Document The World Bankdocuments.worldbank.org/curated/en/608641468061748359/pdf/39679.pdfIRR JICA MICOA MoF MoTC MoPWH MOU MPF MTEF N1 HQ Currency Unit = Metical (MT) 26.42MT = US$1

Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 39679-MZ

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 66.1 MILLION (US$ 100 MILLION EQUIVALENT)

TO THE REPUBLIC OF MOZAMBIQUE

FOR PHASE I1 OF THE

ROADS AND BRIDGES MANAGEMENT AND MAINTENANCE PROJECT

IN SUPPORT OF THE

ROADS AND BRIDGES MANAGEMENT AND MAINTENANCE PROGRAM (RBMMP-11)

May 1,2007

Transport Sector Southern Africa Country Department 2 (AFCS2) Africa Region Office

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 3 1,2007)

ANE APL CAS C B O CEO C F A A C L CREE

CQ DFID DP DPPF EA ERRS EMP FMM F M S GAS GDP G o M HDM

I C B IDA IFR IGF INAV IRR JICA MICOA M o F M o T C M o P W H MOU M P F MTEF N1

HQ

Currency Unit = Metical (MT) 26 .42MT = US$1 1.51US$ = S D R l

F ISCAL YEAR January 1 - December 3 1

ABBREVIATIONS AND ACRONYMS AdministraqCo Nacional de Estradas (National Road Administration) Adaptable Program Lending Country Assistance Strategy Community Based Organization Chief Executive Officer Country Financial Accountability Assessment Community Leaders ComissCo de Relaqcles Economicas Externas (Comlssion for External Economic Relations) Consultant Qualification Department for International Development Development Partner Provincial Directorates o f Planning and Finance Environmental Assessment Economic Internal Rate o f Return Environmental Management Plan Financial Management Manual Financial Management System Gabinete de Assessoria e SupewisCo (Assessment and Supervision Unit) Gross Domestic Product Government o f Mozambique Highway Development and Management Headquarters International Competitive Bidding International Development Association Interim Financial Report Inspectorate General o f Finance Instituto Naczonal de ViaqEo (National Traffic Institute) Internal Rate o f Return Japanese International Cooperation Agency Ministry for the Coordination o f Environmental Interventions Ministry o f Finance Ministry o f Transport and Communications Ministry o f Public Works and Housing Memorandum o f Understanding Ministry o f Planning and Finance (former) Medium Term Expenditure Framework National Road

11

FOR OFFICIAL USE ONLY N C B PAF PARPA

PDO PEFA PF P F M PIP P M PRISE

QCBS R B M M P RF ROCS RSPS RSS SATC SBS SED sc SE S lDA SISTAFE

S SATP S WAp TA U A S M A

UFSA UGEA

U M A S E

voc

National Competitive Bidding Performance Assessment Framework Plano de Acgiio para a ReduGtio da Pobreza Absoluta (Action Plan for the Reduction o f Absolute Poverty) Project Development Objectives Public Expenditure and Financial Accountability Pooled Fund Public Financial Management systems Prise Implementation Plan Procurement Manual Programa Integrado do Sector de Estradas (Integrated Road Sector Program 2007-

Quality and Cost Based Selectlon Roads and Bridges and Management and Maintenance Program Road Fund (Fundo de Estradas) Roads and Coastal Shipping Project Road Safety Policy and Strategy Road Sector Strategy Southern Afr ica Transport Commission (formerly SATCC) Sector Budget Support Standard Bidding Documents Supervision Consultant Site Engineer Swedish International Development Agency Sistema de Administragiio Financeira do Estado (State Financial Management System) Sub-Saharan Afnca Transport Policy Program Sector Wide Approach Technical Assistance Unidade de Assuntos Sociais e Meio Ambiente (Environmental and Social Unit o f ANE) Unidade Funcional de Supewistio das Aquisig6es Unidade Gestora Executora das Aquuicses (Central Unit in charge o f Procurement Functions) Unidade de Monitoramento e Avaliaq?o do Sector de Estradas (Road Sector Unit for Monitoring and Evaluation) Vehicle Operating Cost

09)

Vice President: Obiageli K. Ezekwesili

Sector Manager: C. Sanjivi Rajasingham Country Director: Michael Baxter

Task Team Leader: Dieter Schelling

. . . 111

I I

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

1v

MOZAMBIQUE Roads and Bridges Management and Maintenance Program . Phase I1

TABLE OF CONTENTS Page

A . Strategic Context and Rationale .......................................................................................... 5 Country and sector issues ................................................................................................... 5

Rationale for Bank involvement ......................................................................................... 6

Higher-level objectives to which the project contributes .................................................... 6

1 . 2 . 3 .

B . Project Description ................................................................................................................ 7 1 . Lending instrument ............................................................................................................. 7

2 . Program objective and phases ............................................................................................. 7

3 . Tnggers for Phase I1 and 111 o f RBMMP ............................................................................ 8

4 . Project development objective and key indicators ............................................................ 10

5 Project components ........................................................................................................... 11

6 . 7

Lessons learned and reflected in the project design .......................................................... 12

Alternatives considered and reasons for rejection ............................................................ 13

C . Implementation ................................................................................................................... 14

1. Partnership arrangements .................................................................................................. 14

2 . 3 . 4 . Sustainability .................................................................................................................... 15

5 . Crit ical r isks ...................................................................................................................... 15

6 . Credit conditions and covenants ....................................................................................... 18

Institutional and implementation arrangements ................................................................ 14

Monitoring o f outcomes and reporting ............................................................................. 15

D . Appraisal Summary ............................................................................................................ 19 Economic and financial analyses ...................................................................................... 19 1 .

2 . Fiscal impact o f PRTSE ..................................................................................................... 20

3 . Technical ........................................................................................................................... 21

4 . Fiduciary ........................................................................................................................... 21

5 Social ................................................................................................................................ 22

6 . Environmental ................................................................................................................... 23

7 Safeguard policies ............................................................................................................. 24

8 . Policy exceptions and readiness ....................................................................................... 24

Annex 1: Results Framework and Monitoring ......................................................................... 25

V

Annex 2: Implementation Arrangements .................................................................................. 30

Annex 3: Documents in the Project File .................................................................................... 35

Annex 3: Documents in the Project File .................................................................................... 36

Annex 4: Detailed Project Description ....................................................................................... 37

Annex 5: Project Costs ................................................................................................................ 42

Annex 6: Country and Sector o r Program Background .......................................................... 45

Annex 7: Financial Management and Disbursement Arrangements ...................................... 49

Annex 8: Procurement Arrangements ....................................................................................... 61

Annex 9: Economic and Financial Analysis .............................................................................. 70

Annex 10: Safeguard Policy Issues ............................................................................................. 76

Annex 11: Project Preparation and Supervision ...................................................................... 83

Annex 12: Major Related Projects Financed by the Bank or Other Agencies ....................... 84

Annex 13: Statement of Loans and Credits ............................................................................... 86

Annex 14: Country at a Glance .................................................................................................. 88

Annex 15: Map IBRD 35460 ....................................................................................................... 90

v1

MOZAMBIQUE

FRANCE: Govt. o f [MOFA and AFD

ROADS ANT) BRIDGES MANAGEMENT AND M A I N T E N A N C E PROGRAM - PHASE I1

1 1

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTTR

Date: M a y 1, 2007 Country Director: Michael Baxter Sector Manager: C. Sanjivi Rajasingham

Team Leader: Dieter E. Schelling Sectors: Roads and highways (100%) Themes: Infrastructure services for private sector development (P);Administrative and c iv i l service reform (P);Rural services and infrastructure (P) Environmental screening category- B - Partial Assessment

Project ID- PO83325

Lending Instrument: Adaptable Program Lending (Credit)

For Loans/Credits/Others:

Coop. (NORAD)

Local Sources o f Borrowing Country 195 195

Borrower: Ministry o f Planning and Development Av Ahmed S. Toure 21,4th floor Caixa Postal 272, Maputo Mozambique Tel: 258 21 49 22 68 Fax: 258 21497663

OPEC FUND SWEDEN: Swedish Intl. Dev Cooperation Agency (SIDA) Total:

Responsible Agency: R O A D FUND (Fundo de Estradas) 1 st Floor 170 Martires de Inhaminga Ave P.O. B o x 797 Maputo Mozambique Tel: 258-21 -305589 [email protected];ov. mz

Fax: 258-21 -305069

1 7 8 10 58 68

439 604 1,043

FY 2008 j 2009 2010 2011 0 0 Annual 25.00 1 45.00 25.00 5 .OO 0.00 0.00 Cumulative 25.00 I 70.00 95.00 100.00 0.00 0.00

[ ]Yes [XINO

[ ]Yes [XINO

[ ]Yes [XINO

[XIYes [ ] N o

[XIYes [ ] N o

Does the project depart f rom the CAS in content or other significant respects? Re$ PAD A.3 Does the project require any exceptions f rom Bank policies? Re$ PAD D. 7

I s approval for any policy exception sought f rom the Board? Does the project include any critical nsks rated “substantial” or “hlgh”7 Re$ PAD C.5 Does the project meet the Regional cnteria for readiness for implementation? Re$ PAD D. 7

Have these been approved by Bank management? [ ]Yes [ IN0

0 0 0 0.00 0.00 0.00 0.00 0.00 0.00

Project development objective Re$ PAD B.2, Technical Annex 6 The pnmary objective o f the overall Roads and Bridges Management and Maintenance Program (RBMMP), i s to stimulate growth and contribute to poverty reduction through improved road infrastructure, better sector policies, and enhanced roads sector management. More specifically by (i) improving the coverage and conditions o f roads and bridges in the territory o f the Recipient; (ii) strengthening the Recipient’s institutional capacity to manage and administer the road sector; (iii) establishing financing mechanisms for road maintenance; (iv) promoting the use o f local resources in

2

roads construction and management; and (v) improving road transport safety

The project development objective o f this phase o f the APL i s to improve access o f the population to all- season roads through maintenance, rehabilitation and upgrading o f the classified road network.

The indicators to assess the achievement o f the PDO are (i) the percentage o f classified roads in good and fair condition, and (ii) the percentage o f the rural population within 2 km o f an all-season road. Intermediate outcomes have been defined as follows: (a) improved road sector management capacity; (b) enhanced execution o f the road maintenance program; and (c) t imely and cost-effective implementation o f the IDA financed rehabilitation and upgrading o f sections o f the National Road N1.

Project descnption Re$ PAD B.3., Technical Annex 4 A. Overheads: (i) Administrative costs: salanes, operating costs, office infrastructure expansion and improvement, and office equipment and vehicles for the National Road Administration (ANE) and the Road Fund. (ii) Capacity building: technical assistance, consultancies, training. (iii) Additional Programs: road safety, axle load control and pnvate sector development.

B. Maintenance: (i) Urban road maintenance: small maintenance works o n urban road in the 33 municipalities (i) Provincial consultants, who assist the provincial offices o f ANE to execute their work program, including planning, procurement, and supemsion o f works; (ii) Emergency works including c iv i l works and the procurement and placing o f bailey bridges; (iii) Unpaved road maintenance, including routine maintenance, periodic maintenance, and spot improvements; (iv)Paved road maintenance, including routine maintenance, and, periodic maintenance

C. Investments: (i) Bridge construction and rehabilitation: (ii) Regional and Distnct road program; (iii) National road rehabilitation and upgrade program: c iv i l works and consulting services for rehabilitation and upgrading o f national roads.

Which safeguard policies are triggered, if any7 Re$ PAD 0.6, Technical Annex 10 Environmental Assessment (OP/BP 4.0 l), Cultural Property (OPN 1 1.03) and Involuntary Resettlement (OP/BP 4.12)

Significant, non-standard conditions, if any, for: Re$ PAD D. 7 Board presentation: None.

Credit effectiveness:

a) The Subsidiary Agreement has been executed on behalf o f the Recipient and the Road Fund (the Project Implementing Entity).

b) The Project Implementing Entity and ANE have established a financial management system in form and substance satisfactory to IDA.

c) ANE shall have completed i ts restructuring in a manner satisfactory to IDA.

d) The Project Implementing Entity has adopted the Project Implementation Manual (which includes the Financial Management Manual, The Procurement Manual, environmental and social guidelines, and guidelines for the monitonng, reporting and evaluation o f the Project) in form and substance satisfactory

3

to IDA.

e) The Project Implementing Entity has issued a request for proposal for the selection o f independent auditors in form and substance satisfactory to IDA.

Following i s the condition for disbursement for payments into the pooled fund in support o f components A and B :

The provision o f an acceptable semiannual report o f PRISE including a report on the execution o f the previous semester and the work plan and budget for the following semester in time for the semiannual joint review meetings in September and April each year. Such reports wi l l also include the results o f the financial, technical and procurement audit f i o m mid 2008 onwards.

Covenants applicable to proiect implementation:

a) The Road Fund’s contribution to the project, through road user charges during the years 2007-09 shall not be less than $195 mill ion.

b) The signing o f a contract satisfactory to IDA with an auditor not later than by September 30, 2007

c) That the RF enters into an agreement with ANE on an annual basis for the purpose o f implementing the parts o f the project under the responsibility o f ANE.

d) That the RF enters into an agreement with INAV for the purposes o f implementing component A.3.1 o f the project.

e) That the RF includes in i t s annual budget the necessary amounts to be allocated to the Municipalities for the implementation o f component B.l o f the project.

4

A. Strategic Context and Rationale

1. Country and sector issues

1. Mozambique has made notable progress since the 1992 Peace Accords and has sustained real annual growth o f more than 7 percent since 2003. The benefits o f growth have been broad- based and can be seen in improvements in both monetary and non-monetary poverty measures. There was an unprecedented overall 16 percent decline in poverty between 1997 and 2003, f rom 70 percent in 1997 to 54 percent in 2003; rural poverty fe l l slightly more (by 22 percent) than urban poverty (by 16 percent) but more than 50 percent o f the population remains in poverty Despite the country’s economic success, lifting the other ha l f out o f poverty will require continued broad-based growth in the economy, together with continued expansion o f social and economic services to the poorest.

2. Mozambique’s classified road network-the national and regional roads-consists o f 29,349 kilometers o f roads, o f which 5,814 kilometers (or 20 percent) are paved. N o systematic survey exists on the extent and condition o f the non-classified road network, but i t i s estimated that about 3,000 kilometers o f urban roads (about 500 kilometers o f which are paved) exist, along with 5,000 kilometers o f distnct roads, al l unpaved. The total road network length i s estimated at about 37,349 kilometers (see Table 1).

Table 1: Road Network o f Mozambique (in kilometers)

Type o f road Paved Unpaved Total Classified roads 5,814 23,535 29,349 Urban unclassified roads (estimate) 500 2,500 3,000

................ ................................................................. .... ... ................... ................... ....... ................................................................. . ..... ................................................... .............................. ... .. ,. . ..... .. ..... , , , ......... , .... ....

I Rural unclassified roads (estimate) 5,000 5,000 I Total 6,3 14 3 1,035 37,349

3. Road density per land area i s l o w at 46 meters per sq. kilometer due to the large size o f Mozambique, but quite average, relative to the population, at 423 meters per 1,000 populations. Preliminary estimates suggest that the network could provide potential access (measured as those living within two kilometers o f any road in the network) to around 41 percent o f the nation’s rural population. Because o f the poor condition o f the network, the percentage o f the rural population that has reliable, all-year access i s much smaller (reliable numbers wil l be available once the 2007 population census has concluded); currently, the Performance Assessment Framework (PAF) puts i t at 11 percent. One o f the main objectives o f this project i s to increase the number o f rural residents with reliable access to social and economic facilities. The aforementioned statistics suggest that a much larger local road network will be required to connect al l residents.

4. The Government’s medium-term development objectives are spelled out in the PARPA 11, 2006, the country’s poverty reduction strategy, and are supported by the Country Assistance Strategy (CAS) prepared jo int ly by the Government and the Bank. The 2007-1 1 Road Sector Strategy (RSS), and the Road Sector Policy, support the country’s poverty reduction strategy The strategy i s also in line with the Bank’s Africa Action Plan, which puts renewed emphasis on adequate infrastructure to support growth and increased access to all-season roads.

5

5 During 2006, in close collaboration with road sector Development Partners (DPs), the Government o f Mozambique (GoM) developed PRISE, the 2007-2009 Integrated Road Sector Program. PRISE i s based on the 2007-11 Road Sector Strategy (RSS) and the Road Sector Policy It was decided that PRISE would be implemented using a sector-wide approach (SWAP). The Road Sector Strategy i s an update o f the 2001-2011 Roads and Bndges Management and Maintenance Program (RBMMP), based on which the International Development Association’s (IDA) Adaptable Program Lending (APL) was f i r s t developed. A mid-term review o f RBMMP-1 held in M a y 2005 resulted in a decision to embark on the update.

6. Road sector expenditure between 2001 and 2006 was about US$700 mi l l ion equivalent or U S 1 4 0 mi l l ion on average per annum. I t has been recognized that past road sector investments were insufficient to support the country’s poverty reduction goals. PRISE therefore plans to substantially increase expenditures for both maintenance and investment. Total planned sector expenditure under PRISE 2007-09 i s US$1,043 mill ion, or about US$347 mi l l ion per annum (about 4.4 percent o f GDP).

7 RBMMP-2 supports PRISE. It focuses o n the continued rehabilitation and upgrade o f the main national road N1, and contributes to PRISE through a pooled financing arrangement with G o M and other DPs. This support will enable G o M to carry out a sustainable road maintenance program with particular emphasis on periodic maintenance o f paved roads, while at the same time increasing the capacity o f the implementing agencies. The third phase o f the APL will be contingent on successful implementation o f Phase I1 and on satisfaction o f agreed triggers.

2. Rationale for Bank involvement

8. An important source o f value added by Bank support i s i t s comparative worldwide expenence in facilitating preparation and implementation o f major roads and transport sector development programs. The Bank has also gained considerable expenence in the region from i t s management o f the Sub-Saharan Afr ica Transport Policy program (SSATP). Within the country, the Bank has expenence in the transport sector gained through past and ongoing projects in the roads, rail, and port sub-sectors (ROCS 1 and 2, RBMMP-1, Railways and Ports Restructuring, and the Beira Railway Project).

9 There i s strong commitment by al l DPs to harmonize their approaches in line with the Paris Protocol. Hence i t was decided that PRISE would be implemented in a SWAP mode. The Wor ld Bank team has been instrumental in the preparation o f PRISE and the furthering o f donor harmonization.

10. The use o f a programmatic approach has been validated by the success o f this instrument in many other countnes and sectors. Adaptable Program Lending provides greater f lexibil i ty in adapting project design and financing in response to evolving client needs. The Bank’s participation thus provides continuity for the implementation o f the long-term national plan in the roads sector.

3. Higher-level objectives to which the project contributes

1 1. The GoM’s Act ion Plan for the Reduction o f Absolute Poverty for 2006-09 (PARPA 11) focuses on reducing the incidence o f poverty (from 54 percent in 2003 to 45 percent in 2009) through improvements in governance, human capital, and economic development. The proposed

6

second phase o f the road sector support program continues i t s strong support to the government’s development objectives, and addresses key priorities identified in the new FY08-11 Country Partnership Strategy These are (i) increased accountability and public voice; (ii) equitable access to public services; and (iii) sustainable and broad-based growth.

12. The roads program addresses the development o f infrastructure, a priority area under PARPA I (2001-2005) and retained as a priority area under PARPA I1 (2006-2009). Phase I1 o f the program focuses on improvements in management o f the sector as well as physical infrastructure, with the objective o f improving connectivity across the country Improving access opportunities for agro producers and rural communities to ports and ra i l heads, as wel l as social infrastructure, i s also included.

B. Project Description

1. Lending instrument

13. An Adaptable Program Lending (APL) was designed in three phases to support the Government’s road sector program 2001-11. Phase I (RBMMP-1) with a credit amount o f SDR127 4 mi l l ion (currently U S 1 8 6 . 4 mill ion) was designed to be a four-year program starting on July 1, 2001 and ending o n June 30, 2005 Phase I was presented to the Board o f the Wor ld Bank o n July 19, 2001, and became effective o n June 4, 2002. Delays to execute a subsidiary agreement between M o F and ANE caused a one-year delay in effectiveness. Lengthy procedures for the approval o f contracts caused further delays in implementation, and the credit closing date o f RBMMP-1 i s now June 30, 2007 RBMMP-2 should seamlessly take over f rom RBMMP-1 and i s planned to become effective on September 1,2007 Init ially i t had a planned credit amount o f US$135 mill ion, but the amount was reduced to US$lOO mi l l ion because o f l imited availability o f IDA funding.

2. Program objective and phases

14. The pnmary objective o f the overall Roads and Bridges Management and Maintenance Program (RBMMP), as set out in APL1, i s to stimulate growth and contribute to poverty reduction through improved road infrastructure, better sector policies, and enhanced roads sector management. More specifically by (i) improving the coverage and conditions o f roads and bridges in the temtory o f the Recipient; (ii) strengthening the Recipient’s institutional capacity to manage and administer the road sector; (iii) establishing financing mechanisms for road maintenance; (iv) promoting the use o f local resources in roads construction and management; and (v) improving road transport safety

15. The program i s being implemented in three phases, with the start o f each stage based on measured progress on agreed targets in the previous stage, including policy and institutional reforms, as wel l as implementation o f physical works. The program includes an integrated package o f investments focusing on (i) rehabilitation o f key links in the road network to reduce constraints on trade and growth, increase access by rural populations, and reduce transport costs; (ii) strengthening road planning, management, and implementing financial reforms to ensure sustainability; (iii) completing institutional reforms to align technical and managerial capacity at the central and provincial levels; (iv) improving road safety pol icy and implementation; (v) addressing environmental and social impacts by taking measures to incorporate environmental protection requirements in design standards and during implementation o f works; and (vi)

7

improving sector performance through a well-designed (and funded) monitoring and evaluation framework, and dissemination o f Performance Assessment Framework (PAF) indicators.

16. supports the GoM’s 2007-09 Integrated Road Sector Program, PRISE.

The current second phase o f RBMMP i s planned to be delivered in a SWAP mode and i t

3. Triggers for Phase I1 and I11 of RBMMP

17 Tnggers have been defined that need to be fulfilled to move from one phase to the next. The triggers to move from Phase 1 to 2 have been met (see Table 2) and the overall scope o f the program has not increased. The triggers for moving to Phase I11 are presented in Table 3.

Table 2 Triggers for Phase I1 of the RBMMP

Original Responsible Trigger Specific Action Date Agency Actual Status (summarized) A. Agreed Phase I road works substantially completed

B. Separation o f the Road Fund from ANE completed

Activities defined in the June 2005 ANE Achieved in March 2007 credit agreement substantially completed

Owing to cost increases only 778 kilometers of national roads were rehabilitated and upgraded, instead o f the planned 1250 kilometers. Al l o f the nine civil works contracts awarded are substantially completed and will be fully completed by April 2007

Decree creating the Road June 2004 Government Achieved in May 2003. Fund as a legal entity passed

Separate Road Fund established by Decree 2212003 o f 20 May 2003.

C. Roads Board Board meets regularly June 2004 Road Fund Achieved. functioning Roads Board and Road Fund

Board were created in May 2003. They have since met regularly . , .................................................... ............. ....................... .................................. ..,. ... .... : ........... ....,........ ..... ... .. .. , .. ... .. ... .......................... : ....................................................... ..... ....... ..............................................

D. Financial Outcome and compliance ANE and Achieved partially. management of with financial management Road Fund FM assessments o f the Road ANE and the (FM) assessments Fund have been consistently Road Fund satisfactory. satisfactory ANE has been working to ensure

compliance with FM. However, the following weaknesses were observed; (a) pending items in the reconciliation of Designated Account; (b) delay in implementation o f agreed reforms in the F M unit; (c) some deficiencies in the internal control system.

8

a

Original Responsible Trigger Specific Action Date Agency Actual Status (summarized) E. Timely MPF to channel to Road Continuous Ministry of Achieved, since 2004 in excess provision of Fund: equivalent monitoring Finance of plan. agreed level o f US$40 million in 2002, Actual annual amounts funds to the Road equivalent U S 4 5 million (equivalent US$) transferred by Fund and for in 2003, equivalent GoM to Road Fund were counterpart funds US$50 million in 2004, 2002-US$38.3 million

equivalent US$55 million 2003-US$37.5 million in 2005 2004-US$55.9 million

2005-US$88.7 million 2006-US$ 85.1 million

F Commitment to Audits carried out Annually (or ANE and regular technical semiannually Road Fund and financial for the Road audits Fund as

needed)

G. Satisfactory Activities defined in the June 2005 ANE implementation o f credit agreement the road safety substantially completed plan

H. Satisfactory implementation o f agreed HIVIAIDS prevention measures in relation to road sector

I. All preparatory activities have been satisfactorily completed

Activities defined in the credit agreement substantially completed

June 2005 ANE

Engineering designs and December tender documents for 2004 Phase I1 investments have been completed Environment impact assessment and social impact assessment for Phase I1 investments have been completed

December 2004

ANE

ANE

Achieved partially. Annual financial audits were carried out. The technical audit started but the quality of technical audit reports presented by the auditor was not satisfactory

Achieved. Road safety works and installation o f traffic signs carried out as part of the civil works contracts Achieved. HIVIAIDS prevention clauses included in all contract documents and compliance monitoring being carried out. Training o f HIVIAIDS off ice staff, peer educators and committee carried out. New off ice facilities are being provided

Achieved. Engineering designs and drawings for projects under Phase I1 were completed in 2001. These have been updated and bidding documents are now ready and the procurement process has commenced. Environmental and social impact assessment for Phase I1 projects has been completed prior to appraisal

............................................................................................

................................................................................

.....................................................................................

18. T o overcome shortfalls noted under triggers D and F above, the following measures have been built in the second phase o f the APL (i) overall fiduciary responsibility for project implementation has been given to the Road Fund which performed consistently better than ANE in terms o f financial management, while ANE’s financial management capacity i s strengthened; and (ii) dunng phase one insufficient attention was given to the conduct o f technical audits (these were just an appendix to the financial audit, instead o f being audits in their own right). Based on this, and taking into account world-wide experience with technical audits, appropriate terms o f reference have been defined jo int ly with the financing partners. The conduct o f financial, technical and procurement audits i s part o f the agreements o f the DP o f PRISE (a respective

9

Memorandum o f Understanding i s planned to be signed during the f irst semiannual jo int review meeting in September 2007).

19 Tnggers to move from APL2 to APL3 were defined dunng preparation o f the init ial program. These triggers are s t i l l valid. One additional trigger (G) in respect o f institutional arrangements for the management o f environmental and social issues at ANE has been added to ensure that these remain in place also during phase I11 o f the APL.

Table 3 Revised Triggers for Phase I11 of RBMMP

Responsib Trigger Specific Action Date Agency

A. Agreed Phase I1 road works Activit ies defined in Schedule 1 June 2010 ANE substantially completed

B. Financial management o f ANE Satisfactory FM assessments o f Monitored ANE and and the Road Fund satisfactory ANE and RF annually Road Func

C. Timely provision o f agreed level The agreed level o f funding in U S Monitored G o M o f funds to the Road Fund and G o M budget allocation.

Part C (c) (i) o f the Financing Agreement substantially completed ................................................................................................................................................................................................................................................................ j. ................................ .............................................................................

................................................................................................................................................................................................................................................................]�

Dol lar equivalent f rom the Road Fund i s US$195m (US$63m for 2007, US$64,5m for 2008 and US$67.5m for 2009) and the G o M budget allocation i s US$139m for the period 2007-09

annually

D. Road Safety Policy and Strategy Ministerial Level approval June 2009 G o M I adovted

E. Satisfactory implementation o f Activit ies defined in the financing Continuous ANE agreed H I V i A I D S prevention measures

agreement substantially completed

F Regular financial, technical and Fol low up on recommendations Annually RF procurement audits made made by the audit

G. Satisfactory institutional Institutional arrangements as December ANE arrangements for environmental and defined in Section 6 o f Annex 10 o f 2007 social management at ANE this P A D are in place

H. All preparatory activities for Engineering designs and tender December ANE Phase 3 have been satisfactorily documents for phase three 2009 completed investments as we l l as

environmental and social impact assessments have been comvleted

4. Project development objective and key indicators

20. During adoption o f the sector-wide approach by G o M and DPs, a Performance Assessment Framework (PAF) was prepared as a key element o f PRISE. The P A F includes 21 performance indicators (see Annex 1) that serve to define the program purpose, intermediate outcomes as wel l as indicators to measure the outcomes, with baselines and targets for the coming five years. The indicators proposed below to measure REiMMP-2 outcomes are taken directly f rom the PAF indicators. Institutional responsibilities for the reporting and the monitoring o f the PAF have been defined and are mainly with the Road Fund (RF).

10

21. season roads through maintenance, rehabilitation and upgrading of the classiJied road network,

The project development objective (PDO) i s to improve access ofpopulation to all-

22. The indicators to assess the achievement o f the PDO are (i) the percentage of classi9ed roads in good and fair condition, and (ii) the percentage of the rural population within 2 kilometers of an all-season road.

23. Intermediate outcomes have been defined as follows: (A) improved road sector management capacity; (B) enhanced execution of the road maintenance program, and (C) timely and cost-effective implementation of the IDAJinanced rehabilitation and upgrading of sections of the Nl

24. K e y indicators to assess the achievements o f these intermediate outcomes are the following: 0 A(i): Policy for the management o f unclassified roads adopted and implementation plan

prepared (PAF indicator 2) A(ii): new Road Ac t approved and implemented (PAF indicator 14)

e B : percentage o f annual execution o f the planned maintenance achieved on paved and unpaved roads (PAF indicator 7&8 and P A F quarterly reports)

0 C: 160 kilometers o f the N 1 rehabilitated and upgraded by June 2010 as per plan (from the PAF quarterly reports).

5. Project components

25 The project consists o f three components: A, Overheads; B, Maintenance; and C, Investments. Components A and B are mainly financed through Road Fund revenues and Development Partner (DP) contributions through pooled funding. IDA contributes US$35 mi l l ion to this pool. Component C i s financed exclusively through dedicated funding by both G o M and DPs. IDA contributes to component C with US$65 mill ion.

A. Overheads: USS69.6 million (of which RF and DPs, including IDA, contribute US$45.2 million through pooled funding, and DP contributes US$24.4 million through dedicated funding)

A. 1 Administrative costs: salaries, operating costs, office infrastructure expansion and improvement, and equipment for ANE and the Road Fund.

A.2 Capacity building: technical assistance, consultancies and training to build up capacity o f ANE, both at headquarters and in the provinces, particularly in terms o f planning, procurement and contract management, and to strengthen the financial management and oversight capacity o f the Road Fund.

A.3 Additional Programs: road safety, axle load control and private sector development.

B. Maintenance: US$263.9 million (of which RF and DPs, including IDA, contribute U S 2 4 6 . 2 million through pooled funding, and RF and DPs contributes US$17.2 million through dedicated funding)

B.l Urban road maintenance: funding o f small works on urban roads in the 33 financed by dedicated funding from the Road Fund (1 0% o f fuel levies by decree).

municipalities

11

B.2 Provincial consultants: who assist the provincial offices o f ANE to execute their work program, including planning, procurement, and supemsion o f works.

B.3 Emergency works: including emergency c iv i l works and the procurement and placing o f bailey bridges.

B.4 Unpaved road maintenance: including routine maintenance (1 5,575 km), periodic maintenance (725 kilometers), and spot improvements (823 km).

B .5 Paved road maintenance: including routine maintenance (4,260 km), periodic maintenance (600 km).

C. Investments: USS709.8 million (of which GoM contributes USS139.1 million and DPs USS570.7 million, o f which IDA contributes U S 6 5 million-all dedicated funding)

C. 1 Bridge construction and rehabilitation: the construction o f 16 bndges, including the Zambezi bridge at Caia and the rehabilitation o f three existing bridges.

C.2 Regional and Dzstrict road program: under this program i t i s planned to rehabilitate about 1,500 kdometers o f regional and distnct roads. C.3 National road rehabilitation and upgrade program: financing the rehabilitation and upgrading o f about 487 kilometers o f national roads, o f which 160 kilometers by IDA, as follows (sub-component C.3.1):

(a) Jardim-Benfica section (7 km) (b) Xai-Xai-Chissibuca section (96 km) (c) Massinga-Nhachengue section (57 km)

C.4 National roads paving: under this program about 607 kilometers o f national unpaved roads will be paved.

C.5 Engineering Services: this includes a l l supervision services for the works on national roads, and the preparation o f detailed design and bidding documents for the next phase o f the project.

6. Lessons learned and reflected in the project design

26. Implementation delays: RBMMP-1 experienced implementation delays because o f (i) delayed execution o f the subsidiary agreement; (ii) implementation problems; and (iii) bureaucratic procurement approval procedures external to ANE. To mitigate against these delay factors the following has been decided: (a) a draft subsidiary agreement (called memorandum o f understanding) between the Ministry o f Planning and Development and the Road Fund has been prepared; (b) a restructunng program for ANE has been agreed upon (see paragraph below); and (c) G o M has presented a proposal for the reduction o f the need for external approvals for procurement decisions to IDA at negotiations.

27. Restructuring of ANE. Prior to November 2005, responsibility for the management o f the classified road network was split between ANE (primary and secondary roads) and provincial public works offices under the Governor o f each province (tertiary and vicinal roads). In November 2005 G o M decided to merge the roads section o f the provincial road offices and ANE into one body responsible for the management o f the entire classified road network. For that purpose, an appropnate organizational structure, in line with modern road management principles, has been adopted both at ANE headquarters and at provincial levels. The 50 key positions o f this new structure are currently being selected through a transparent, competitive

12

process (for details see Annex 2) and the salary structure o f ANE (and the RF) i s being reviewed and will be adjusted to comparable levels in pnvate sector or government institutions o f similar importance. Also, a new Board o f Directors o f ANE i s being put in place. As per the Financial Agreement i t i s an effectiveness condition that ANE shall have completed i t s restructuring in a manner satisfactory to IDA. In the Minutes o f Negotiations this has been defined as follows: (i) the new organizational structure o f ANE has been adopted (done on April 3, 2007); (ii) the new Board o f Directors o f ANE i s in place; and (iii) at least the ANE headquarters’ Director General, the Executive Directors and ANE’s provincial delegates have been selected in a manner satisfactory to IDA (which means they have been selected through a competitive process).

28. Use of local building materials: The coastal areas o f Mozambique have few naturally available materials suitable for road building. Crushed stone must be hauled to coastal sites f rom distant quarries, which adds substantially to the cost o f road construction. ANE has carned out research with support f rom the University o f Texas on the use o f locally available material (sand asphalt) for the construction o f roads. The result o f the research has been applied in the updated designs for the N1 road sections to be rehabilitated and upgraded during this phase.

7. Alternatives considered and reasons for rejection

29. Mode of financing: G o M would l ike to move toward sector budget support as soon as possible. Having to deal with 19 sector DPs, each with i t s own (financing) procedures, certainly puts a heavy load on the sector institutions and further undermines their l imi ted capacity As part o f the SWAP it was agreed that during Phase 2 considerable amounts would be set aside by the DPs for pooled financing to be channeled through the Road Fund (RF). If Phase I1 i s successfully implemented, it i s envisaged that the IDA share o f pooled funds will increase or will move to Sector Budget Support (SBS) in Phase 111. In addition, the road fund legislation requires that al l road sector funding be channeled through the RF for both maintenance and development. The alternative to this approach for IDA would have been to stick to the financing mechanism applied during Phase I, when al l project funding was channeled directly to ANE and a l l funding was earmarked. This was rejected as not being in line with Government requirements and donor harmonization, hence the channeling o f a l l IDA funds through the RF part o f which through the pooled fund.

30. Operation of the provincial offices of ANE: Because o f the limited availability o f experienced engineers in Mozambique, the following options were considered to operate the provincial offices o f ANE: (i) outsourcing the provlncial road management functions to the private sector; (ii) augmenting and strengthening the available staff with technical assistance (TA) and training; and (iii) appropnately filling top tier management and technical positions in the provincial offices o f ANE through national and regional recruitment, and offering attractive salary scales in line with private and public entities o f similar importance to ANE. Option (iii) i s preferred and i s currently being implemented. If through these efforts ANE cannot be appropriately staffed by the Credit effectiveness date, it would be necessary to fa l l back on option (ii).

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C. Implementation

1. Partnership arrangements

3 1. This project i s a partnership between G o M and nineteen DPs. I t i s to be implemented in a SWAP mode. It entails a jo int ly developed and agreed sector policy, strategy, and investment plan, common financing arrangements (for the overhead and maintenance component only), common financial management and procurement procedures, as wel l as a common reporting and monitoring system. Furthermore it includes jo in t auditing arrangements, including financial, technical and procurement audits. I t i s planned to hold semiannual jo int review meetings in September and April each year to which G o M will invite DPs. In order to reduce the number o f missions that are visiting Mozambique it i s suggested that D P should combine their supervision missions with the jo in t review meetings. It i s planned to agree on the mode o f execution and collaboration in respect o f PRISE in agreements to be signed by the partners. A Memorandum o f Understanding (MoU) would be signed by al l “pool funding” DP and a Code o f Conduct (CoC) by a l l partners that are contributing to the SWAP through pooled or parallel financing, or both. Drafts o f the M o U and CoC have been prepared and would be signed at the f i rs t semiannual jo in t review meeting in September 2007 I t i s a requirement o f the M o U and the CoC that there will be a jo int financial, technical and procurement audit (financed from the pooled fund) that will serve the requirements o f a l l partners.

2. Institutional and implementation arrangements

(a) Project Implementation. The responsibility for project implementation will be with the Road Fund, the legally autonomous entity for managing the collection and disbursement o f road sector funds. Policy guidance and oversight wil l be provided by the Ministry o f Public Works and Housing (MoPWH) and i t s advisory unit (GAS).

(b) Planning; and implementation o f road works wi l l be the responsibility o f ANE, the national road administration responsible for the management o f classified roads in Mozambique. ANE headquarters will manage large contracts while the management o f smaller maintenance contracts will be delegated to the provincial offices o f ANE (the threshold for such delegation i s defined in the procurement manual for PRISE.)

(c) Procurement Arrangements. Responsibility for procurement o f most o f the contracts financed under the Project will be with ANE. Those contracts financed under earmarked funding wil l have to fo l low the procurement rules o f the various DPs, including IDA. Contracts that are funded under the Pooled Fund will be procured following national procurement procedures as described in the Procurement Manual. The financial and technical audit o f a l l funding under the pooled fund will include a procurement audit. The road fund will employ a high level procurement specialist who will ensure that the procurement arrangements under the project are being followed and that sufficient capacity i s built up to execute the project.

(d) Financial Management and Auditing. The overall responsibility for financial management i s with the Road Fund. The RF will manage a pooled fund with funding from road user charges and contributions f rom some o f the D P (including IDA). In addition, the RF will manage the IDA designated account, a G o M investment account, and an urban roads account meant for the financing o f the maintenance o f urban road by the municipalities. The RF will procure the services o f an external auditor to conduct annual financial, technical, and procurement audits o f PRISE.

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3. Monitoring o f outcomes and reporting

32. The overall responsibility for the monitonng and reporting on the project will be with the RF, which i s establishing a specific unit for that purpose (UMASE). The RF will, based on the agreed sector performance assessment framework (PAF) (see Annex l), report quarterly o n the progress o f the implementation o f the project to al l stakeholders o f the project. Templates have been created for preparation o f quarterly reports for the f i rs t and the third quarter o f each calendar year. These quarterly reports wi l l essentially be updates o f statistical sector data. More detailed semiannual reports will be prepared as o f June 30 and December 31 each year (a draft template has been created). These semiannual reports will be the basis (together with the audit reports) for the semiannual jo int sector review meetings.

33. ANE will have to provide much o f this reporting information to the RF in a timely manner. The RF will need to initiate the collection o f some o f the mission baseline data. The quarterly or semiannual reports will fo l low up on the agreed indicators and will provide explanations i f targets have been missed. The Reports will also include financial information o f the various accounts managed by the RF Each report will provide information on the implementation o f the period immediately previous to reporting period, as wel l as total achievement since the beginning o f the project. I t wil l also set out the budget and work plan for the coming quarterly or semiannual penod. The semiannual report for the period July to December will also report o n the execution o f the program o f the previous year, while the report for the penod January to June will set out a preliminary work program and budget for the following year.

34. G o M wil l invite DPs twice a year (in April and September) to jo in t sector review meetings for which the respective semiannual progress report and the technical, financial, and procurement audit reports will form the basis. At the April meeting physical and financial progress o f the implementation o f the previous year wil l be discussed and evaluated. Progress will also be discussed at the September meeting, and the updated work program and the budget requirements o f the following year will be reviewed and agreed upon.

4. Sustainability

35 Crit ical to the sustainability o f the road sector program i s improvement o f maintenance performance. Sufficient increased resources for maintenance have been allocated in PRISE (US$SS mi l l ion on average per annum). Since maintenance works wil l largely be implemented by the provincial offices o f ANE, ensunng their strong performance will be crucial to sustainability o f the program. Clearly, the planned overall spending under PRISE (4.4 percent o f GDP) will not be sustainable in the long run, but i s considered necessary in the short run to cover the huge backlog and achieve the country’s poverty goals. In the medium term, however, overall resource allocation relative to GDP will decrease, and the share o f maintenance compared to investments will increase. Dunng this phase a great deal o f emphasis has been placed on development o f appropriate annual periodic maintenance programs o n paved roads, for which a large portion o f the pooled funding i s intended.

5. Critical risks

36. Constrained implementation capacity: the planned increase o f the average annual expenditure in the road sector from US$140 mi l l ion to U S 3 4 2 mi l l ion wi l l require a substantial

15

increase in A N E ' s capacity, both at headquarters and in the provinces. T h i s comes at a t i m e w h e n ANE i s b e i n g restructured through the in tegrat ion o f p r o v i n c i a l road of f ices into ANE. T h i s c lea r l y poses a chal lenge and might l e a d to imp lemen ta t i on delays. To mi t i ga te th i s r i s k ANE i s current ly rest ructunng i t s e l f through compe t i t i ve selection o f a l l k e y manager ia l a n d technica l s ta f f (a total o f 50 positions). Star t ing with the D i rec to r Genera l (DG), ANE i s adver t is ing these pos i t ions in M o z a m b i q u e and in n e i g h b o n n g countnes (to attract Mozamb icans from the Diaspora). An attract ive salary scheme, s im i la r to those o f p n v a t e a n d p u b l i c enti t ies o f comparable impor tance i s b e i n g developed. R e m a i n i n g s k i l l gaps will b e f i l l e d tempora r i l y with technica l assistance f i nanc ing p r o v i d e d in PRISE. Tab le 4 summarizes the main categories o f r isks.

Table 4: Critical risks and possible controversial aspects

Risk Rating wit Risks Risk Mitigation Measures Mitigation

To Project Development 0 bj ectives Constrained implementation IImplementation capacity wil l be strengthened at H i g h capacity 'headquarters and in the provinces through (a) restructuring

o f ANE, (b) integration o f provincial road offices into ANE, (c) appointment o f key managerial and technical staff ,through competitive selection; and (d) the application o f an lattractive salary scheme.

Implementation delays because o f the need for the procurement related approvals which will be agreed pr ior to disbursement external to ANE

'RF in consultation with the MoF, and M o P W H i s preparing ,a proposal for internalization o f the procurement procedures,

Medium

To ComDonent Results

Financial management r isks ;Before effectiveness, the Bank will approve a Financial iManagement Manual, which wil l define budgetary control, ;accounting policies and procedures in accordance with international standards. :A governance structure with clear distmction o f roles and ;responsibilities including separation o f strategic oversight i(MoPWH), project implementation (RF) and project :execution (ANE) functions i s being established.

High

....................... .... ..... ................ .. ..... . .. .. , . .... .... .. ... ....... ........... .............. ....... ............... ..... ................................ . ....... ......... ............. . ..... .. .. .. ......... ....... ..... ...... ..... ..... ...... ..... ................... ............. ................ ..... .... ...... .. ... ........ . ............. . ... . , . .... . ........... . Poor governance and corruption in the sector

M e d i u m

Delay in generating sufficient ;Flexibility i s built in the deterrmnation o f the size o f the Low funds in the pooled fund, or isermannual IDA payments to the pooled fimd. Modalit ies there i s a surplus due to slow !wil l be agreed upon in a Memorandum o f Understanding progress o f works. lbetween pooled fund contributing parties. Planned to be

:concluded at the first sermannual sector review meeting in ;September 2007

37. Implementation delays because o f the need for procurement-related approvals external to ANE: O n e o f the expenences o f the imp lemen ta t i on o f Phase I of RBMMP w a s that the requi rement for var ious external (outside the road sector agencies) procurement decisions was

16

a major contributor to the delays in implementation o f the project. It was agreed with other DPs and G o M that this issue must be addressed as part o f the implementation o f PRISE. The present system requires that al l evaluation reports be sent to the Ministry o f Public Works and Housing (MoPWH) for approval, and evaluation reports for externally funded project with a value equal or above the equivalent o f U S D 1 m i l l i on must be approved by CREE (ComissZio de Relaqdes Econ6micas Externas - Commission for External Economic Relations). Before signature o f the contract, another approval i s required from both M o P W H and Ministry o f Finance (MoF). Moreover, all foreign exchange payments must be made through the Bank o f Mozambique, which requires that the contract be approved by the M o F According to the law, the Tribunal Administrativo must also give vzsto prbvzo (pnor review) for a l l contracts pno r to implementation o f the contract. G o M has presented a proposal for the simplification o f these processes.

38. Financial management risks: The financial management assessment done pr ior to appraisal i s rating the financial management r i sks as substantial due to the complexity o f the project. During phase one o f the APL, when ANE was the implementing agency, i t s financial management showed some weaknesses (as explained in Table 2 section D). The changed financial management arrangements under PRISE (Phase I1 o f R B M M P ) place the main responsibility for financial management under the RF (while ANE will be able to focus on i t s core strength namely procurement and contract management). Since the core activity o f the RF has always been financial management (most o f i t s staff are financial specialists), and i t s assessed capacity i s satisfactory, the overall financial management nsk i s substantially reduced. However, the workload o f the RF under the new arrangements will increase. The RF i s preparing a proposal for the employment o f additional staff and will employ a high-level procurement specialist prior to effectiveness.

39 The detailed financial management arrangements o f PRISE, including the various responsibilities, monitonng, control, and reporting functions are being la id out in the PRISE Financial Management Manual, a draft o f which was reviewed and commented on dunng appraisal. A new draft was presented prior to negotiations. Approval o f the Financial Management Manual (satisfactory to IDA) by the Board o f Directors o f the RF and the Ministry i s a condition o f effectiveness.

40. Procurement risks: a procurement capacity assessment o f ANE’s central procurement unit (UGEA) was carried out during appraisal o f the project. I t s capacity was assessed as substantial and the overall procurement risk o f the project was assessed as moderate. The challenge for the UGEA wil l be to ensure adequate procurement capacity in the provincial units o f the ANE (UGEAP) which are currently being created. However, in the past the provincial road units (which are being integrated into ANE) have procured works for an average o f US$4 mi l l ion per annum and their staff i s being absorbed into the UGEAP ANE i s preparing a procurement manual (a draft was discussed pnor to negotiations and i t s completion satisfactory to IDA i s an effectiveness condition) which wil l lay out the detailed procurement procedures for al l works, services and goods to be procured through the pooled fund. Additionally, the RF will employ a high level procurement advisor who wil l oversee the implementation o f the procurement activities under the project.

41. Governance risks: Although there i s considerable nsk o f poor governance and corruption in the sector, such nsk i s not disproportionate compared to those for other sectors or similar countnes. Vanous measures have been taken to mitigate against such nsk: (i) the sector investment program (PRISE) has been defined through a participatory and lengthy planning process with a large number o f c i v i l society representatives and stakeholders; through this process

17

a detailed investment program has been defined, any deviation f rom which would need to be agreed to by a l l the stakeholders during the semiannual sector review meetings; (ii) an elaborate monitoring system for the implementation o f PRISE has been defined and clear responsibilities for the monitonng function have been assigned; (iii) the governance structure o f the sector i s elaborate, with clear distinction o f the roles and responsibilities o f the vanous bodies, including the separation o f oversight functions (the Ministry), financing (the RF), and execution (ANE); both RF and ANE have Boards o f Directors with pnvate sector representation; (iv) the sector operation modalities are being la id down in financial management and procurement manuals, which are currently being finalized. These manuals will describe clear and transparent processes, including publishing the results o f procurement process on designated Web sites, the national press, and the need for transparent and clear financial reports; (v) in addition, there will be an extensive external financial, technical, and procurement audit that will provide feedback to al l financiers as to the proper implementation o f the program and achievement o f value for money

42. Delay in generating sufficient funds in the pooled fund o r the funds are in surplus due to slow progress of works: Although there i s willingness among the participating DPs to provide sufficient funding to meet the cash f low requirements o f the pooled fund to finance commitments to service providers, there i s a risk that funds will deplete quickly if the DPs are not able to make their contributions o n time; or, alternatively, a situation could occur where there are sufficient funds in the common fund and the RF would l ike to delay or decrease the IDA payment to avoid excessive liquidity T o mitigate this nsk, it i s planned to build in flexibil i ty regarding the IDA payment size and timing. I t i s proposed that each payment will be agreed upon jo int ly among GoM, DPs, and IDA at the semiannual sector review meeting in September and April each year. The size and timing o f subsequent payment will be based on the agreed and updated cash f low forecast for the pooled fund presented by the RF at the semiannual sector review meetings.

6. Credit conditions and covenants

Following are the conditions of effectiveness:

a) The Subsidiary Agreement has been executed on behalf o f the Recipient and the Road Fund (the Project Implementing Entity).

b) The Project Implementing Entity and ANE have established a financial management system in form and substance satisfactory to D A .

c) ANE shall have completed i t s restructuring in a manner satisfactory to IDA.

d) The Project Implementing Entity has adopted the Project Implementation Manual (which includes the Financial Management Manual, The Procurement Manual, environmental and social guidelines, and guidelines for the monitoring, reporting and evaluation o f the Project) in form and substance satisfactory to IDA.

e) The Project Implementing Entity has issued a request for proposal for the selection o f independent auditors in form and substance satisfactory to IDA

Following is the condition for disbursement for payments into the pooled fund in support of components A and B:

a) The provision o f an acceptable semiannual report o f PRISE including a report on the execution o f the previous semester and the work plan and budget for the fo l lowing semester in time for the semiannual jo in t review meetings in September

18

and April each year. Such reports will also include the results o f the financial, technical and procurement audit f rom mid 2008 onwards.

Following are Project Covenants:

a) The Road Fund’s contribution to the project, through road user charges during the

b) The signing o f a contract satisfactory to IDA with an auditor not later than by

c) That the RF enters into an agreement with ANE o n an annual basis for the purpose

d) That RF enters into an agreement with INAV for the purposes o f implementing

e) That RF includes in i t s annual budget the necessary amounts to be allocated to the

years 2007-09 shall not be less than US$195 mi l l ion

September 30,2007

o f implementing the parts o f the project under the responsibility o f ANE

component A.3.1 o f the project

Municipalities for the implementation o f component B.l o f the project

Following are the key milestones for the implementation of the project:

a) Effectiveness o f the credit i s planned for September 1, 2007

b) Joint review meetings are planned in September and April each year

c) A mid-term review o f the project shall be carried out not later than by April 30, 2009

d) The project i s planned to be fully implemented by June 30, 2010

e) The project closing date i s June 30, 201 1

D. Appraisal Summary

1. Economic and financial analyses

43. An economic analysis has been completed for the N1 rehabilitation and upgrading component financed by IDA. This component accounts for 65 percent o f total IDA financing and does not require any counterpart funding by GoM. The investments proposed under this project are priorities in the updated Road Sector Strategy, as o f M a y 2006, o f the GoM. As these roads were part o f the c iv i l works component o f RJ3MMP1, detailed designs were prepared under APL1 and have now been updated, along with the economic analysis. The results for the three project roads indicate I R R s in the range o f 15 to 6 1 percent with a combined IRR o f 19 percent.

44. The HDM 4 model has been used for the economic analysis. The proposed works option i s compared with a “do minimum” scenario, which assumes that a minimum amount o f maintenance o f the existing road will be camed out. The economic analysis i s based o n benefits f rom savings in VOCs, travel time, and road maintenance costs, compared with the costs o f rehabilitation and upgrading, and maintenance. Discounted benefits are compared to discounted costs for benefit-cost ratios and net present values, as well as calculating the I R R s . A sensitivity analysis o f the I R R s was camed out for (a) an increase in costs o f 30 percent; (b) a reduction in traffic o f 20 percent; and (c) reduction in traffic o f 20 percent, combined with a simultaneous

19

increase in cost o f 30 percent. The sensit ivi ty analyses indicate that a l l the projects would remain economically feasible even with 20% lower traffic and 30% higher costs.

2. Fiscal impact o f P R I S E

45 T o measure the fiscal impact o f PRISE, expenditures are viewed in the context o f GDP and the main G o M fiscal magnitudes as projected by the IMF over the 2007-2009 penods (see table 5). Average annual PRISE expenditure o f US$348 mi l l ion would be about 4.4 percent o f GDP and 16 percent o f total G o M expenditures.

Table 5 : GoM Fiscal Projections by IMF 2007-2009

Avg Annual 2007-2009

Item US$ billion Yo o f GDP 100.0% GDP (nominal) US$8.100

............................................................................................................................................................................. " .................................................................................................................................. !.s!4.% GoM revenue US$1.251 ofwhich ................................................................................................................................................................................................................................................................��

Taxes on petroleum US$O. I1 0 1 4 % Other taxes on goods & services US$ 0.5 1 4 6.3%

............. .TEe?..on..!ncome US$0.270 3.3% Taxes on international trade US$O. I62 2.0% Other taxes US$O. 024 0.3% Other sources of revenue US$O. 1 70 2.1%

........................................................................ GoM expenditure,,& net lending US$2.233 2 7.6%

Current expenditure US$1.180 14.6%

................................................................................................................................................................................................................................

................................................................................................................................................................................................................................................................ �

........................................................................................................................................................................ /..... ..................................................................

................................................................................................................................................................................................................................................................��

........................................................................................................................................................................................................................... ..~ ............................................................................

............................................................................... ........................................................................................................................ ofwhich: ............................................................................................................................... ," ...............................................................................................

................................................................................................................................................................................................................................................................4� Capital expenditure, US$0.977 12.1% .................................................................................................................................................... " ................................................................................................................................... of which: ........................................................................................................................................................... " .........................................................................................................................................

Capital expenditure-local& financed US$0.340 4.2%

Grants received US$0.664 8.2% ofwhich;

................................................................................................................................................................................................................................................................�� Capital expenditure-other financing US$0.637 7.9%

................................................................................................................................................................................................................................................................��

Project US$0.421 5 2% I Nonuroiect USs0.243 3 .O% PRISE (expenditure on classified roads) US$0.348 4.3% ............................................................................................................................................................................................................ ..................................... .........................................................................

Domestic funding 0.111 1.4% Foreign funding 0.236 2.9%

................................................................................................................................................................................................................................................................��

46. Approximately two-thirds o f PRISE 2007-2009 expenditures i s programmed for investment and one-third for maintenance (current expenditures). Under the medium-term plan shown in the Road Sector Strategy, almost al l large-scale investments on the national trunk road network and major bndges will be completed by 2010 or 201 1. The next phase o f the roads program will concentrate on asset preservation (maintenance), and expanding rural accessibility through low-cost upgrades and rehabilitation o f the rural roads network; although those needs are extensive, they wil l almost certainly involve a substantial decrease in total allocations of resources to investment. At the same time, annual allocations to maintenance should m e to US$lOO mi l l ion or more. Thus, the l ikely level o f total annual road expenditures f rom 2012 onward should be in the US$200-250 mi l l ion range (bringing road sector expenditures down to a

20

level o f around 3 percent o f GDP), with the relative balance between maintenance and investment shifting in favor o f the former.

3. Technical

47 ANE i s currently carrying out a review o f the Southern A fnca Transport Commission (formerly SATCC) standards to ensure how these can be best adopted in a cost-effective and affordable manner in terms o f both geometric and structural design standards taking into account environmental conditions, traffic volume, locally available construction materials, and ease o f future maintenance. With an a im to decrease unit cost o f rehabilitation works o n national roads, ANE i s adopting modem road design technology using Accelerated Pavement Testing (APT) with consultant’s support f rom the University o f Texas. ANE has embarked o n testing procedures on locally available road construction matenals for durability and ease o f their applications. The lessons, drawn f rom the research and material testing expenences, have been used in the design o f rehabilitation o f three road sections on N1. T w o design options were considered, one using crushed stone based o n the standard engineering practices, and the other using sand-asphalt, based on APT design methods. The APT design method was adopted as it was found to give a cost savings o f about 18 percent.

48. T o ensure sustainability and improve technical quality o f road maintenance ANE i s planning to implement a p i lo t output- and performance-based management and maintenance contract, for which the engineering design was carned out under APL Phase 1. Furthermore, the project will continue to support the development o f road safety programs, adoption o f axle load control study recommendations, conducting technically sound road condition surveys, and application o f the Integrated Roads Management System in the planning, design, and implementation o f the routine and periodic maintenance programs o f the road network.

4. Fiduciary

49 The procurement procedures for the pooled fund component wil l be in accordance with the G o M Public Procurement Regulation enacted in December 2005, with the provision that domestic preference shall only apply to International Competitive Bidding (ICB) procedures and that for ICB, bidding documents and advertisement shall also be available in English. The client has prepared and presented to IDA prior to negotiations a draft Procurement Manual describing the procurement procedures applicable for all contracts funded from the pooled fund. The Procurement Manual describes the various procurement procedures applicable for works, goods and services, relevant thresholds, procedures for the disclosure o f procurement procedures, etc. It will now be updated to reflect the procurement procedures agreed upon dunng negotiations (as per Annex 8). I t i s a condition o f effectiveness that a final Procurement Manual, as a part o f the Project Implementation Manual, i s presented to IDA for i t s review and clearance. For the IDA financed portion o f component C o f the project, to be funded through an IDA designated account maintained by the RF at the Bank o f Mozambique, IDA procurement procedures wil l apply The procurement o f contracts financed by other D P through dedicated funding wil l fo l low the procedures o f the various DP To strengthen the capacity o f i t s procurement staff both at headquarters and in the provinces, ANE will prepare, by June 30,2007, a plan for suitable on-the j ob training o f i t s procurement staff. T o strengthen i t s oversight capacity the RF will employ a high level Procurement Advisor.

21

50. A financial management (FM) review o f both the RF and ANE was carried out at appraisal to assess the institutional capacity for handling FM functions. The general observation i s that the accounting and financial management systems o f both the RF and ANE need to be upgraded to establish an acceptable control environment to mitigate financial management risks. Given that the satisfactory assessment o f the FM system was a trigger for APL2, ANE has been working to ensure compliance with FM. However, the fo l lowing weaknesses were observed: (a) pending items in the reconciliation o f special accounts; (b) delay in implementation o f agreed reforms in the FM unit; and (c) some deficiencies in the internal control system. To strengthen institutional capacity for managing FM functions an action plan as shown in Table A7.1 in Annex 7 has been agreed on. Funds from the GoM, DP, and IDA will be channeled through the RF and from there to executing agencies (see f low o f funds diagram in Annex 7, Figure A7.1). The overall financial management risk i s rated as substantial.

5. Social

51. Safeguards arrangements for the implementation of PRISE. In 2001 a “Strategic Environmental Impact Assessment” for the road sector was prepared for the ten year (2001-1 1) Road and Bridges Management and Maintenance Program (RBMMP) (also called Roads 3). This strategic assessment i s being updated for PRISE and the update i s expected to be available in M a y 2007 Under a previous project, Roads and Coastal Shipping Project 2 (ROCS-2) guidelines were prepared, in 1996, for environmental assessments (EA). For the implementation o f resettlement action related to the implementation o f PRISE, a Resettlement Policy Framework (RPF) was prepared in 2006 as part o f the APL1 activities. U A S M A , the Environmental and Social Unit o f ANE, i s applying the above mentioned instruments to al l sector investments under the project, not just those financed by IDA. Additionally, U A S M A has developed guidelines for the application o f H N / A I D S control measures and applies these guidelines consistently in al l sub-projects.

52. Resettlement issues related to the IDA financed road section: The EA revealed that impacts upon some housing, along with shops, kiosks, and associated fences, are anticipated along the Jardim-Benfica section o f the National Road during rehabilitation and upgrading, and some loss o f land i s expected along the Xai-Xai-Chissibuca and Massinga-Nhachengue sections. Social analyses documented persons and assets affected by project construction activities, and a Resettlement Act ion Plan (RAP) for each sections was developed to accommodate displacement o f indimduals and structures and their resettlement. Mechanisms to minimize the impacts have been incorporated in the RAPs, and include provision for repositioning structures removed within the existing area to minimize resettlement in new areas, adequately compensating al l affected persons to ensure that their means o f l ivelihood are sustained or improved, and paying compensation before the affected persons’ properties are removed to minimize transitional loss o f income, services, and livelihood by the affected persons. Provision i s also made for ensunng that the affected persons’ grievances are addressed as soon as possible to avoid loss, and for providing employment to Project Affected Persons as an alternative source o f income. Costs for implementation o f the R A P s are to be met under the pooled fund.

53. A Resettlement Policy Framework (RPF) has been developed for application to future road projects, and this should also be monitored and evaluated during implementation o f the Project. Both the RPF and R A P s were disclosed in-country and in the Bank’s InfoShop pr ior to appraisal.

54. H I V / A I D S control: ANE will enhance institutional arrangements to scale up existing prevention activities and continue developing and implementing measures to prevent and mitigate

22

the spread o f Sexually Transmitted Infections and H N / A I D S among ANE staff and their families as wel l as construction workers and communities living near road construction activities. Functions and specialist staffing will form part o f U A S M A (Unidade de Assuntos Soiais e Me io Ambiente-Environmental and Social Unit o f ANE), and will work with the l ine ministry, the National Aids Commission and other authorities to implement the workplace pol icy guiding implementation o f the sectoral response to HIV/AIDS. Priority will be given to developing a monitoring and evaluation system and to exchanging information with the H IV /A IDS Multi- sectoral Aids Program (MAP). With direct assistance from NGOs and Community-based Organizations (CBOs), new approaches will be adopted to assure the implementation o f clauses in contractors’ contracts.

6. Environmental

55. EAs in respect of the IDA financed sections o f the N1: Environmental Assessments (EA) analyzed the potential environmental and social impacts o f the proposed rehabilitation and upgrading o f three sections o f the N1, and stipulated measures to mitigate such impacts. The environmental policy, and legal and administrative framework o f Mozambique were also reviewed, along with institutional capacity to identify any weaknesses and needs for strengthening. The EA shows that impacts generated by the project activities are l imited in extent and duration, given that good construction and management practices will be integrated in design, project implementation plan, and contract documents, and safeguard provisions will be closely monitored during implementation. These requirements have been explicitly described and costed in the Environmental Management Plan (EMP) section o f the EA, and include environmental protection measures covering drainage, soil erosion, noise control, and short-term, local impairment o f water quality, and borrow pit use and restoration. The EMP also specifies the responsibilities o f agencies for the implementation and supervision o f environmental and social safeguards. The environmental screening category i s ‘category B’ and the EA has been disclosed in-country and in the Bank’s InfoShop.

56. Institutional arrangements for the application of environmental and social safeguards: The following key players wil l be involved in EMP and RAP implementation during construction stage: 0 ANE and i t s Environmental and Social Unit (UASMA) 0 Supervision Consultants (SCs), that is, the Site Engineer (SE) and SE representatives

Contractors The Director General o f ANE, with the assistance o f U A S M A , will have overall responsibility for certifying compliance with al l safeguard measures and reporting to the regulatory bodies and IDA.

57 Fol lowing recommendations in the ENEMP, personnel who have charge o f environmental, social, and health issues in ANE will work within a single unit-that is, U A S M A , and report directly to the Director General o f ANE. T o assure efficiency and integration, U A S M A should be headed init ially by the senior level Environmental/Social Specialist. This would have the added benefit o f enhancing decision making and coordination within and outside ANE, and ensuring that the activities stipulated in EMP and RAPS are implemented satisfactorily TORS have been agreed on, stipulating UASMA’s objectives and functions covenng environmental, social, HN/AIDS, and safety activities.

58. Consultations: Init ial and detailed consultations took place with the different stakeholders f rom government departments, local authonties, and local communities, and their

23

output forms an integral part o f project design and implementation arrangements. Communities have a mandate for participation in the decision-making process and this provides an enabling environment for enhancing the benefits o f infrastructure development.

7. Safeguard policies

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/C;P 4.0 1) [XI [I Natural Habitats (OP/RP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [XI 1 1 Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) 11 [XI Forests (OP/BP 4.36) 11 [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/RP/GP 7.60)* [I [XI Projects on International Waterways (OP/RP/GP 7.50) [I [XI

8. Policy exceptions and readiness

59 This project complies with al l applicable Bank policies.

60. The engineering design and bidding documents for the roads to be financed under this credit have been completed, and the procurement o f works and supervision services i s ongoing. I t i s expected that respective contracts can be signed immediately after effectiveness o f the credit.

* By supporting the proposed project, the Bank does not intend to prejudice the final determination o f the parties’ claims on the disputed areas.

24

Annex 1: Results Framework and Monitoring MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase II)

1. Arrangements for Results Monitoring

1. Progress made in achieving the objectives o f PRISE will be reported through a Performance Assessment Framework (see project files, Annex 3) which has been jo int ly developed by a l l the sector stakeholders. The road sector Performance Assessment Framework (PAF) aims at incorporating the reporting needs o f a l l stakeholders to reduce the need for the high level o f individual project reporting needs that have prevailed in the sector until now The overall responsibility for monitoring and reporting o n the program will be with the Road Fund (RF). T o cope with the reporting needs for PRISE, the RF i s building up a specialized reporting and monitoring unit (UMASE). The RF will prepare quarterly and semiannual reports based on the PAF Templates for these reports have been prepared and agreed upon (see project files, Annex 3). The quarterly reports wil l be prepared for the first and third quarter o f each calendar year. They are essentially updates o n statistical data being collected in the sector. The semiannual reports wi l l cover the penods January to June and July to December each year. They will incorporate the previous quarterly report and will constitute one o f the key inputs to the semiannual jo in t sector review meetings scheduled for September and April each year.

2. RBMMP-2 Results Framework Table A l . l RBMMP-2 Results Framework

PDO T h e project development objective is to improve access o f the population to all-season roads through maintenance, rehabilitation and upgrading o f the classified road network.

Intermediate Outcomes Outcome A. Improved road sector management capacity

Outcome B: Enhanced execution o f the road maintenance program

Outcome C: Timely and cost- effective implementation o f the IDA financed rehabilitation and upgrading program on the N1

T h e indicators to assess the achievement o f the PDO are (I) the percentage o f classified roads in good and fair condition, and (ii) the percentage o f the rural population within two kilometers o f an all- season road (PAF indicators 1 and 3).

Intermediate Outcome Indicators (I) Policy for the management o f unclassified roads adopted and implementation plan prepared (PAF indicator 2); (ii) new Roads Act approved and implemented (PAF indicator 14) % o f annual execution o f maintenance achieved on paved and unpaved roads (PAF indicators 7&8, periodic maintenance from the PAF quarterly report)

160 kilometers o f the N1 rehabilitated and upgraded b y June 20 10 (from PAF quarterly report)

Use of Project Outcome Information

To engender a road planning process that focuses on min imz ing road user costs and on providing reliable access to as many o f the rural dwellers as possible. To feed into the overall monitoring o f the PARPA I1 and the CAS.

Use of Intermediate Outcome Monitoring

Compliance with these indicators w i l l demonstrate GoM’s willingness to reform the sector and enhance i t s management.

The periodic maintenance program i s the most prominent omission o f past maintenance programs. IDA contribution to the pooled fund i s meant to assist to close this gap.

A detailed plan for the implementation o f these works has been prepared. Close monitoring w i l l help avoid delays.

25

3. Performance Assessment Framework (PAF) Indicators for PRISE 2. Twenty-one performance indicators have been defined based on the aforementioned results framework. For each performance indicator, a fiche has been established (see PAF in the project files) with a detailed definition o f the indicator, responsibility and means o f collection, baseline data, and targets for the years 2007 to 201 1 (for the five-year road sector strategy, including the three-year PRISE).

26

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Annex 2: Implementation Arrangements MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

1. The project wi l l be carried out under the strategic direction and coordination o f the Ministry o f Public Works and Housing (MoPWH) and under the overall responsibility for the implementation, coordination and oversight o f the Road Fund (RF). The RF will enter into annual contract agreements (Contrato Programa) with ANE for the execution o f the part o f the project to be implemented by ANE. Part o f the Road Safety component o f PRISE will be executed by INAV (Instituto Nacional de Viaqiio), which i s under the oversight o f the Ministry o f Transport and Communication. The main responsibilities o f each o f the agencies in the road sector are as follows.

2. MoPWH has the overall responsibility for the roads sub-sector. It sets policies and strategies. I t oversees the proper functioning o f the agencies under i t s responsibility, and coordinates their activities. M o P W H has an advisory unit called GAS (Gabinete de Assessona e Supervis?io), which assists the Minister in his sector oversight and policy setting functions.

3. The Road Fund (Fundo de Estradas) i s the Project Implementing Entity I t i s responsible for sector finance and monitoring. I t s tasks include sector financial planning and management o f sector disbursements. It enters into annual Contract Programs with ANE. The Road Fund i s also responsible for overall supervision (control) over annual program execution, and employs financial, technical, and procurement auditors to audit program execution. Finally, the Road Fund will coordinate the sector-wide monitoring, evaluation, and reporting system through a unit established especially for this purpose (Unidade de Monitoramento e Avaliaqiio do Sector de Estradas-UMASE).

4. The Road Fund i s an autonomous, fully operational body, overseen by i t s Board o f Directors (see Figure A2.1). The objectives o f the Road Fund (RF or FE) are to guarantee financing for implementation o f the Government’s policies o n maintenance and development o f public roads, and promote increasing participation o f road users in the provision o f funds. The FE i s responsible for collecting funds (from government and external sources), approving spending plans and disbursing funds for work completed according to pre-approved budgets and programs.

5 The chairperson o f the board (consisting o f five members) has executive powers and oversees the day-to-day running o f the organization, which has approximately 25 staff. Representatives f rom the Ministnes o f Finance and State Administration, and two members f rom private sector organizations involved in the sector, make up the remainder o f the five-member Board.

6. ANE (AdministragPo Nacional de Estradas) i s an autonomous body responsible for the preparation and implementation o f sector plans and programs. ANE prepares the medium- and short-term (annual) sector plans, including investment and maintenance components, both at national and provincial level, as well as capacity building activities. Design, supervision and execution o f works i s done by private sector consultants and contractors under contracts procured and managed by ANE.

7 ANE i s in the process o f evolution that began with i t s transition in 1999 from the former National Directorate o f Roads and Bndges (DNEP), part o f MoPWH, to an autonomous road authority overseen by a Board o f Directors, and underwent a redefinition o f i t s responsibilities in 2003, when the RF and ANE were separated. Further major changes were decided upon in November 2005-namely, the merger o f the functions o f ANE with those o f the roads unit o f the provincial public works departments. O n April 3, 2007 the decree o f ANE o f M a y 2003 was

30

amended and a new organizational structure was adopted both at headquarters and in the provinces to reflect this merger. I t i s a condition o f effectiveness o f this credit that key elements o f this restructunng are in place, including the renewal o f the Board o f Directors o f ANE, and the competitive selection o f key staff o f ANE (Director General, Director level staff at ANE headquarters and provincial delegates). The full renewal i s expected to be concluded by December 3 1,2007

8. In i t ia l ly (in 1999), the functions o f funding, oversight, and implementation in the road sector were located in a single organization, under an executive board. This board was made up o f representatives f rom both the public and private sectors, with nominations made by the Minister o f Public Works and Housing, based on proposals from appropnate ministnes and private sector organizations. The Board had eleven members; a Chairman, Vice Chairman, four representatives f rom ministnes, four from the pnvate sector and one from the university

9 This structure was altered under the second round o f reforms, which were intended to increase separation o f the financing and executive functions and strengthen the institutions responsible for carrying them out. Decree 23/2003 transformed the role o f ANE's Conselho de AdministraqZo from i t s previous hands-on (executive) role to one o f non-executive oversight o f the performance o f ANE. The current board has five members: a chairperson, representatives f rom the Ministries o f Public Works and Housing and Transport and Communications, and two members f rom private sector organizations involved in the sector.

10. Under the 2003 Decree, ANE had administrative autonomy, and was responsible for planning the development and maintenance o f the public roads system, implementing national roads programs, recommending projects to be financed, and examining and proposing administrative and technical regulations for roads. I t s Directorate o f National Roads (DEN) was responsible for the rehabilitation and penodic maintenance o f national roads, whereas the Directorate o f Regional Roads (DER) had the role o f coordinating, supporting, and monitoring the provincial roads departments and municipalities responsible for the routine maintenance o f roads and the management o f regional roads.

11. Further changes to the structure o f ANE were agreed by the Board in September 2006 and have led to a new organizational structure both at ANE headquarters and in the provincial offices o f ANE. This new structure (see Figures A2.2 and A2.3) has been legalized through two decrees passed by cabinet on April 3, 2007 Under the new structure ANE headquarters will be managed by a Director General (DG) and four Directors, for Planning, Projects (investments), Maintenance, and Administration and Finance. Specialized un i t s responsible for procurement (UGEA), environmental and social issues (UASMA), internal audit, legal services, and public relations will report directly to the DG. Other key staff will be a variety o f technical specialists (such as matenals, bndge, and road safety specialists, and so forth), and at least f ive highly qualified project managers with extensive procurement and contract management expenence. K e y staff in the provinces will be the provincial manager, and heads o f the Planning and Projects departments. All o f the aforementioned staff are currently being recruited in a transparent, competitive process. Whereas it i s expected that most o f the positions will be fi l led f rom existing staff o f ANE both at HQ and in the provinces, i t will also be important to attract professionals f rom outside ANE and indeed, attempts are being made to attract Mozambicans currently working in neighboring countries and from the Diaspora by offering attractive salary packages comparable to those offered by other pnvate and public sector entities.

12. INAV (Instituto Nacional de ViaqPo): INAV operates under the supervision o f the Ministry o f Transport and Communications (Decree 3/2006 o f February 28 2006) and i s

31

responsible for road safety pol icy and i t s implementation, including regulating drivers and vehicles, road regulations such as speed limits, and the collection o f road safety data.

32

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Figure A2.3 Proposed Organizational Structure for ANE (Provinces)

Accountant

Procurement Management

Human Resources

1 Head of Planning

Department

Technician

Department I I Control Dept. I I Safety Department 1

Coordinators

Paved Road

I I

35

Annex 3: Documents in the Project Fi le MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

Documents are available in electronic form in the files noted.

I Document Electronic Fi le

01-RSS 2006 Final Report Eng.pdf

1. Road Sector Strategy (Road Sector Strategy 2007 -2011, Final Report, August 2006)

: ................................................................................................................... ......................................................................................................................................................................................................................................................... 2. Road Sector Integrated Program 2007-2009 (PRISE - Programa

Integrado do Sector de Estradas, Implementation Plan 2007 - 2009, Final Summary Plan, February 2007)

02-Prise 2007-2009 Final.pdf

................................................................................................................................................................................................................................................................x� 3. Performance Assessment Framework (PAF) for PRISE (Road 03-PRISE PAF v4 Final.pdf I Sector Program, PRISE 2007 - 2009. Performance Assessment

Framework, February 2007) I 4. Maps for Road Sector Strategy and PRISE Implementation Plan

Folder: 04-Maps I 5. Draft ANE Procurement Manual, Manual de Procedimentos de

Procurement, Draft Prelimnar Maputo - Moqambique, March 2007 05-Procurement Manual Prelimnar Draft-30.03.07.pdf

6. Draft Road Fund Financial Management Manual, Manual de Gestiio Fmanceira (versiio Prelimnar) March 2007 06-Draft Financial Management

Manual.pdf ................................................................................................................................................................................................................................................................f�

07-Draft PRISE M o U 8 FEB 2007.pdf

08-Draft PRISE CoC 9 FEB 2007.pdf

7 Draft PRISE Memorandum o f Understanding, 8 February 2007

................................................................................................................................................................................................................................................................q� 8. Draft PRISE Code o f Conduct, 9 February 2007

9 Decrees 20 through 2312003 o f May 20 - Statutes creating the mstitutional and financial framework o f the Roads Admnistration System, creating the Road Fund, and approving ANE’s existing organizational structure.

09-Decrees 20-23 2003.pdf

................................................................................................................................................................................................................................................................}� 10. Decree 5412005 o f December 13 - Government Procurement

Regulation, Regulamento de Contratacco de Empreitada de Obras Publicas, Fornecimento de Bens e Prestapio de Sewiqo ao Estado.

1 0-Procurement Regulation Decree.pdf

................................................................................................................................................................................................................................................................j�

1 1-Draft Decree ANE reorganization.pdf

11. New decree establishng ANE [Draft version submtted to the Cabinet for approval, to be replaced by final version when published in the GoM Official Gazette.]

12. Decree 3/2006 o f February 28 2006, Approval o f the organic 12-INAVDecree.pdf statutes o f INAV

13. Decree 10312006 o f June 1 2005, Approval o f the reclassification o f 13~Classlficat~on Decree.pdf the road network, Aprova a classi9ca@o de estradas do pais, e revoga a anterior classijcapTo.

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Annex 4: Detailed Project Description MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

General

1. Phase I1 o f R B M M P supports PRISE, the 2007-09 integrated road sector program o f GoM. PRISE i s being implemented in a sector wide approach (SWAP) mode. PRISE incorporates a coherent GoM-owned-and-led roads program in a comprehensive and coordinated manner, with emphasis on planning, finance, implementation monitoring, and evaluation. The SWAP mode wil l foster stronger country ownership and leadership in the road sector. I t wil l also facilitate a coordinated and open pol icy dialogue for the entire sector, involv ing the key G o M agents MoPWH, ANE, Road Fund, and other local stakeholders) and the road sector development partners (DP). PRISE i s developed consistent with the prionties and objectives o f the G o M road sector policy, the action plan for the reduction o f absolute poverty (PARPA), the Medium Term Expenditure Framework (MTEF), and the Road Sector Strategy (RSS).

2. The cost estimate o f the three years' PRISE 2007-09 i s US$1.043 b i l l ion comprising US$69.6 mi l l ion (7 %) for overheads, US$263.9 mi l l ion (25 %) for maintenance and US$709.8 mi l l ion (68 %) for investments. Total D P contribution to PRISE i s US$709 mi l l ion or 68 percent o f the total. Out o f this, US$114 mi l l ion wil l be provided as pooled funding and the balance o f US$595 mi l l ion through traditionally dedicated funding. The IDA support o f US$lOO mi l l ion to PRISE, i s planned to be appropnated as follows: (a) US$35 mi l l ion contribution to the pooled fund for overhead and maintenance expenditures; and (b) US$65 mi l l ion dedicated funding for the rehabilitation and upgrading o f three sections o f the N1,

Fol lowing are the various components planned to be financed under PRISE:

A. Overheads: UW69.6 million (of which RE' and DP, including IDA, contribute US$45.2 million through pooled funding; and DP contributes US$24.4 million through dedicated funding)

A.l Administrative costs (US$37.3 million - to be financed from the pooled fund). including salaries, operating costs, office infrastructure expansion and improvement, and equipment for ANE and the Road Fund.

A.2 Capacity building (US$25.1 million of which US$4.7million to be financed from the pooled fund and US$20.4 million through dedicated funding). including technical assistance, consultancies, training, and additional programs as follows:

A.2.1 Technical Assistance (US$10.6 million of which US$2.9 million from the pooled fund and US$7.6 million from dedicated funding))) for ANE and RF in the areas o f planning, procurement, contract management, financial management, internal auditing, environmental and social issues, human resource management, information technology and monitoring and evaluation, as per the Technical Assistance Strategy and Plan, which i s part o f the PIP The overall objective o f the technical assistance sub-component i s to transfer know-how and to create capacity which will eventually make technical assistance in the sub-sector unnecessary

37

A.2.2 Consultancies (Studies) (US$13 million of which US$1.2 million from the pooled fund and US$l l .9 million from dedicated funding), including (i) an integrated road management system for ANE; (ii) social and environmental studies, including H IV /A IDS control activities to be executed by the social and environmental unit o f ANE (UASMA); (iii) a study on engineenng design standards, to take into account the local environmental, geotechnical, availability o f local materials and maintenance practices for ANE; (iv) information technology for implementation o f LAN and WAN linking ANE headquarters, provinces, and RF, including hardware, software, and operating costs; (v) technical support for financial management and control systems for ANE and RF; (vi) support to the formulation of provincial strategies, updating o f project implementation plan, preparation, and rol l ing five- and three-year work plans by ANE; (vii) a road user charges study for the RF; (viii) a financial, technical, and procurement audit for the entire implementation o f PRISE for the RF; and (ix) other studies, as necessary

A.2.3 Training (US$1.5 million of which US$0.6 million from pooled funding and US$0.9 million from dedicated funding). a training budget for staff o f ANE, the RF, INAF, and GAS has been prepared with an estimated amount o f US$0.5 mi l l ion per annum.

A.3 Additional Programs (US$7.2 million of which US$3.3 million from pooled funding and US$4.0 million from dedicated funding). this includes programs for road safety, axle load control, and pnvate sector support.

A.3.1.1

A.3.1.2

A.3.1.3

A.3.1.4

A.3.1.5 A.3.1.6

A.3.1.7

A.3.1 Road Safety program (US$3.7 million of which US$1.2 million from pooled funding and US$2.5 million from dedicated funding for sub-component A3.1.7) as follows:

Preparation o f a Road Safety Policy and Strategy (RSPS) that clearly defines responsibilities, financing mechanisms, and a monitoring framework; the RSPS will be prepared in consultation with al l stakeholders. The lead agency for this activity i s Instituto Nacional de ViagHo (INAV) A financial and management review o f INAV, with a focus on i t s regulatory functions while outsourcing most o f i t s activities to private operators Completion o f post-implementation training for the Driver License and Vehicle Registration Project, by INAV Establishment o f a National Crash Database, founded on a reliable crash data collecting system, by INAV Establishment and support o f a road safety audit unit within ANE A road safety action plan, along the newly rehabilitated section o f the N1, with a focus o n measunng enhanced road safety to be executed by ANE Support for small c iv i l works to address black spots on classified roads (including road signs) under supervision o f ANE’s road safety audit unit.

A.3.2 Axle Load Control (US$2.0 million - all pooled funding): this activity to be led by ANE focuses o n setting up the institutional and implementation frameworks and various operational costs for Ax le Load Control defined under a study executed during Phase I o f R B M M P Financing the construction o f additional weigh bridges will be included in the various road works contracts along sections where a weigh bridge i s proposed under the study

A.3.3. Private Sector Support (US$1.5 million - all dedicated funding)) i s support to M o P W H to assist in the development o f local contractors including the establishment o f a national contractor’s federation and provincial associations.

38

B. Maintenance: US246.2 million (of which RF and DP, including IDA, contribute US263.4 million through pooled funding, and DP contributes UW17.7 million through dedicated funding)

B.1 Urban road maintenance (US$I 7.2 million - to be channeled through a dedicated account). funding o f small works on urban roads in the 33 municipalities financed by dedicated funding f rom the Road Fund (10% o f fuel levies by decree) to be managed by the infrastructure departments o f each municipality;

B.2 Provincial consultants (US$18.0 million - pooled funding) will assist the provincial offices o f ANE to execute their work program, including planning, procurement, and supervision o f works. The provincial consultants (one per province) are local consultants. Their contracts are being procured at ANE HQ because o f their size. However, the consultants will report to the ANE delegate in the provinces.

B.3 Emergency works (US$I 6.0 million -pooled funding): including emergency c i v i l works and the procurement and placing o f bailey bridges. These are activities that will be managed by the provincial offices o f the ANE.

B.4 Unpaved road maintenance (US$S8. 6 million - pooled funding), including routine maintenance (15,575 km), periodic maintenance (725 km) and spot improvements (823 km). All works are planned and managed by the provincial offices o f the ANE.

B.5 Paved road maintenance (US$124. I million) B.5.1 US$123.6m pooled funding for routine maintenance (4,260 km) and periodic

maintenance o n 15 sections o f national roads (600 kilometers). These contracts, because o f their large size, will be procured and managed f rom ANE headquarters, although in a second phase routine maintenance responsibilities may be delegated to the provinces. US$O.Sm for the penodic maintenance o f the Zandamela-Maxixe section which i s being financed by AFD through dedicated funding provided by AFD.

B.5.2

C. Investments: US$709.8 million (of which GoM contributes UW139.1 million and DP UW570.7 million-of which IDA contributes US$65 million-all dedicated funding). All these contracts will be procured and managed by ANE headquarters staff because of their large size.

C. 1 Bridge rehabilitation and construction (US$I 31.3 million). this includes the rehabilitation and construction o f at least 16 bridges, including the construction o f the Zambezi nver bndge at Caia, which i s under construction and which i s financed by the EU, SIDA, and I ta ly (planned expenditure dunng the PRISE penod US$66.5 million).

C.2 Regional and district road program (US$101.3 million) under this program, which i s financed by G o M and vanous DPs: it i s planned to rehabilitate about 1,500 kilometers o f regional and district roads. Provincial strategies for the improvement o f rural accessibility that take into account the development plans o f the provinces and distncts (e.g., agriculture, connections to stations on the Sena railway line) are being developed by ANE in collaboration with provincial and district authonties. These strategies utilize the “rural roads” approach that focuses on solving transitability problems and ensunng maintainability rather than on upgrading or rehabilitation o f entire roads.

39

C.3 National Road Rehabilitation and Upgrading Program (US$232.2 million of which US$65 million is IDA funding). this program, which i s largely financed by DP under dedicated funding arrangements (with the exception o f N7, Vanduzi-Changara, which i s largely GoM- financed) plans to rehabilitate 17 sections o f high-priority national roads with a total length o f (487 hlometers). The three sections o f the N1 planned to be rehabilitated under IDA funding are part o f this item.

C.3.1 IDA contribution to National Road Rehabilitation and Upgrading: IDA wil l contribute US$65 mi l l ion for the execution o f three large c iv i l works and three supervision consulting services contracts for the rehabilitation and upgrading o f three sections o f the N1. The National Road N1, starting f rom the capital, Maputo, and connecting to Pemba in the north, i s the longest and most important road corndor in the country G o M has therefore assigned the highest pr ionty to this National Road.

Under the IDA Credit for APL1, about 670 kilometers o f N1 between Maputo and Inchope have been rehabilitated and upgraded to meet national standards and the requirements o f current traffic volumes. However, owing to funding constraints under APL1, the following three sections could not be completed: (a) Jardim-Benfica section o f N1 (length- 7 km); (b) Xai-Xai-Chissibuca section o f N1 (96 km), and (c) Massinga- Nhachengue section o f N1 (57 km). Given that the condition o f the three road sections i s poor, and the sections are in urgent need o f rehabilitation and upgrading, the APL2 will include c iv i l works and supervision services. With the completion o f APL2, about 1,000 km o f the N1 Maputo-Inchope section (which i s almost ha l f o f N1) will be improved to National Road standard. The rehabilitation work will include widening, shape correction, strengthening, and upgrading o f the existing pavement. It will also include repairs o f minor drainage structures, as wel l as geometric and structural improvements to enhance traffic capacity and safety for vehicles and pedestrians. A detailed description o f each road section follows.

(a) Jardim-Benfica section o f N1 (7 km): The project entails the rehabilitation o f road N1 between Jardim and Benfica. The entire road i s located in Maputo Province, and runs in the north-northeast direction f rom Maputo. The road includes urban sections. The road i s heavily trafficked with a traffic volume o f more than 23,000 vehicles per day, o f which 10 percent consists o f heavy vehicles. The road i s thus too narrow to accommodate the current traffic volume. The section wi l l be upgraded to a four-lane divided carnageway o f 13.6 meters in width.

(b) Xai-Xai-Chissibuca section o f N1 (96 km): The project entails rehabilitation o f road N1 between Xai-Xai and Chissibuca. Most o f the project road i s located in Gaza Province, with a short section in Inhambane province. Xai-Xai i s the provincial capital o f Gaza, situated some 200 km fkom Maputo c i ty The traffic on the road i s moderate, currently carrying just more than 1,400 vehicles per day at Chongoene and 900 vehicles per day at Zandamela. The vehicle composition i s 78 percent cars and light delivery vehicles (pickups) and minibuses, with the remaining 22 percent comprising buses and trucks. The existing road consists o f a 5.8 to 6.8 meter-wide carnageway with unsurfaced shoulders o f variable width on both sides. This section will be strengthened and widened to a two-lane carnageway o f 6.8 meters width, and shoulders o f 1.5 meters on either side.

(c) Massinga-Nhachengue section o f N1 (57 km): The project entails rehabilitation o f road N1 between Massinga and Nhachengue. The entire project road i s located in Inhambane. The traffic on the road today i s significant, currently carrying more than 900 vehicles per day The

40

vehicle composition i s 63 percent cars and light vehicles, with the remaining 37 percent comprising buses and trucks. The road travels through predominantly rol l ing terrain with very short sections o f hilly terrain, where the gradient o f the road i s steep. The existing road consists o f a 5.8 to 6.8 meter-wide carriageway with unsurfaced shoulders o f variable width o n both sides. This section will be strengthened and widened to a two-lane carriageway 6.8 meters in width, and shoulders o f 1.5 meters o n either side.

C.4 National Roads Paving (US199.2 million): fifteen national roads, which are currently gravel roads totaling 607 kilometers, are planned to be paved. This program as wel l i s largely financed by DP (US$185 million), with US$14.2 mi l l ion i s GoM counterpart funding.

C.5 Engineering Services (US45 4 million): these are costs o f engineenng services for supervision and design services (mainly for international consultant firms), including the engineenng designs and preparation o f bidding documents for the program beyond PRISE.

41

Annex 5: Project Costs

# Description

A 'Overheads ............................. i...

A. 1 :Administrative costs A.2 i Capacity building

A.2.1 Technical assistance

A.2.2 Consultancies A.2.3 Training

....................................................................................................................................................................................................................................

........................................ :..

A.3 ,Additional programs A.3.1 Road safety

A.3.2 Axle load control

...................................... :

...............................................................................................................................................................................................................................................................

MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

Dedicated Funding Total Pooled Cost Funding GoMW DP Subtotal

................................................................................................................................................................................................................................................................0� 37.3 37.3 .,. .....................................................

.................................................................................................................................................................................................................... .. ............................................................ 10.6 2.9 7.6 7.6 13.0 1.2 11.9 11.9

1.5 0.6 0.9 0.9

................................................................................................................................................................................................................................................................G�

................................................................................................................................................................................................................................................................=�

................................................................................................................................................................................................................................................................a�

................................................................................................................................................................................................................................ ~ .............................................................................. 3.7 1.2 2.5 2.5

2.0 2.0 ..........................................................................

1. PRISE Use o f Funds

B. 1 'Urban road maintenance

B.2 lProvincia1 consultants

B.3 'Emergency works

B.4 'Unpaved road maintenance

...........................................................................................................................................................................................................................................

....................................................................................................................................................................................................................

.................................................................................................................................................................................................................................................

1. RBMMP-2 contributes to PRISE; the Government's 2007-09 roads program. Table A5.1 shows the total planned expenditure for PRISE o f US$1,043.2 mill ion, 7 percent o f which i s planned to be used for overheads, 25 percent for maintenance and 68 percent for investments (further details o f planned expenditures can be found in the PRISE Implementation Plan, which i s in the project files-see Annex 3).

17.2

18.0 18.0 16.0 16.0

88.6 88.6

17 2 i 17 2

'Regional & District road program

National road rehab & upgrade 454 1868

142 1850

Note: Pooled Funding includes US$35 rmll ion o f IDA funding; dedicated funding includes US$65 r m l l i c o f IDA fbnding under category C.3: National Roads Rehabilitation and Upgrading, for three N1 sections

42

2. Development Partner Contributions

2. Table A5.2 presents the individual levels o f DP funding by program component. Although not al l D P funding levels are yet definitively confirmed, they form a sound basis for proceeding with the program as constituted, while showing flexibil i ty in implementation to take account o f changing needs and resources.

Table A5.2 DP Funding by Component, PRISE 2007-2009 (US$ millions)

Component Dedicated Dedicated Dedicated DP Overhead Maintenance Investment Pooled Fund Total

IDA APL2 65.0 35.0 100.0 IDA APLl 1.5 0.5 9 7 11.7 EU 9.6 116.2 59.8 185.6

............................................................................................................. : ........................................................................................................................................... ~ ........................................................................................................................................

................................................................................................................................................................................................................................................................u�

ADB DFID Asdi Italy Japan MCC USAID KfW AFD DANIDA NORAD BADEA IDB Irish NDF OPEC IFAD

44.6 20.0

13.3 52.9 1.8 19.0 74.9

137.1 5.9

11.8

................................................................................................................................................................................ ~ ....................................................

................................................................................................................................................................................................................................................................��

..................................................... .....,.......... ............................................................................................ .......................................I .....................................................

.............................................................. : ........................................................................................................................... ..........,. ...........................................................

0.5 10.1

................................................ : ................................................................................................................. .............I ........................................................

2.2

44.6 20.0 68.0 19.0 74.9

137.1 5.9

11.8 0.5

10.1 2.2

..................................

.................................................

............................................................

................................................................

............................................................

..................................................................

.....................................................................

................................................................

..............................................................

..............................................................

................................................................... : ................................................................................................................................ .~ ........................................................................................................................... 12.4 12.4 2.0 2.0 8.5 8.5 8.1 8.1 0.1 0.1

......................................................................... : ...................................................................................................................................... ~ ....................................................................................................................................

................................................................................................................................................................................................................................................................��

................................................................................................................................................................................................................................................................��

........................................................................................................................................................... ...,... .....................................................................................................

I 0.5 580.6 116.6 722.5 Total 24.4

Note: Values indicated at time o f PFUSE launching, February 2007

43

3. IDA Contribution to PRISE

Contribution to components A and B through pooled funding

Contribution to component C: Rehabilitation and Upgrading of Sections of N1

Jardim-Benfica (7km) Civil works

Supervision

Xai-Xai-Chissibuca (96km) Civil works

Suuervision

3. Table A5.3 shows the IDA contribution to PRISE under RBMMP-2, comprising two components: (i) component A. Contribution to the Pooled Fund ( U S 3 5 million); and (ii) component B: Rehabilitation and Upgrading o f Sections o f N1 (US$65 million).

~~ ~ ~~

35.0

10.45 18 1.88 12.3 0.63 18 0.11 0.7

25.16 18 4.52 29 7 1.51 18 0.27 1.8

Table A5.3 IDA contribution to PRISE (US$ millions)

Base cost

Total IDA contribution

Description

100.0

including taxes) l b l ‘Zt’ 1 ,“,“,“,l;t 1 Total

Civil works

44

Annex 6: Country and Sector or Program Background MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

1. Road Network

1. Table A6.1 below.

Mozambique's road network consists o f about 37,000 kilometers o f roads as shown in

Table A6.1 Length o f Classified Network in km

I Classification Paved Unpaved Total I Primary 4,459 1,407 5,866

Secondary 809 3,983 4,792 I Tertiary 516 1 1,645 12,161 I Vicinal 30 6,500 6,530

Urban Roads* 500 2,500 3,000

District Roads* 5,000 5,000 ...... ........ .. ... , ,... .... .... ..... ........ ................. ............ .................................................................................... ...........................................

Grand Total 6,314 31,035 37,349 * These roads are not classified- their length i s an estimate.

2. In 1992, when the peace agreement was signed, i t was estimated that less than 10 percent o f the network was in good condition and more than one-third o f roads, particularly the rural roads, were in poor condition and not passable on a regular basis. Poor condition o f roads contributed to high vehicle operating costs, high transport costs, and consequently l o w traffic volumes, posing major constraints to the marketing o f farm produce and to economic growth generally Moreover, most o f Mozambique's transport infrastructure was designed to serve the colonial economy, providing access to sea ports for landlocked countries in southern A f i x a . This had senous implications, particularly for the agricultural sector, as large areas o f the country, especially the agnculturally productive areas o f the north and center, remained isolated and poorly integrated into national markets.

3. The Wor ld Bank and other Development Partners' (DPs) assistance in the sector led to major improvements in the condition o f Mozambique's road network since 1992. Under the First and Second Roads and Coastal Shipping Projects (ROCS1 and ROCS2, approved in 1992 and 1994 respectively), more than 3,800 kilometers o f primary, secondary and tertiary roads were rehabilitated and about 3,000 meters o f metallic bndges were laid. In 2001, the Roads 3 program, comprising the GoM's 10-year Roads and Bridges Management and Maintenance Program (RBMMP) evolved, encompassing al l national road sectors planning and financing, inclusive o f programmed support f rom a l l the development partners. Within 10 years, G o M expected to systematically maintain al l roads specified in the annual programs, eliminating backlogs. RBMMP was planned to be completed in three phases.

4. The program assigned priority to expanding links to agricultural areas, secunng access to ports, upgrading corridors to neighbonng countries to encourage industrial investment, and improving the coastal road network to stimulate development o f tourism. The Government's network strategy i s focused on improvement o f the main north-south road that runs from Maputo to Pemba, which contributes to national unity, promotes internal commerce, and improves access.

45

The program assists the Government to (a) improve the coverage and condition o f roads and bridges; (b) strengthen capacity to manage road sector activities; (c) establish effective, efficient, and sustainable institutional arrangements for the sector; (d) establish mechanisms for sustainable financing o f road maintenance; (e) promote use o f local resources in roads construction and maintenance; and (0 support efforts to reduce the spread o f H IV /A IDS and improve road safety

2. Sector Policy

5. Recognizing the dual roles o f the road network, which include (a) ensunng the social and economic mobi l i ty necessary for promoting growth, and (b) fostenng regional development by providing secure links to all areas o f the country, G o M has adopted the following as road sector p o 1 icy

National Integration: Better roads contribute to the reduction o f regional differences and to the building o f national unity through integration

0 Economic Growth: Better roads stimulate economic growth by reducing transportation costs and providing access to markets, They facilitate marketing o f agricultural commodities by ensunng reliable delivery o f inputs and timely marketing o f production at reasonable cost Strategic Asset: Better roads bolster Mozambique’s strategic geographical position as an essential transit comdor for i t s landlocked neighbors, facilitating their access to international markets

0 Poverty Reduction and Social Development: Roads provide access to distnct capitals, employment opportunities, schools, health care facilities, and other social services, consistent with Act ion Plan for the Reduction o f Absolute Poverty (PARPA)

3. Government’s P r o g r a m for Poverty Reduction

6. Programa do Governo para a ReduGZo da Pobreza Absoluta, or PARPA, the Government’s program for poverty reduction, establishes five major goals for the road sector:

0 Supporting Markets: To contribute to the expansion o f markets, in particular the agricultural sector

0 District Access: To ensure access to districts with the greatest economic potential, focusing o n provinces with high population densities and high concentrations o f poverty

0 Connectivity. To establish connectivity between the major regions o f the country and to develop the main comdors

0 Decentralization: To improve the capacity at the provincial and local level for the management and pnontization o f roads c iv i l works

0 Quality of Works: To improve the quality o f the roads c iv i l works, including construction, rehabilitation, and maintenance

4. R o a d Sector Strategy

7 As a result o f the mid-term review o f the implementation o f phase one o f the RBMMP (APL1) in M a y 2005, a Road Sector Strategy 2007-2011(RSS) has been formulated in a participatory process with a l l sector stakeholders. The goals and objectives o f RSS are consistent with the Programa do Governo para a ReduqZo da Pobreza Absoluta, or PARPA, the Government’s program for poverty reduction.

46

8. The RSS takes a medium- to long-term perspective o f the development and management o f the classified road network o f Mozambique. RSS adds a level o f detail to the GoM’s Road Sector Policy to, establish the main principles, approaches, and activities that will be undertaken through the end o f Roads-3, GoM’s 10-year road’s program, covering Phases 2 and 3 o f RBMMP The strategic plans for investment, maintenance, and finance included in RSS are prepared for a 5-year horizon, 2007-2011. Bo th RSS and the 5-year strategic plans should be reviewed and revised in three years’ time for the preparation for Phase I11 o f Roads-3. The overall thrust o f RSS i s to create an efficient, dynamic, independent, and responsive system o f roads management that i s capable o f implementing national and provincial policies and effectively delivenng road services desired by road users. Fundamental pnnciples underlying the Road Sector Strategy, incorporated in the Plan for Phase 11, are Sustainability, Connectivity, Accessibility, Transitability, Asset Preservation, and Maintainability

The sustainability o f the road network ensures that resources invested in the sector y ie ld long- term benefits to the economy, through sustainability o f maintenance, financial sustainability, and sustainability o f capacity.

Connectiviv i s directly related to the goal o f national integration and mainly refers to the role o f the pnmary, and to a lesser extent, the secondary road networks in connecting the nation’s provinces, provincial capitals, and main international comdors. I t also contributes to national economic development by connecting national and international markets to zones o f production and consumption.

The concept o f accessibilitv refers to the role o f secondaly roads to provide access to high- priority economic poles and to the role o f tertia y and vicinal roads to improve and expand rural accessibility, especially in densely populated and economically productive regions. Accessibility i s closely related to the concept o f transitability.

The goal o f transitability i s to keep roads open almost al l year, in almost a l l weather, especially for those roads that are the only source o f accessibility for otherwise isolated rural populations and distncts.

The asset preservation principle i s to minimize the long-term, life-cycle costs o f maintaining the road network. In particular, i t strives to prevent the high costs o f neglected maintenance, especially on roads that represent the largest investment in the sector, paved roads.

Maintainability entails the design and construction o f roads, keeping in mind the limited capacities for maintenance. I t does not mean using expensive low-maintenance options, but rather focusing on realistic life-cycle costs o f keeping roads in good, or at least transitable, condition.

5. Integrated Road Sector Program 2007-09 - PRISE

9 The Mozambican economy continues to show solid growth, having achieved a real GDP growth rate o f about eight percent, which was driven by the good performance o f the transport, communication and construction sectors. G o M has also designed a Programa Integrado do Sector de Estradas (PRISE), plan for the implementation o f RSS in the f i r s t three years, that is, 2007- 2009 under a Sector Wide Approach (SWAP). The objective in moving to a sector-wide approach i s to support a coherent Mozambican-owned-and-led roads program in a comprehensive and coordinated manner. The PRISE Implementation Plan (PIP) includes al l program elements and their sources o f funding. Development Partners (DPs) have been involved in this process, and there i s agreement among DP that the GoM-led strategy and sector approach i s coherent and that

47

al l D P support should be within PRISE. Moreover, working under PRISE will help donors meet their commitments to the PARIS Declaration on Aid Effectiveness. T o harmonize the support from the DPs in the road sector, G o M launched PRISE in a stakeholder workshop held on February 28, 2007 in Maputo, and prepared a draft Memorandum o f Understanding (MOU- planned to be signed by D P that participate in pooled funding), and a Code o f Conduct (CoC-for a l l other DP), which are planned to be signed between G o M (Ministry o f Public Works and Housing, Road Fund and ANE) and D P during the f i rs t bi-annual jo in t sector review meeting in September 2007

10. The PRISE Implementation Plan 2007-09 (PIP) equates to approximately a US$1 b i l l ion program. The funding i s made up o f 19 percent f rom the Road Fund, 13 percent f rom GoM, and 68 percent f rom D P There are 19 participating DP, including IDA.

48

Annex 7: Financial Management and Disbursement Arrangements MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

1. Introduction

1. An assessment o f the financial management arrangements for the project was carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Board o n 3 November 2005. The objective o f the assessment was to determine whether these arrangements are adequate to ensure that (1) project funds are used only for the intended purposes in an efficient and economical way, (2) periodic financial reports are prepared in an accurate, reliable and timely manner, and that (3) the entities’ assets are safeguarded. This annex contains the results o f this assessment.

2. Country issues

2. The public financial management system in Mozambique has been the subject o f a number o f diagnostic studies in the recent past, the latest o f which i s the report based on the P F M PEFA (Public Expenditure and Financial Accountability) Strengthened Approach, issued in March 2006. They also include a Country Financial Accountability Assessment (CFAA) report issued in December 2001, and a Public Financial Management Assessment conducted in September 2004. These reports conclude that the public sector financial management systems in Mozambique are weak and that the overall public sector fiduciary risk in Mozambique i s high.

3. The Government, with the support o f i t s development partners, has instituted a number o f reforms in i t s efforts to address these weaknesses. These include the introduction o f a new Financial Management l aw that forms the basis for the introduction and implementation o f a computerized integrated financial management information system, e-SISTAFE, which has been rolled out in the Ministry o f Finance and selected other l ine ministnes. T o accompany these, the Government also (i) issued regulations for the Financial Management law; (ii) initiated the introduction o f a new and more detailed functional classifier into the budget; (iii) introduced restnctions on bank accounts held by public institutions; (iv) started to incorporate off-budget revenues, as wel l as DP-funded expenditures into the budget; (v) initiated training for budget staff in double-entry accounting; and (vi) established a consolidated electronic treasury account to improve control o f treasury operations and cash management.

4. The PEFA Report concluded that these reforms had begun to have an impact. The budget was a credible document with final out-turns reasonably close to init ial approvals; there was also a steady improvement in revenue collection and administration. Fundamental weaknesses remained in the quality o f the Public Financial Management Systems (PFM), especially in internal control systems; limited coverage o f the external audit; and the high-level o f off-budget spending, mainly f rom external project finance. The draft report noted that the quality o f the P F M was expected to continue improving as a natural consequence o f ongoing reforms such as e- SISTAFE; however, this would take time.

5 The 2006 report notes that despite this progress, there are s t i l l some lingenng weaknesses in areas such as the comprehensiveness and transparency o f the budget and the medium-term planning and budgeting, and emphasizes the weaknesses o f these in relation to budget execution, accounting and reporting. These form part o f the continuing efforts by Government to strengthen the P F M system.

49

3. Institutional Arrangements for Financial Management

6. The objective o f RBMMP-2 i s to support PRISE, which will be implemented by the RF and executed by ANE under the oversight o f the Ministry o f Public Works and Housing (MoPWH), In addition, part o f the Road Safety component o f PRISE will be executed by INAV (Instituto Nacional de Via@o) which i s under the oversight o f the Ministry o f Transport.

With regard to financial management, the main responsibilities o f each agency in the road sector are as follows:

7. M o P W H wil l exercise overall policy guidance and oversight, primarily through i t s Consultative Council and supported by an advisory body called GAS (Gabinete de Assessoria e SupervisZo). In this function, i t wi l l ensure that the financial management arrangements for the project continue to be satisfactory and that the implementing agencies continue to function properly

8. The Road Fund (Fundo de Estradas) i s generally responsible for sector finance and monitoring. I t s tasks include sector financial planning, and management o f sector disbursements. The Road Fund i s also responsible for monitonng the annual program execution and manages technical audits o f the contract program activities. I t wil l thus retain overall responsibility for the financial management arrangements o f the project. The RF enters into annual contract agreements with ANE (Contrato Programa).

9. ANE (Administraqgo Nacional de Estradas) i s responsible for execution o f the sector plans and programs. ANE prepares the medium and short-term sector plans, including both investment and maintenance components, as wel l as sector capacity building activities. ANE’s main activities are in the execution o f the plan at both national and provincial levels. It i s responsible for the detailed programming o f planned works and engineering services, and then for carrying them out through effective project management and supervision. In addition to the technical tasks, ANE must also manage contracts and estimate cash flows, in conformity with the established procedures.

10. In carrying out i t s ultimate responsibility for financial management, the Road Fund has prepared a Financial Management manual which indicates a clear allocation o f responsibilities. These responsibilities will also be the subject o f a Contract Agreement between the Road Fund and the ANE, and will be referred to in a Memorandum o f Understanding. A key provision in the Contract Program will be the clear delineation o f the responsibility o f each party in the management o f project funds. A more detailed description o f the funds f low mechanism i s given below (Figure A7.1). The Road Fund will assure itself that ANE has put in place adequate financial management arrangements to enable it to properly safeguard assets and report periodically o n the use o f funds before effectiveness.

11. At central level, the Road Fund has an adequate number o f staff; however, given the size o f the proposed project as well as the enhanced role as a coordinating agency, consideration should be given to recruiting additional staff.

50

4. Risk Assessment

Risk Rating

12. The nsk rating for the project in the area o f financial management i s substantial, reflecting the complexity o f the funds f low mechanism, the nature o f the financing for the project, and the implementation arrangements (see Table A7.1). In addition to funds disbursed to ANE headquarters, some funds will be managed at the provincial level by ANE’s provincial delegations, in which the adequacy o f staffing levels wil l assume crucial importance.

Risk Mitigating Measures

13. these nsks.

The table below indicates the activities that will be undertaken by the client to mitigate

Overall Inherent Risk

Table A7.1 Summary o f Project Risks

S

INHERENT R I S K S

The Government o f Mozambique i s highly comrmtted to a re form program underpinned by the introduction o f a new legal and regulatory framework, and the introduction o f an integrated financial management system, the eSISTAFE. However, there s t i l l exist major weaknesses in the FM environment, resulting mainly f r o m capacity shortages. There are s t i l l weaknesses in capacity and in audit, with respect to preparation o f the first set o f consolidated accounts.

Project Level S

CONTROL R I S K S I Budgeting i M Accounting 1

The legal and institutional framework supports project oversight and implementation, with overall responsibility for the project allocated to the Ministry o f Public Works. The RF will have ultimate responsibility for financial management, and i t i s a legal entity. There also exist arrangements for overall po l icy guidance related to financial management, and for coordination o f the responsibilities o f both ANE and the RF Strong internal control procedures and inspection arrangements wil l be adopted to ensure compliance.

Through i t s responsibility for FM, the RF will be responsible for ensuring continuing adequacy o f financial management arrangements in a l l implementing agencies. RF will remain adequately staffed throughout the project. K e y project activities wil l be implemented at the provincial level. The f l ow o f funds wil l be carefully coordinated, and procedures wil l be adopted to ensure the proper recording and reporting o f these.

The Financial Management Manual (FMM) will define the arrangements for budgeting, budgetary control, and the requirements for budgeting revisions.

Accounting policies and procedures wil l be documented in the FMM. These wil l be in accordance with international accounting standards.

51

Internal Control

I

Funds F l o w

Risk Rating

H

H

Financial Reporting

M

Auditing S

s Overall Control

OVERALL RISK RATING: S

Risk Mitigating Measures

Internal control procedures wil l be documented in the manual, and management wil l adopt measures to monitor compliance with these. The RF and ANE both have internal audit departments that have the duty to ensure this compliance. These procedures wil l also be the subject o f an agreement between Government and the donors in a Memorandum o f Understanding.

The Funds F l o w mechanism has been defined in the financial management manual and as shown in Figure A7.1, and wil l be included in a Memorandum o f Understanding between donors and GoM, thus providing clarity o n the procedures. There wil l also be strict procedures adopted for regularly accounting for the use o f funds. The disbursement o f funds will be l inked to the project’s p l a m n g and reporting.

The project implementing units have experience in reporting to donors on SWAP-type operations. There are regular reporting requirements to facilitate t imely preparation o f the required reports. The format o f reporting statements wil l be specified in the manual. Overall pol icy guidance arrangements wil l ensure that financial information i s fol lowed up and relevant recommendations are implemented.

The project’s institutional arrangements al low for the appointment o f adequate external auditors. International auditing standards are fol lowed in the industry. Management wi l l adopt measures to ensure that the audit i s undertaken in a timely manner.

H - H i g h S - Substantial M -Modest L - L o w

14. program:

The legal and institutional fi-amework supports project oversight and implementation. The Financial Management Manual (FMM) defines responsibilities for financial management and procedures to be adopted.

0 The f low o f funds will be carefully coordinated, and procedures wil l be adopted to ensure the proper recording and reporting o f these.

0 Accounting policies and procedures are documented in the FMM. These are in accordance with international accounting standards.

0 Strong internal control procedures and inspection arrangements will be adopted to ensure compliance. The Funds Flow mechanism wil l be documented in a Memorandum o f Understanding signed between DPs and the Government.

0 The project implementing units have experience in reporting to donors on SWAP- type operations.

Key Strengths: The Government o f Mozambique i s highly committed to a reform

52

15. Main Weaknesses: 0 The multiple sources o f financing for the PRISE present complexities with respect to funds

f low and reporting arrangements. There may be a lack o f capacity for ensuring proper financial management, particularly for activities implemented at provincial level.

5. Funds Flow Mechanism

16. IDA funds wil l be disbursed through designated accounts managed by the RF Amounts for components A and B o f the project will be channeled through a pooled designated account and those for component C wil l be channeled through a segregated designated account. Additionally, the RF will manage designated accounts for funding for the Municipalities (10% o f the fuel levy) and for G o M budget allocations. Figure A7.1 illustrates the funds f low mechanisms used by the project.

5.1. Bank Accounts

17 kept at the Bank o f Mozambique:

The following accounts managed by the Road Fund and used for funds from IDA wil l be

0 IDA designated account: this account will be denominated in U S Dollars. Disbursements f rom the IDA credit will be deposited in this account and will be used to finance the IDA portion o f component C o f the project which encompasses three large c i v i l works contracts and three supervision services contracts. Pooled F u n d the pooled fund will consist o f three accounts denominated in Meticals, U S Dollars and Euros. Disbursement f rom the IDA credit will be made to the U S Dollar account. Contributions f rom other DPs to the pooled fund can be channeled to these accounts as per procedures s t i l l to be defined in a Memorandum o f Understanding between partners contributing to the pooled fund and GoM.

18. Additional accounts managed by the Road Fund include:

0 Urban Roads Account: This account will receive funds from the fuel levy (1 0%) and will be used to finance the maintenance o f urban roads in the 33 municipalities.

0 G o M Investment Account: This account will receive G o M road sector budget allocations and will be used for the financing o f counterpart funding (of sub-project financed by other DP) and for G o M dedicated investments under component C o f the project.

5.2. Disbursement o f I D A funds to the Designated Accounts

19 The disbursement o f the IDA credit funds into the designated accounts will be done on the basis o f quarterly un-audited Interim Financial Reports (IFR). A preliminary format o f the IFR was agreed upon dunng negotiations and i s attached to the minutes o f negotiations. This format will be further refined prior to effectiveness o f the credit. T h e IFR will be part o f the overall project reports prepared by the RF and are due not later than 45 days after each reporting period. Each IFR will report on the use o f the funds from the IDA designated account (for component (2.3.1 o f the project). The consolidated bi-annual reports will report on the use o f a l l funds for the project, including the pooled fund.

53

20. The IFR wil l include information under the following main categories: (1) a project financial statement, which includes a summary o f sources and uses o f funds; (ii) an updated six- month forecast; designated and pooled account activity and reconciliation statements; (iii) a statement o f eligible expenditures by disbursement category; (iv) a project progress report

Figure A7.1 Funds Flow Mechanism

explaining variances between actual physical and financial progress versus forecasts; and (v) a procurement management report showing procurement status and contract commitments.

r’’ IDA Source o f funds (Credit) )

-.,, /-’-’------..

Budget f Roadusen \ (’

\.., -._.----

Amounts (m USD)

(Total $1,043m)

r t

Road Fund i IDA Designated

Managed Accounts .- A c c i ~ ~

~

Other Agency’s

Achvities Financed

T p e o f Funding ~ IDA Project Funding Pooled Funding

\

I Municipalities :- - --I I

Other Funding

Certification Requirements for Payment - ANE HQ certifies Invoices Disbursements according to DP requirements ANE Pronncial Delegate Certifies Invoices Quarterly advances against disbursement forecasts and sansfactory post review

........ . . . . . . . . . . . . . . . . .,

X Other DP conuibuhons to the pooled fund to be confirmed

21. An advance will be made to the IDA designated account at the inception o f the project. The advance will be meant to cover forecast expenditures for six months, as indicated in the init ial six-month cash f low forecast. After every subsequent quarter, the project will submit IFRs that include a cash f low forecast for the following six-month penod. The cash request at the reporting date will be the amount required for the forecast penod as shown in the approved Interim Reports, less the balance in the Designated Account at the end o f the quarter. Subsequent disbursements o f the IDA funds will be made with respect to this request.

54

22. With respect to the disbursement to the pooled fund, six semi-annual payments will be made. Disbursement o f the payments i s contingent to the submission o f satisfactory semi-annual reports and (only starting mid 2008) to the receipt o f satisfactory audit reports. These reports will form the basis o f the discussions at semi-annual jo int review meetings in September and April each year. There, jo int ly with the other D P contributing to the pooled fund, and based on the cash f l ow forecast o f the RF for the following six month the percentage o f IDA contribution to the pool wi l l be determined.

5.3. Disbursement of funds from the Pooled Fund

23. The Road Fund (RF) will make disbursements f rom the pooled fund as necessary to finance the activities implemented by ANE headquarters and i t s provincial offices. The RF will obtain assurance on the continued existence o f adequate financial management arrangements in the concerned agency each time it advances funds to such agency These arrangements will include the existence o f staff with appropnate qualifications and expenence. The minimum expectations wi l l be la id out in the FMM.

24. Implementing agencies will prepare three-months rol l ing work plans and related cash needs. Funds will be disbursed from the pooled fund to the ANE operational account and to ANE provincial delegations monthly based upon these three-month plans. The f i rst disbursement will cover three month’s forecast and subsequent disbursements wil l be based o n work plans and the submission o f satisfactory documentation to justify the use o f funds disbursed earlier.

25. Funds for c iv i l works contracts and other services managed by ANE headquarters and funded by the pooled fund will be disbursed by the RF directly to service providers, upon certification by ANE.

55

5.4 Withdrawal of the Proceeds of the Credit

The following table specifies the categories o f eligible expenditures that may be financed from the proceeds o f the credit.

Table A7.3 Withdrawal of the Proceeds of the Credit Category

(1) Goods, works, services (other than consultant’s services), consultants’ services, training and operating costs under Parts A and B o f the Project financed from the pooled fund (except for components A.3.1.7,B.l, andB.5.2)

(2) Works under Component C o f the Project financed by IDA

(3) Consultants’ services for Component C o f the Project financed by IDA

(4) Unallocated

TOTAL AMOUNT

Amount o f the Credit Allocated

(in U S $ million)

35.00

51.98

3.12

9.90

100.00

Percentage of Expenditures to be

Financed (inclusive o f taxes)

Such percentage as IDA may d e t e m n e for each semester o f the Financial Year

100%

100%

6. Internal Controls and Accounting Procedures

26. A Financial Management Manual (FMM) i s being be prepared for the project. I t includes a clear allocation o f responsibilities for financial management. It describes the accounting system, internal control procedures, the basis o f accounting, standards to be followed, and policies and procedures to be used in accounting for program funds.

27 The internal controls includes arrangements to provide reasonable assurance that (a) operations are being conducted effectively, efficiently, and in accordance with relevant financing agreements with respective donors; (b) financial and operational reporting i s reliable; (c) applicable laws and regulations are being complied with; and (d) assets and records are safeguarded.

28. The accounting policies specify the accounting treatment o f financial transactions and establish basic principles designed to ensure that the accounting records are complete, relevant, and reliable, and that accounting practices are followed consistently This manual sets forth financial policies and procedures for the guidance o f all personnel charged with financial responsibilities, with the aim o f ensuring that program resources are properly managed and safeguarded. It documents specific procedures for each significant accounting function. I t also

56

covers the fo l lowing aspects: administrative and human resources; f l ow o f funds; financial and accounting policies; record keeping and maintenance; the chart o f accounts; formats o f records and books o f account; authonzation procedures for transactions; planning and budgeting; financial reports (including formats, linkages with Chart o f Accounts, and procedures for reviewing these); and auditing arrangements.

7. Accounting System

29 The accounting system i s used to track, record, analyze, and summarize the project’s financial transactions relating to the components for which they are responsible. The project’s accounts will be prepared on a cash basis in accordance with International Accounting Standards.

30. The RF’s accounting records are maintained using a computerized accounting system based on the accounting software, Primavera, which i s adequate to properly account for project resources. The system integrates budgeting, operating, and accounting systems to facilitate monitoring and reporting. I t also enables the automatic generation o f intenm, annual, and other financial reports.

3 1. Accounting staff are being trained to maintain and operate the system and appropriate controls are being instituted to safeguard the confidentiality, integrity, and availability o f the data. The existence o f a computerized accounting system helps to reduce the nsk o f human errors in record keeping, and enhances efficiency in prepanng reports.

32. The Government o f Mozambique i s undertaking a public sector management reform, SISTAFE, which among other things i s aimed at improving public financial management. This would integrate budgeting, treasury management, and accounting through a cornputenzed management information system, and also introduce a new internal control regime to support improved public financial management. The accounting systems that are used for the project will be designed to fit within the framework o f the SISTAFE once this reform i s completed.

33. Books o f account will include at a minimum, a general ledger, cashbook, and subsidiary ledgers. A proper filing system that allows authorized users easy access will be set up to ensure that a l l accounting and supporting documents are retained on a permanent basis and properly maintained.

8. Financial Reporting

34. The project reporting system will have as an objective the production o f sufficient detailed information to manage the program, and the provision to stakeholders, including government and DPs, with quarterly consolidated Intenm Reports and bi-annual consolidated financial statements. The FMM documents the format o f the reports and responsibilities at each level o f implementation for the production o f reports and financial statements. The Road Fund will be responsible for consolidating reports submitted by ANE provincial delegations.

35. The financial reports are designed to provide high-quality and timely information to project management, implementing agencies, and various stakeholders on project performance. These reports include financial statements (for example, sources and application o f funds; expenditure classified by project components, disbursement categones, expenditure types and

57

implementing agencies, and comparison with budgets; short-term forecasts o f expenditure; unit costs for key items and comparison with budgets; and so forth).

36. Annual financial statements and annexes for the project will include a Statement o f Sources and Uses o f Funds, showing funds from IDA, other DPs and G o M separately; a summary of expenditures analyzed under the main headings and by main category o f expenditures; Notes in respect o f significant accounting policies and accounting standards adopted by management; a Designated Account Reconciliation Statement; an Implementation Report, which would be a narrative summary o f the implementation progress for the project; and a Summary o f Withdrawals.

9. Oversight Arrangements: Audits

9.1. Internal Auditing

37 There i s an internal audit department at the Road Fund comprised o f three staff. I t s main role i s to assess the level o f compliance with internal controls o f the agency both at headquarters and at provincial level. Given the R F ’ s overall responsibility, they wi l l also ensure compliance by ANE o f financial management procedures that are agreed upon. The head o f the internal audit department reports directly to the Chairman o f the RF The RF management will ensure that the department i s always staffed adequately to enable i t to fulfill the mandate envisaged for it. ANE through i t s own internal audit unit will monitor the technical and procedural aspects o f works carried out by ANE both centrally and at provincial level.

3 8 . In addition, the Ministry o f Finance plays a central role in the management o f public finances and in the coordination o f the implementation o f SISTAFE. I t s organizational structure includes an Inspectorate General o f Finance (IGF) and Provincial Directorates o f Planning and Finance (DPPF) that have the responsibility o f inspecting the transactions o f every ministry within the province. Internal audit inspections wi l l be conducted by IGF-MoF once a year in compliance with the norms and procedures used by the Government. The scope o f these audits will cover both central and local implementing agencies.

9.2. External Auditing

39 Constitutionally, the Administrative Tribunal i s mandated to audit a l l government expenditure. However, additional measures will be taken to ensure that the audit i s conducted by an international firm o f auditors. The annual financial statements o f the project wi l l be audited by independent auditors, acceptable to the Bank, in accordance with acceptable auditing standards. The external audit will be conducted to international auditing standards using terms o f reference acceptable to the Bank and other DPs. Auditors will be required to issue a single opinion on the project’s financial statements, according to the guideline on Annual Financial Reporting and Auditing for World Bank-financed Activities o f June 30, 2003. In addition, auditors wi l l be required to issue a management letter, highlighting any identified internal control weaknesses, which will contribute to the strengthening o f the control environment. The auditor’s report will be submitted to the Bank n o later than six months after the end o f each fiscal year.

58

10. Financial Covenants

40. A financial management system, including records and accounts, will be maintained by the Road Fund. Financial Statements will be prepared in a format acceptable to IDA, and will be adequate to reflect in accordance with sound accounting practices the operations, resources, and expenditures with respect to the project. Financial statements will be audited o n an annual basis.

11. Conclusion

41. The overall conclusion o f the assessment i s that the current financial management arrangements are satisfactory to meet IDA FM requirements, subject to the implementation o f the measures agreed o n and documented in the Act ion Plan.

12. Financial Management Action Plan

The financial management action plan (see Table A7.2) contains measures required to be implemented to ensure the adequacy o f the financial management arrangements for the project.

Table A7.2 Financial Management Action Plan ~~~~ ~~~

Action Due Date Responsible

Memorandum o f Understanding. To be reviewed IDA/DPs/Government September 2007

I Finalization o f a Chart o f Accounts incorporating the Effectiveness Road FundANE activities to be carried out under the project (as part o f the FMM) Financial reporting formats (a draft IFR template is part o f the mnutes o f negotiations. I t wil l be further refined before effectiveness)

Preparation o f the Financial Management Manual Effectiveness Road Fund documenting the operations o f the financial management system for the project, including:

Staffing responsibilities Funds F l o w mechanisms Responsibilities o f implementing agencies

RFP issued for selection o f independent auditors in format satisfactory to IDA

................................................................................................................................................................................................................................................................n� Draf t completed (negotiations) To be refined before effectiveness

Road Fund ANEIIDAIDPs

................................................................................................................................................................................................................................................................2� I.......

................................................................................................................................................................................................................................................................N� Effectiveness Road Fund

13. Supervision

42. Financial management supervision will be carried out regularly by the Bank Financial Management Specialist at least twice a year. The init ial supervision will be a review o f the implementation progress o f agreed action plans noted above. The Specialist will also:

Review the implementation o f financial management arrangements before credit effectiveness 0 Review the financial component o f the quarterly Interim Report

59

Review the annual audit reports and management letters f rom the external auditors and fol low up o n matenal accountability issues by engaging with the TTL, client (Road Fund), or auditors.

60

Annex 8: Procurement Arrangements


1. General

1. The estimated cost o f the three-years- road program i s U S 1 . 0 4 3 billion, and IDA will contribute US$lOO mill ion. The IDA contribution will include (a) US$35 mi l l ion through pooled funding, for which the procurement processing wil l be consistent with the Government Procurement Regulation (Decree 54/2005) enacted on December 13, 2005 and a l l procedures will be la id out in the project’s Procurement Manual; and (b) U S 6 5 mi l l ion through traditional IDA dedicated funding, for the execution o f three large c i v i l works and three supervision services contracts for the rehabilitation and upgrading o f three road sections o f N1. The procurement procedures for the dedicated IDA-funded component will be consistent with the Bank’s procurement policy, and Bank’s standard bidding and proposals documents will be used.

2. Part A and B: Pooled Funding (US$291.4 million, of which US$35 million i s IDA contribution)

2. The Government, IDA, and DPs’ have agreed to create a pooled fund in an amount o f U S 2 9 1 . 4 mi l l ion (IDA contribution US$35 mill ion) to support the Government’s three-year (2007-09) integrated road sector program (PRISE), estimated at US$1.043 bil l ion. The PRISE will be executed in a sector-wide approach (SWAP) for the fol lowing expenditures: (a) overhead costs composed o f administrative costs, part o f the capacity building, and part o f the additional program, and (b) maintenance costs o f unpaved roads, urban roads, emergency works, provincial consultants, and a large part o f the paved road maintenance.

3. The procurement system in Mozambique has been under reform over the last two years, based on the recommendations o f the 2002 Country Procurement Assessment Report (CPAR). The Government enacted a Public Procurement Regulation o n December 13, 2005, replacing al l previous procurement legislation. This law covers procurement for government agencies under both central government and local authorities.

4. For pooled fund expenditure financed by IDA under APL2, the Mozambican procurement system may be used provided: (i) domestic preference i s applied only for I C B (International Competitive Bidding) procedure. Under N C B domestic preference shall not apply, even when foreigners do show interest; (ii) domestic preference for locally manufactured goods shall be applied only for I C B without l imitation to the nationality o f goods’ manufacturer and (iii) when i t i s in an I C B the bidding documents as the advertisement shall be made available in the English language. Accordingly the following Procurement and Selection methods have been established:

5 Goods, Works and Services (other than Consultant’s Services): (i) Request for Quotations (RFQ); (ii) National Competitive Bidding (NCB) and; (iii) International Competitive Bidding (ICB).

Participation o f the various DP that have shown interest in participating in the pooled fund i s still to be 1

confirmed.

61

Consultant’s Services: (i) Quality and Cost Based Selection (QCBS); (ii) Selection Based on Consultant’s Qualifications; and (iii) Least Cost Selection (LCS).

Tables A8.1 through A8.3 below summarize the various procurement and selection methods:

Table A8.1: Civi l Works

Categories Threshold Values Remarks

a) Request for Quotation b) NCB: National Competitive Bidd ing

< us$100,000 us$loo,ooo -

< US$5.0 m i l l i on

At least 3 qualif ied contractors Open for National and International Bidders. Advertising only in local newspaper and internet website; English not required. Document should also be available in English; domestic preference i s applicable.

............................................................................................................................................ .................................................................... ................................................................................................................................................

................................................................................................................................................................................................................................................................e� c) ICB: International Competitive Bidding XJS$5.0 m i l l i on

Table A8.2: Goods and Services


a) Request for Quotation b) NCB: National Competitive Bidding

< US$SO,OOO US$50,000 -

< US$250,000

At least 3 qualif ied suppliers Open for National and International Bidders. Advertising only in local newspaper and lnternet website; English not required..

Document should also be available in English; domestic preference i s applicable.

................................................................................................................................................................................................................................................................•�

............................................................................................................................... ...................................... ............................................................................................................................................................................................................... c) ICB: International Competitive Bidd ing SJS$250,000

Table A8.3: Consulting Services


a) CQS - Consultant Qualifications based

LCS - Least Cost Selection QBS - Quality Based Selection FBS - Fixed Budget Based Selection b) QCBS - Quality and Cost based

< US$lOO,OOO Short-lists may be comprised entirely o f Selection national consultants

.................................................................................................................................................. ,... ..................................................... ~ ............................................................................................................................................................ ~us$100.000 Short-lists shall not have more than two

f i r m s f rom any given country, unless qualif ied consultants did not express interest, except as per paragraph below.

selection

6. Short l is ts o f consultants for services estimated to cost less than US$200,000 equivalent per contract for construction design and supervision and US$lOO,OOO for other types o f assignments may be comprised entirely o f national consultants.

7 ANE has prepared and sent to the Bank pr ior to negotiations a draft procurement manual (PM). The Manual includes the procurement thresholds for the pooled fund activities, a provision mandating the preparation o f a procurement plan, along with the annual work plan and the use o f a set o f standard bidding documents, including c i v i l works, goods, and consulting services, that have been produced and published in the framework o f the new procurement regulation.

62

8. The government procurement regulation confirms that award o f contract will be made to the lowest evaluated bidder substantively responsive to the bidding documents, in accordance with predetermined and preannounce, published, and transparent methods. The bid evaluation reports will clearly state the reasons for rejecting any non-responsive bids. Any activity, found to be inconsistent with the agreed procurement procedures, will not be considered eligible for subsequent payments into the pooled fund account.

Salaries & operations

Infrastructure .. .. , . . .. .. ............... ................................... ....................... ...........

9 following:

The annual independent procurement and technical audit reports would a im to do the

29.0 13.0 3.4 12.6 4.5 2.0 2.5 0

.............................................. ......... ........... ........ ...... .... .... . . . . . . .....

0 Veri fy that the procurement and contracting procedures followed for the pooled funding component are in accordance with the Procurement Manual

0 Verify technical compliance, physical completion, and price competitiveness o f each contract in the selected representative sample

0 Review and comment on contract administration and management issues as dealt with by implementing agencies

0 Review capacity o f implementing agencies in handling procurement efficiently 0 Determine improvements in the procurement process in the light o f any identified deficiencies

10. pooled fund components (US$291.9million) are shown in Table A8.4.

The procurement arrangements in terms o f responsible agencies and category for the

Table A8.4 Procurement Arrangement for Pool Funded Activities

Procurement Category I I Civil Goods Consult. Operation

Works Services Costs * 0 0 0 29.0 I

4.3 0 0.2 0

63

Equipment 3.5 0 0.3 Tech. Ass is t 1 ::: 1 2.9 * 0 0 Consultancies

Road Safety

Axle Load

1.2 0 0 0.4 0 0.2 1.2 0 0 2.0 0 0

0 0 0

26.2 5.9 13.1

0 3.8 0 0 0 0 2.9 0 0 0 1.2 0 0 0 0.2 0.4 0 0 1.2 0 0 0 1 .o 1 .o 0 0 0 0

4.3 3.8 6.7 30.4 Provincial Consultants

Unpaved RM

Paved RM

Paved P M

rotal Maintenance

18.0 0 0 8.0 8.0 0

0 60.9 0 0 10.1 0

17.6 0 0 42.1 0 0

77 4 0 0 4.6 0 0

1677 79.0 0

0 0 18.0 0 14.0 1.0 1 .o 0 60.9 0 0 0

....................... ........,... ......................... .....,..... ..............................................................................

................................ ..: ............................................................................. /.... ..............................

10.1 0 0 0 17.6 0 0 0 42.1 0 0 0 77 4 0 0 0

0 0 4.6 0

222.1 1 .o 23.6 0

rotal Amount 291.9 193.9 84.9 13.1 226.4 4.8 30.3 30.4 ' Procurement mvolved in Operational Costs has not been considered

Estimated numbers and values o f contracts under the pooled fund component are shown in Tables A8.5 through A8.7

Table ASS Civil Works Contracts and Thresholds (Civ i l Works: (a) ANE, US$151 mill ion, (b) Provinces, US$71 mil l ion. Total: US$226.4 mill ion.)

Projected N u m b e r o f Con t rac t by Value

Procurement Leve l Contracts Con t rac t Value To ta l Value N u m b e r o f Average

Contracts o f US$150,000 in 10 provinces (av 22 in each 229 150,000 34,350,000 province)

Contracts o f US$500,000 in 10 provinces (av 5 in each 57 500,000 28,500,000 province)

province)

Contracts o f US$l-2 m i l l i on centrally 15 1,500,000 22,500,000 Contracts o f US$2-5 m i l l i on centrally 24 3,500,000 84,000,000 Contracts o f US$S-lO mi l l i on centrally 2 7,5 00,000 1 5,000,000 Contracts over US$lO mi l l i on centrally 3 10,000,000 30,000,000

...............................................................................

................................................................................................................................................................................................................................................................3� Contracts of US$l m i l l i on in 10 provinces (av 1 in each 12 1,000,000 12,000,000 ................................................................................................................................................................................................................................................................C�

................................................................................................................................................................................................................................................................”�

................................................................................................................................................................................................................................................................\�

................................................................................................................................................................................................................................................................k�

Civil W o r k s Procurement Thresholds

N u m b e r o f % o f To ta l Thresholds f o r Civil W o r k s Procurement Review Contracts T o t a l Value Value

64

Mandatory Post Review via Procurement Audit (US$2 -

Table AS.6 Consulting Services Contracts and Thresholds (Total: US$30.3 million)

Projected Number of Contract by Value

Procurement Level Contracts Contract Value Total Valuf Number of Average

Contracts o f <US$50,000 I Contract o f <US$ 100,000 l4 8 I 25,000 350,000 75,000 600,000

Icontracts ~ ~ < u s $ ~ ~ o , o o o Icontracts ~ ~ < u s $ ~ ~ o , o o o

125,000 3,125,000 250,000 7,500,000

Contracts o f more than US$ lmill ion 15 1,250,000 18,750,000

Total: 92 30.325.000

Consulting Services Procurement Thresholds

Thresholds for Consultinp. Services Procurement Review Contracts Total Value Value Number of % of Total

Isample Review through Procurement Audit (<US$lOO,OOO) I 950,000 I 3% Mandatory Post Review via Procurement Audit (US$lOO - I us$200,000)

10% 25 I 3,125,000 I

1Prior Review (above US$200,000) I 45 I 26,250,000 I 87%

Total: 92 30,325,000

Table A8.7 Goods Contracts and Thresholds (Total: US$4.8 million)

IProjected Number of Contract by Value I Number of Average

Procurement Level Contracts Contract Value Total Value

Contracts of<US$ 100,000 7 100,000 700,000 Contract of <US$300,000 2 300,000 600,000 Contracts of<US$500,000 2 500,000 1,000,000 Contracts o f more than US$lml l ion 2 1.250.000 2.500.000

I Thresholds for Goods Procurement Review Number of % of Total 1 Contracts 1 Totalvalue I Value I

Isample Review through Procurement Audit (<US$lOO,OOO) I 7 I 700,000 1 15%

65

........ ..... ...... ..... .................... ...... . , ..... ..... ........................ ........ ..... ..... ..... .............................. ...... . .,.. .... . .,... ..... ...... .. ...... ...... . ... . ............ .. ................................. ............ ..................... .............. ...... . .... ...... ........................ .... . ....... .....

I O I Mandatory Post Review via Proc. Audit (US$lOO,OOO - I US$250,000)

3. Part C: IDA dedicated funding (US$65 million):

11. This part will be used only for the financing o f three c iv i l works and three related supervision services contracts aimed at rehabilitation and upgrading o f three sections on N 1, the primary national road. The procurement would be carried out in accordance with the Wor ld Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” and “Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers” both dated M a y 2004, revised October 2006; and the provisions stipulated in the Financing Agreement. The Procurement Plan for the three-year project penod will be updated at least annually or as required, to reflect the actual project implementation needs and improvements in institutional capacity

12. Procurement of works. Three c iv i l works contracts with an estimated cost o f U S 1 2 . 3 mi l l ion for Maputo-Benfica, US$29 7 mil l ion for Xai-Xai-Chissibuca and US$19.3 mi l l ion for Massinga-Nhachengue will be awarded through international competitive bidding (ICB). The procurement o f works will be done using the Bank’s Standard Bidding Documents (SBD) for I C B large contracts, and standard prequalification documents.

13. Prior review by the Bank for civil works contracts. All three large c iv i l works contracts wi l l be subject to prior review, which wil l include review o f budgets, prequalification documents and evaluation reports, bidding documents, bid evaluation reports, and draft contracts. ANE will be required to maintain al l relevant procurement documentation for subsequent review by IDA.

14. Selection of consultants: The estimated cost o f three supervision services contracts will be US$0.7 mi l l ion for Jardim-Benfica, US$1.8 mi l l ion for Xai-Xai-Chissibuca, and US$1.2 mi l l ion for Massinga-Nhachengue. Consultants financed by IDA will be hired in accordance with the methods provided in the Bank’s “Guidelines for the Selection and Employment o f Consultants by Wor ld Bank Borrowers,” dated M a y 2004, revised October 2006. Consultants will be selected through competition among qualified short-listed f i r m s in which the selection will be based on Quality and Cost-Based Selection (QCBS), by evaluating the quality o f the proposal before comparing the cost o f the services to be provided. For inviting consultants’ proposals, the Bank document “Standard Request for Proposal (SRFP) for Consulting Services,” dated M a y 2004, revised October 2006 (or later, if available), will be used for the preparation o f solicitation package and standard form o f the consultant’s contract.

15 Prior review by the Bank for consultant contracts. All three consulting service contracts will be subject to prior review, which wil l include review o f budgets, EO1 evaluation reports, shortlists, selections procedures, terms o f reference, requests for proposals, evaluation reports, negotiations minutes, and draft contracts. ANE will be required to maintain al l relevant procurement documentation for subsequent review by IDA.

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4. Assessment o f the Agency’s Capacity to Implement Procurement

16. The Mozambican Procurement Regulation has mandated the creation in each contracting entity or ministry o f an UGEA (Unidade Gestora Executora das Aquisiq6es) in charge o f the management o f the procurement functions, f rom planning to implementation o f the process to the monitoring o f contract execution.

17 ANE has created i t s UGEA at headquarters, which i s staffed with six engineers with substantial experience in the procurement o f goods and works and selection o f consultants under national and international procurement procedures, including those o f the Wor ld Bank.

18. A procurement capacity assessment o f the ANE’s UGEA was carned out by Slaheddine Ben-Halima (Senior Procurement Specialist) on February 5, 2007 The assessment and previous Supervision Missions and Post-Procurement Review have highlighted that (i) the ANE procurement team needs strengthening; (ii) the record keeping needs improvements; and (iii) the procurement staff should be involved in the process o f contract monitonng and invoice processing.

19 T o reinforce ANE’s procurement capacity measures are being undertaken that pnmari ly include (a) planning and implementation o f a capacity-building program in procurement for the ANE headquarters staff in Maputo, and the field staff in the provincial offices, who will be responsible for the management o f a l l procurement activities; (b) the drafting o f a Procurement Manual; (c) improvement o f the record keeping system; (d) establishment o f a documentation flow, involving UGEA in the process o f payment certification o f invoices, and the preparation o f a template for contract execution monitonng; and (e) continuation o f technical assistance on procurement to ANE. The action plan in Table A8.8 below sets out agreed strengthening activities including the finalization o f the Procurement Manual which i s a condition o f effectiveness .

20. The procurement capacity o f the UGEAs at the Provincial level (UGEAP) could not be assessed at this time as they are in the process o f being established, although the staff o f ANE’s provincial delegations have carried out procurement worth an average o f US$4 m i l l i on per year in the past and will be incorporated into the UGEAPs. UGEAPs once created will be monitored and supervised by the central UGEA. Individual contracts at provincial level are not expected to exceed US$1 million, with an average value o f US$250,000.

21. The key issues and actions concerning procurement for implementation o f the project have been identified and are included in the agreed Act ion Plan (see Table A8.8). The assessment established that the overall risk for procurement i s moderate.

67

Table AS.8 Procurement Management Action Plan

Risk Mitigation Issues Actions Due Date Conditionality

Ongoing d a in procurement needs to be strengthened Prepare p lan for suitable on-the-job June 30, 2o07 da

Continue Technical Assistance to UGEA headquarters capacity ANE procurement staff

training for ANE Drocurement staff

Ongoing d a

June 30,2007 d a

Improve procurement f i l ing and

Appoint full-t ime clerk responsible Procurement documentation record keeping system. not f i led systematically

for record-keeping and filing ................................................................................................................................................................................................................................................................“� Procurement arrangements for pooled and earmarked June 30, 2007 Effectiveness funds not fully established

Produce f inal Procurement Manual and dissemmate

Establish a documentation flow UGEA staff not involved in al l stages o f procurement giving UGEA access to information July 2007 d a

on contracts performance

Lack o f adequate controls and timely contract execution information system

Provincial procurement staff (provincial heads) not yet identif ied Training and certification o f a l l December

Note: d a = not applicable.

Develop and implement a contracts d a December

2007

June 2007 rda

d a

execution monitoring and evaluation

................................................................................................................................................................................................................................................................A� .,.. ............................................................ Appointment o f a l l UGEA-P

UGEA-P by central UGEA 2008

5. Procurement Plan

22. A procurement implementation plan has been produced for the major components o f the project which includes the pool funded activities, Part A and B o f which the IDA share i s US$35 mill ion. After the credit i s effective, the procurement plan including annual program, quarterly progress reports, and audit reports will be updated and reviewed along with other DPs during the semi-annual meetings with RF and ANE. The procurement plan for Part C o f the IDA dedicated funding (US$65 mill ion) covering the works and consultancy service contracts has been developed at appraisal and provides the basis for the procurement methods. This plan has been agreed between Borrower and the Project Team on April 16, 2007 and i s available at the ANE office in Maputo. I t wil l also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the project team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity

6. Disclosure Policy

23. After the Bank No-Objection, ANE shall publish in UNDB online and in dgMurket the details o f contract awards for Goods, Works and Consulting Services. The same information shall be sent to al l participating contractors, suppliers or consultants, as the case may be, who have submitted bids or proposals. Reasons for rejection o f bids or proposals shall also be included. ANE shall also publish the same information on the UFSA-Unldude Funclonal de Supewmio dus

68

Aquuzq6es Web site-(www.concursosUublicos.~~v,ni~). ANE shall promptly provide the needed debnefing to bidders and consultants on request.

7. Details o f the Procurement Arrangements Involving International Competition

7.1. Works and Non-consulting Services

(a) List o f contract packages to be procured fol lowing ICB and direct contracting:

1 2 3 4 5 6 7 8 9 I Domestic Review by

Ref. Contract Procurement Preference Bank (Prior Expected Bid- No. (Description) Est. Cost Method P-Q (yesho) / Post) Opening Date Comments

Yes Yes Yes July 3 1,2007 USS12.3 ICB I RoadRehab. Maputo- Benfica m

Yes Yes Road Rehab. Xai- US$29.7 ICB I Xai- Chissibuca m Yes July 3 1,2007

Yes Yes Yes July 3 1,2007 US19.3 ICB Road Rehab 3 Massinga-

Nhachengue m

(b) I C B contracts estimated to cost more than US$5,000,000 per contract will be subject to prior review by the Bank.

7.2. Consulting Services

(a) L i s t o f consulting assignments with shortlist o f international f i r m s .

1 2 3 4 5 6 7 Review by

Description of Selection Bank (Prior / Expected Proposals Ref. No. Assignment Estimated Cost Method Post) Submission Date Comments

USSO 7m QCBS Yes May 3 1,2007

USS1.8m QCBS Yes May 3 1,2007

Supervision Maputo - Benfica

Supervision Xai-Xai - Chissibuca

US$1.2m QCBS 'Supervision Massinga - I , Nhachengue Yes May 3 1,2007

(b) Consultancy services estimated to cost more than US$200,000 per contract will be subject to prior review by the Bank.

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Annex 9: Economic and Financial Analysis MOZAMBIQUE: Roads and Bridges Management and Maintenance Program

1. Prioritized Investment Plan for PRISE 2007-2009

1. As part o f the review o f the Road Sector Strategy, a 5-year prioritized Investment Plan was formulated based on analysis o f socio-economic and technical feasibility as well as on the resources available for implementation. The underlying principle was that given the scarcity o f resources and the importance o f prioritizing maintenance, al l investments in roads and bridges rehabilitation and upgrade must be economically and socially justified, and consistent with the broad objectives o f the Government’s social-economic policy and in the PARPA.

2. For the purposes o f the planning exercise, projects were divided into three categories: 59 national roads projects (primary and secondary roads): These projects were pnorit ized using economic analysis using HDM and multi-critena analysis. 69 regional roads projects (tertiary and vicinal roads): these projects were not init ially prioritized as these rehabilitation priorities were to be established by the provinces, with the support o f ANE.’ 32 bridge projects, including a pr ionty program o f 10 bridges for rehabilitation and repair.

3. Using data on the road network collected from several sources ( H N M S Database, Reclassification Database, 2003 Visual Condition and Surface Roughness Survey Database), the Consultant created a GIS database o f the network consisting o f 34,331 kilometers o f road. The data sets assembled for analysis included: road inventory, road condition data, traffic data, intervention costs, and vehicle operating costs.

4. The 59 national roads candidate projects were each evaluated in terms o f the required level o f intervention based upon existing detailed designs, H D M - 4 output, recommendations by road sector professionals, and the Consultant’s inspection o f the road. Six broad types o f intervention were defined, each with alternative levels o f intervention: periodic maintenance, rehabilitation, upgrade, and “targeted intervention” in various combinations for paved and unpaved roads. Estimated costs for interventions were amved at using a combination o f recent costs for c iv i l works contracts, engineering estimates for projects which have completed designs, and estimated built up costs using know comparable national and regional input pnces.

5. The economic feasibility o f the projects was computed with the use o f the HDM-4 model. Where more than one intervention was analyzed, the one with the higher economic rate o f re tu rn (benefit-cost ratio) was selected for pnontization. 32 o f 59 projects earned an EIRR greater than 12%, and 14 others had EIRRs between 0 and 12%. In general, paved roads have higher traffic volumes and therefore generally higher EIRRs. Paved road penodic maintenance projects had many o f the highest rates o f return, substantiating the asset preservation approach to roads management explained in the pnnciples o f the Road Sector Strategy Rates o f return for upgrade projects varied widely, suggesting that very careful consideration o f the appropriate intervention was required in the feasibility study or design phase made. The targeted intervention approach

ANE i s currently assisting the provinces to formulate provincial strategies for roads rehabilitation and 2

upgrade that features a technical strategy that gives pr ior i ty to providing maximum accessibility and maintainability.

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would permit a mix o f upgrade and unpaved rehabilitation or periodic maintenance, and i s a suitable method for “staged upgrade” Rates o f return on unpaved interventions tended to be quite low, mainly due to the l o w levels o f traffic and relatively high costs o f these interventions.

6. project’s contribution in four areas:

Economic Feasibility as measured by i ts internal rate o f return; 0 Connectivity as defined by the major function o f the road in the national grid;

Accessibility. external economic benefits accruing from increased accessibility, in particular, existing or potential for promoting small-holder agricultural, agro-industry, other industries, natural resource exploitation, tourism, inter-modal transportation, and additional Government priorities; Social Weight: a factor measuring the incidence o f poverty in the area o f influence o f the road;

Multi-critena analysis was used to rank projects within each category, assessing each

7 Alternative weighting schemes were applied to the results to evaluate the sensitivity o f the priontization to emphasis ,on different attributes. W h i l e a l l national roads candidate projects were evaluated together for the purposes o f the multi-critena analysis, for the Investment Plan, periodic maintenance projects were treated separately f rom national roads rehabilitation and upgrade projects.

8. The resulting priontization yielded the preliminary 5-year Investment Plan: enhanced paved road maintenance; national road rehabilitation; regional roads rehabilitation; bndges rehabilitation and construction; and urban roads rehabilitation. The summary Investment Plans as formulated under the RSS and in the final PRISE 2007-2009 are shown here (costs i n m i l l i o n USD).

Table A9.1 Procurement Management Action Plan

RSS Values a ......................................................................................................................................................................... , ‘ P R I S E Estimated value b Category

costs # Projects Kilometers ~ ~~~~~~

Paved Road Backlog Maintenance 19 1,593 US$48 US$48

Bridge Rehabilitation and Construction 10 8,900 US$137 US$131 ................................................................................................................................................................................................................................................................{�

................................................................................................................................................ ..*... ....................................... .........* ..................................................................................................................................................... Regional and District Roads 20 600 US$5 1 US$102 ...................................................................................................................................................................... ..,. ........................................... ....,..... .............................................................................. ..................... .......................................... National Roads Rehabilitation e 12 1,285 US$328 US$232

National Roads Upgrade 10 1,468 US$156 US$199 ................................................................................................................................................................................................................................................................e�

.................................................................................................................................................................. ........................................................ ...................................................... : ..................................................................................... Investment Engineering US$45 US$45

Total 6,026 US$765 US$758

Values in mi l l i on U S Dollars. a. F r o m Road Sector Strategy, February 2006 b. F r o m Final PRISE 2007-2009 (February 2007) c. Total span in meters. d. estimated number o f projects at average project length o f 30 kilometers e. In the RSS Investment Plan, this category was “funded rehabilitation and upgrade”, o f which most was

rehabilitation. f. In the RSS Investment Plan, this category was “unfunded rehabilitation and upgrade”, o f which most

was upgrade.

9 Following the presentation o f the Draft Final Report o f the RSS, the Investment Plan was subjected to a series o f revisions based on G o M and D P considerations and inputs. Whi le the

71

interventions or estimated costs o f some o f the projects included have changed, the overall size and composition o f the Investment Plan i s substantially the one that was proposed under the RSS.

2. I D A Financed Three Road Sections

2.1. Project Costs

10. Economic analyses o f paved and national road rehabilitation and upgrading projects were undertaken using HDM 4. The analyses were based on economic costs, which excluded taxes and duties. The economic costs were assumed to amount to 80 percent o f financial costs. The discount rate used was 12 percent. The appraisal penod used was 20 years. N o shadow pncing o f unskilled labor was used in the Road Sector Strategy Study analyses.

11. The projects appraised in the economic analysis comprise mainly the construction o f a new base, sub-base, and a bituminous surfacing, the widening and surfacing o f shoulders, upgrading the road furniture, and the rehabilitation or widening o f drainage structures. Each road section will be upgraded by means o f widening and strengthening o f the existing carriageway The heavily trafficked Jardim-Benfica section will be widened to four-lane standard and the other sections to two-lane standard. T w o alternative design standards are defined for each section, which are: Alternative A, using crushed stone base course, based o n internationally accepted engineenng design n practices, and Alternative B, using the locally available material o f sand with asphalt as base course, based on the research recently carried out by ANE in Mozambique in association with the University o f Texas. Alternative B i s marginally cheaper in each case.

12. contingency allowance and can be summarized as follows in Table A9.2:

The financial costs o f the rehabilitation and upgrading projects include an 18 percent

Table A9.2 Financial Costs of Rehabilitation and Upgrading Projects

. ....

The maintenance standard adopted for each alternative for use in the HDM 4 based analysis was a scheduled routine maintenance and condition responsive periodic maintenance standard.

Total maintenance costs are higher for the cheaper Alternative B. Maintenance interventions included in the analysis are as follows:

A single reseal in Year 2015 for the rehabilitation Alternative A 0 A double reseal in Year 2015 for the rehabilitation Alternative B This reflects the probable need for heavier maintenance for Alternative B.

2.2. Traffic Assumptions

13. Traffic growth f rom 2002-2007 was taken to be 4 percent a year. Base Year (2007) traffic and subsequent traffic growth assumptions were accordingly estimated as shown in Table 9.3 for the Additional Economic Analysis:

72

Table A9.3 Traffic Forecasts for Rehabilitation and Upgrading Projects

2007-2013 2007-2027 (YO / year) (YO / year)

Ref. Light Heavy Light Heavy AADT Range AADT Range No. Description Veh. Veh. Veh. Veh. 2007 2027

I 1 Jardim- Benfica 6.0 5 .O 5.0 4.0 28,110 - 19,140 74,779 - 50,917 I 2 Xai-Xai - Chissibuca 6.0 5.0 5.0 4.0 1,763 - 912 3,080 - 2,432 ......................... ...... ...................................... ...... ..... ...... ..... ..... ....... ...... ....... ..................... . ............... ...... .......... ................... ............................... ........................

3 Massinga - Nhachengue 6.0 5.0 5.0 4.0 1,155 - 912 3,080 - 2,432

14. Each project road was split in links for economic analysis with separate assessment o f traffic for each link. The values in the tables reflect this range. The traffic counts are fully detailed in the Economic Analysis section o f the Design Review Reports. The HDM analysis i s based o n economic factors alone to calculate the viabil ity o f the proposed works. The results are predominantly influenced by road roughness which i s greatly improved due to the pavement upgrading but the program has also taken into account traffic congestion factors.

2.3. Results of the Economic Analysis

15 The full results o f the revised economic analysis are set out in Table A 9 4 and the results o f the sensitivity analyses are shown in Table A9.5

16. The analysis undertaken using HDM 4 indicate that each rehabilitation and upgrading alternative for the three road sections i s economically feasible with EIRRs wel l in excess o f the 12 percent economic feasibility threshold. A combined result for the three sections gives an NPV (at a 12 percent discount rate) o f US$69 7 mi l l ion for Alternative A, and US$89.6 mi l l ion for Alternative B. The approximate overall EIRR for the combined projects would be about 20 percent. Alternative B, with higher NPV and EIRR as shown in tables A 9 4 and A9.5, was selected.

17 assuming: 0 20 percent lower traffic 0 30 percent higher investment costs

A worst-case scenario combining 20 percent lower traffic and 30 percent higher investment costs

The basic sensitivity analyses undertaken examined the impact on economic feasibility o f

2.4. Sensitivity Analysis

18. The sensitivity analyses indicated that a l l projects would remain economically feasible, even with 30 percent higher investment costs and 20 percent lower traffic. The cheaper Alternative B was uniformly more economical because o f lower construction costs.

18. allowance.

The financial and economic costs shown in Table A 9 4 include an 18 percent contingency

73

N N m r - M v i

r - r - m d d W

- r - v i r - 0 c

" 8 0 0

c o r - w m m w o o

m o 2 %

v i m m e

h l w m N - N N m m I ,

0 0 m m

m m w o o c m m

- . .

m m m m

- m w w w

m m w w

+

M L: Y 2

P, 4

0 0 r - r - 0 0 w w

I ,

- 0 0 w w m m

0 0 0 0 2 2

8 $ M r

9 - rL

4 -

a m a m

- z

Table A9.5 Sensitivity Analysis Revised Econonuc Feasibilit. dicators

Improvement Alternative NPV

(US$ million)

NPVI Financial Cost

Ratio 3.8200 2 4200 2 7600

16900 5.7200 3 6100 4 2200

2 6100 0.5100 0 1900 0 2100

-0 0400

Road Nr. Scenario Tested Location

JardimBenfica

EIRR (%)

60.90 44.40 5 1 S O

37.00

N1 A Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30%

49.7 31 50 46 70

28 60 64.70 40 90 62 10

38 40 16.50 6 10 8 80

-1 60 20.60 9 90

14 30

3 60 3.50

-0 60 -0 90

-5 00 4.30 0 10 0 10

-4 00

N1 Jardim-Benfica B Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30% Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30%

67.70 49.80 57.70

42.10 18.30 14 40 14.80

11.50

N1

N 1

N 1

N 1

N 1

Xai-Xai-Chissibuca

Xai-Xai-Chissibuca Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30% Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30% Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30%

0.7700 0 3700 0 4100

0.1000 0.7700

-0 0300 -0 0400

-0 2100 0.2400 0 0100 0 0000

-0 1800

20.80 16 50 17 20

13.40 14.80 11.60 11.40

8.70 15.60 12.10 12.10

9.20

Massinga-Nhachengue

Massinga-Nhachengue

Combined Projects A Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30% Best estimate Base Year Traffic -20% Financial cost +30% Worst-case scenario Traffic -20% & Cost +30%

69.70 37.00 54.60

22.00 89.60 50.90 76.50

38.00

1.0800 0 5800 0 6500

0 2600 1.6100 0 9200 10600

0 5300

18.68 14 55 14 99

11 47 20.73 16 20 16 92

12 99

N 1 Combined Projects B

Note: The EIRRs o f the combined projects are an approximation based on weighting by length. T h e HDM outputs are shown in the files.

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Annex 10: Safeguard Policy Issues


1. Arrangements for the Application o f Safeguards under PRISE (the Project)

1. In 2001 a “Strategic Environmental Impact Assessment” for the road sector was prepared for the ten year (2001-1 1) Road and Bridges Management and Maintenance Program (RBMMP) (also called Roads 3). This strategic assessment i s being updated for PRISE and the update i s expected to be available in M a y 2007 Under a previous project (ROCS-2) guidelines were prepared, in 1996, for environmental assessments (EA). For the implementation o f resettlement action related to the implementation o f PRISE, a Resettlement Policy Framework (RPF) was prepared in 2006 as part o f the APL1 activities with an environmental category B. U A S M A , the Environmental and Social Unit o f ANE, i s applying the above mentioned instruments to al l sector investments under the project, not just those financed by IDA. Additionally, U A S M A has developed guidelines for the application o f H N / A I D S control measures and applies these guidelines consistently in al l sub-projects.

2. Environmental Assessments @A) for the three Road Section Financed under the Dedicated Funding o f the IDA Credit

2. EAs for each o f the three road sections financed under the IDA credit, assessed the potential environmental and social impacts o f the proposed rehabilitation and upgrading works, and stipulated measures to mitigate such impacts. The environmental policy, legal, and administrative framework o f Mozambique was reviewed along with institutional capacity The EA shows that the impacts generated by the project activities are l imited in extent and duration, given that good construction and management practices will be integrated in design and bidding documents, and closely monitored during implementation. These requirements have been explicitly described in the Environmental Management Plan (EMP) section o f the EA and include the following:

0 Drainage provisions for the Jardim-Benfica section, especially for surrounding surface drainage facilities

0 Soil erosion control measures proposed for the Xai-Xai-Chissibuca section, including other mitigation measures as needed

0 Erection o f noise barners for selected schools near the roads to improve the health and safety o f school children

0 Specific management plans for workers’ camps (on completion o f the project, these facilities will be handed over to local communities)

0 Explicit provisions for environmental management o f borrow pit operations and rehabilitation o f the pits

0 Enhancement o f culvertldrainage to assure flows between for adjacent wetlands/lagoons 0 Compensation for tree loss (financial or replacement)

3. The EA also revealed impacts upon some housing, shops, kiosks, and associated fencing along the Jardim-Benfica section. Mechanisms to minimize the impacts before implementation will include:

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Provisions for relocation or repositioning o f removed structures within the existing area to minimize resettlement in new areas Adequate compensation for al l affected persons to ensure that their means o f l ivelihood are maintained or improved Payment o f compensation before the affected persons’ property i s removed to minimize transitional loss o f income, services and livelihood by the affected persons Ensunng that the affected persons’ grievances are addressed as soon as possible to avoid loss Provision o f adequate security to avoid looting o f property that has been exposed during demolition Provision o f employment to Project Affected Persons as an alternative source o f income

S I

The Environmental Management Plan (EMP)

Activity

The EMP for the three road sections sets out pragmatic environmental management

1

requirements for the road works at each development phase. It identifies the major environmental and social impacts, and presents measures to mitigate the adverse impacts o f the project and to enhance the positive outcomes. In particular, the EMP includes an action plan containing mitigation measures and environmental protection clauses in bid documents, and specifies the responsibilities o f agencies in the implementation and supervision o f environmental and social safeguards. The proposed road works require an environmental license (EL) from M I C O A (Ministry for the Coordination o f Environmental Interventions) before implementation begins. Specific environmental and social consent and permit requirements dunng preconstruction and construction phases are outlined in Table A10.1.

Roadside tree fel l ing

Table A1O.l Specific Consent and Permits Required During Preconstruction and Construction

removaVprotection o f cultural

I

Competent Authority Provincial Directorate o f Agriculture (DPA)- Forest Department

Provincial Directorate o f Culture (DPC)

Public Utility Companies

Requirements

Prepare tree cutting plan, including details o f trees to be cut, compensation to be paid, tree plantation program, and so forth

Obtain consent o f the community leaders (CL) on tree cutting p lan

Obtain f inal consent o f D P A Prepare p lan in consultation with community and CL

Obtain f inal consent o f D P A Prepare utility shifting plan

Obtain p e m s s i o n f rom respective utility companies

Responsibility

ANE

ANE

ANE

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- S I Activity

Demolit ion‘ shifting o f structures f rom Corridor o f Impact (COI)

Locating plants/ construction camp/ workers’ camp

Locating borrow pits and restoration

Locating stone and sand quarries

Use o f water for construction

Competent Authority District Admn is t ra t i od Community Leaders

Provincial Directorate o f Agriculture (DPA)

Provincial Directorate o f MICOA

Provincial Directorate o f Minera l Resources

Provincial Directorate o f Minera l Resources

Regional Water Admmstrat ion ( A W

Requirements

Obtain approval o f RAP f rom CL

Issue pr ior notices

Pay compensation and other assistance to PAPS pr ior to displacement Consult with CL to finalize location

Firm up agreement with community leader for post- construction uses o f workers’ camp

Finalize compensation for tree felling, crops removal, and so forth

Obtain consent f r o m DPA Consult with community leader to finalize location, operation and redevelopment p lan

Finalize compensation for tree felling, crops removal, and so forth.

Obtain written consent f rom CL /land occupier

Obtain consent f r o m D P A

Obtain consent f rom the Provincial Directorate of Geology and Minera l Resources Consult with community leader to finalize location, operation, and redevelopment p lan

Finalize compensation for tree felling, crops removal, and so forth

Obtain consent f r o m the Provincial Dlrectorate o f Minera l Resources Identi fy locations in consultation with CLs

Obtain consent f r o m A M s

Responsibility

ANE

ANE/ Contractor

ANE/ Contractor

A N E / Contractor

ANE/ Contractor

78

5. The budgetary allocations for EMP implementation are included in the bill of quantities o f the bidding documents for the c iv i l works and have been costed accordingly U A S M A wil l receive funding f rom the pooled fund to supervise and monitor c iv i l works activities, train the staff, and develop capacity and expertise within the department to apply environmental and social safeguards. 4. Environmental Monitoring

6. Monitoring will be carried out during project implementation to record the environmental status o f the project and will be reported in the semi-annual project reports. The monitoring records will indicate whether progress i s being achieved as planned, and would form the basis for any modifications to achieve compliance with environmental and social regulations.

7 Recently, the Government o f Mozambique published standards for ambient air quality; a noise quality standard i s in the pipeline. To monitor ambient air and noise levels using two air quality samplers, one micro weighing machine, and one digital portable noise monitor would be required. It i s recommended that these items are procured under this project.

8. Environmental officers o f the supervision consultants wil l assist U A S M A for carrying out the monitoring. Budgets for the monitormg program and procunng equipment have been included under project costs.

5. Resettlement Actions Plans and Resettlement Policy Framework

9 Social analyses documented Project Affected Persons (PAPs) and assets affected by construction activities. A Resettlement Act ion Plan (RAP) was developed to accommodate displacement o f individuals and structures and their resettlement, and to stipulate compensation for al l affected persons along the Jardim-Benfica section o f the N1. The other sections (Xai-Xai- Chissibuca and Massinga-Nhachengue) involve minor land take for which R A P s have been developed and compensation measures identified. Studies facilitated details o n the following:

0 Valuation and compensation for losses by PAPs 0 Resettlement measures 0 Organizational responsibilities for implementation o f the R A P s 0 Implementation schedule and modalities for the RAPS

Costs and budget 0 Monitoring and evaluation mechanisms for the R A P s

Costs for the implementation o f the R A P s are to be met under pooled funding.

10. projects, and i t s application should also be monitored and evaluated.

A resettlement pol icy framework (RPF) has been developed for application to future road

6. Cultural Properties

11. A mosque and two graves are close to the Jardim-Benfica road formation and a strategy has been developed to minimize or avoid any impacts upon these properties. The final design has

79

been revised to avoid the boundary walls o f the mosque, and the graves wil l be moved takmg into account the need to ho ld traditional ceremonies.

7. H I V / A I D S Control

12. ANE will enhance institutional arrangements to scale up existing prevention activities and continue developing and implementing measures to reduce the spread o f Sexually Transmitted Infections and H IV /A IDS among ANE staff and their families as wel l as construction workers and people living near road construction activities. U A S M A will work with the l ine ministry, the National AIDS Commission and other relevant authorities to implement the workplace pol icy guiding the implementation o f the sectoral response to HIV/AIDS. Priority wil l be given to developing a monitoring and evaluation system and to exchanging information with the HIV /A IDS M A P Approaches will be adopted to assure the implementation o f clauses in contractor’s contracts with the direct assistance o f NGOs and CBOs having a track record in the field o f HIV/AIDS. Because the transmission o f H IV /A IDS increases with improved mobility, U A S M A wil l commission a baseline and monitonng study throughout the project to highlight critical issues and needed actions and to measure the impact o f the H IV /A IDS activities on road projects and communities along the road.

8. Institutional Arrangements for the Application of Environmental and Social Safeguards

13. construction stage:

The following key players will be involved in E M P and RAP implementation during the

0 ANE and i t s Environmental and Social Unit (UASMA) Supervision consultants , that i s i t s Site Engineer (SE) and SE representatives Contractors

14. The Director General o f ANE, with the assistance o f U A S M A , will have overall responsibility for certifying compliance with al l safeguard measures and reporting to the regulatory bodies and Bank.

15. Fol lowing recommendations in the ENEMP, a l l o f the above mentioned personnel (who have charge o f environmental, social and health issues in ANE), will work within a single unit i.e. U A S M A and report directly to the Director General o f ANE. It i s also recommended that U A S M A be headed init ially by a senior level Environmental/Social Specialist for effective decision making and coordination within and outside ANE to ensure that each o f the activities stipulated in EMP and RAPS are implemented satisfactorily

16. The overall objective in the TOR for U A S M A will be:

Ensunng that environmental and social considerations (including gender, H IV /A IDS prevention, and poverty alleviation) are incorporated in al l road construction, rehabilitation, and maintenance and operations.

And the specific aims wil l include:

0 Formulating and reviewing TOR for impact studies and analyses, in particular environmental and social impact assessments.

80

Reviewing and evaluating the studies and analyses with ANE staff and MICOA to ensure compliance with TORS, Mozambican legal and regulatory requirements, donor policies, and ANE’s environmental and social guidelines for road works. Monitoring progress o f projects concerning the scheduling o f mitigation and other safeguard measures, including oversight o f the implementation o f such measures by contractors. Conducting site visi ts and helping Site Engineers to comply with environmental and social safeguards. Enhancing the training program for ANE staff, consultants, and contractors concerning the application o f environmental and social safeguards. Developing a monitoring and evaluation program for environmental and social management o f road projects. Reviewing, evaluating and assessing the performance o f consultants and NGOs employed to implement environmental and social safeguards, and H IV /A IDS awareness o n behalf o f ANE; and Developing and reviewing environmental and social policies, legislation, and standards in the road sector, including consistency with the transport sector overall.

The role o f the Senior Environmental/Social Specialist will include:

0 Coordinating and planning the activities o f U A S M A 0 Reviewing, revising, and updating U S A M A ’ s Environmental and Social Act ion Plan 0 Documenting experience and lessons learned in the implementation o f environmental and

social safeguards 0 Conduction liaison with other l ine departments and stakeholders 0 Reporting to MICOA, DPs, and other relevant parties on the status o f safeguards

implementation for programs and projects 0 Preparing a budget and maintaining records o f expenditure

17 The EA found that there i s a huge gap between the central and provincial level in terms o f labor, skill, and awareness o f environmental, social, and health issues related to road projects. At present, each province has one delegate who i s pnmari ly responsible for the technical and management aspects o f road works and has insufficient time for supervising, monitoring, and reporting on E M P or RAP implementation. Accordingly, training programs (using good practice examples) will be conducted at project sites for engineers o f ANE’s provincial delegations and environmental representatives in supervising and monitoring EMP and RAP implementation at project site levels.

18. Staff o f the U A S M A will ensure that al l the approved mitigation measures would be implemented in spirit and to the letter, and that it (UASMA) will prepare regular progress reports for transmission to the regulatory authority by certifying that the relevant environmental measures have been complied with during project implementation. The fol lowing authonties will be given to the Senior Environmental Engineer o f U A S M A

19 The Environmental Officer (EO) o f the supervision consultant will provide guidance to i t s f ield staff and contractors for implementing each activity according to the EMP The E O will be responsible for record keeping, providing instructions through the EngineerRE for corrective actions, ensuring compliance with various statutory and legislative requirements, and assisting EngineerRE with submitting reports to ANELJASMA. The E O wil l maintain close coordination

81

with the contractor and ANELJASMA for successful implementation o f the environmental safeguard measures.

20. U A S M A , under the leadership o f the Director General, shall promoting the coordination o f environmental and social safeguards in the road sector, particularly at the level o f provincial and local administrations. U A S M A shall also work to develop opportunities for cross-sectoral integration and appreciation o f the wider development context o f road investments, and look for opportunities to influence the decision-making process to include assessment o f development alternatives at policy, programmatic, and project levels.

9. Consultations

2 1. In i t ia l and detailed consultations took place with the different stakeholders f rom government departments, local authorities, and local communities, and their output forms an integral part o f project design and implementation arrangements. Communities have a mandate for participation in the decision-making process and this provides an enabling environment for enhancing the benefits o f infrastructure development.

82

Annex 11: Project Preparation and Supervision MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

~~

Planned Actual P C N review 04/04/06 04/04/06 Ini t ia l P I D to PIC 0511 1/06 0511 1/06 Ini t ia l I S D S to PIC 0511 1/06 0511 6/06 Appraisal 02/26/07 0212 610 7 Negotiations 04/09/07 0411 8/07 Board 05/22/07 Planned date o f effectiveness 09/01//07 Planned date o f mid-term review 04/30/09 Planned closing date 06/30/20 1 1

K e y institutions responsible for preparation o f the project: INAV

MoPWH, GAS, RF, ANE and

Bank staff and consultants who worked on the project included: Name Title Unit Dieter Schelling Lead Transport Specialist AFTTR Subhash Seth Senior Highway Engineer AFTTR Ntombie Siwale Program Assistant AFTTR Jose Chembeze Transport Specialist AFTTR Kavita Sethi Senior Transport Economist AFTTR Jonas Hermanson, Road Safety Specialist AFTTR Olav Ellevset Road Management Specialist AFTTR Joao Tinga Financial Management Analyst AFTFM Antonio Chamuqo Procurement Specialist AFTPC Jocelyne do Sacramento H IV IA IDS Specialist AFTTR Joseph Kiz i to Senior Financial Mgmt. Specialist AFTFM Salma Chande Team Assistant AFcs2 Slaheddine Ben-Halima Senior Procurement Specialist AFTPC Luz Meza-Bartnna Senior Counsel LEGAF Suzanne Morr is Senior Finance Officer L O A G 2 Nina Chee Senior Environmental Specialist AFTS3 Col in Rees Environmental Consultant AFTS3

Bank funds expended to date on project preparation: 1. Bank resources: US$427,000 2. Trust funds: n la 3. Total: US$427,000

Estimated Approval and Supervision costs: 1. Remaining costs to approval: u s $ l o , o o o 2. Estimated annual supervision cost: us$90,000

83

Annex 12: Major Related Projects Financed by the Bank or Other Agencies MOZAMBIQUE: Roads and Bridges Management and Maintenance Program (Phase 11)

A. World Bank Funded Projects

Latest Supervision (PSR) Ratings Implementation Development

Project Sector Issue Progress (IP) Objectives (DO)

Roads and Coastal Shipping Support Mozambique's Completed Project 1 economc recovery program (Cr. 2374-USS74.3 m l l i o n ) through rehabilitation and "

Roads and Coastal Shipping maintenance Of priority Completed Project 2 and further strengthen the

sector institutions (Cr. 2599-US$188 mill ion) management Of road

Roads and Bridges Trunk Road Rehabilitation and Satisfactory Satisfactory Management and Maintenance Maintenance. Strengthen Program-APL1 institutional capacity in the (Cr. 3550-US$162 mill ion) Road Sector

Ra i l and Ports Reconstruction Substantially increase the Satisfactory Satisfactory Project operating efficiency o f three (Cr. 3288-US$110 mil l ion)

Beira Railway Project Make cost-effective and Satisfactory Satisfactory (Cr. 3991-USSlOO mil l ion)

major port-rail systems

efficient transport available in Zambezi valley

................................................................... .. i. .......................................................... ... .

B. Other DP Funded Projects'

Development Project Sector Issue Partner Status

Zambezi Bridge (US$66.5 National Economy integrity EU, Asdi and I ta ly Ongoing mil l ion) and improve national road

connectivitv

Guija Bridge (US$12 mill ion) Construction o f Bridge over NDF Limpopo River in Gaza Province

Ongoing

Capacity bui lding ANE-PE2, Stimulate economc growth EU Road Periodic Maintenance through increasing rural access And Capacity Building and improved roads and road Programme (9 ACP MOZ 002- sector management 08-Euro 944.000) (approximately €5 mil l ion)

Ongoing

Beira Corridor (€40 mill ion) Rehabilitation o f N6, f rom EU Beira to Machipanda (Zimbabwe border)

Under Planning

Includes only the major projects o f other DPs. 3

84

B. Other DP Funded Projects3

Project Sector Issue Development Partner Status

Mocuba - Milange Road Upgrade (€30 m i l l i on

L i chnga Montepuez Road Upgrade (approximately U S $ l l O mil l ion)

Institutional and Budget Support for the Decentralized Management o f Regional Roads (approximately US$30 mil l ion)

Improve condition o f trunk EU road between M a l a w i border

: and Quelimane

Improve condition o f ma in east-west trunk road across Niassa and Cabo-Delgado provinces

Support institutional capacity Asdi, DFID to manage, maintain, and construct roads that provide access to rural populations including funding for c i v i l works.

.................................................................................... ...,............. ..................................................................... . ADB, Asdi, Japan

.....................................................................................................................................................................................................

Under planning

Commencing

Ongoing

Roads Rehabilitation And Improve econormc activities Afr ica Development Upgrading Project (P-MZ- through the upgrading, Bank DBO-006-US$36.3 mil l ion) rehabilitation, and

maintenance o f transport infrastructure so as to protect past investments, and to stimulate and recover the previous and future traffic levels o f the road networks

Ongoing

Water, Roads and Private Improve infrastructure in Mi l l enn ium Under planning Sector Support to four northern northern four provinces in provinces, estimated Value o f order to promote econormc Corporation road sector component: growth US$135 m i l l i on

Challenge

Rehabilitation and Improve access o n priori ty KfW Maintenance o f Roads in Inhambane Province (approximately U S $ l 2 mil l ion)

regional roads in the province Ongoing

Rural Roads Component o f the Improve road access to DANIDA ARPS (approximately US$ lO agricultural areas mil l ion)

Ongoing

Cabo-Delgado Tertiary Road Improve tertiary roads in NORAD Ongoing Project (approximately US$5 Cabo-Delgado mil l ion)

85

Annex 13: Statement of Loans and Credits MOZAMBIQUE: ProjectName

Difference between expected and actual

disbursements Onginal Amount in US$ Millions

Project ID FY Purpose IBRD I D A SF GEF Cancel. Undisb. Ong. Frm. Rev’d

PO96332 2007 PO93 165

PO87347

PO86169

PO76809

PO71465

PO8261 8

PO01807 PO69183

P 0 7 8 0 5 3

PO72080

PO73479

PO69824

PO01785

PO01808

PO42039

PO35919 PO70305

PO52240

2006

2006

2006

2006

2006

2005 2004

2004

2003

2003

2002

2002

2002

2001

2000

2000

2000

1999

Maputo Municipal Development Program

MZ-Market Led Smallholder Dev (FY06)

M Z Tech & Voc Edu & Training (FY06)

MZ-Financial Sector TA Project

MZ-GEF TFCA & Tounsm Dev (FY06)

MZ-TFCA & Tounsm Dev (FY06) MZ-Beira Railway S I L (FY05)

MZ-Decentr Planning &Fin S I L (FY04)

M Z - Energy Reform and Access S i L (FY04) MZ-HIVIAIDS Response S I L (FY03)

MZ: Pub Sec Reform (FY03)

MZ-Com Sec Reform

M Z Higher Education S I M (FY02)

MZ-Roads & Bndges M M P (FY02) MZ-Mineral NRMCP (FYO1)

MZ-Railway & Port Restr (FYOO)

GEF Coastal & Manne S I L (FYOO)

MZ-Coastal& Manne Biodiv Mgmt (FYOO)

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

30.00 0.00

20.00 0.00

30.00 0.00

10.50 0.00

0.00 0.00

20.00 0.00

110.00 0.00

0.00 0.00 40.26 0.00

0.00 0.00

0.00 0.00

14.90 0.00

60.00 0.00

162.00 0.00

18.00 0.00

100.00 0.00

0.00 0.00 5.60 0.00

MZ-Natl Water 2 (FY99) 0.00 75.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

10.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 3.09 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 4.11 0.00

0.00 0.00

0.00 0.00

29.85 19.19

29.60

9.51

9.73

18.64 70.40

20.94

40.79

32.27

20.99

6.21

15.64

17.95

1.04

15.39

0.87 0.37

32.69

-0.63 0.00

1.16 0.00

3.27 0.00

0.00 0.00

1 .oo 0.00

0.16 0.00 -9.62 0.00

6.04 0.00

29.61 9.85

1.13 0.00

17.34 0.00

3.64 0.00

5.02 0.00

-8.07 -19.84

-0.90 0.00

9.86 9.86 4.10 3.81

-0.13 -0.55

11.03 8.84 \ ,

Total: 0.00 696.26 0.00 17.20 0 00 392 07 74.01 11.97

MOZAMBIQUE STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f U S Dollars

Committed Disbursed

F Y Approval Company

IFC IFC

Loan Equity Quasi Partic. Loan Equity Quasi Partic

2004

1997

2001

2000

1997 2000

2001

2004

ENH

GTFP BDC

MOZAL

MOZAL

SEF Ausmoz SEF CPZ

SEF Cab0 C a p SEF Grand Pnx

SEF Merec

Total portfolio:

0.00 18.50 0.00 0.00 0.00 13.37 0.00 0.00

0.11 0.00 0.00 0.00 0.11 0.00 0.00 0.00

29.70 0.00 58.50 0.00 29.70 0.00 58.50 0.00

10.12 0.00 0.00 0.00 10.12 0.00 0.00 0.00

0.72 0.00 0.00 0.00 0.72 0.00 0.00 0.00

1 .oo 0.00 0.00 0.00 1 .oo 0.00 0.00 0.00

0.58 0.00 0.00 0.00 0.51 0.00 0.00 0.00

0.33 0.00 0.00 0.00 0.33 0.00 0.00 0.00

1.02 0.00 0.00 0.00 1.02 0.00 0.00 0.00

43.58 18.50 58.50 0.00 43.51 13.37 58.50 0.00

86

Approvals Pending Commitment

FY Approval Company Loan E q W Quasi Partic

Total pending commitment: 0.00 0.00 0.00 0.00

87

Annex 14: Country at a Glance

MOZAMBIQUE: ProjectName

POVERTY and SOCIAL M oramblque

2005

GNIpercapita (Atiasmethod, US$) 3 0 6.1

Average annual growth, 1999-05

Population, mid-year (miiiions) 8 .8

GNI (At/as method, US$ biiiions)

Population (%j Laborforce (%)

2.0 17

M o s t recent est lmate (latest year available, 1999.05)

Poverty (%o fpopulation beio wnationaipovertyiine) Urban population (%oftotaipopuiationj Life expectancyat birth (parsj Infant mortality(per lOOOiive births) Childmalnutrition (%ofchiidrenunder5) Access to an improvedwatersource(%ofpopuiation) Literacy (%o fpopuiation age 15+j Gross primaryenrollment (%of schooi-agepopuiationj

Male Female

35 42 0 4 24 43

95 0 4 86

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1985 1995

GDP (US$ biiiions) 4.5 2.2 Gross capital formation1GDP 3.5 30.5 Exports of goods and sewicesiGDP 2.9 15.6 Gross domestic savings1GDP -5.1 5.0 Gross national savings1GDP -5.0 4.8

Current account balance1GDP Interest pa)ments/GDP Total debtiGDP Total debt sewicelexports Present value of debt1GDP Present value of debtlexports

-9.9 -30.1 0.5 3.3

64.4 332.0 34.5 34.8

1985-95 1995.05 2004 (averageannuaigrowfh) GDP 3.8 8.4 7.5 GDP percapita 19 8.1 5.4 Exports of goods and sewices 9.0 8.0 8.9

Sub- Saharan Low.

Afrlca Income

741 2,353 745 580 552 1364

2.3 19 2.3 2.3

37 31 46 59 00 80 29 39 56 75

82 93 0 4 99 10 87 99

2004 2005

5 9 8 6 226 204 309 326 143 0 7 8 5 4 4

-141 -159 0 5

78 7 4 4 U 6

43 0

2005 2005.09

7 7 7 3 57 5 8 8 3 0 8

)evelo pment dlamo nd'

Life expectancy

T

GNI Gross

capita per 1

Access to imorovedwatersource

.------Mozambique

Lo wincome gro up

IEconomic ratios'

Trade

T

I 1

I Indebtedness

-I-- Mozambique I - Lo wincome gm up

STRUCTURE of the ECONOMY

(%ofGDPj Agnculture Industry

Sewices

Household final consumption expenditure Genera gov't final consumption expenditure Imports of goods and sewices

Manufactunng

(average annual gro wfhj Agnculture Industry

Sewices

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods andsewices

Manufactunng

1985 1995

475 369 732 154

8 1 393 477

922 852 P 9 9 8 115 410

1985-95 1995-05

2 7 5 2 -12 157

7 5 4 4 6 9

17 4 4 4 7 P I 6 7 0 6 2 5 9 6

2004

23 3 29 2 148

47 5

75 3 0 4 39 2

2004

8 3 5 1

0 2 8 9

0 9 5 0 -111 4 1

2005

22 3 29 8 142

47 9

79 1 0 3

42 3

2005

16 9 9 a 7 0 0

0 8 6 0 0 7 7 3

Growth o f exports and Imports (Oh) BO

40

20

0

-20

Note 2005 data are preliminaryestimates This tablewas producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators in thecountry(in bo1d)comparedwthits income-groupaverage lfdataare missing, thediamondwll

be incomolete

88

2985 2004 200s

TRADE

BALANCE a f F A Y M ENTS

2005 E X T E R N A L D E 3 1 and RESdURCE FLOWS

1985

G

f ' 3

M I t

i

Corn O f 2 9 0

i; ? f b f

Annex 15: Map


90

MAP SECTION

MAPUTO

G A Z A

MANICA

S O F A L A

T E T E

Z A M B E Z I A

N A M P U L A

C A B OD E L G A D O

N I A S S A

I N H A M B A N E

Xai-Xai

Beira

Inhambane

Chimoio

Quelimane

Tete

Lichinga

Pemba

Nampula

MAPUTO

Moamba Bridge

Guija Bridge(Limpopo)

Rio LuciteBridge

Rio Muira Bridge

Tete Bridge

Zambezie BridgeCuacua Bridge

LicungoBridge

Lugela Bridge

Mozambique Is. Bridge

MeluliBridge

Unity Bridge

Moamba

Quissico

Manhiça

NamaachaBoane

Bela Vista

MabalaneMassingir

Chigubo

Funhalouro

Chongoene

ChibutoChókwè

MaciaMagude

Inharrime

Massinga

Morrumbene

Homoíne

Panda

MachangaNova Mambone

Inhassoro

Chibabava

Chitobe

Espungabera

Massangena

Mabote

Chinde

Mocímboa da Praia

Mueda

IboMacomia

Mecúfi

Ancuabe

MontepuezBalama

Mecula

Mavago

Marrupa

Metangula

Unango

Muembe

Malanga

Massangulo

Metarica

CuambaMalema

Maúa

Mandimba Lalaua

Nipepe

Namuno

Mecubúri

Monapo

Nacaroa

Memba

Nacala-a-Vela

Dondo

Búzi

NhamatandaSussundenga

Manica

Gorongosa

Muanza

Inhaminga

MarínguèCatandica

Guro

Zumbu

Mphende

Fíngoè

Chifunde

Furancungo

Ulónguè

Tsangano

Songo

Maotize

ManjeInsaca

Gurué

Namarrói

Liúpo

Moma

AltoMolólcuè

Murrupula

Nametil

IleGilé

Milange

Nhacolo

Chemba

Lugela

MocubaLuenha

Caia

Morrumbala

Inhassunge

NicoadalaNamacurra

PebaneMaganja

Marromeu

VilanculosVila EduardoMondlane

S O U T HA F R I C A

SWAZILAND

Z I M B A B W E

Z A M B I A

T A N Z A N I A

MALAWI

Massinga-NhachengueRehabilitation

(for detail, see inset)

Xai-Xai – Zandamela –Chissibuca Rehabilitation


Jardim – BenficaRehabilitation & Upgrade


Macarretane – MassingirRehabilitation

Vanduzi – ChangaraRehabilitation

Maniamba – MetangulaUpgrade to Paved

Magigi – CuambaUpgrade to Paved

Gurué – MagigiUpgrade to Paved

Lichinga – LitundeWiden & Reseal

Cuamba – LichingaUpgrade to Paved

Tete – ZóbuèRehabilitation

Changara – TeteRehabilitation

Gorongosa – CaiaRehabilitation & Reseal

Chimuara – NicoadalaRehabilitation

Mocuba – MilangeUpgrade to Paved

Oasse – MuedaReseal

Marrupa – RuaçaUpgrade to Paved

Ruaça – MontepuezUpgrade to Paved

Nampula – CuambaUpgrade to Paved

Machipanda – ChimoioReseal

3 de Fevereiro – IncoluaneReseal

Macia – Chókwe – Macarretane(R445) Rehabilitation &

Upgrade

Mapapa – ManiqueniqueUpgrade to Paved

Lindela (N1) – Inhambane,Tofo Rehabilitation &

Reseal

Pambara – Rio SaveRehabilitation & Reseal

Beira CorridorRehabilitation

Inchope – GorongosaReseal

Nicoadala – NamacurraReseal

Moma – Chalaua – NametilUpgrade to Paved

Namialo – NamapaRehabilitation & Reseal

Monapo – Ilha deMozambique Reseal

Rio Lúrio – MetoroRehabilitation

Macomia – OasseRehabilitation & Upgrade

Corrane – NampulaUpgrade to Paved

Nametil – NampulaUpgrade to Paved

Rio Save – MuxungueSpot Repairs

30°E 35°E

30°E 35°E 40°E

25°S

20°S

15°S

20°S

15°S

10°S

N4

MAPUTO

Benfica

Jardim

Jardim – BenficaRehabilitation & Upgrade

Jardim – Benfica

N1

N102

Xai-Xai

ZandamelaChissibuca

Chicumbane

Chongoene

Chidenguele

ChibonzaneManjacaze

Malehice

Xai-Xai – Zandamela –Chissibuca Rehabilitation

Xai-Xai – Chissibuca

R450

R451

R450R440

N1

Nhachengue

Massinga

Massinga – NhachengueRehabilitation

Massinga – Nhachengue

R444R900

R915

IDA FINANCED N1 SECTION

PAVED ROAD PERIODIC MAINTENANCE

NATIONAL ROADS UPGRADE

NATIONAL ROADS REHABILITATION

PRIMARY ROADS

SECONDARY ROADS

OTHER ROADS

MOZAMBIQUE

ROADS AND BRIDGES MAINTENANCE ANDMANAGEMENT PROJECT APL2

BRIDGES

TOWNS/VILLAGES

CAPTIALS OF ADMINISTRATIVE POSTS

PROVINCE CAPITALS

NATIONAL CAPITAL

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

IBRD 35460

MAY 2007

MOZAMBIQUE