|
Country Case Study—Tanzania
|
|
|
|
Bank support to a low-income, predominantly rural economy is assessed in this case study.
Transport and the Economy
Developing Effective Road Maintenance Systems in Tanzania | Like most African countries, Tanzania has waged a long battle to develop adequate systems for maintaining the road network needed to serve a large and widely distributed population. The 1994 WDR recommended a dual approach to resolving the road maintenance problem—with equal emphasis on reliability in the flow of funds and efficiency in their use—and cited Tanzania as a best practice case.
Within a year or two, however, it became clear that institutional capacities in the country were insufficient to bring the new systems to effective fruition at the same time as implementing a large roads investment program. Serious questions arose about major corruption and misuse of funds in the Ministry of Works.
A new approach was gradually worked out, not fundamentally changing the directions adopted in the early 1990s, but filling them out and giving them a much stronger constitutional foundation. December 1998 saw a road fund formally established—in lieu of the one created by official declarations of the Finance Ministry in 1991–92. A board of nine persons (including an independent chairperson appointed by the president, four representatives from the private sector, and four senior civil servants) was set to run it. On July 1, 2000, TANROADS (Tanzania National Roads Agency) was established as a semiautonomous agency of the Ministry of Works to manage maintenance and development of the primary road network.
The mutually supportive public and private sector efforts engendered by these arrangements have shown several promising trends. The road fund board's extensive monitoring and auditing efforts help to ensure that user charges to support maintenance are duly collected and used for the intended purpose. Besides regular financial audits of recipients (and itself), a major technical audit was conducted by a Norwegian-South African consortium in 2002–03; it concluded that the board was generally receiving value for its money and that 90 percent to 95 percent of activities were achieving the required standard of output.
Annual expenditures for road maintenance, which had risen with the original road fund from a totally inadequate $10 million or less at the start of the 1990s to the equivalent of $30 million in 1994–95 and then fallen off with the problems of that period, reached $48 million in 2000–01 and $57 million in 2002–03. The increase came in part from Finance Ministry acceptance of the increase in fuel levy recommended by the board for the latter year. Whereas road works had previously been undertaken almost entirely by foreign contractors or by force account, from the early 1990s considerable effort had been devoted to supporting development of local contractors, especially for maintenance. Their confidence suffered severe blows from the unexpected drop-off in funding after 1995, but TANROADS has resumed training efforts and, in line with general government policies, about 90 percent of all road maintenance efforts are contracted out.
The combined effort of TANROADS and the board has yielded a significant reduction in vehicle overloading (fines for which accrue to the road fund) in terms of both scale and incidence, such that only 6 percent of the 1 million vehicles weighed in 2003–04 were found overloaded. Coverage still needs to be extended to other roads. The long-discussed Road Maintenance Management System was finally established in one zone in 2002–03 and extended to the other three the following year. The corresponding data collection has been actively under way, with an updated network inventory completed in December 2003 and work on traffic counts and pavement quality started in 2004.
Trends in overall network condition cannot be established with a high degree of reliability, even for the primary network, because of uncertainties as to its actual extent, the predominance of gravel and earth surfaces subject to rapid change with weather conditions, and the unavoidable element of subjectivity in judgments. The most valid information available is probably that on the actual lengths (as opposed to percentages of the varying network assumed at different times) that were rated "good" or "fair" in regional engineers' visual inspections. These numbers show relatively little change in the extent of primary network rated "fair" (from about 9,000 km in 1990 to 10,700 km in 2004) but much sharper growth and fluctuation in the extent rated "good." That increased from less than 3,000 km in 1990 to more than 7,000 km in 1993 before falling over the second half of the 1990s and rising again thereafter to reach more than 11,000 km in 2004.
Although there is some room for doubt about the validity of the last figure (because it is much greater than the previous year's estimate even though gravel road maintenance had fallen much short of the plan in the interim), it indicates that good primary network distance may have increased as much as 8,000 km since 1990 (this can be compared, for order of magnitude, with the increase of 5,000 km in the same category in the similarly sized country of Ethiopia between 1995 and 2002).
Among further developments being considered, the most important may be ensuring the most efficient possible allocation of the scarce resources available for maintenance. A very important initiative by the board has been to start systematic financial support for maintenance of local roads by allocating 30 percent of road fund resources to district and urban councils, as required under the law. The board considers that these allocations are sufficient for maintenance of only about one-quarter of the approximately 50,000 km of such local roads; those for TANROADS can cover about half of the 28,000 km for which it is responsible. The full inventory of local roads planned will clearly be very important for identifying rational priorities in use of the expanding resources maintenance badly needs—and in the development of local capacities for maintenance management, which are still very weak. TANROADS's Maintenance Management System will be of great value to this end, too. The 2003 technical audit of board expenditures also urged greater use, in the Performance Agreements that the board negotiates each year with the agencies that manage the maintenance, of clearly defined and objectively measurable indicators of accomplishment— and greater readiness to withhold or reduce disbursements when monitoring reports show lack of progress. Although TANROADS's effectiveness has clearly benefited from its more autonomous status and the improved salary structure and stronger discipline that this made possible, consideration is also being given to the possible advantages of further increasing its independence and flexibility for meeting the firm set of overall performance targets agreed with its supervising ministry and the board. |
Located on the coast of East Africa, Tanzania, with a population of 37 million, is one of the most populated countries of Sub-Saharan Africa. Tanzania’s GDP per capita (at purchasing power parity) is about $600. GDP has been growing at more than 5 percent per year in recent years. About onethird of the population lives below the poverty line, and more than 80 percent of the population is rural.
After decades of economic stagnation partly caused by a highly centralized economy, Tanzania’s economy began to turn around toward the end of the 1980s, with the launching of an economic recovery program. Sustained, deeper reforms have taken place since the mid-1990s and have led to better economic growth. As a result, during the 10-year period until 2005, the economy grew at annual rates of between 3 percent and 7 percent. Despite the economic improvements, poverty in Tanzania remains deep and pervasive. The rates of poverty and rural residency are essentially unchanged.
Transport bottlenecks are a major hindrance to economic growth. Key aspects of these bottlenecks are the poor condition of the road network— more than two-thirds of the roads are not accessible year round—and constrained capacity and operations of the country’s railway systems.
The strategic location of the Dar-es-Salaam port, serving a number of landlocked neighboring countries, is estimated to give transport (if bottlenecks are removed) the potential to become the country’s largest foreign exchange earner, as well as the largest contributor to Tanzania’s GDP.
Tanzania’s geography, size, diversity, and dispersion give roads a special position in the integration of the national economy. In particular, roads serve rural areas more effectively than any other mode of transport.
Tanzania’s trunk and regional road networks are managed by the road agency TANROADS. While TANROADS’s roads are better maintained than those of other authorities, close to half are in poor condition and are not passable year round. Despite recent reforms, TANROADS is still far from achieving the necessary operating and financial autonomy that is required to efficiently manage the road system (see sidebar).
Two railway systems operate in Tanzania. The Tanzania Railway Corporation (TRC), a 2,600-km line, was formed in 1977 after the break-up of the East African Railways. TRC connects Dar-es-Salaam with Burundi, Rwanda, the Peoples Republic of Congo, and Uganda. The Tanzania-Zambia Railway Authority (TAZARA) connects Tanzania and Zambia and is owned by both countries.
As part of the economic reforms, the government successfully transferred the container terminal of the Dar-es-Salaam port to a private operator in 2000, and the port’s traffic, efficiency, and financial results have improved significantly. Attempts started about the same time to privatize the TRC railway encountered more difficulties, but a concession contract for the transfer of TRC to a private operator is nearing completion.
Bank Assistance to the Transport Sector
Tanzania receives approximately $1 billion per year in international development aid and remains one of the most aid-dependent countries in the world, relying on foreign donors for close to half of its public expenditures. For many years, Bank transport lending was cofinanced by a combination of multilateral and bilateral development agencies. In recent years, however, the level of cofinancing has radically decreased, largely because the overall assistance for transport has decreased. The most recent Bank-supported project, the 2004 road project, is cofinanced by just one bilateral agency that provides a small fraction of the funding, compared with the Bank’s amount. Other development agencies also provide funding for transport, although the number of agencies and the total allocated to transport has been greatly reduced, compared with a few years ago. Most agencies are now focusing on the social sectors or on providing budget support.
Bank lending for transport over the past 25 years has followed an erratic pattern. During fiscal 1981–86, lending was limited to a small port project. The highest level of lending was achieved during the 10-year period fiscal 1986–95, when it exceeded $50 million a year on average and included roads, ports, and railway projects. However, 40 percent of the 1994 road project was canceled, substantially reducing the Bank’s actual contribution to transport during this period. There was no lending in this sector during fiscal 1996–2000. During the recent 5-year period (fiscal 2001–05), lending for transport resumed and has reached $122 million.
During the fiscal 1981–2005 period, lending for roads accounted for more than three-quarters of total transport lending. Most road projects financed road rehabilitation. They also provided technical assistance to the Ministry of Works, mainly to strengthen its road management and maintenance capacity.
The last railway project, in 1990, was intended to help TRC become a commercially viable enterprise, operationally efficient and financially selfsufficient. During implementation, it became evident that its parastatal framework imposed serious constraints on efficient commercial operations. In line with the economic reforms, the objective was changed from helping restructure to assisting with transferring the railway to a private operator. Bank involvement with the TAZARA railway did not commence until 2004.
Two port projects (in fiscal 1985 and fiscal 1990) had as their main objectives support of the Tanzanian ports agency and expansion and modernization of its facilities. As in the case of the railway project, the objective of the last project was eventually shifted to privatize the container terminal; this was fully achieved.
Transport projects also provided assistance to a state-owned trucking corporation, a study of urban transport in Dar-es-Salaam, the management of the Air Tanzania Corporation, and studies for the development of a rapid bus transit system for Dar-es-Salaam. Public sector management projects helped finance the process for involving the private sector in ports and railways and assisted in the creation of a new transport regulatory agency. During the period under review, the Bank did not carry out formal sector work, either for the transport sector as a whole or for individual transport modes. However, internal staff appraisal reports have generally been thoroughly prepared and contain much useful information.
Performance of Bank Assistance
Six of the nine transport projects closed since fiscal 1981 had satisfactory outcomes. These projects generally achieved their physical objectives, which were relevant to the Tanzanian economy and were mostly completed as expected and within reasonable costs. The economic return on the project investments was high, and several projects had returns of over 20 percent.
The reasons for the three project failures (a railway and two roads) varied. The railway project failed, despite improvements in operations and infrastructure, because of overambitious goals regarding improvements in operational efficiency, financial performance, and the time to complete transfer to a private operator. The unsuccessful road projects did not improve the condition of the roads to satisfactory levels, and the government showed no commitment to achieve institutional improvements. The failed railway and 1990 road projects were deemed unsustainable.
Three projects were considered to have a substantial institutional development impact: two port projects and the failed railway project. Privatization of the last and the substantial progress toward privatization of the railway were deemed to have significant institutional impact. In the port project, performance indicators after privatization confirmed that the impact had been real. Two transport projects are currently active. One is a 1994 roads project and the other a 2004 transport project. Both projects appear to be meeting their development objectives and making satisfactory implementation progress.
Issues
The following appear as being of interest for future Bank assistance: - Funding and autonomy of TANROADS need to be improved.
- The Bank needs to improve its intellectual contribution through the preparation of policy and strategy papers.
- The privatization of ports and (eventually) rail requires strengthening of the regulatory systems.
- Port privatization should advance further by transferring further facilities to private operators.
|
|
|
RSS