a vitaland economically justified part of the high priority investments includedin the Government Development Plan.

B. Objectives

3.02 The primary objectives of the project are to;

Transport Sector

(a) ease critical transport bottlenecks on Jordan's principalexport/import routes to facilitate the movement of such keycommodities as phosphate, potash, fertilizers, cement andgeneral cargo, all vital for the economy of Jordan andneighboring countries;

(b) initiate institution building efforts by introducing andencouraging investment and financial planning, manpowermanagement, training and technical assistance;

(c) improve project preparation and thereby the receptivity ofthe capital markets towards cofinancing;

Highways

(d) improve monitoring, control and enforcement of the legallimits of vehicle axle loads and dimensions by operation ofpermanent and mobile weighing stations;

(e) promote systematic and effective highway maintenance; and

Railway

(f) encourage technology transfer in order to improve ARC'soperating efficiency with greater utilization of linecapacity;

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(g) strengthen management of ARC by the preparation andimplementation of sound Operational and Action Plans(Annex 1);

(h) enable ARC to achieve financial viability; and

Port

(i) enable TPC to improve interface operations -- rail/portmovement of phosphate and highway/port movement of con-tainerized cargo--through technical assistance and training.

C. Description

3.03 The proposed project deals with highways, railway and the portwhich serve the major part of Jordan's transportation. The project isbased on a broad review of all major investment programs of the above threemodes in the 1981-85 Plan including important spillover works through87/88, that is, up to the end of the project period. The structure andorganization of these agencies, their on-going investments and financingplans are described in Chapter 2.

3.04 The project components derived from the above investment plan layspecial emphasis on the development and maintenance of international traderoutes and institution building. The project components are discussedbelow:

Highway Components

Highway Maintenance

3.05 The proposed project includes routine and periodic maintenanceactivities set out in Annex 3.

3.06 The periodic maintenance asphalt overlay program for strengtheningof sections of the highway network would be selected on the basis of tech-nical and economic criteria which were discussed and agreed during negoti-ations (para. 4.10). Sections of the following four highways have beententatively proposed by MNPW for strengthening:

(a) Azraq-Saudi Arabia Border, 50 km;

(b) Juwaidah-Azraq-Iraqi Border, 320 km;

(c) Access road to Queen Alya International Airport, 35 km; and

(d) Al Hashimiyah-Rihab; 30 km.

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3.07 Equipment included in the project to assist the implementation ofroutine and periodic maintenance consists of:

(i) five to seven fixed bitumen storage heaters for periodicresealing and routine patching;

(ii) a highway striping machine;

(iii) portable weighing scales for axle load control;

(iv) traffic counters; and

(v) pavement deflection testing equipment for asphalt overlaydesign purposes.

Technical Assistance

3.08 Technical assistance to strengthen highway maintenance management,planning, operations and training would be undertaken by consultantsappointed to "in-line" positions within MPW for 100-120 man-months-onesenior engineer for planning and budget (30 man-months), one administra-tion/procurement officer (30 man-months), one field maintenance engineer(30 man-months), and one training specialist (20 man-months). Duringnegotiations, the Jordanian delegation expressed the Government's comit-ment to an effective highway maintenance program and plan of action, inaccordance with established practices already set out in the MPW HighwayMaintenance Manual (see Annex 7, Project File, Item B9) and based on therecommendations of the NTS and other bilateral agencies who have recentlyvisited Jordan (USAID, Sweden, TRRL (UK)); implementation progress would bemonitored through project supervision. Expatriate consulting services costestimates are based on the estimated man-months required and consultantsrates applicable to Jordan. Bank financing is limited to training activi-ties only, as technical assistance for other requirements would be financedby the Government or any bilateral sources that may become available.

Civil Works

3.09 Diversion around Aqaba Town of heavy trucks destined to or fromthe Aqaba port area and JFI is only practically possible on the easternside of the town away from the Gulf of Aqaba shore and the mountainous area(see Map IBRD 18002). The proposed 30 km two-lane alignment will beginabout 15 km from Aqaba on the Aqaba-Amman road, overpass the ARC track andproceed along the Wadi Yutum in a SSW direction towards Wadi 2 (JFI).Climbing lanes for trucks will be required on about 9 km of the first 15 kmwhere the 6 km spur to the container berth area branches off the mainalignment; these will accommodate slower-moving trucks on gradients between6 and 7%. No climbing lanes are required on the spur. Truck parking areaswith repair/maintenance facilities will be constructed alongside the spurto store vehicles in convenient proximity to Aqaba port.

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Railway Components

3.10 Aqaba Workshop Extension is vital to enable the ARC to adequatelymaintain its traction and rolling stock. Most of the ARC's locomotives arenow due for 8-year major overhaul and the phosphate wagons are due for4-year minor overhaul around 1984. These overhauls are additional tonormal repairs and necessary to ensure satisfactory operation and a reason-able life for the traction and rolling stock. The present lack of space atMa'an would inhibit maintenance work and result in a substantial drop oflocomotive availability from 80% (1982) to 70Z (1985). The planned exten-sion of the workshop would allow the concentration of all locomotive main-tenance at Aqaba and free space for all freight wagon maintenance at Ma'an.

3.11 Track Renewal. Track renewal involves high priority sectionsRum-Aqaba (31 km), Batn El Ghul-Disi (40 km), and El Hassa - Jerouf/Jourdan- Ma'an (30 km), where standards and conditions of the rails, sleepers,fastenings, and ballast are unsatisfactory. Without the proposed trackrenewals which includes using heavier rails of 49 kg/meter (Annex 4), thepoor track conditions would deteriorate further and restrict the dailynumber of trains.

3.12 Track Machinery. In light of the specialized natur rf the work,the ARC proposes to carry out track renewal with its own work force. Costswould be lower than using contractors and track quality would be bettermaintained especially on the long stretches of line (about 115 km) withsteep gradiants up to 2.692. To this end the proposed project includestrack renewal machinery to carry out track renewals planned after 1987.

3.13 Freight Wagons. Sixty phosphate wagons have been ordered andwould be delivered in early 1984. The project provides for a further 90wagons to be delivered in 1985 and 1986. Detailed calculations (Table 8)demonstrate the need for these wagons to meet the transport target of about4 million tonnes per year by 1987.

3.14 Breakdown Crane. Derailments and collisions result in trafficinterruptions which would have a substantial adverse affect on the numberof daily trains operated substantially. With the expected increase intraffic, line blockage would become increasingly serious. Since ARC has nosuitable breakdown crane the purchase is essential and would avoid delayssimilar to those experienced in the past when hiring lifting equipment.

3.15 Locomotive Rehabilitation, Spare Parts. In recent years severallocomotives were heavily damaged by train accidents (para. 4.16). ARCplans to rehabilitate four of them, which are in repairable condition, toprovide the necessary locomotives for phosphate trains and for ballast andmaterial trains during the track renewal period. Extra spare parts such asdraft gear assembly, coupler, crankshaft, engine governor, etc. are neededto rehabilitate the locomotives.

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3.16 Training and Technical Assistance. The ARC has a serious manpowerproblem due to high turnover of staff resulting from unattractive employ-ment conditions. Since there has been no systematic training on the rail-ways, the project includes a training component (Annex 5) to meet theurgent needs and make the lower level staff technically more competent.Bank financing is needed for the railway component only since bilateraltechnical assistance on attractive terms is available for the highwaycomponent (except training-see para. 3.08) and TPC will finance its owntraining needs (para. 3.19).

3.17 Training costs are based on estimates of 36 man-months for expat-riate consultants services, 108 man-months for overseas courses for ARCstaff, 200 man-months for local, technical and professional assistance andprovision of training equipment and materials. Training equipment andmaterials are estimated to cost US$150,000.

Port Components

3.18 To ensure that the objectives of efficient operation of the inter-dependent transport modes are achieved, it is essential that the interfaceoperations such as rail/port movements of phosphate and highway/port move-ments of containerized cargo are effectively coordinated and implemented.To this end the project contains a training component whereby existingoperational staff in the port will receive further training which willinclude container, general cargo and shipping operations, phosphate handl-ing and storage, repair and maintenance of equipment, finance and admini-stration, project planning and maintenance, and safety/fire fighting. TheGovernment in cooperation with TPC would initiate an investigation of thelikely advantages of restoring the phosphate loading facilities at Berth'A' (see Map IBRD 17937) and/or of other ancillary facilities which wouldbe needed to provide sufficient capacity to sustain regular rail movementsof phosphate and to take into account the seasonal variations in shiparrivals (para. 2.47).

3.19 The technical assistance and training needs an estimated input ofabout 100 expatriate man-months-operations specialists (18 man-months),phosphate storage and handling (12 man-months), maintenance engineer(36 man-months), finance and administration (24 man-months), projectplanning and maintenance (6 man-months) and safety/fire fighting (4 man-months)-and about 36 man-months of overseas training for selected staffand middle management. US$150,000 has been included for training equipmentmaterials. The USS1.3 million total cost of the training component is tobe financed from TPC's own resources.

D. Engineering

Highway Maintenance

3.20 Detailed engineering for the asphalt overlays will be undertakenby consultants using the results of field testing of the selected roadsections to determine residual pavement life and projections of futuretraffic demand.

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Civil Works (Highways)

3.21 Detailed engineering and bid documents for the Wadi YutumrWadi 2"back road" and the spur to the Aqaba Container port were substantiallycompleted in June 1977 by consultants (VBB-Sweden and Ahmad Fawzi and Asso-ciates - Jordan). Extensions of the final engineering to include detailsand quantities for the road junctions at Wadi Yutum, Wadi 2, and thecontainer port are estimated to be completed by September 1984.

3.22 Design standards adopted are shown in Annex 6 and are satisfactorywhen considering the harsh terrain through which the alignment passes.Where vertical gradients are steeper than 6Z, climbing lanes have beenprovided for heavy trucks; these sections are 3.7 km long (inbound to theport) and 5.7 km long (outbound from the port) in which the maximum verticalgradient of 7Z occurs over 2.6 km.

Track Renewal (Railway)

3.23 Detailed engineering for the track renewal was carried out by ARCon the basis of experience with similar ongoing works. Geometric standards,however, were not changed because straightening of curves with small radii,which restrict speeds substantially below the maximum of 80 kmph, would beextremely expensive.

3.24 The present track standards (see paras. 2.25, 3.11 and 4.13) hadbeen chosen for a traffic volume of 1.5 to 2 million tonnes per year. Sinceactual traffic is now above this limit, improved standards of trackmaterials have been adopted by ARC (Annex 4).

Aqaba Workshop Extension

3.25 Detailed engineering for the extension of the existing Aqaba work-shop, for earthworks, tracks and a new access road was undertaken by con-sultants. They also assessed the necessary workshop equipment and machinery(see Project File, Annex A7, Item B3). The ARC will prepare the biddingdocuments based on the consultant's recommendations.

E. Cost Estimates and Financing

3.26 Project cost estimates and Bank participation are summarized in thetable below:

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Table 3.1s Project Cost Estimates nd Bank Pwrticipation ./

SForeign Bank

JD million USS million Exchange ParticipationLocal Foreign Total Local Foreiqn Total Coponent USS Million

A. HIGHIRAS CONPONENT

Highway NaintenanceRoutine Maintenance 4.0 2.0 6.0 11.0 5.5 16.5 33 -Periodic Maintenance 1.7 2.5 4.3 4.7 7.0 11.7 60 7.0Highway mintenance. Traffic and

Pavement Testing Equipment - 0.2 0.2 - 0.5 0.5 100 0.5Technical Assistance:(a) Naintenance anagment 0.1 0.4 O.S 0.3 1.1 1.4 s0(b) Training 0.2 0.1 0.3 0.6 0.2 0.8 25 0.2

Sub-total 6.0 5.3 11.3 16.6 14.3 30.9 46 7.7

Civil WorksWadi Yutum-hadi 2 (31 ki) 3.2 4.7 7.9 8.6 13.0 21.6 60 --Spur to Container Port (6 kb) 1.0 1.4 2.4 2.6 3.9 6.5 60 --

- Sub-Total 4.2 6.1 10.3 11.2 16.9 28.1 60 --

Base Cost (JD & US$ million) 10.2 11.4 21.6 27.8 31.2 59.0 53 7.0

ContingenciesPhysical ZJ 1.0 1.1 2.2 2.8 3.1 5.9 53 0.oPrice Escalation Y 1.6 1.9 3.2 4.3 S.2 9.5 55 1.5

TOTAL (Highways) 12.8 14.4 27.2 34.9 39.5 74.4 53 10.0_. MM . ._. _i u __ me _

B. RAMILWY C(UONENT

Aqaba orkshop Extension 1.5 1.0 2.5 4.2 2.6 6.8 38 -Track Renwal 3.4 6.3 9.7 9.2 17.2 26.4 65 16.0Track Machinery - 0.6 0.6 - 1.7 1.7 100 -Phosphate Wagons - 3.1 3.1 - 8.6 8.6 100 -Breakdown Crane - 0.3 0.3 - 0.9 0.9 100 -Locometive Rehabilitation - 0.5 0.5 - 1.5 1.5 98 -Technical Assistance and Training 0.2 0.3 0.5 0.5 .0.8 1.3 62 0.2

Subtotal 5.1 12.1 17.2 13.9 33.3 47.2 71 16.2

CotingenciesPhysical 0.5 0.8 1.3 1.3 2.1 3.4 62 1.6Price Escalation 0.8 1.6 2.4 2.1 4.4 6.5 68 2.2

TOTAL (Railway) 6.4 14.5 20.9 17.3 39.8 57.1 70 20.0m. _ m.. _ . __m .m. mem...._ _

C. PORT COMPONENT

Technical Assistanceand Training 0.1 0.4 0.5 0.3 1.0 1.3 80 -

GRANW TOTAL (Highways.Railway and Port) 19.3 29.3 48.6 52.5 80.3 132.8 60 30.0

__m me. _em _me._ .. m._. em .m. m..

.f Local and foreign costs do not include taxes as IPI nd ARC components are tax-exempted.31 Physical contingencies at 1S. except for railwy equipment and machinery.3I Price esculation for foreign exchange calculated using 7.5% (1984), 7.01 (1985) and 6.51 thereafter

and for local costs 7.51 throughout.

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3.27 The project cost estimates are based on April 1984 price levels.The total project costs are estimated at JD 48.6 million (US$132.8 million),consisting of highways JD 27.2 million (US$74.4 million), railwaysJD 20.9 million (US$57.1 million) and ports JD 0.5 million (US*1.3 million)with an estimated foreign exchange component of about JD 29.3 million(US$80.3 million). A US$30.0 million loan would thus represent about 23%of the cost of the project and about 37Z of the foreign exchange component.

3.28 Cost estimates for civil works are based on quantities from theprovision1 final engineering design and on unit rates derived from currentconstruction contracts. Railway equipment estimates are based on recentprocurement and market surveys.

3.29 The foreign exchange component of the Wadi YutumrWadi 2 and spurto Aqaba container port and for the asphalt overlay program is estimated tobe about 60% which includes an element of foreign costs for non-Jordanianconstruction workers.

3.30 The data used in the preparation of the project are listed inAnnex 7.

Financing

3.31 Out of the total foreign exchange cost of US$80.3 million, financ-ing to the extent of US$50.7 million has been assured by the Bank loan(US$30.0 million), a Saudi Development Fund loan (US$11.4 million) and anIslamic Development Bank loan (US$9.3 million) as shown in Table 3.2 below:

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Table 3.2: ProJect Comeonent Cost Estimtes and Sources of Financing

US) millionn 1 ---Government Co-Financier

Local Foreign IBRD SOF IDO Cnrcial TotalCredits

A. HIGhWAYS

Highway Maintenance(a) Routine Maintenance 11.0 S.S 1 - - -- -- 16.5(b) Periodic Maintenance 4.7 -- 7.0 - -- - 11.7(c) Highway Maintenance. Traffic &

Pavement Testing Equipment -- -- 0.5 - -- - 0.5

(d) Technical Assistance;(i) Maintenance Management 0.3 1.1 - -- -- -- 1.4(ii) Training 0.6 - 0.2 - -- - 0.8

Sub-Total 16.6 6.6 7.7 -- - _ 30.9

Civil Works(a) Wadi Tutum-Wadi 2 (31 ki) 8.6 4.8 21 - 8.2 - - 21.6(b) Spur to Container Port (6 ki) 2.6 3.9 - - - _ 6.5

Sub-Total 11.2 8.7 -- 8.2 -- - 28.1

Base Cost (JD & US) million) 27.8 15.3 7.7 8.2 -- - 59.0

Contingencies(a) Physical 2.8 1.S 0.8 0.8 -- - 5.9(b) Price Escalation 4 1.3 1.3 1.5 2.4 - - 9.s

TOTAL (Highays) 34.9 18.1 10.0 11.4 Y - 74.4

B. RAILWAY

(a) Aqaba Workshop Extension 4.2 1.2 S - -_ _ 1.4 Al 6.8(b) Track Renewal 9.2 1.2 AS 16.0 -- - -- 26.4Cc) Track Machinery - -- - -- - 1.7 L 1.7(d) 90 Freight Wagons -- - - -- 8.6 7/ -- 8.6Ce) Breakdown Crane - - - -- - 0.9s 0.9(f) Locomotive Rehabilitation and Spares - - - -- - 1.S Y 1.S(g) Training 0.5 0.6 0.2 - -- -- 1.3

Sub-Total 13.9 3.0 -16.2 - 8.6 5.5 47.2Contingencies(a) Physical 1.3 -- 1.6 - - 0.5 3.4(b) Price Escalation 3/ 2.1 0.5 2.2 - 0.7/N 1.0 6.5

TOTAL (Railway) 17.3 3.5 20.0 - 9.3 7.0 57.1

C. PORT

(a) Training Aids and Books -- _ _ _ _ __(b) Technical Assistance and Local Training - -- - - - -- _

Cc) Overseas TrainingSub-Total 0.1 1.0 - -- - -- 1.1

Contingencies(a) Price Escalation 3/ 0.2 - 0.2

TOTAL (Port) 0.3 1.0 / - - 9/ 1.3

TOTAL (Highways. Railway, and Port) 52.5 22.6 30.0 11.4 9.3 7.0 132.8

50.7__----- 80.3

11 Foreign exchange element to be financed by Government.12 Includes heavy vehicle parks.3/ Price escalation for foreign exchange calculated using 7.5% (1984). 7.01 (1985)

and 61 thereafter and for local costs 7.5% throughout.4/ Saudi Developuent Fund (SOF) assistance (SR 40 million; US$11.4 million equivalent).k1 Foreign exchange element of workshop building to be financed by Goveriment.6/ Foreign exchange shortfall for m2% balance of cost of rails to be financed by Govermient.7/ Islamic Developoent Bank (IB) comnlttment.!/ Foreign exchange to be financed by TPC.

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During loan negotiations, the financing of project costs was discussed withthe Borrower and agreement reached that the foreign exchange costs inexcess of the proposed Bank loan and the co-financing arrangements, and alllocal costs, including cost overruns would be met by the Government.Therefore, in addition to local costs (US$51.7 million), the Governmentwill finance foreign exchange costs of routine highway maintenance(US$6.6 million), the foreign exchange gap of the Wadi Yutumr-Wadi 2 roadand spur to the container port (US$8.7 million), the railway locomotiveworkshop building at Aqaba (US$1.2 million), rails (US$1.2 million), andrailway and port training (US$1.6 million) to the extent of US$22.6 million,including physical and price contingencies. The Government expects toenlist additional financial support of US$7.0 million for the railway partof the project from suppliers' and/or export credits.

3.32 Since parallel financing is preferred by the co-lenders, theGovernment requested at negotiations that the Bank and the co-lendersshould finance separate, economically self-reliant project components. Forthe railway, the parts of the project to be financed by each are distinct.For highways, the Bank would finance the foreign exchange cost of theperiodic maintenance, while the Saudi Development Fund would contributepart of the foreign exchange cost of construction of the Wadi YutumrWadi 2highway, the spur to the containe-r port, heavy vehicle parks and floodcontrols at Wadi 2. Each financing agency would administer procurementrelated to its part of the project and the Government would arrange regularexchanges of information between co-lenders. Such arrangements were dis-cussed and confirmed during loan negotiations. Signature of officialco-financing arrangements would be a condition of loan effectiveness.

3.33 In respect of the port component, which is to be fully financed bythe TPC, agreement was reached during loan negotiations that TPC wouldinvestigate by December 31, 1985, the optimum use of berth facilities forphosphate loading and exchange views with the Bank on proposed measures tobe taken (paras. 2.47 and 3.18).

F. The Loan, The Borrower and Beneficiaries

3.34 The Hashemite Kingdom of Jordan will be the borrower of the Bankloan for the whole project totalling US$30.0 million comprisingUS$10 million for highways and US$20 million for railway. The beneficiaryfor highways will be MPW; since the Ministry is a part of the Governmentand is not a revenue earning entity, there will be no relending arrange-ments. The beneficiary for the railway component of the project will beARC. The portion of the Bank loan for the railway component would berelent by the Government to ARC under the same terms as the proposed Bankloan to the Government. Signing of the subsidiary loan agreement would bea special condition of loan effectiveness.

G. Implementation

3.35 The executing agencies would be MPW for highways, ARC for therailway and TPC for the port, each assisted by consultants engaged underterms and conditions satisfactory to the Bank. During negotiations, agree-ment was obtained from the Government that it would retain, or cause ARC

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and TPC to retain, as the case may be, consultants for constructionsupervision and for other technical assistance services required in theproject under terms of reference satisfactory to the Bank (paras. 3.08,3.16 and 3.19).

3.36 In order to reduce costs, improve service quality and its marketposition, the ARC has prepared Comprehensive Action Plans which addressorganization, planning, investments, productivity, information systems,finance, government support and staff training. The Plans specify actionsto be taken to achieve agreed productivity, operational and financial tar-gets and will be updated annually. As part of its Action Plan, the ARC hasprepared Operational Plans to improve the utilization of its traction androlling stock and to serve as a basis for procurement (Annex 1).

3.37 During loan negotiations, agreement was reached with theGovernment that:

(a) before presentation of the project to the Bank's Board ofDirectors, MPW, ARC and TPC would nominate an officer ofeach agency with appropriate qualifications and experienceto be appointed in consultation with the Bank as ProjectCoordinator responsible for implementation of his agency'spart of the project in accordance with agreed specifica-tions, time schedules and budgets and this has been done;

(b) before presentation of the project to the Bank's Board ofDirectors, MPW, ARC and TPC would, and in consultationwith the Bank, appoint/nominate full-time trainingofficers with suitable qualifications and experience andtake all steps necessary to ensure that satisfactoryarrangements be completed on time for carrying out thetraining programs and technical assistance envisaged intheir respective project components and thereafter causesuch training programs to be carried out according to atime-table to be agreed between the Government and theBank and this has been done; and

(c) the ARC, in conjunction with JPMC and TPC would endeavorat all times to; (i) carry out its Action Plan (Annex 1)including its operational plan and training program;(ii) follow appropriate monitoring procedures to assessprogress in the implementation of its Action Plan;(iii) review annually in consultation with the Bank itsAction Plans.

3.38 All communications and reporting will be through the NationalPlanning Council. Implementation schedules for the project components,prepared in conjunction with the transport agencies (Tables 13 and 14),were discussed and confirmed by the Government during loan negotiations.

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The Government also agreed to prepare regular progress reports on aquarterly basis and a project completion report within six months of theLoan Closing Date.

H. Procurement

3.39 Contracts for asphalt overlays would be offered for bids under ICBprocedures and in accordance with the Bank's Guidelines for Procurementunder World Bank Loans and IDA Credits (July 1980 Edition) after satisfac-tory review by the Bank of: (i) the technical and economic evaluations ofselected highway sections prepared by consultants; (ii) the final engineer-ing and bid documents; and (iii) the bid evaluations (see paras. 3.06, 4.10and 6.02). The timing of the first overlay contract is estimated to beAugust 1985.

3.40 The construction contracts for the Wadi Yutum-Wadi 2 highway sec-tion, the spur to Aqaba container port, related heavy vehicle parks andflood control measures would be awarded on the basis of unit prices afterinternational competitive bidding in accordance with the procedures of theSaudi Development Fund. Bids are expected to be called for in early 1985and construction begin in June 1985. The duration of construction isexpected to be 2-1/2 years.

3.41 Equipment for pavement testing and traffic data collection will beprocured on the basis of limited international competitive bidding becauseof the specialized nature of the items.

3.42 Materials for track renewal would be procured by ICB in accordancewith the Guidelines for Procurement under World Bank Loans and IDA Credits(July 1980 Edition) after Bank review of the bid documents. Domestic firmsparticipating in bidding would be accorded a preference of 15%, or thecustom duties, whichever is lower. The proposed items to be procured comrprising rails, fastenings, fish plates, anti-creep and anti-warp devicesare shown in Table 15; the list of items was discussed and agreed with theGovernment during loan negotiations.

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Table 3.3: Procurement Method

TotalProject Element ICB LCB Other N.A. Cost

(US$ million)

Civil WorksHighways 53.3 -- -- 18.3 1/ 71.6

( 93) C-) (--) 2/ () ( 9.3)

Railways -- -- 1.6 16.8 18.4C-) (-) (--) (-) (-)

EquipmentHighways -- -- 0.6 -- 0.6

(C-) (C-) t 0.5) (-) ( 0.5)

Railways 21.7 -- 15.4 - 37.1(19.7) (-) (--) C-) (19.7)

ServicesHighways -- -- -- 2.2 2.2

C-) C -) C--) C 0.2) ( 0.2)

Railways -- -- -- 1.6 1.6C -) (- ) (--) ( 0.3) C 0.3)

Ports -- -- 1.3 -- 1.3.-- __C-) C--) (-) (-)

TOTAL 75.0 -- 18.5 38.8 132.8(29.0) (-) C 0.5) ( 0.5) (30.0)

1/ Routine highway maintenance.2/ Figures in brackets are for the proposed Bank loan.

NOTE: Unbracketted figures are for project.

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I. Disbursements

3.43 The proceeds of the highway and railway component of the proposedBank loan would be disbursed on the following basis:

Highways

(a) 601 of the total costs of asphalt overlay, which representsthe estimated foreign exchange component of this item;

(b) lOOZ of the c.i.f. landed costs of highway maintenance,traffic and pavement testing equipment; and

(c) the actual foreign exchange costs of the consultantsundertaking training services.

Railways

(a) 10OZ of expenditures on track materials up to the amountallocated in the Loan Agreement; and

(b) the actual foreign exchange costs of the consultantsundertaking technical assistance and training services.

3.44 The estimated cumulative quarterly disbursement schedule shown inTable 16 assumes that the loan would become effective by October 1984. Thedisbursement profile is closely similar to those for other regional trans-portation projects (see Table 16) and, in view of Jordan's long terminvolvement and familiarity with Bank projects, the marginal improvementsassumed between the project and regional transport standard profiles arerealistic. During negotiations, the Government and the Bank discussed andconfirmed the Bank participation rates for each loan category and thedisbursement schedule.

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IV. ECONOMIC EVALUATION

A. General

4.01 Increased emphasis is being given in Jordan to develop industry andmining projects with a large export potential. Industry, particularlymining and construction, has been the engine of growth during the lastdecade. In the 1980s, relatively high growth rates, about 15-20% per annumare envisaged for industries such as fertilizers, phosphate mining, cementand refining, as compared with a growth rate of about 8-10 per annum forthe economy as a whole. Generally, these economic priorities would generateincreased transport requirements on the principal trade routes of thecountry. Jordan has experienced an unusual upsurge of transit traffic toIraq through the port of Aqaba since outbreak of hostilities in the Gulf in1979; this has strengthened Jordan's political and economic ties with Iraq.Even when the hostilities cease, because of the complementary interests ofthe two countries, Iraq would wish to continue to have a reliable outletoverland through Jordan. Furthermore, a post-war reconstruction boom inIraq is likely to result in the import of increased tonnages of constructionmaterials over the Aqaba-Baghdad route.

4.02 As in the past, the ARC's investment programs would remain closelyrelated to the increasing transport needs of phosphate movements from themines to Aqaba port for export. The railway is likely to assume a renewedsignificance in the era of energy consciousness. Road transport would con-tinue to play the dominant role in facilitating the movement of such keycommodities as potash, fertilizers, cement, and general cargo which arevital to the economy of Jordan and its neighboring countries. The AqabaPort, which has by now developed adequate capacity, would be required todeal with increasing pace of containerization and considerable growth inbulk exports such as phosphate, potash and fertilizers.

4.03 Many important links in the transport networks are already over-loaded now and, with the projected growths in traffic, would become evenmore congested later. Several sections of the primary highway network arealready under reconstruction to meet the Government's objective to restorethe primary highway network to adequate pavement service levels by 1985.The proposed project aims at relieving transport bottlenecks on somecritical road and rail sections. One of the principal highway componentsincluded in the project is the improvement of road maintenance systems,particularly for the primary road network; another aims to divert the heavyport-oriented truck movements away from Aqaba town. The railway componentsincluded in the project are intended to provide additional capacity andtechnology transfer.

4.04 The ultimate beneficiaries of the proposed project would be trans-port users who, due to the diversity of traffic using the transport net-works, come from a wide range of sectors and income groups. The proposedproject would benefit long distance international trade, and support

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Jordan's efforts for energy conservation. Because of the competitive natureof the transport industry, it is expected that the benefits of the project,which initially would accrue to transport users, would be ultimately passedon to the economy in general.

B. Project Costs and Benefits

4.05 The economic evaluation of the different sub-projects is based onthe feasibility studies undertaken by the consultants Hughes Planning Unitand Rail India Technical and Economic Services (RITES) for the highway andrailway components respectively. These studies were reviewed and discussedwith the concerned agencies and, to the extent necessary, some of the mar-ginal subprojects were either reformulated or postponed as a result of thereview.

4.06 The traffic projections for the different sub-projects are based onpast traffic trends, recent origin-destination studies and planned increasesin production and consumption in the zones of influence. The quantitativeeconomic analysis for the project road sections takes account of savings invehicle operating costs due to savings in distances, reduced congestion andimproved road surfaces. Benefits from improved environment around Aqabatown and possible development of tourism at the Red Sea coast due to thediversion of heavy commercial vehicles from the city and coastal roads havenot been quantified. The economic benefits due to the railway workshopfacilities and