Document of The World Bank FOR OFFICIAL USE ONLY Report Ne.7571 PROJECT PERFORMANCE AUDIT REPOKf TANZANIA TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT (CREDIT 743-TA) DECEMBER 30, 1988 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report Ne.7571
PROJECT PERFORMANCE AUDIT REPOKf
TANZANIA
TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT(CREDIT 743-TA)
DECEMBER 30, 1988
Operations Evaluation Department
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
ICB - International Competative BiddingIDA - International Development AssociationMCT - Ministry of Communications and TransportMICS - Management Information and Control SystemNIT - National Institute of TransportNTC - National Institute of TransportNRHC - National Road Haulage CorporationOED - Operations Evaluation DepartmentPCR - Project Completion ReportPCU - Project Coordinating UnitPPAM - Project Performance Audit MemorandumPPAR - Project Performance Audit ReportRETCOs - Regional Transport CompaniesSAR - Staff Appraisal ReportSMC - State Moror CorporationTRDB - Tanzania Rural Development Bank
UNITED REPUBLIC OF TANZANIAFISCAL YEAR
July 1 - June 30
THE WORLD DANK FOR OFFICIAL USE ONLYWastngton. D.C. 20433
U.S.A.
offe of oiectr-GWaIOpMMn aluaton
Dezember 30, 1988
NEMRANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT
SUBJECT: Project Performance Audit Report on Tanzania Trucking IndustryRehabilitation and Improvement Project (Credit '743-TA)
Attached, for information, is a copy of a report entitled"Project Performance Audit Report on Tanzania Trucking IndustryRehabilitation and Improvement Project (Credit 743-TA)" prepared bythe Operations Evaluation Department.
Attachment
This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
PROJECT PERFORMANCE AUDIT REPORT FOR OMCIAL USE ONLY
TANZANIATRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
(CREDIT 743-TA)
TABLE OF CONTENTS
Page No.
PREFACE ...........................BASIC DATA SHEET .............................................EVALUATION SUMARY ........................................... V
PROJECT PERFOMNWCE AUDIT ME1ORANDUM
Introduction ....................... IProject Inception and Preparation ...................... 3Implementation Experience ...... .. .. ....... ........ 4Lessons and Conclusions ................................ 7
PROJECT CCMPLETION REPORT
I. Introduction ............................. 13II. Project Preparation and Appraisal ............... 15III. Project Implementation and Cost ......................... 19IV. Operating Performance ................................ 26V. Financial Performance ... ............................ * 28VI. Institutional Development ............................ *** 30VIT. Economic Re-evaluation ...... ..................... .*** 31VIII.Conclusions ..................... *** 33'
Tables
1. Composition of Technical Assistance ..................... 352. Details of Technical Assistance to RETCOS ............... 363. Details of Technical Assistance to NTC
(coordination unit) ................................. 374. Regional and Size Distribution of Trucks/Trailers
Procured Under Cr. 743-TA ............................... 85. Project Cost ............................................ 36. Cumulative Disbursement Schedule ........................ 407. Operating Performance of RETCOS ......................... 418. Consolidated Profit and Loss Statement
of Project Companies ................................... 429. Consolidated Balance Sheets of Project Companies ........ 4310. Economic Re-evaluation ............ ... *. ......... .. .... 4411. Assessment of Operating Costs: Without Project .......... 4512. Economic Re-evaluations Assuming Additional Truck
Purchases in Without Project Case ................. ... 4613. Without Project: Assessment of Investment Requirements .. 47
IThis docuament has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authodiution.
PROJECT PERFORMANCE AUDIT REPORT
TANZANIATRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
(CREDIT 743-TA)
PREFACE
1. This is the performance audit of the Trucking Industrykehabilitation and Improvement Project for which Credit 743-TA in the amountof US$15.0 million was approved on October 4, 1977. The original Closing Date(June 30, 1983), was extended twice and by the final Closing Date (June 30,1985), the Credit was fully disbursed.
2. The Project Performance Audit Report (PPAR) consists of a ProjectPerformance Audit Memorandum (PPAM) prepared by the Operations EvaluationDepartment (OED), and a Project Completion Report (PCR) prepared by theEastern and Southern Africa Projects Department.
3. The PPAM is based on a review of the Staff Appraisal (SAR) and thePresident'a Report (PR), of the legal documents and the transcripts of theExecutive Directors' meetings which considered the project, related documentsin the Bank's files, and information supplied by the Borrower. After studyingthe file and discussing the project with Bank staff in Washington, OEDconducted a field mission to Tanzania in May-June 1988 to secure the views ofthe Borrower.
4. The PCR contains a thoughtful account of objectives and achievementsbut, in the audit's opinion, considers the project somewhat too restrictively.It compares intentions listed in the SAR with accomplishments measured againsta possibly over-scrupulous performance scale which does not take into adequateaccount the macroeconomic environment where the Executing Agency and thetruckb* companies, established under the project, have been obliged tooperate. As part of a comprehensive country study, 0D has recently reviewedBank Group experience in Tanzania between 1966 and 1988. The PPAM hastherefore attemptee to examine the Trucking Industry and RehabilitationProject from the wider perspective afforded by this review.
5. Following standard OED procedures, copies of the draft PPAR weresent to the Government and the Borrower. No comments were, however, received.
- ii -
PROJECT PERFORMANCE AUDIT BASIC DATA SHEET
TANZANIATRUCKIXG INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
(CREDIT 743-TA)
BASIC DATA SHEET
KEY PROJECT DATA
Actual as 2Appraisal of AppraisalEstimate Actual Estimate
Total Project Cost (US$ million) 18.2 22.1 21.4%Credit MAount (US$ million) 15.0 15.0 100%Project Completion Date 12/82 12/84 --Proportion Completed by
Appraisal Completion Date (2) 100 74 --
Economic Rate of ReturnAssistance to Transport Companies 372 102 --
Replenishment of Stock of Spare Parts )38Z 38% --
CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS(US$ thousand)
Borrowers United Republic of Tanzania (TA)Executing Agencys National Transport Corporation
Follow-On Proiectsa None
- v-
PROJECT PERFORMANCE AUDIT REPORT
TANZANIATRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
(CREDIT 743-TA)
EVALUATION SUMMARY
Backaround and Objectives
1. The project was a pilot operation (SAR, para 4.01; PR, pars 46) toreverse the deteriorating trend in road transport. For the industry As awhole, the objective was to encourage "liberalization" by promoting a freerimports regime and by fostering more competition. For public transport, theobjective was to establish five financially viable regional transportcompanies (PPAM, para 6; PCR, para 2.11).
2. Throughout project inception and preparation, the question waswhether IDA should focus on public transport, when private truckers weremoving 85% of the traffic. IDA decided that country relations made itappropriate to assist the public sector and macroeconomic factors suggestedthat project success would have to be judged more in terms of organizationalachievements, than in terms of strictly financial results. In the audit'sview, appraisal did not take proper account of macroeconomic factors (PPAM,para 13; PCR, par&, 8.01).
Implementation Experience
3. The project was successful. It contributed to the improvement ofthe import process (PCR, para 3.17), and strengthened manpower trainingthrough the National Institute of Transport (PCR, para 3.12). Establishingfinancially viable transport companies meant the creation of entities capableof meeting their operational and capital requirements. Introduction of properoperational practices and management procedures did not create majordifficulties (PPAM, para 9; PCR, paras 4.02-4.04, 6.01-6.03) but provision ofadequate equity capital, although eventually arranged, did pose problems formore than two years (PPM, para 9; PCR, paras 3.06-3.07).
Results
4. There was a 21% cost overrun (from US$18.2 to US$22.1 million), andcompletion was delayed from 1982 to 1984, largely because of equity capitaldifficulties (PCR, paras 3.18, 3.06-3.07). The National Transport Corporation
(NTC), the project's Executing Agency, performed well (PPAM, para 16). Theregional transport companies (RETCOs) established under the project haveperformed better than the rest of the public trucking sector (PCR, para 7.03).In the long run, they may not be financially viable but this is due to factorsbeyond their control: no freedom to charge -_,onomically justified tariffs forintra-regional movements, no incentives fc local staff, shareholder demandsfor less than economic pricing for services offered to them (PPAM, para 17;PCR, para 4.04). Project-financed technical assistance has made importmntcontributions to institution building (PCR, paras 3.08-3.11), and NTC operates
- vi -
a monitoring and control system, including systematic data collection onvehicle operating costs (PCR, para 6.01). The PCR, following assumptionscomparable to those used at appraisal, concludes (PCR, paras 7.01-7.04) thatthe re-estimated economic rate of return for assistance to transport companiesis 102 (as against 372 at appraisal) and the corresponding figure forreplenishment of spare parts is 382 (as against also 382 at appraisal). Inthe audit9s view, these figures, though arithmetically correct, are notsufficient indices of success. Institutional and organizational achievements(establishment of scrupulously run public transport companies; creation of theonly reliable information system for truck operations in Tanzania) cannot befully reflected in financial and economic rate of return calculations (PPAM,paras 11 and 16).
Sustainability
5. Sustainability of project results depends upon conditions outsideRETCO and NTC control. Viable RETCOS must be able to recruit and retaincapable staff, to charge reasonable rates, and to procure spare parts andvehicle replacements. Such conditions would be met only after themacroeconomic environment has improved significantly. This will take timeand, meanwhile, NTC is making every effort to extend the services of thetechnical assistance staff, without which RETCO performance would bejeopardised. Through the 1986 Sixth Highway (Rehabilitation) Project, IDA isfinancing the continuation of RETCO and NTC technical assistance staff untilthe end of calendar 1989 (PPAM, para 17).
Findings and Lessons
(a) IDA was hasty in preparing the project, particularly regarding thedifficulties of securing equity capital for RETCOs. Given Tanzania'sfinancial straits and that this was IDA's first intervention inroad transport, the haste betrays undue optimism, or undueeagerness to proceed, or both. Subsequent developments repeat alesson of previous projects with which IDA ought to be familiar:preparation which devotes proper attention to contentious issuescontributes to smoother execution, and to better IDA-Governmentrelations (PPAM, para 14).
(b) The project's satisfactory outcome is due to the professional andpersonal qualities of the NTC Chairman and to the technicalassistance staff assigned to NTC and to RETCOs. In view of theExecuting Agency's performance, NTC management proposals andinitiatives made during project implementation deserved stronger IDAsupport (PPAM, pare 15).
(c) Contrury to the intentions explicitly stated in both the President'sand the Staff Appraisal Reports, there has been no follow-onproject, possibly because IDA resources for transport were primarilyallocated to highway maintenance. In reviewing its current lendingprogram to Tanzania, IDA might now consider some further assistanceto the trucking sector (PPAM, para 18).
- vii -
(d) Project experience suggests three aspects which IDA might take intoaccount in its future policy dialogue. First, under the rightcircumstances, Tanzania is willing to use expatriate personnel inline positions. Second, there is room for road transport developmentthrough carefully-designed assistance both to the public and to theprivate sector. Third, management talent is not lacking in Tanzaniaand IDA might consider further support to encourage such talentswhich offer the best guarantee for the proper deployment of localmanpower and for the most effe-tive use of expatriate technicalassistance (PPAM, pars 19).
- 1 -
PROJECT PERFORMANCE AUDIT MEMORANDUM
TANZANIATRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
(CREDIT 743-TA)
Introduction
1. IDA-assisted operations to strengthen the transport sector began in1964 and the Sixth Highway (Rehabilitation) Project is ongoing in 1988.11Summaries of audit and project completion reports are as followas
The Revised First ninhway Projects Credit 48-TA Credit 115-TA of1964 would finance construction of eight road sections. Delays andincreased costs led IDA to reappraise the project, and provide aUS$3 million supplementary credit in 1968. Project completionregistered major delais and cost increases, largely due to scarcityof technical staff.
The Second Highway Prolect: Loan 586-TA: Credit 142-TA of 1969 wouldassist the construction of two sections of the Tanzania-Zambiahighway. The project was economically successful only because offortuitous circumstances. An important issue on distribution ofbenefits was raised upon completion at appraisal it was expectedthat most benefits (85%) would accrue to Tanzania; on completion ithas become evident that 45% of the benefits had accrued to Zambia.
East African Community -- Second and Third Harbour Proiectas Loans638 and 865-EA of 1969 and 1972 were for development of facilitiesin Mombasa, Dar es Salaam and Tanga. They registered significantoverruns in both time and cost and the audit suggested that futureprojects ought to emphasize productivity, manpower development, andmaintenance.
East African Community -- Third Railway Prolects Loan 674-EA of 1971was to rationalize tariffs and reduce operating down costs. A cost-based tariff was not implemented because the economic, political andoperational consequences were not foreseen. The cost reductionprogram failed to materialize because of political differencesamong the Partner States in the East African Community. By theplanned completion date only 5 per cent of the project had beencarried out, and it never was completed. There were substantial
1, A full review of Bank Group activities in the Tanzanian transportsector over the 1964-1988 period is under preparation in OED andwill be incorporated in a country study scheduled for completion in1989.
-2-
cost increases though the extent of the overrun could not bedocumented in the absence of adequate cost records.
The Third Hishway Projects Credit 265-TA& Loan 586-TA of 1971 (latersupplemented by a transfer of a US$1.9 million surplus from theSecond Highway Project) would construct a section of trunk road inthe southern part of the country; Improve and maintain feeder rodsin the north; and strengthen maintenance. There were significantcost overruns; improvement of feeder roads was short lived; trainingof Tanzanian engineers met with limited success; and the staffingprogram was not carried out. The goal of stimulating agriculturalproduction was not met. Investments in the trunk road had a 41 rateof return, and those in feeder roads had negative rates of return.
The Fourth Highway (Maintenance) Project: Credit 507-TA of 1974 wasthe first of two phases intended to establish a trunk roadmaintenance organization but failed to achieve its physicalobjectives.
The Fifth Hishway Proiects Credit 876-TA of 1979 was the secondphase but its scope was also too large. The need to reduce theproject area became obvious during implementation but Governmentwas reluctant to scale it down. Implementation capacity wasaffected by the Executing Agency's unwillingness to employexpatriate staff in line positions.
The Port Rehabilitation Proiect: Credit 1636-TA of 1984 (ongoing inmid-1988) is to rehabilitate and modernize the port of Dar-es-Salam.
The Sixth Highway (Rehabilitation) Project of 1986 (ongoing in mid-1988) is to rehabilitate the most important sections of the highwaynetwork and to improve road maintenance by encouraging work bycontract rat4er than by force account.
2. The Trucking Industry Rehabilitation and Improvement Proiect of1977, IDA's first attempt to assist the road transport industry, wasidentified and prepared under inauspicious conditions. Until 1973, almost allroad freight was carried by private transporters but Government chose tocreate specialized transport companies, as well as transport wings inmanufacturing, trading and crop marketing parastatals. The President's Report(PR) on the Trucking Project explained this decision as follows:
"Tanzania's transport priorities and policies have changed over theyears in response to changing national needs and conditions" (para26).
However, the PR acknowledged that results were not encouraging:
"Since their establishment, these entities have been characterizedby inefficiency, low productivity and unreliable provision ofservices. Rapidly established, they have inexperienced management,
- 3 -
and suffered from a lack of working capital while carrying highdebt obligations" (para 32).
The new transport entities were often required to carry freight on the mostdifficult routes, and accept unprofitable rates for doing so. Lackingincentives for high productivity and efficient operation, they registered lowscores for truck utilization and truck availability compared to privatetruckers. Then, in 1974, Government set up a licensing scheme for the importof vehicles and spare parts, a move which further reduced truck availabilityand utilization for both public and private operators. The scheme wasadministered by the State Motor Corporation (SMC) which was made the soleagency for importing trucks and spare parts, even though it did not havetrained staff to collect and analyze data on trucking industry needs. Importapplications were submitted to the Central Bank which allocated the necessaryforeign exchange, although, like SMC, it lacked proper staff and had no way ofdetermining actual needs. Government intervention was thus responsible forthe trucking sector's deteriorating performance but IDA would not say thisopenly, and the Government would not admit it.
Proiect Inception and Preparation
3. In March 1974, having noted the adverse effects of poor roadtransport upon agricultural development, IDA suggested a review of thetrucking sector. A report was prepared by a Consultant in early 1976 and anappraisal took place in September of the same year. Both the PR and the SARpresented the project as a pilot attempt to "support Government's efforts toreverse the deteriorating trend in truck transport, a mode upon which thepredominantly agricultural economy depends heavily" and the SAR continues:
"While early Improvements will necessarily be modest, the experienceand skills gained under the project are expected to provide a basisfor subsequent comprehensive rehabilitation and Improvement of thetransport industry" (para 4.01).
The PR states:"Lessons learned in initial operations will be integrated into laterefforts" (para 46).
4. The project was negotiated in July 1977. The Government knew thatpublic transport was not performing well but was disinclined to return to afully private system. IDA implicitly acknowledged this and the project filecontains numerous memoranda2l recording internal debates at the Bank as towhether sufficient attention was being paid to the private-public transportissue. The PCR suggests (para 8.01) that while acknowledging reality, theBank deferred to politics and made the best out of a difficult situation byproposing that the project assist with the establishment of five public
21 Those dated January 6, 1977, February 2, 1977, April 4, 1977, April20, 1977 and June 21, 1977 summarize the crystallization of theBank's position.
-4-
trucking companies, including technical assistance, procurement andrehabilitation of trucks, and provision of repair facilities. Mindful of thefact that about 80% of all freight carried by road was still being transportedon private trucks, IDA suggested, and Government agreed, that the projectshould also assist the industry as whole by providing training of drivers,mechanics and accountants, replenishing the spare parts inventory, andimproving the spare parts and truck import systems.
5. The Board approved the project in October 1977, the Credit Agreementwas signed in November 1977, and the project became effective in April 1978.Total project cost was estimated at US$18.2 million, with a foreign exchangecomponent of US$15 million to be financed by IDA. Project implementation,scheduled to begin in early 1978, was expected to be completed by December1982.
Implementation Experience
6. The project0a primary objectives were two: for the industry as awhole, to encourage "liberalization";I/ and, for public transport, toestablish five financially viable regional transport companies (RETCOs).
7. Encouraging "liberalization" required two relatively modest stepswhich would precede any more drastic measures: first, improving the process ofimporting spare parts, and, second, providing better training for industrypersonnel. The project mads some contribution in the first direction (PCR,para 3.17), and even more in the second, through the project-assistedtraining at the National Institute of Transport (NIT).
8. Establishing financially viable transport companies meant thecreation of entities capable of meeting their operational and capitalrequirements. Poor performance of parastatal organizations already engaged inroad transport, dictated that procedures be laid down for monitoring andcontrol of the new companies. The project's Executing Agency --the NationalTransport Corporation (NTC)-- would supervise the RETCOs which would otherwiseoperate with considerable autonomy within their respective regions.4/ Giventhe scarcity of appropriately trained local personnel, the project financedtechnical assistance to design management guidelines, assist local managers,and train workshop personnel.
9. Project preparation hinted (SAR, para 4.06) -- and projectimplementation demonstrated (PCR, para 5.02)-- that financial feasibility ofthe new companies would not be easy. For a RETCO to be viable, it would haveto recruit and retain capable staff, charge economic rates, be able toprocure spare parts and vehicle replacements, and command adequate amounts of
3/ The SAR, paras 4.02(i)-(ii), uses this term to imply, withoutactually saying, that the end objective ought to be a freer regimefor imports and a greater degree of competition in road transport.
!/ SAR, paras 4.03-4.12.
-5-
equity capital. While some iSsues (notably staff recruitment and tariffsetting) remain problematic because of the macroeconomic context, they did notgenerate insurmountable obstacles during project implementation. By contrast,providing RETC0s with adequate equity capital did create problems which, inturn, were largely responsible for the 2-year delay in project completion.Eventually, Government provided virtually all of the equity financing neededbut, while sources of equity contribution were being debated and IDA missionswere suggesting cancellation of the project,5/ IDA could not disburse forprocurement of trucks. This impeded implementation progress because technicalassistance was in place but, in the absence of trucks and equipment, could notbe effectively utilized.
10. Since 1980, progress was satisfactory: RETCOs were established,trucks and spare parts were delivered, technical assistance to the RETCOs andto the NTC made possible an acceptable RETCO performance. An information andmanagement control system is in place and provides the only reliable roadtransport cost data. Institution-building has been particularly successful(PCR, paras 6.01-6.03) at NTC, the RETCOs, and NIT. It is true that even morecould have been accomplished if RETC0s, and the NTC, did not have to operateunder the constant prospect of losing good staff to the private sector.However, givev the low salaries and absence of effective incentives in thecivil service, this is a problem not amenable to fast solutions. Throughout,NTC management did its best to recruit local staff, to establish RETCOs, toequip workshops, and to retain competent expatriates. In view of theExecuting Agency's fine performance, IDA staff could have been more supportiveof NTC, especially in the 1978-1982 period when too much attention was in-vested in futile attempts to encourage national transport planning,6/ and inover-detailed exchanges on the background and qualifications of technicalassistance staff that NTC wished to recruit.7/
11. The PCR (para 5.02) states that RETCO financial performance has notbeen good enough to cover their asset replacement needs from the cash they
&J A June 25, 1981 Back-to-Office Report reads in part: "ShouldGovernment commitment in the form of proposed equity contributionsnot materialize in the specified time-frame, I would recommendcancellation of the project."
g/ Despite the Tanzanian disregard at the time for even the mostrudimentary data collection (e.g., between 1970 and 1985, roadtransport statistics are non-existent; vehicle registrations by theCentral Transport Licensing Authority ceased in 1981), IDA staffwere keen to encourage comprehensive national transport planningexercises (cf., Back-to-Office Report dated December 6, 1978; IDAletter to Government dated December 29, 1980, Government letter toIDA dated July 21, 1982).
Z1 cf., in the Project File, NTC letter to IDA dated February 5, 1980,the series of telexes between IDA and NTC during August-December1980, the correspondence between NTC and IDA between June 1981 andFebruary 1982.
- 6 -
generate, and that "the realized economic rate of return, based on assumptionsbroadly consistent with those made at appraisal, is significantly less thanthe appraisal estimate" (para 7.04). The audit concurs with this judgment butnotes that performance targets established at appraisal were not based on areliable body of data.
SAR para 2.24 states that the basic document for project preparation(the consultants' report submitted in early 1976) "was not verysuccessful in analyzing problems and developing a remedial program,in part because of a lack of detailed industry data."
Para 3.12 states that "there is little data available on thenumbers, types, and duration of services licenses issued as theLicensing Authority does not compile statistics, analyze demand, orassess performance of license holders."
Para 3.17 states that while detailed data are not available,interviews and direct observation in Tanzania show that privatetruck owners achieve a much higher availability rate thanparastatals..."
Para 4.04 scates that "in the absence of detailed information onlocal conditions and needs, it would not be meaningful to try toanticipate exact fleets, organizational, manpower and equipmentrequirements for the five companies."
Nevertheless, absence of data did not impede appraisal:
SAR para 4.06 states that "while detailed forecasts and breakdownsof individual company structures and financial statements -annot beusefully prepared at present ... these target figures have been usedin the economic analysis of the proposed aid to the five companies... and represent reasonably attainable objectives for them."
Para 4.07 states that "while detailed financial forecasts cannotmeaningfully be made at this stage, it is possible to projectanticipated financial performance in general terms."
Notwithstanding the absence of reliable figures, the SAR concluded that theproposed investment in the five RETCOs would yield a 37% economic return (para5.05), and that investment for spare parts imports, "whose benefits, thoughundoubtedly large, are difficult to estimate, would yield 38%" (para 5.08).The PCR (paras 7.03-7.05), using a methodology similar to that of the SAR,shows rates of return of 10% and 38% respectively. These figures arearithmetically accurate but do not, in the audit's view, adequately reflectthe significant organizational strengthening and institution-building to whichthe project has visibly contributed.
-7-
Lessons and Conclusions
(a) Preparation
12. IDA was hasty in preparing the project and submitting it to theBoard. The consultants, whose report formed the basis of IDA assistance, wereselected too quickly but, even though their work was deficient, project
preparation did not slow down to examine important aspects superficiallycovered (PCR, para 2.01). IDA precipitousness is noted in the PCRs
"While in the field the mission decided that it had gatheredsufficient information and had reached an acceptable degree ofagreement on project scope and content with Government to proceedwith an appraisal" (para 2.04).
In fact, the agreed scope was the same as that drawn up (on the basis of theconsultant's deficient report) in March 1976, with one addition: besidesproviding assistance to the National Road Haulage Corporation (NRHC),assistance would also be provided to four RETCOs. However, NRHC went intoliquidation prior to Board presentation after defaulting on its debts; it wasreplaced in the project by another RETCO (PCR, para 2.05).
13. Throughout inception and preparation, the basic question was whetheror not, in its first attempt to strengthen road transport, IDA should focusprimarily on public transport when private truckers were moving about 85Z ofthe traffic. In the mid-1960s, IDA-Tanzania relations were not such that IDAwould be prepared to challenge Government ideology and, after some internaldebate98/ IDA concluded that, under the circumstances, "this unorthodoxproject was appropriate."91 With this decision, IDA embarked upon a programof assistance which (given the state of the Tanzanian economy, the lack ofreliable data, and Government's preference for non-market solutions toeconomic and financial problems), would be difficult to evaluate according tobenefit-cost methods applicable in environments where free competitionprevails. In the auditOs view, project success would eventually have to bejudged in terms of organizational strengthening rather than in terms ofprofit-and-lose statements, since the factors determining RETCO profits andlosses (rate setting, legitimate access to spare parts, recruitment ofqualified staff, prevention of private truck overloading) would be outsideRETCO control. Appraisal did not, in the audit's view, take proper account ofthese macroeconomic factors.
14. Also, appraisal assumed that RETCO capital structure would bestrengthened by attracting as shareholders potential public sector users oftransport services. The SAR concluded that no difficulties should be expected:
81 cf. the January 6, 1977 memo from the Senior Vice President, and theFebruary 2 and April 4, 1977 staff responses.
9/ cf. the June 24, 1977 note from the Transportation Department.
-8-
"Equity capital will be subscribed by the shareholders and all otherassistance to the trucking companies will be in the form of loans,"(para 4.25).
Given Tanzania's financial straits, this statement betrays undue optimism, orundue eageraess to proceed, or both. Subsequent developments,L0I acknowledgedin the PCR (;?ara 2.08), point to a lesson with which IDA ought to have beenfamiliar, especially after the difficulties encountered in the Third andFourth Highway Projects: preparation which devotes proper attention tocontentious issues contributes to smoother execution, and to better IDA-Government relations.
(b) Implementation
15. The PCR notes (paras 3.09, 6.01), and the audit shares the belief,that the project's satisfactory outcome is due to the professional andpersonal qualities of the NTC Chairman and to the technical assistance staffassigned to NTC and to RETCOs. The Executing Agency proved that the opinionsexpressed in the SAR were justified,11/ and supervision reports containnothing but praise for the Executing Agency's performance. Accordingly, moreIDA support for NTC suggestions and initiatives would have been welcome. Forexample, greater understanding could have been shown in approving study toursfor Tanzanian staff, not only because the travel would have beenprofessionally rewarding but, also, because NTC management could have offeredthese opportunities as rewards for good performance to selected members of theunderpaid RETCO and NTC staff. The audit believes that a project whichallocated more than US$5.0 million for technical assistance might haveallocated one tenth of that amount for the familiarization of local staff withroad transport procedures in foreign countries.
(c) Results and Sustainability
16. Much needs to be done in trucking but the audit believes that theproject did assist in the slow process for improvement by establishing publiccompanies which, in an environment where statistics are not always given their
10/ After appraisal, the Back-to-Office Report, dated November 9, 1976,pointed at no major issues and suggested that a Decision Meetingwould not be needed. Seven months later, a June 21, 1977,memorandum indicated that five issues had emerged: Timing of theproject; Project financing; Composition of the public truckingcompanies; Spare parts; and the role of the private sector. Oneyear later, a June 26, 1978 memorandum noted that equity capitalfor the RETCOS would not be easily forthcoming. This issue causedfriction between the Government and IDA until 1982, when it becameclear that all outstanding equity contributions would be made byTreasury.
11/ SAR para 3.02 reads in part as follows: ONTC fulfills its dutiesadequately, particularly since the recent appointment of an able andenergetic chairman and managing director as its head."
- 9 -
due, regularly publish data on their operations. Also, the project did
facilitate, as planned, the import process for spares. In addition, itdemonstrated that scrupulously run public companies can continue to operateover a number of years. All these are institutional and organizationalaccomplishments that cannot be fully reflected in financial and economic rateof return calculations related to small part of the industry at a time wheneven rudimentary cost data on private trucking is still missing. In thissense, the project contributed to increased transparency in road transportoperations and NTC, and specifically its Chairman, deserve credit for aperformance which, in every aspect within NTC's control, has been trulyexceptional by Tanzanian standards.12/
17. The PCR correctly, and repeatedly, points outl3/ that sustainabilityof project results depends on factors outside NTC and RETCO control. Mainsuch factors ares no freedom to charge economically justified tariffs forintra-regional movements; no incentives for local staff; RETCO shareholdersdemands for less than economic pricing of services provided to them; limitedinvestment opportunities for RETCOs except truck purchases and, at the sametime, shortages in the supply of trucks. For day-to-day purposes, perhaps themost pressing need is for expatriate staff. The May 1988 audit mission toTanzania noted that NTC is making every effort to extend the services oftechnical assistance staff and it is encouraging that, through fundreallocations in the 1986 Sixth Highway Project, IDA is financing thecontinuation of RETCO and NTC expatriate staff until the end of calendar 1989.
(d) Follow-on Projects
18. There have not been many successful IDA-assisted operations inTanzanial4/ and it is surprising that, contrary to the explicit intentions in
12/ The NTC (which, among other transport entities and in addition tothe RETCOS, controls the National Bus Service and the Dar Es SalaamMotor Transport Company),is not directly engaged in transportoperations but exercises substantial influence over the policiesand activities of its subsidiary operating organizations. Also, itcontrols the training activities of the National Institute ofTransport (NIT), which was strengthened under the project.Policy formulation at NTC is thoughtful, comprehensive, and based onthe only reliable road transport data collected in Tanzania. NTCreports are models of analysis and presentation (cf., Proposal for aPolicy and Procedures for Fixing Freight Rates and Bus Fares (August1984); A Proposal for a National Road Transport Policy -- Trucks andBuses (July 1985); and Feasibility Report on the Establishment of aregional Transport Company in Rukwa Region (February 1987).
13/ Paras. 5.03, 6.02, 8.02, 8.03.
14/ cf. OED Reports No. 791 (June 26, 1975), 4029, 4030 and 4031 (allthree of June 30, 1982), 4533 (June 3, 1983), 6483 (November 7,1986).
- 10 -
both the President's and the Staff Appraisal Reporta (para 3, above), therehas not been a follow-on project. In an October 10, 1984, letter from theMinistry of Finance to IDA, Government expressed the desire for a new project.This would have covered the July 1985-June 1990 period, and cost an estimatedUS$25 million. It would have expanded assistance to the private sector, andstrengthened training activities at the NIT for both private and publictruckers. The Project File does not contain IDA's response, and the fact thatno follow-on project has been approved is probably due to lending programstringencies which reserved all available funds in the transport sector forhighway maintenance activities. In reviewing its lending program to Tanzania,IDA might now consider some further assistance to the trucking sector.
(e) Policy Dialogue
19. Project experience suggests three aspects which IDA might take intoaccount in its future policy dialogue with the Government.
First, Tanzania is willing to use expatriate personnel in linepositions but under the right circumstances. Successfulcollaboration among NTC management, RETCO staff, and technicalassistance personnel, shows that the unsatisfactory outcome of otherIDA-supported transport projects (e.g., the Fourth and FifthHighways Projects) may have been due, at least in part, to theselection of unsuitable expatriates. The Trucking Project hasdemonstrated that when technical assistance staff selection isentrusted to a competent Executing Agency, few problems arise.
Second, between the paralysis of full nationalization and the jungleof full privatization, there is room for balance. RETCOs haveperformed two functions not anticipated at appraisal: they maketransport available to remote areas where a purely commercialenterprise (partly because of low transport demand and partlybecause of extremely poor roads) would not freely choose to go; and,by generating truthful cost data, they provide a check upon theactivities of private truckers who, in the absence of effectiveregulatory agencies, can be counted upon to maximize profits bytruck overloading and other illegal practices. In a country ofpoor, scattered farmers, where regulatory agencies are ineffectiveand collusion easy, private truckers alone are not the answer:properly run public transport services are a precondition for ruraldevelopment and deserve the type of assistance extended through thisproject.
Third, as demonstrated by NTC, management talent is available inTanzania. IDA may consider further support to encourage suchtalents which offer the best guarantee for the proper deployment oflocal manpower and, simultaneously, for the most effective use ofexpatriate technical assistance.
- 11 -
PROJECT COMPLETION REPORT
TANZANIA
TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
CREDIT 743-TA
May 21, 1987
Eastern and Southern Africa Projects DepartmentTransportation Division
- 13 -
I. INTRODUCTION
1.01 Tanzania has a large territory (945,000km2) with a widelydispersed population of 19.8 million, a low population density (21 personsper kn), and sharply contrasting terrain (0-19,340ft. above sea level).Economic activity is widely dispersed over the country. The combination ofthese factors makes the transport system a complex one with transportmovements over long distances an important characteristic.Roads are the predominant transport mode, especially for domestic traffic.The railways network, consisting of two systems, the Tanzania ZambiaRailways Authority and Tartzania Railways Corporation, are importanttransport arteries for the international trade of neighboring land-lockedcountries.
1.02 The Bank Group became involved in the transport sector of Tanzaniain 1964, with the First Road Project (Credit 48-TA). This was followed bytwo further Credits in 1969 (Cr. 142-TA) and 1971 (Cr. 265-TA). Theseprojects were directed towards investments in new roads. The FourthHighway (Maintenance) Project (1974) signaled a shift in Bank strategytowards maintenance, institution-building and training. In 1977, the BankGroup became involved for the first time in providing specific assistance -to the trucking sub-sector through the Trucking Industry Rehabilitation andImprovement Project. Subsequently, a significant measure of assistance is.being provided to the trucking sub-sector under the ongoing Sixth Highway(Rehabilitation) Project (Cr. 1688-TA).
1.03 The Trucking Industry Rehabilitation and Improvement Project wasprepared in March 1976 and appraised in September 1976. The IDA Credit ofUS$15 million was to finance the foreign exchange costs of trucks,technical assistance and workshop facilities for selected public companies,provide foreign exchange to Government in support of the liberalization ofspare parts imports and provide assistance to a transport industry traininginstitute. The executing agency was the National Transport Corporation(NTC) which was established in 1969 with a charter to conduct or engage inthe businesses of carrying, for hire, persons and goods by land, sea,inland waterway or air transport. Since its establishment NTC has operatedas the holding company for various public passenger and freight transportcompanies and for a coastal shipping line. It has also played an activepart in the formulation of Government policy with respect to the roadtransport industry.
1.04 This completion report is based on:
(i) a review of the project files;
(ii) the information provided in the project completion reportprepared by NTC;
- 14 -
(ILL) information collected on a mssion to Tanzania in January1987;
(iv) review of two documents on the Tanzania trucking industzyprepared by Mason-Gilling Associates (Study of Road TransportPolicy and Practice and the Role of the Public Sector) and byMessrs. Beenhakker and Bruzelius (Transport and Marketing ofAgricultural Products in Tanzania).
- 15 -
II. PROJECT PREPARATION AND APPRAISAL
2.01 The poor operating performance of the trucking industry had, priorto 1974, been identified by several World Bank missions as a major sourceof economic dislocation in Tanzania, particularly in the agriculturalsector. In February 1974, the Government of Tanzania requested assistancefrom the World Bank in determining the cavses of the industry's poorperformance and the measures that should be taken to rationalize it. Basedon this request, the Association decided to include a study of the industryas a component of the Fourth Highway Project. The study was to, interalia, review the structure of the industry and recommend measures toovercome constraints to its efficient performance. This proposed study wasto form the basis of specific Bank Group assistance to the industry.
2.02. Consultants, selected on a sole-source basis, were appointed inJune 1975 to undertake the study. A draft final report was submitted inDecember 1975. The report identified seven major constraints on theefficient performance of the industry, namely (a) lack of operational andmanagement skills; (b) inefficiency of the major parastatal truckingcompany, the National Road Haulage Corporation (NRHC); (c) shortage ofspare parts; (d) shortage of storage for agricultural produce; (e)inadequate regulatory framework; (f) shortage of trucks. However, both theAssociation and the Government considered the report deficient iu itsanalysis of the industry, and incomplete because of its lack of assessmentof the costs of its recommendations. Nonetheless, it was felt by theAssociation that the consultants had done sufficient work to justifyfielding a preparation mission in advance of the consultants's revisedreport.
2.03 A preparation mission was sent to Tanzania in March 1976. Themission's main findings were that the lack of operating and managementskills and the poor condition of the roads were the major causes of theindustry's poor performance. Accordingly it recommended that components ofa proposed trucking industry project be confined to assistance in traiiingin transport activities, assistance in strengthening YRC's managevial andoperating capability and assist-nce in the maintenance of roads other thantrunk roads. This proposed project scope was subsequently modified toexclude the road maintenance component end to include assistance in theprocurement of trucks and a study of vehicle spare parts availability anddistribution in the country. The maintenance of secondary roads wasconsidered better addressed in a future project. Inclusion of a truckImport component was expected to Increase the project's impact on thetrucking sector in the immediate future. In respect to the spare partscomponent, the mission found little evidence of an absolute shortage ofspare parts. However, there was considerable evidence of an inadequatedistribution of the available stock of spare parts. The proposed financingof a spare parts study would lend weight to an Association proposal toreview the operations of the State Motor Corporation (SMC) which wasresponsible for the allocation of spare parts and which was due to takeover the import of spare parts. The proposed project scope and content assubsequently modified was agreed with Government.
- 16 -
2.04 Owing to a lack of appropriately qualified staff in the Ministryof Communications and Transport (MCT), progress in preparing the projectfor appraisal was exceedingly slow. In September 1976, a mission was sentto Tanzania to assist Government in project preparation, and if it judgedit appropriate, to appraise the project. While in the field the missiondecided that it had gathered sufficient information and had reached anacceptable degree of agreement on project scope and content with Governmentto proceed with an appraisal.
2.05 The project as appraised followed substantially the proposalagreed and with Government following the March 1976 preparation mission.The only change was the enlargement of the scope of assistance to thepublic sector trucking industry to include four regional trucking companies(RETCOs) in addition to NRHC.1 Assistance in the procuremeut of trucksand the provision of technical assistance in operations and management wasproposed for these entities.
2.06 No major issues were identified by the appraisal mission and nodecision meeting was held. However, during processing of the appraisalreport, two issues were consistently raised:
(i) whether financing of a study of spare parts availability was*the best means for the Association to assist in improving thecountry-wide availability of spare parts;
(ii) whether the organizational and financial structure of thetrucking companies to be assisted should be firmlyestablished before presentation to the Board.
In respect of spare parts, it was decided that the Associationshould assist in the financing of spare parts. However, such assistancewas to be conditional on Government taking acceptable measures toliberalize the Import of spare parts. In respect of the organizational andfinancial structure of the trucking companies, it was ultimately decidedthat little was to be gained by delaying project processing by thoroughlydefining them at the appraisal stage. Assistance to the companies would bephased and disbursements against the procurement of trucks would beconditional on the Association's satisfaction with the organizational andfinancial arrangements proposed for these companies. A key element of sucharrangements was to be a capital structure that ensured the financialviability of the companies and that ensured participation of the majorprospective users of the companies' services as shareholders. Thesignificant level of technical assistance proposed for these companies andthe National Transport Corporation (NTC) would assess the financialrequirements of the companies as well as provide some insurance againststart-up risks.
2.07 Underlying the Association's preparation and appraisal of theproject was the key issue of the most effective ownership and
11 NRRC went into liquidation prior to Board presentation after defaultingon its debts; it was replaced in the project by another regionaltrucking company.
- 17 -
organisational arrangements in the trucking industry. The private sectoraccounted for 702 of the country's truck fleet and had a disproportionatelyhigher share of truck transport services. However, Government wascommitted to a policy of promoting the public sector segment of theindustry. In view of this, the Association saw concentration of itsassistance on the public sector-owned segment of the industry as the bestavailable means of enabling it to address industry issues with Governmentand to encourage rational development of this segment. The private sectorwas considered best assisted through financing of training for drivers,.mechanics and managers in the industry as a whole and through encouragingGovernment to take appropriate action to facilitate the flow of spare partsto it.
2.08 Further, given the impact of poor truck transporz on theagricultural sector, Government and the Association were keen to ensurethat project processing was as.expeditious as possible. It was felt thatthe then existing base of knowledge on the industry could not be expandedupon without significant delays. Moreover, MCT did not possess thecapacity for the extensive project preparation the detailed definition ofthe project scope would involve. A major consequence of this attitude wasthe inadequate attention that was devoted to the financial arrangements forthe project companies. In particular, the capacity or willingness of theprospective shareholders in these companies to invest was not assessedduring appraisal but was deferred for detailed consideration by theproposed technical assistance staff during implementation. This approachwas to prove ultimately.counter-productive as the resolution of thecapitalization of the companies accounted for significant delays in projectimplementation and a wasteful use of technical assistance resources (para.3.07).
2.09 The project was presented to the Board on October 4, 1977 and theDevelopment Credit was signed on November 3, 1977. Project Implementationwas expected to start in early 1978 and the project was expected to becompleted by the end of 1982.
Proiect Goals
2.10 The goal of the project was to support Government's efforts toreverse the deteriorating trend in truck transport, a mode on which thepredominantly agricultural economy depended heavily. The project's initialimpact was expected to be modest. However, the experience and skillsgained in project implementation were expected to provide the basis forsubsequent comprehensive rehabilitation and improvement of the industry.
2.11 This overall goal was to be achieved through specific assistanceto the public sector segment of the industry and generalized assistance tothe industry as a whole. In terms of specific assistance to the publicsector trucking industry, the project's objectives were twofold:
(i) to strengthen the operating capability of selected companiesin regions where agricultural activity was severelyconstrained by inadequate truck transport services throughdirect assistance in procuring and rehabilitating trucks andthrough strengthening of management and managementinformation systems;
- 18 -
(iL) to put these trucking companies on a sound financial footingthrough both operating improvements and covenantedrequirements for adequate rates to ensure that they can beself-financing.
(iii) to strengthen the Tanzanians' carability to run thesetrucking companies.
In respect of generalized assistance to the industry as a whole,the project's objective was to improve- the industry's utilization ofexisting capacity through improved operating and managerial practices andthrough facilitating a change--in the existing system of spare parts importand distribution.
Project-Description
2.12 The description of the project was as follows:
(1) provision of trucks and spare parts for the rehabilitation oftrucks for five selected RETCOs;
(ii) technical assistance for the management operations andtraining of staff of the selected RETCOs;
(iii) provision of workshop equipment for the selected RETCOs;
(iv) strengthening of the recently established National Instituteof Transport through the provision of instructors, teachingaids and equipment;
(v) replenishment of the country's inventory of spare parts;
(vi) provision of technical assistance to the projectimplementation agency, NTC, for project coordination,monitoring and policy advice.
- 19 -
III. PROJECT IMPLEMENTATION AND COSTS
Start-Up
3.01 Project start-up was relatively smooth. During negotiations theGovernment had proposed the National Transport Corporation (NTC) as theimplementine agency for the project. NTC had significant experience in thetrucking industry through Its control of NRHC. The proposal was acceptableto the Association. The project provided for the appointment of acoordinator and an assistant in NTC to strengthen its project monitoringand control capability. In November 1977 NTC submitted the curriculumvitae of a candidate for the post of Project Coordinator. The Associationwas initially reluctant to approve the selected candidate because of hislack of experience in the operation and management of trucking companies.However, it eventually agreed with NTC's assessment that the candidateosexperience in starting and monitoring projects in Tansania.was morevaluable an attribute than specific trucking experience. However, theAssociation was insistent that his deputy should possess an acceptableamount of industry experience. The Project Coordinator was appointed inJanuary 1978. No candidate acceptable to the Association was found for theposition of Assistant Coordinator.
3.02 The project was declared effective in April 1978, two months laterthan originally scheduled. There was one condition of disbursement in.respect of the RETCOs' trucks and workshop equipment component of theproject: the execution of a subsidiary loan agreement, satisfactory to theAssociation, between the Tanzania Rural Development Bank (TRDB)--thefinancial intermediary through which the Association's funds for thiscomponent were to be chaneled to the individual RETCOs--and the RETCOs.Owing to difficulties in attracting sufficient equity capital commitmentsto the RETCOs, which was a condition for the Association's approval of anysubsidiary loan agreement, the agreements were not entered into until late1979 (paras. 3.06-3.07).
Technical Assistance
3.03 The project provided for twenty technical assistance specialistsin the RETCOs, two in the Project Coordinating Unit (PCU) in iNTC and twovehicle import advisors to Government who would be attached to NTC. Fourexpatriate instructors were also to be provided for NIT. NTC and theAssociation agreed that recruitment for all staff except the ProjectCoordinator and the Assistant Project Coordinator in the PCU should beundertaken by consultants selected on a competitive basis. This wouldreduce the demands on NTC's administrative resources that would be entailedby direct recruitment of such a large number of technical assistancespecialists. It would also confer on NTC the benefit of a larger pool ofpotential candidates with exposure to different operating environments towhich a suitable recruitment firm would have access.
3.04 In May 1978 a consulting firm was selected out of 16 firmsoffering proposals to undertake recruitment of technical assistance stafffor NTC. In August 1978 NTC sought Association approval for five technicalassistance staff recruited by the consultants. Although the Association
- 20 -
granted approval for their appointment, it noted that all the candidateswere of the same nationality. This was counter to the expectation that aconsulting firm would recruit a better spread of nationalities.
3.05 By November 1978 the Association had granted approval for a totalof 15 technical assistance specialists of whom 14 were designated forpositions in the regional companies. In November 1978 approval was soughtfrom the Association for the appointment of a further ten technicalassistant staff of which six were for positions in the RETCOs, two forpositions in NIT as instructors and two for NTC. An interesting aspect ofthis batch of candidates was the significant proportion drawn fromexpatriates working for other parastatals in Tanzania. NTC felt that theexperience of these expatriates in Tanzania made them more effectiveadvisors or managers for the RETCOs. The Association was, however,concerned that these expatriates were being drawn away from otherenterprises prior to the expiration of their contracts. Accordingly, itwas reluctant to grant approval for their appointment until it hadconfirmation that NTC had rhe approval of their existing employers. NTCwas able to confirm that domestically-based expatriates were recruited onlyat the end of their contracts or with the approval of their existingemployers.
3.06. Little progress had been made in attracting outside capital to theRETCOs. Recruitment of technical assistance staff to this point had beenfor advisory/managerial positions in the three RETC0s that were already inexistence. The vehicle fleet of these companies was small and aged andtheir management teams were generally recognized as poor in quality.However, without a degree of equity capitalization judged adequate by theAssociation to provide a cushion for its onlent funds, disbursements forthe procurement of additional new trucks could not be made. Equallyimportant, without the change in ownership that equity resources from newsources would entail, the management teas could not be changed. Technicalassistance personnel could not be effectively deployed under thesecircumstances. As uf November 1978, the assessment ot the required levelof external funds and the likely contribution from the prospectiveshareholders had not been made. In the light of this, the Associationdecided that financing for the companies be resolved before appointment ofthe additional ten proposed technical assistance experts.
3.07 NTC completed its assessment of the vehicle fleet, .the equity fundrequirements and the time-phasing of such requirements of the RETCOs inDecember 1978. However, the prospective shareholders approached wereeither willing but unable to invest because of their poor financialsituation or, like some crop authorities, were reluctant to participatebecause of their desire to expand their own transport operations. Noprogress was made in adequately capitalizing the RETCOs until the Ministryof Finance and Planning (MFP) intervened in October 1979 to instruct theidentified prospective shareholders to either (i) contribute equity in theform of cash; or (ii) where they owned sizeable vehicle fleets in thedesignated regions of operation of the RETCOs, by handing over all but asmall portion of such fleets. MFP undertook to finance any shortfall incontribution. This comaitment enabled TRDB to finalize the subsidiary loanagreements with the individual RETCOs. By January 1980, one prospectiveshareholder had committed to provide its equity contribution in cash while
- 21 -
the other shareholders had committed to provide a total of 61 vehicles ofassorted ages and condition in kind. However, it was not until July 1980that MFP met its commitment to provide the shortfall on required funds forthe first phase. The formalities of establishing new companies, changingthe Board of Directors of the existing companies and recruiting newmanagement teams for the companies were not completed until December 1980.
3.08 By January 1981, 277 man-months (36%) of the total of 774 man-months of eventual technical assistance to the RETCOs had been utilized.The quality and adaptability to Tanzanian conditions of some of thetechnical assistance personnel initially recruited were poor. This washowever, overcome by subsequent recruitment of technical assistance stafflargely from within Tanzania and with the active participation of NTC inthe recruitment process. More importantly, the large expenditure ontechnical assistance resources was not effectively utilized for the firstthree years of project implementation because of the delay in forming theregional companies. This could have been avoided if the time and resourceshad been devoted at preparation or appraisal to (i) assessing the amount ofequity capital required in the RETCOs; (ii) assessing the capacity orwillingness of the identified prospective shareholders to invest; (iii)clearly fixing Government's obligation to provide the shortfall in theequity requirements by a designated period. Such an alternative approach -was hinted at during appraisal report processing. Although a timetable forthe individual companies' formation was agreed upon with Government atnegotiations, the delays that can arise from the process of companyformation appear not to have been fully appreciated. Ultimately, too muchreliance was placed on the provisions of the Credit Agreement, whichprovided for Government underwriting of the companies' funding but did notstipulate a time frame within which Government had to honor itsunderwriting commitment. Further, no indication was provided to Governmentof the likely magnitude of its commitment. On its part, Government provedvery slow in making the necessary budgetary provisions for the equitycapital in the companies after it became clear that the prospectiveshareholders were unwilling or unable to subscribe to the RETCOs' capital.
3.09 In contrast to the under-utilization of technical assistance staffin the RETCOs, the technical assistance staff in NTC proved very effectiveduring this period. In addition to the Project Coordinator, two vehicleimport advisors were appointed in August 1978. In addition, NTC arguedfor, and the Association ultimately agreed to, the financing of anexpatriate Financial Advisor. The Project Coordinator and the FinancialAdvisor played an important role in drawing up or supervising the design ofperformance indicators, reporting procedures and financial, workshop andoperating manuals for the three existing companies in the period 1978 to1980. These management control tools are now an integral and key part ofthe system of control in the RETCOs. NTC also developed substantialcapacity for analysis of industry issues during this period.
3.10 With the full establishment of all the RETCOs in 1981, theeffectiveness of technical assistance improved substantially. NTC had, onthe basis of the experience of use of technical assistance staff, arguedthat two of the four technical assistance positions in the RETC0s wereredundant. In particular, advisors to the general managers and.traffic
managers were considered unnecessary since the financial advisors could
- 22 -
undertake both roles. Further, the RETCOs were able to recruit and train(at NIT) qualified Tanzanians for most of these positions. The Associationagreed to this assessment. The financial advisors proved effective inthese roles. Another lesson learnt from the earlier period was that theexpatriate personnel could be easily perceived simply as advisors and theiradvice taken by their counterparts on a discretionary basis. A part of theproblem was that without a clear mandate over the companies, NTC could notimpose the expatriates on the existing management teams as equal managementpartners. This problem was essentially resolved once NTC was given a clearadministrative mandate with the reconstitution of the old companies andformation of the new ones.
3.11 The project was extended twice and was eventually closed in June1985. Much of the technical assistance to the RETCOs and NTC was alsoextended to the ultimate closing date. Technical assistance to the RETCOsand NTC has subsequently been further continued under the Sixth Highway(Rehabilitation) Project. Technical assistance to the RETCOs and NTCundoubtedly was one of the key elements responsible for the relatively goodoperational performance of the RETCOs. However, it is generally agreedthat such good performance is not sustainable in the absence of expatriatepersonnel. Over the project period, the RETCOs have experiencedsubstantial difficulties in recruiting or retaining good staff,particularly in the areas of financial and workshop management. Theunderlying problems have been both a country-wide shortage of persons withsuch skills and the relatively uncompetitive remuneration of such skills bythe RETCOs. The result has been that the major project objective ofstrengthening the Tanzanians' capability to run their own truckingoperations has not been fully realized.
Assistance to NIT
3.12 The technical assistance staff provided to NIT under the projectmade a substantive contribution to the strengthening of this institution.Although at appraisal it was expected that the instructors wouldparticipate primarily in the development of three-month courses forrelatively experienced transport industry personnel, NIT's early experiencesuggested that the demand for such courses was not strong since the pool ofsuch people was limited. Further, employers could not afford to releasethem for such extended periods.- However, appropriate courses entailingshorter releases from work were developed by the instructors and theseproved both popular and effective.
Procurement
3.13 The tender documents for the procurement of trucks and associatedspare parts were completed and sent to the Association in January 1981.The appraisal report had provided for a total of 160 trucks and relatedspares to be procured out of the Credit at an estimated cost of US$4.7million. At appraisal, the truck fleet to be procured was envisaged asconsisting of 100 trucks of 12-ton capacity and 60 trucks of 7-toncapacity. However, the precise requirements both in terms of sizes andnumbers of trucks were to be established by NTC and the RETCOs' technicalassistance staff based on detailed reviews of regional market conditionsand the types of trucks provided by the prospective shareholders as equity
- 23 -
in kind. NTC and the RETCOs' technical assistance staff assessed theRETCOs requirements at 163 trucks and 63 trailers with a total estimatedcost of US$7.5 million (including spare parts). The composition of thisproposed truck fleet was as follows:
Number of trucks Size of trucks
78 7 tons37 10 tons48 12 tons
163
NTC argued for the inclusion of 10-ton trucks amongst the trucksto be procured on the grounds that they offered a cost advantage of about10% per ton-km in intra-regional freight transport compared to 7-ton trucksand were more appropriate for this type of traffic than 12-ton trucks. Thenumber of 12-ton trucks to be procured was reduced from the level indicatedin the appraisal report. However, their capacity was to be substantiallyenhanced by the procurement of 9-ton trailers. This-would enable them tobe used competitively for long-distance inter-regional freight transport.The Association had no objections to the composition of vehicles proposedby NTC. This fleet requirement was included in the tender document, which-was well prepared. The Association's only major objection was in relationto the provision that bidders must have established agents in Tanzania onthe date of bidding and that they must also furnish their past performancerecord in fulfilling contracts in Tanzania. This would effectively haveJmited the pool of potential bidders to vehicle manufacturers or theiragents already established in Tanzania. The invitation to bid was issuedin July 1981 and bids were opened on September 22, 1981. The response wasgood with 18 bids received and eight bids declared responsive. The awardwas made in November 1981 and Association approval for such award grantedin December 1981. The final award was for 174 trucks and 65 trailers at atotal cost of US$4.9 million. In the negotiations prior to the signing ofthe contracts for the supply of vehicles, the lowest evaluated bidder inrespect of the 12-ton trucks to be procured offered 15-ton trucks in 'substitution for the 12-ton trucks on the same terms and conditions as itsbid. The 15-ton trucks were considered by NTC to be technically moreappropriate for operations in the hilly terrain of the regions where muchof the long-distance traffic was expected to be generated. In May 1983 the .Association agreed to the procurement of 19 additional trucks on the sameterms and prices as the original award. The distribution of the trucksprocured under the Credit by size and region is given in Table 4.
3.14 NTC was initially uncomfortable with the prospect of putting outthe tenders for trucks to international competitive bidding (ICB) sincethere was the possibility that the lowest evaluated bid would be for trucksnot then familiar to Tanzanian mechanics and drivers. In the event,although the tender was awarded in part for an unfamiliar make of vehicle(10-ton and 15-ton trucks), NTC has been well satisfied with the resultsfor two reasons: (i) the performance of the vehicles has been exceptionallygood; (ii) the bids were significantly lower than expected.
3.15 Although most of the trucks orderqd were received by July 1982, itwas not until June 1983 that all of them were fully operational. The
- 24 -
trucks were ordered on a chassis and cab basis o"ly. Body-building was tobe contracted to the well developed locel body-building industry. However,the selected body-builders did not have adaquate access to imported steelplates and welding components and this accounted for the significant delaysin making trucks fully opetational. The source of the problem wasessentially the lack of familiarity on the part of NTC with the constraintson the body-building industry. NTC now involves body-builders in theplanning process for procurement of trucks.
3.16 A significant amount of spare parts was bundled with the purchaseof vehicles. The rationale for this was to insulate the companies from theimpact on operations of potential shortages of foreign exchange. However,at the time of drawing up the vehicle and spare part specifications, therewas no firm knowledge of the makes of vehicles to be ordered and the likelyrate and distribution of spare parts consumption under Tanzanianconditions. The mix of spare parts ordered has proven inappropriate, withsome items considered critical proving to be slow-moving and vice-versa. Away to have avoided this consistent with preserving the original rationalefor bundling would have been to reduce the proportion bundled and to phasethe procurement of the balance of the assessed requirements with evolvingexperience of operating the trucks.
Spare Parts
3.17 The provision in the project for the replenishment of thecountry*s inventory of spare parts was based on an assessment of the likelysurge in imports of such items if controls .were relaxed. Government wasconsidered by the Association to have fulfilled the objective ofliberalization of import of spare parts with its increased allocation offoreign exchange for such imports from TSh76.1 million in 1976 to TSh320.1million in 1978. This raised the amount allocated as a proportion of theamount applied for from 22% in 1976 to 351 in 1978 and there was evidencethat both the actual use of allocations and the proportion of spare partsdestined for up-country had improved. Approval for disbursement of thefunds for this component was given in May 1979 after Government submitted astudy prepared by NTC on the impact of the liberalization of the import of.vehicle spare parts on the availability and distribution of such items.
Project Costs
3.18 The estimated and actual project costs are set out in Table 5.Total project costs were estimated at US$18.2 million includingcontingencies and taxes. Actual project costs were US$22.1 million, anincrease of US$3.9 million on the estimated costs. There were two majorcauses of the cost overruns: (i) greater than anticipated truck body-building costs due to increased units of trucks procured aid unit-buildingprices; and (ii) the cost of workshop buildings not taken into account inthe appraisal estimates.
Disbursements
3.19 The cumulative disbursements are given in Table 6. Actualdisbursements lagged the appraisal estimates significantly until the thirdquarter of FY82 when the disbursements against the initial procurement of
- 25 -
trucks were made. Thereafter, the rate of disbursement was acceptable,taking into account the two-year extension of the project to alloweffective use of technical assistance.
Reporting
3.20 NTC provided quarterly progress reports of a good quality duringproject implementation.
- 26 -
IV. OPERATING PERFORMANCE
4.01 Details of the operating performance of the RETC0s over the period1981182 to 1984/85 are given in Table 7. The performance of the RETCOscompared to the appraisal targets is given below:
1981/8& 1982183 1983/84 1984/85
Running kms per truck p.a. (km)
Average all RETCOs - 34,832 39,161 42,458 35,430Appraisal Targets 40,000 50,000
Truck Availability (%)
Average all RETCOs 77 74 68 58Appraisal Targets 70 80
Ton-kms per truck p.s. (ton-kms)
Average all RETCOs 161,725 202,341 247,268 229,464 -
Appraisal Targets 125,000 250,000
4.02 As the table indicates, thu RETCOs' productivity improved up to1983/84 but declined sharply in 1984/85. A notable feature of the RETCOs'performance has been the poor record of truck availability, which hasdeclined consistently from 772 in 1981/82 to 582 in 1984/85. A significantpart of this decline is attributable to the non-availability of spare partsand tires. Although provision was made in the Credit for the procurement ofspare parts, the mix of such items acquired proved inappropriate to actualoperating conditions. A further problem has been the RETCOs' restrictedaccess to unofficial or parallel sources of spare parts and tires duringthis period. This was a period when foreign exchange shortages and pricecontrols on and official allocation of such items led to the growth of*significant parallel and unofficial markets for spare parts, and tires.Finally, deficiencies in the RETCs* stores management system and theinability of the workshops to recruit an adequate complement of skilledmechanics were significant contributory factors to the record of poorvehicle availability.
4.03 The performance in respect of running-kilometers and truckingservices performed (ton-kms) relative to the appraisal targets was good upto 1983184. However, this partly reflected the fact that the composition ofthe fleet acquired and the mix of services provided was significantlydifferent from that envisaged at appraisal. About 37Z of the fleetpurchased from Credit funds were 15-ton trucks devoted to long-distanceinter-regional haulage. This compares to an envisaged fleet of only 7-tonand 10-ton trucks to be devoted mainly to intra-regional transport. Inaddition, the vehicle fleet's capacity was further enhanced by theprocurement of trailers. This was not envisaged at appraisal. Thesubsequent deterioration in performance in 1984/85 reflected mainly theImpact of the sharp deterioration in vehicle availability and severe fuelshortages. The RETCOs have taken appropriate measures (operation of own
- 27 -
fuel tanker fleets to scurce fuel from Dar es Salaam) to insure against thedisruptive effects of fuel shortages on operations. In respect of spareparts and tires, the Association has further provided assistance under thecurrent Sixth Highway Project for the replenishment of the country0a stockof spare parts and, for the procurement of tires and fast moving spare partsby the RETCOs. More importantly, Government has abolished controls on thepricing and allocation of spare parts, thereby enabling entities like theRETCOs to'freely acquire such items.
4.04 In terms of Government's explicit objective of promoting the publicsector in the industry, recent evidence suggests that productivity of theprivate sector truckers is significantly better than that of the publicsector segment of the industry. However, the RETCOs' performance issuperior to that of other parastatal trucking entities and the smallerprivate operators. Furthermore, although the RETCOs enjoy relatively nevervehicle fleets and substantial managerial resources in the form of technicalassistance, they are restricted in their operating flexibility, particularlyin respect of the incentives they can offer drivers, the charges they canlevy for delays at looding and unloading points and the areas in which theyoperate. This probably accounts for a large part of their poorerperformance compared to the larger private operators.
- 28 -
V. FINANCIAL PERFORMANCE
5.01 The RETCOs' consolidated financial performance is given in Tables 8and 9. The appraisal report did not include a detailed review of theprospective financial performance of the RETCOs. However, operating costand-ratio targets were set for the companies. The basis for the derivationof these targets is not clear. Nonetheless, as illustrated in the tablebelow, the RETCOs have performed better than or in line with these targets.
5.02 A major project objective was to ensure that the RETCOs were self-financing with respect to their operating and capital requirements. TheRETCOs have been highly profitable and cash generative. However, the PCRmission has estimated that taking into account (i) the RETCOs' truck fleetsise and composition in 1984185; (U1) the age of the fleet; and (iii) thereplacement cost of trucks in 1984/85, depreciation charges on the truckfleet on a replacement cost basis will result in a loss of about TSh 7.0million on transport operations before financing charges in FY84/85. A firminterpretation of this figure is complicated by lack of knowledge of thefinancial performance of the passenger services operation of the RETCOi.Nonetheless, it is broadly indicative of the fact that tariffs andproductivity in 1984185 were not sufficient to ensure that the RETCOs as agroup earned a sufficient surplus to preserve their carrying capacity in thelong run.
5.03 - A detailed review of the RETCOs' applications for tariff increasesrevealed that whereas they take into account the replacement cost of vehiclesand make adequate provisions for truck lives and most inputs, they also takeinto account load factors and target running-kms that are unrealisticallyhigh given actual operating conditions in the regions. This has tended tomake tariffs applied for intra-regional movements lower than economicallyjustified. Moreover, tariffs applied for have not in all instances beengranted. Furthermore, the RETC0s ownership structure whereby theshareholders are also the main users, has tended to inhibit the appropriatepricing of the RETCOs' services. In effect, the shareholders have beengetting their returns through less than economic pricing of services provided
- 29 -
them. These restrictions on the RETC0s pricing flexibility has created asubstantial incentive for them to change their vehicle fleet mix to offermore capacity for long distance inter-regional traffic. Finally, the RETCOshave had little incentive to be very cash generative since their investmentoptions outside the purchase of trucks is limited as is the supply of trucks.
-30-
VI. INSTITUTIONAL DEVELOPMENT
6.01 The major project objective was to assist in the establishment ofviable public trucking companies serving the agricultural areas. A majorelement of such assistance was to be the strengthening of the capacity ofTanzanians to run these companies effectively. The technical assistanceprovided to this end has resulted in the Institution of an excellent uniformManagement Information and Control System (MICS) in the RETCOs. This systemcomprises a simple but effective traffic information system, a workshop andstores management system and an accounting system. The degree of integrationbetween these systems is high-and efficient. General management and NTCcontrol of operations is effected through a simple but well-definedoperations budgeting system with clearly defined performance indices evolvedthrough the early period of project implementation. NTC, which acts as theeffective holding company for the RETCOs, has a strong performance monitoringcapability. This capability has been well deployed in assisting Governmentin the formulation of policy for the industry, including preparation of astrategy for the industry which was a requirement in the Credit Agreement.The RETCOs and NTC are now the main source of credible and systematicinformation on the financial and operating performance of the truckingindustry in Tanzania.
6.02 The project has, however, been much less successful in imparting toTanzanians the skills.necessary to operate and use the MICS. As aconsequence, the project objetive of creating managerially self-sustainingentities has not been fully realized. Technical assistance has beeneffective in treting the basis for good management but due to the RETCOs'inability to attract or retain appropriately skilled personnel a cadre ofproficient managers has not been developed. NTC has good and dynamicindigenous senior managers, but expatriate technical assistance staff stillplay a major role in the key technical functions of monitoring of the RETCOs'performance and conduct of industry studies.
6.03 The assistance to NIT has been instrumental in strengthening 'aninstitution which plays a key role in the development of key technical andmanagerial personnel for the local transport industry. NIT is alsoincreasingly atttacting students from other African countries.
- 31 -
VII. ECONOMIC RE-EVALUATION
7.01 Two components of the project were subjected to economicevaluation at appraisal: (a) assistance to the five selected truckingcompanies; and (b) assistance in the replenishment of the inventory ofspare parts held in the country. These components accounted for 91% of theestimated total economic cost of the project.
7.02 In respect of assistance to the RETCOs, the appraisal economicanalyses assumed that the principal benefit of the technical assistance andthe investments in trucks, associated spare parts, workshops and workshopfacilities would be gains in truck productivity. These gains were expectedto arise from a reduction in unit costs as a result of the improvement intruck availability from around 50% to 802 and an increase in load factorsfrom about 50% to 702 expected with project implementation as compared totypical parastatal trucking operations. The economic return on theproposed investments in the RETCOs was estimated at 37%, with the foreignexchange costs of investments shadow priced by a factor of 1.33. Withoutsuch shadow pricing, the economic rate of return would have been assessedat about 52% at appraisal.
7.03 In the economic re-evaluation, the economic rate of return on theinvestments in the RETCOs is estimated on the basis that without theproject, the transport service actually performed by the RETCOs would havebeen generated at a higher cost by comparable parastatal truckingoperators. This reflects the evidence that other parastatal operatorsperform much poorer than the RETCOs, with running-kilometers per vehicleper annum generally significantly lower than 30,OOkm. per annum and loadfactors that are significantly lower on average than is experienced by theRETCOs. It is assumed that the average running-kilometers per vehicle perannum and load factors thtt would have been attained without the projectwould have been respectively 25,000km. and 502. These assumptions areconsistent with the productivity assumptions in the without-project casemade at appraisal. Further, and consistent with assumptions made atappraisal, it is assumed that without the project a vehicle fleet sizeconsistent with the lower productivity levels assumed would have beenavailable from existing vehicle resources. On this basis, the ex-posteconomic return (without shadow pricing of foreign exchange costs) isestimated at about 102. Detailed calculations and assumptions are given inTables 10 and 11.
7.04 The realized economic rate of return, basud on assumptions broadly%onsistent with those made at appraisal, is significantly less than theippraisal estimate. This reflects the fact that truck transport costsavings are estimated as being much lower than envisaged at appraisal.However, it is unlikely that vehicle fleet size consistent with (a) theproductivity of the other parastatal trucking operators and (b) the RETCOs'actual transport service (ton-km) performance would have been available, inthe without-project case, to comparable intra-regional parastatal truckingoperators. 2 On the more conservative assumption that without the project,
11 The prospective shareholders who represented the largest pool from whichContinued on next page
- 32 -
the transport service actually performed by the RETC0s would have beengenerated only with the acquisition of additional trucks over and above thesize of the RETCOs' fleet, the ex-post eu-nomic return to the project is402. Detailed calculations are given in Tables 12 and 13. On this basisthe economic return on this project component is good, albeit much lowerthan would have been the case at appraisal with a comparable assumption.
7.05 The economic return on the Association's assistance for thereplenishment of the country's in-entory of spare parts was estimated at38% at appraisal. This was based on the assumption that such procurementwould lead to the avoidance of the import of 2,500 trucks, and at least athird of this added vehicle capability would be efficiently utilized. Thesame assumptions on truck productivity and operating cost used in theappraisal calculations are valid for application to a re-evaluation of theeconomic return on this component. The evidence suggests that Governmentallocated a greater amount of foreign exchange for imports of spare partswith the expectation that the incremental amounts would be partly financedwith Association funds. On the basis of the foregoing, the realized rateof return on this component is at least as great as assessed at appraisal.
Continued from previous pagetrucks for intra-regional transport of agricultural products and inputson a third party basis would have been drawn were in fact reluctant orunable to provide to the RETCOs any significant number of serviceabletrucks, in lieu of cash, as equity (para. 3.07 above).
- 33 -
VIII. CONCLUSIONS
Maior Prolect Objectives
8.01 The project represented the Bank Group's first direct assistance tothe.Tanzania trucking industry. As such it was a logical extension of itsclose involvement in the development of Tanzania's road network. Assistanceto the industry was provided in the context of strong Government commitmentto the development of the public sector. Given this commitment, theAssociation was compelled to direct the major part of its assistance to thepublic sector segment of the industry notwithstanding the existence of adominant private sector. In view of this, an evaluation of the impact of theproject must ultimately address two issues:
(i) whether Association involvement attained its objective ofassisting in the creation of viable and self-sustaining publictransport companies;
(ii) whether the channelling of resources into the public sectorwas the most efficient way of attaining the ultimate goal ofrelaxing the constraints on the transportation of agriculturalproducts and inputs.
8.02 In respect of the first question, the Association's assistance hasresulted in the establishment of potentially viable and self-sustainingpublic sector companies. But this.potential will only be realized if theexpatriate staff now responsible for much of the day-to-day management ofoperations is replaced by indigenous staff and the companies ability to pricetheir services appropriately is increased. There has been little discernibleprogress made in attracting suitable financial and workshop managementpersonnel for the RETCOs. This problem can ultimately only be satisfactorilyresolved through greater national effort in training of staff, particularlyengineers and accountants and through the provision of competitiveremuneration for such staff. In respect of the RETCOs' pricing of theirservices, Government has, in fulfillment of one of the conditions fordisbursement of a second tranche of the Multisector Rehabilitation Credit,announced a new policy of allowing the rates for the intra-regional transportof goods to be determined by akrket forces rather than by rate fixing boards.This should give the RETCOs greater pricing flexibility and ensure that theymaintain their primary commitment to intra-regional trucking. *This will,however, only happen if their shareholders who are also their primary userswill permit the exercise of such flexibility.
8.03 The RETCOs' operating performance has been satisfactory given theconstraints under which they operate. However, this performance has beenattained and is, at least for the near future, sustainable only with asignificant input of technical assistance. Given the operating capability ofthe privace sector, it is likely that, ceteris paribus, the game or betterresults could have been obtained by channelling similar resources to it butwithout the large expenditures on technical assistance. Nonetheless, giventhe constraints on the Bank's ability to do this during project preparationand the such poorer operating performance of other parastatal transportoperations, the assistance to the RETCOs has been a satisfactory if second-best use of the Association's resources.
-34-
Performance of the Association and Lessons Learned
8.04 The borrower expressed satisfaction with the quality of thesupervision missions but felt that there should not have been so many Bankstaff changes.
8.05 The project experienced considerable delays because of delays incapitalizing the RE1COs. The project was the first one undertaken by theRegion9s Transport Division that attempted to attract a diverse set ofshareholders as investors in commercially oriented companies. It was alsothe only commercially oriented project appraised by the then HighwaysDivision. As a result the legal and financial ramifications of the formationof companies were not fully appreciated. Indeed, it was only during thelatter stages of project Implementation that financial analysts were involvedin project supervision. Much closer involvement of Bank financf&l staff isnow required in all projects, particularly commercially oriented ones.
8.06 Technical assistance has been invaluable in developing systems.However, there has been little transfer of knowledge. This points to thefact that without both a strong specific skills training component inprojects and an appropriate incentive system in the assisted organization,technical assistance aimed at strengthening indigenous management can proveineffective. Both these factors have been taken into account in recentlending to the sector in Tanzania.
8.07 Finally, although the RETCOs have been relatively successfulcompared to other parastatal trucking operators, their performance.relativeto private operators has been mixed. In particular, despite considerabletechnical assistance, they have not yet been able to display a capacity to bemanagerially self-sustaining. This is in contrast to the private sector. Toutilize all available resources effectively in the industry, the Associationnow pays particular attention to providing assistance on a non-discriminatorybasis to all segments of the industry (e.g. provision of spare parts underthe Sixth Highway Rehabilitation Project).
- 35 -
Table 1
TANZANIA
PROJECT COMPLETION REPORT
TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
CREDIT 743-TA
COMPOSITION OF TECHNICAL ASSISTANCE
ORGANIZATION MAN-MONTHS
National Transport Corporation (NTC)
Project Coordination Unit 159Vehicle Imports Advisors 60
/ Investments include Government equity subscription in with or withoutproject case; assumed that age profile of vehicles in with or withoutproject case are similar.
3/ Technical assistance assumed to continue at 1984/85 level In with projectcase.
H/ No operating cost reduction benefits assumed for the project before fullformation of companies and importation of project trucks and spare parts.
3f Operating cost assumptions :Z without project case: (a) fuel consumptionper running-ki assumed 29X higher; (b) other costs per kilometer excludinglabor assumed the same as RETCOs; (c) crew costs in RETCOs assumed to be353 of salary and wages disclosed in accounts; (d) running and crow costsin without project case adjusted for greater vehicle fleet and runs (SeeTable 10).
- 45 -Table 11
TANZANIA
PROJECT COMPLETION REPORT
TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
CREDIT 743-TA
WITHOUT PROJECT: ASSESSMENT OF OPERATING COSTS
1990/81 1991/L2 1982/83 1983L64 1 L94/85
(A) WITH PROJECT
RETCO fleet she ( trucks) 77 195 231 269
RETCO fleet capacity (tons) 661 1,941 2,295 2,688
RETCOs: ton-km performed (Ot-km) 12,463 89,468 67,119 61,725
Government Equity Infusion (TSh.m) 27.0 43.0 * * -
/ Investments include Government equity subscription to with or withoutproject case.
/ Technical assistance assumed'to continue *t 1984/85 level in with projectcase; trucks assumed to have an economic life of five Years.
f/ Assumed in without project case that vehicle fleet capacity upto amountprovided through Association financing could be made available locally; theIncremental trucks requirement in the without project case is calculated inTable 10.
/ No operating cost reduction benefits assumed for the project before fullformation of companies and importation of project trucks and spare parts.
/ Operating cost assumptions in without project case: (a) fuel consumptionper running-km assumed 29 higher; (b) other costs per kilometer excludinglabor assumed the same as RETCOs; (c) crew costs in RETCOs assumed to be35 of salary and wages disclosed in accounts; (d) running and crew costsin without project case adjusted for greater vehicle fleet and runs.
- 47 -
Table 18
TANZANIA
PROJECT COMPLETION REPORT
TRUCKING INDUSTRY REHABILITATION AND IMPROVEMENT PROJECT
CREDIT 748-TA
WITHOUT PROJECT: ASSESSMENT OF INVESTMENT REQUIREMENTS
