AFRICAN DEVELOPMENT FUND

Language: English Original: English

MULTINATIONAL: INSTITUTIONAL SUPPORT FOR

EAST AFRICA TRADE AND TRANSPORT FACILITATION PROJECT APPRAISAL REPORT

INFRASTRUCTURE DEPARTMENT

OINF OCTOBER 2006

TABLE OF CONTENTS EXECUTIVE SUMMARY .......................................................................................................................................XI 1.

ORIGIN AND HISTORY OF THE PROJECT ............................................................................................ 1

2.

THE TRADE AND TRANSPORT SECTORS.............................................................................................. 2

3.

4.

5.

6.

7.

2.1

OVERVIEW ................................................................................................................................................. 2

2.2

TRADE SECTOR ......................................................................................................................................... 3

2.3

THE REGIONAL TRANSPORT SYSTEM ..................................................................................................... 5

2.4

REGIONAL TRANSPORT POLICY AND PLANNING.................................................................................. 10

THE TRADE AND TRANSPORT FACILITATION SUBSECTOR....................................................... 11 3.1

OVERVIEW OF FACILITATION ................................................................................................................ 11

3.2

INFRASTRUCTURE BOTTLENECKS ......................................................................................................... 12

3.3

POLICY AND REGULATORY FRAMEWORK ............................................................................................ 14

3.4

INSTITUTIONAL FRAMEWORK ............................................................................................................... 16

THE PROJECT............................................................................................................................................... 20 4.1

PROJECT CONCEPT AND RATIONALE .................................................................................................... 20

4.2

PROJECT AREA AND BENEFICIARIES..................................................................................................... 22

4.3

STRATEGIC CONTEXT............................................................................................................................. 25

4.4

PROJECT OBJECTIVES ............................................................................................................................ 25

4.5

PROJECT DESCRIPTION .......................................................................................................................... 25

4.6

ENVIRONMENTAL AND SOCIAL IMPACT ................................................................................................ 28

4.7

PROJECT COSTS ...................................................................................................................................... 29

4.8

SOURCES OF FINANCING AND EXPENDITURE SCHEDULE .................................................................... 31

PROJECT IMPLEMENTATION................................................................................................................. 32 5.1

EXECUTING AGENCY .............................................................................................................................. 32

5.2

INSTITUTIONAL ARRANGEMENTS .......................................................................................................... 33

5.3

SUPERVISION AND IMPLEMENTATION SCHEDULE ................................................................................ 34

5.4

PROCUREMENT ARRANGEMENTS .......................................................................................................... 34

5.5

DISBURSEMENT ARRANGEMENTS .......................................................................................................... 37

5.6

MONITORING AND EVALUATION ........................................................................................................... 37

5.7

FINANCIAL REPORTING AND AUDITING ................................................................................................. 37

5.8

AID CO-ORDINATION .............................................................................................................................. 38

PROJECT SUSTAINABILITY AND RISKS.............................................................................................. 38 6.1

PROJECT SUSTAINABILITY ..................................................................................................................... 38

6.2

CRITICAL RISKS AND MITIGATION MEASURES .................................................................................... 39

PROJECT BENEFITS ................................................................................................................................... 40 7.1

ECONOMIC BENEFITS ............................................................................................................................. 40

7.2

SOCIAL AND POVERTY REDUCTION BENEFITS ..................................................................................... 41

8.

CONCLUSIONS AND RECOMMENDATIONS ....................................................................................... 42 8.1

CONCLUSIONS ......................................................................................................................................... 42

8.2

RECOMMENDATIONS .............................................................................................................................. 42

This Report was prepared by Mr. A. OUMAROU, Transportation Engineer/Team leader (Ext. 3075), a Transport Consultant, and a Customs Consultant following an appraisal mission to Tanzania, Kenya, Uganda and Rwanda in March 2006. Any inquiries relating to this report may be referred to either the Task Team Leader or to Mr. J. RWAMABUGA, Manager, OINF.2, Ext. 2181 or to Mr. G. MBESHERUBUSA, Director, OINF Ext. 2034.

i

AFRICAN DEVELOPMENT FUND 01 B.P. 1387 - ABIDJAN Tel: 20 20-44-44 Fax: (225) 20 20-49-86 Telex: 23717, 22202, 22203 PROJECT INFORMATION SHEET The information given below is intended to provide some guidance to prospective suppliers, contractors, consultants, and to all who may be interested in the procurement of goods, works, and services for projects approved by the Board of Directors of the Bank Group. More details and guidance could be obtained from the Executing Agencies of the Borrowers. 1.

COUNTRIES

:

Kenya, Rwanda, Tanzania, Uganda, Burundi

2.

PROJECT TITLE

:

Institutional Support for East Africa Trade & Transport Facilitation Project

3.

LOCATION

:

Kenya, Tanzania, Rwanda, Uganda, Burundi

4.

BORROWER

:

N/A

5.

BENEFICIARIES

:

EAC, NCTTCA, TTFA

6.

EXECUTING AGENCIES

: East African Community P.O. Box 1096 Arusha, Tanzania Tel: (255) 27 2504253 Fax: (255) 27 2504255 Email: [email protected] NCTTCA Secretariat P.O. Box 95341 Mombasa, Kenya Tel: (254) 41 314643 Fax: (254) 41 311572 Email: [email protected] Ministry of Infrastructure Development P.O. Box 9144 Dar es Salaam, Tanzania Tel: (255) 22 2112858 Fax: (255) 22 2112751 Email: [email protected]

7.

DESCRIPTION

: The project is co-financed by the ADF and the World Bank. The World Bank (IDA) component provides national level assistance to Kenya, Uganda, Tanzania and Rwanda that is designed to improve trade and transport facilitation

ii

process. The components focus on: (i) port improvements in security, procedures and cargo handling; (ii) support of customs modernization and greater use of IT and electronic communications to streamline procedures, feasibility studies and implementation of onestop border posts; (iii) improvement of overland transit regarding weighbridge equipment and operations, development of ICDs and improved intermodal handling throughout the Corridor network; and (iv) support to the implementation of the Joint Concession of Kenyan and Ugandan Railways. The African Development Bank (ADF) components provide regional level assistance to the East African Community, and the two main Corridor Authorities to strengthen their role in policy, planning, harmonization, and coordination. The components focus on: (i) Implementation of the EAC Customs Union; (ii) Assistance to NCTTCA to implement facilitation measures on the Northern Corridor; (iii) Establishment of the Central Corridor Transit Transport Facilitation Agency (TTFA). 8.

TOTAL COST

:

UA 195.50 million

9.

ADF GRANT

:

UA 9.20 million

10.

OTHER FINANCIERS WORLD BANK (IDA) GOK, GOR, GOT, GOU EAC, NCTTFA, TTFA

: : : :

UA 138.11 million UA 46.39 million UA 0.95 million

11.

DATE OF APPROVAL

:

IDA (January ’06) ADF (Nov. 2006)

12.

ESTIMATED STARTING DATE OF PROJECT AND DURATION

:

January 2007 – 48 months

13.

PROCUREMENT OF GOODS (ADF-Funded Components)

:

The Acquisition of the Regional Customs IT interconnection system and related computers and database systems will be under International Competitive Bidding (ICB) procedure. The Acquisition of Video Conferencing System, Corporate ICT, and office furniture will be through International and National Shopping. 14.

CONSULTANCY SERVICES REQUIRED AND STAGE OF SELECTION (ADF-Funded Components):

iii

The consulting services under the project will be procured on the basis of short-lists of qualified consulting firms or qualified candidates (for the recruitment of TTFA staff and fix-term technical experts for capacity building). The following services are included in that category: (i) EAC Transport Strategy and RRSDP, (ii) Regional Customs IT Interconnection Study, and (iii) Northern Corridor Infrastructure Master Plan, (iv) EAC Trade & Transport Facilitation Program, (v) EAC Customs Strategy, (vi) EAC Customs Training, (vii) NCTTCA Transit Facilitation Program, (viii) TTFA Business & Strategic Plan, (ix) Transport Cost Study, and (x) Recruitment of fix-term experts. Project audit services will be procured on the basis of a Short list of auditing firms. The procurement of project components funded by IDA will be in accordance with World Bank procedures.

iv

CURRENCY AND MEASURES Currency Equivalents (April 2006 Exchange Rates) 1 UA 1 UA 1 UA 1 UA UA

= = = = =

KES 105.041 TZS 1701.95 UGX 2618.57 RWF 795.027 USD 1.45250

Weights and Measures 1 metric ton (t) 1 kilogram (kg) 1 meter (m) 1 foot (ft) 1 kilometer (km) 1 square kilometer (km2) 1 hectare (ha) = 0.01 km2

= = = = = = =

2,205 lbs. 2.205 lbs. 3.281 ft 0.305 m 0.621 mile 0.386 square mile 2.471 acres

FISCAL YEAR July 1 – June 30 LIST OF TABLES AND FIGURES Table 2. 1 Table 2.2 Table 3.1 Table 3.2 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 5.1 Table 5.2

: : : : : : : : : : : : :

Importance of Trade and Transport in GDP, 2003 Trade of Project Countries, 2004 Time and Procedures involved in Import and Export Facilitation Funded by Other Development Partners Project Overall Costs per Component and Source of Finance Project Overall Costs per Country and Source of Finance Summary of Project Cost Estimates by Component (Net of Taxes) Sources of Finance by Component Financing Plan by Source of Funds Expenditure Schedule by Component Expenditure Schedule by Source of Finance Summary of Project Implementation Schedule Summary of Procurement Arrangements LIST OF ANNEXES

Annex 1 Annex 2 Annex 3 Annex 4 Annex 5 Annex 6

: : : : : :

Project Location Map Organizational Chart of Executing Agencies Project Implementation Schedule Detailed Description of Project Abridged Terms of Reference Project Processing Schedule

No of Pages 1 2 1 4 8 1

v

ABBREVIATIONS AND ACRONYMS ACIS ACV ADF AfDB APL ASYCUDA CET CIDA COMESA COMESA CD CU DANIDA DFID DRC EAC EACCMA EATTFP EDI EIU ESA EU FDI FTA GATT GDP GNI GOB GOK GOU GPN HS IDA ICD IEA ISPS KPA KRC MAGERWA MID NCTTCA NEPAD OSBP PCR PIT PRG PTA RAFU RCBG REC RKC ROO RSC RVRC

Advanced Cargo Information System Agreement on Customs Valuation African Development Fund African Development Bank Adjustable Programmatic Lending Automated System for Customs Data Common External Tariff Canadian International Development Agency Common Market For East and Southern Africa COMESA Customs Document Customs Union Danish International Development Agency Department for International Development(United Kingdom) Democratic Republic of Congo East African Community East African Community Customs Management Act (2004) East Africa Trade and Transport Facilitation Project Electronic Data Interchange Economic Intelligence Unit East and Southern Africa European Union Foreign Direct Investment Free Trade Area General Agreement on Tariffs and Trade Gross Domestic Product Gross National Income Government of Burundi Government of Kenya Government of Uganda General Procurement Notices Harmonized Commodity Description and Coding System International Development Association Inland Container Depot Interim Executing Agency International Ship and Port Facility Security Code Kenya Ports Authority Kenya Railways Corporation Magasins Generaux du Rwanda (General Wholesale Markets of Rwanda) Ministry of Infrastructure Development (Tanzania) Northern Corridor Transit Transport Coordination Authority New Partnership for Africa's Development One Stop Border Post Project Completion Report Project Implementing Team Partial Risk Guarantee Preferential Trade Area Road Agency Formation Unit Regional Customs Bond Guarantee Regional Economic Community Revised Kyoto Convention Rules of Origin Regional Steering Committee Rift Valley Railway Consortium

vi

SADC SIDA SIL SUMATRA TANROADS TEU TPA TRC UA UNCTAD UNDP UNECA URC USAID ECA

South Africa Development Community Swedish Development Agency Sector Investment Loan Surface and Marine Transport Authority Tanzania Roads Twenty -foot Equivalent Unit Tanzania Ports Authority Tanzania Railways Corporation Unit of Account United Nation Conference on Trade and Development United Nations Development Programme United Nations Economic Commission for Africa Uganda Railways Corporation East and Central Africa Trade Hub funded by USAID

vii MULTINATIONAL East Africa Trade & Transport Facilitation Project OVERALL PROJECT MATRIX HIERARCHY OF OBJECTIVES

EXPECTED RESULTS

PERFORMANCE INDICATORS

INDICATIVE TARGETS

ASSUMPTIONS/RISKS

The project is completed in 2010. To determine longer-term impact this should be done in 2015.

Peace and Security in the region is maintained

Beneficiaries:

Goal Sector/Theme: Contribute to increase the competitiveness of traded goods through reduction of transport and transaction costs.

REACH

Increased trade volumes and value. EA captures new markets and plays a greater role in global supply chains.

The general public through increased goods at lower prices and the EAC and national economies through trade-induced economic growth.

Increase in intra-regional trade volumes and value that can be linked to the project. Source: EAC trade statistics, before and after. Increase in external trade volumes and value from project countries. Source: National trade statistics.

Objectives: Secure effective EAC Customs Unions and ensure openness to candidate countries.

Reduce transit time, non-tariff barriers and uncertainty along the region’s main trade corridors.

The EAC Customs Union is established and functions in a harmonized way.

Residents and businesses in the EAC.

Rwanda developed and implemented a comprehensive action plan for accession.

Rwandese who will benefit from greater availability of goods and services at lower prices.

Rwanda has completed the requirements for accession. Source: Record of submission for membership.

Transit time and variance on the Northern and Central Corridors is significantly reduced.

Shippers, transporters, logistics providers, international buyers and sellers, government agencies and the general public.

Transit time and variation of time from Kigali to ports. Source: Baseline and end of project survey of transit time and variance.

Single customs document introduced from Mombasa to Kigali by 2009.

Policies and regulations on both Corridors are harmonized.

Introduction of single customs document from Mombasa to Kigali. Source: Customs and border records.

Interconnectivity fully functioning by 2009 and escort system abolished.

Customs interconnectivity is operational. Escorting is ended.

Interconnectivity full functioning.

Ports have improved security in compliance with ISPS Code. Improve rail transport efficiency and reduce governmental transfers to railways.

EAC Customs Union is fully operational in Kenya, Uganda and Tanzania. Source: EAC records.

Customs Management Law is operational by 2008 and fully utilized by 2010.

Railway concession is effective and financially sustainable.

Shippers, international buyers and the general public who benefit from improved service and reduced cost for commodities where rail has a competitive advantage.

Audit by IMO of ISPS compliance. Source: IMO Interview shippers regarding effectiveness and review railways annual reports to assess financial sustainability.

Rwanda has completed preparation for accession by 2008. Transit time reduced by 30% by 2010. Variation of transit time reduced to 7 days by 2010.

Ports of Mombasa and Dar receive ISPS certification, 2010. Rail market share increased to 30% by 2010. Overall transport and insurance costs reduced by using more rail transport.

EAC member countries remain committed to regional cooperation and integration. EAC membership has priority over other similar arrangements

viii HIERARCHY OF OBJECTIVES

EXPECTED RESULTS

REACH

PERFORMANCE INDICATORS

INDICATIVE TARGETS

ASSUMPTIONS/RISKS

Activities/Inputs: Component 1 US$45.41 Support to the Customs Union Implementation

Strategy for CU implementation, Approved law and regulations, being executed and understood by shippers, forwarders, etc. Training needs assessment and training developed, Monitoring & evaluation system.

All laws and regulations necessary for the implementation of CU operation domesticated by 2008. Source: National Customs Administrations.

CU operating in Kenya, Uganda and Tanzania by 2010.

Customs officials and other agencies that utilize customs data.

Customs officials able to run specific types of reports and analyses. The data base meeting predetermined needs.

Interconnectivity fully functioning by 2009. Data base functional by 2009.

EAC CU. Shippers, transport operators, forwarders, national customs administrations

Over 300 customs officials trained.

Support for customs modernization and interconnectivity of national administrations

Interconnectivity operational among Kenya, Uganda, Tanzania Rwanda and EAC. Common customs data base is established and operational.

Support to national customs administrations

Effective modernization and streamlined procedures in each country.

Revenue Authorities, customs officers.

Each national component has its own indicators.

The target is to complete all national program targets by 2010.

Masterplan for Northern Corridor Improved facilitation, including National facilitation committees FS for 3 border posts Improved IT and procurement capacity

NCTTCA Secretariat.

Transit time from Mombasa to Kigali decreased by 30%. Source: Survey of hauliers. Introduction of single customs document from Mombasa to Kigali. Source: Forwarders and Border records. Permanent staff able to handle AfDB procurement procedures

Gradual decrease with 30% achieved by 2010. Variation of time reduced by 7 days by 2010. Single customs document introduced by 2009. By 2008, staff should be fully conversant on AfDB procedures By 2009, staff able to maintain website and publish electronic newsletter.

Transit time from Dar es Salaam to Kigali decreased by 30%. Source: Survey of hauliers. Introduction of single customs document from Dar es Salaam to Kigali. Source: Forwarders and Border records.

Gradual decrease with 30% achieved by 2010. Variation of time reduced to 7 days by 2010. Single customs document introduced by 2009.

Component 2

See above.

Poor regional telecom systems has been addressed.

US$19.63

Northern Corridor Transit Transport Coordination Authority is strengthened.

TTFA Secretariat. Central Corridor Transit Transport Facilitation Agency is established.

Organization operating. Strategy and business plan prepared. Improved facilitation on Corridor. Secretariat able to handle AfDB procurement.

EAC Transport Sector Development Strategy and Facilitation

Medium-long-term road development master plan Harmonized construction standards, licensing, etc.

EAC. Development of project proposals based on long range plan. Harmonization of road traffic regulations, construction and environmental standards, and vehicle licensing and registration.

Preparation of two fully documented project proposals based on master plan by 2010. Harmonization of road traffic and vehicle regulations and construction and environmental standards by 2010.

.

The risk is lack of coordination between countries and among agencies in each country. Mitigation: Specific task force in each country comprising all agencies at the borders with regional coordination at the EAC and bilateral committees for each border.

ix HIERARCHY OF OBJECTIVES

EXPECTED RESULTS

REACH All port users served by Mombasa and Dar es Salaam.

Port Investment

Improved Security at ports. Community-based systems are installed and operational.

Axle load control improved without adding barriers to transit time on main corridors.

Improved load control in Tanzania, Kenya, Uganda and Rwanda.

All Corridor users.

Component 3

US$129.43

Implement one-stop borders.

Component 4

Malaba (Kenya/Uganda) Busia (Kenya/Uganda) Isebania–Sirari (Kenya/Tanzania) Lungalunga-Horohoro (Kenya/Tanzania) Gatuna-Katuna (Uganda/Rwanda) Rusumo Falls (Tanzania/Rwanda)

All Corridor users.

Concession is effective and financially sustainable. Market share improves and efficiency improves.

All railway users and indirectly all transport users in more costeffective allocation of cargo to modes.

PERFORMANCE INDICATORS

INDICATIVE TARGETS

Audit by IMO of ISPS compliance. Source: IMO Scheduling and document exchange among all port users done electronically. Dwell time at Mombasa reduced to 7 days and Dar to 10 days.

Ports of Mombasa and Dar receive ISPS certification, 2010. Scheduling and document exchange among all port users done electronically by 2010. Dwell time reduced to target by 2010.

Reduced time at weighbridges, combined with end of escorting.

Reduced time at weighbridges, combined with end of escorting.

Reduce crossing time by 20% to 35%.

Reduce crossing time by 20% to 35%.

Rail market share increased from current 16% to 30%. Source: Annual Report. Railway costs for government are diminished. Transit time from Mombasa to Kampala reduced to 7 days.

Rail market share reaches 30% by 2010.

ASSUMPTIONS/RISKS

US$85.59

Implementation of railway concession.

Net transfers negative for GOU by 2007 and for GOK by 2009. Transit time from Mombasa to Kampala reduced to 7 days by 2008.

See above.

x MULTINATIONAL Institutional Support for East Africa Trade & Transport Facilitation Project ADF GRANT MATRIX HIERARCHY OF OBJECTIVES

EXPEXTED RESULTS

REACH

PERFORMANCE INDICATORS

INDICATIVE TARGETS

ASSUPTIONS/RISKS

Sector Goal Contribute to increase the competitiveness of traded goods through reduction of transport and transaction costs.

Reduction of Transports and transaction costs for import and export.

Populations of East Africa.

2.1 EAC Customs Management Law is implemented within EAC region. Regional customs IT interconnection and customs database are in place. 2.2 Total transit time through the northern & central corridors is reduced. Standard deviation of average transit time is reduced.

Business community, exporters, importers, truckers, farmers, East African Community.

Project Objective 2.1 Secure effective implementation of the EAC Customs Union. 2.2 Reduce transit time, non-tariff barriers and uncertainty along the region main trade corridors

Activities Consultancy Services EAC Transport Strategy (1.20 M). EAC Transport Facilitation (0.42 M). Customs Union Implement. (1.73 M). EAC Capacity Building (0.54 M). NC Infrastructure Plan ((0.80 M). NC Transit Facilitation (1.00 M) NCTTCA Capacity (0.28 M) TTFA Capacity (0.53 M) TTFA 5-YBSP (0.17 M) Project Audits (0.14 M) Acquisition of Goods & Other 4.11 TTFA Basic Equipment (0.08 M) 4.12 Regional Customs IT Hardware & Software (2.08 M) 4.13 EAC Video Conferencing Equipment (0.10 M) 4.14 TTFA Operating Costs (0.42 M)

4.1 EAC customs strategy. Regional interconnection of Customs IT systems and common databases; EAC customs training workshops; Training in WTO trade facilitation negotiations. Establishment of Central Corridor Management Agency EAC Transport Strategy and 10-Year Regional Road Sector Development Program. Northern Corridor Infrastructure Master Plan. Regional instrument for harmonizing policies and regulation regarding transport and transit along the Northern corridor and Central Corridors. 4.6 Trade adviser & Project Monitoring Consultant for EAC. Procurement and IT experts for NCTTCA. Short term training for Staff of EAC and NCTTCA.

Shippers, Freight Forwarders, Transporters, EAC, NCTTCA, TTFA, National Customs, Revenue Authorities, Ministries in charge of Transport and roads of EAC member countries.

Ratio of transport and insurance costs to total value of exports for the region reduced by 30%. Source: Trade Data from IMF, COMESA

Transport and Insurance costs for East Africa Region reduced to 13% of total value of export by 2010. Baseline: 18% in 2003.

EAC Customs Union is established and operational. Transit time through northern and central corridors reduced by 30%. Variation of average transit time reduced by 50% to 7 days.

EAC Customs Union established and fully operational by 2009. 30% reduction in transit time and 50% reduction in transit time variation achieved by 2010. Baseline: transit time MombasaKigali is 19 days in 2005.

Member Countries remained committed to regional cooperation and their membership to EAC and the customs union. Rwanda and Burundi become members. Member Countries support actively harmonized transport policies and programs and pursue their implementation vigorously.

The regional interconnection of Customs IT systems installed and operating; Common Database installed and operating; EAC customs curriculum and procedures prepared. 300 customs officers from member countries trained. The Central Corridor Transport Transit Facilitation Agency is created and operating efficiently; Reports for the Regional Road Sector Development Program and NC Infrastructure Master Plan studies validated by stakeholders; Harmonized Policies and regulations regarding transport and transit in the region are incorporated in national laws and regulations;

The regional interconnection of Customs common database and IT systems installed and operating by 2009. EAC customs curriculum and procedures prepared by 2008. 300 customs officers from member countries trained by 2009. Harmonized transport policies and programs adopted and incorporated in individual countries development plans by 2009. Regional road network Program adopted by member countries & receive implementation commitment of donors by 2009.

Effective coordination of the implementation of the CU, and the adoption of regional transport policies and plans is carried out by the EAC with strong support from the member states. The Central Corridor Facilitation is established in a timely manner. A conducive environment for a genuine partnership between the public and private sector stakeholders is put in place by the EAC, NCTTCA, and TTFA.

xi

EXECUTIVE SUMMARY Project Background The East African Community (EAC) is a regional economic community comprising the Republics of Kenya, Uganda and Tanzania. The three EAC countries cover an area of 1.8 million square kilometers with a population of about 95 million. The member states signed a Customs Union (CU) Protocol in March 2004, to speed up regional economic integration and cooperation; and approved a Customs Management Law on December 31, 2004, for a common external tariff and reduced internal tariffs to be applied starting from January 1, 2005. The EAC countries are committed to enhance the competitiveness of their economies through increased production, trade, and investment and to deepen their regional integration. Rwanda and Burundi are also in the process of joining the EAC. The modernization of regional transport infrastructure and the removal of non tariff barriers to trade are among the key priorities of the EAC. The reduction of trade tariffs however, will have only limited impacts in promoting intraregional trade among the member countries unless it is accompanied by measures to address both the physical and non-tariff barriers including the poor condition of transport infrastructure, underdeveloped transport and logistics services, as well as slow and cumbersome bureaucratic procedures at the ports and border-crossing points. To tackle these challenges, the EAC member countries, and the other landlocked countries of the Great Lakes region approached the World Bank and the African Development Bank to solicit their financial assistance for a trade and transport facilitation project. The proposed project was conceived as a multi-national/multi-sector Program to support trade growth in the region, by securing an effective EAC Customs Union, reducing transit time, non-tariff barriers, and uncertainty along the region’s main logistics chains. The World Bank component provides national level assistance to Kenya, Uganda, Tanzania and Rwanda that is designed to improve the facilitation process. The components focus on: (i) port improvements in security, procedures and cargo handling; (ii) support of customs modernization and greater use of IT and electronic communications to streamline procedures, feasibility studies and implementation of one-stop border posts; (iii) improvement of overland transit regarding weighbridge equipment and operations, development of ICDs and improved intermodal handling throughout the Corridor network; and (iv) support to the implementation of the Joint Concession of Kenyan and Ugandan Railways. The African Development Bank components provide regional level assistance to the East African Community, and the two main Corridor Authorities to strengthen their role in policy, planning, harmonization, advocacy and implementation of the Customs Union and facilitation measures on specific Corridors. Purpose of the Grant The ADF grant of UA 9.20 million will be used to finance the entire foreign exchange cost of UA 8.20 million and UA 1.00 million of local cost to support the regional activities under the East Africa Trade and transport Facilitation Project. The grant will specifically finance the institutional support for the establishment of the EAC customs union, the strengthening of the Northern Corridor Transit Transport Coordination Authority, and the establishment of the Central Corridor Transit Transport Facilitation Agency.

xii

Sector Goal and Project Objective(s) The sector goal of the project is to promote trade, economic growth, and regional integration of the East African countries and enhance the competitiveness of their economies through the modernization of regional transport infrastructure and the removal of non tariff barriers to trade. The project objectives are twofold; (i) Improve trade environment through the effective implementation of the EAC Customs Union Protocol; and (ii) Enhance transport and logistics services efficiency along key regional transport corridors by reducing non tariff barriers, delays, and uncertainty of transit time. Brief Description of Project Outputs: The project comprises the following major components: A. Support to implement EAC Customs Union B. Institutional support for transport facilitation C. Investment support for transport facilitation D. Support to the Concession of the Kenya-Uganda Railway E. Partial Risk Guarantee (PRG) for the Railway Concessions. The African Development Fund is funding the implementation of the regional elements of components (A) and (B) supporting the EAC Secretariat and the Transport Corridor Management Institutions. The World Bank (IDA) is funding the national elements of component (A) and (B) as well as components (C), (D), and (E). Project Cost The estimated total cost of the project irrespective of the financing source is UA 195.50 million (USD 280.06 million) not including the Partial Risk Guarantee. The cost of the regional components of the project are estimated at UA 9.85 million (US$14.19 million), of which UA 8.20 million (US$11.77 million) is in foreign exchange and UA 1.68 million (US$2.42million) is in local cost. Source of Finance The proposed project will be co-financed by the World Bank, the ADF, Kenya, Tanzania, Uganda, and Rwanda. The EAC Secretariat and the Corridor Authorities will also contribute a small portion in financing their respective components. The World Bank will provide UA 138.11 million (US$ 199.02 million) representing 71% of the total cost; the ADF will provide UA 9.20 million (US$ 13.21 million) equivalent to 5% of the total project cost; and the beneficiary countries and regional entities will contribute UA 47.07 million (US$ 67.83 million) representing 24%. Project Implementation The ADF-funded project components will be implemented by the EAC, the NCTTCA, and the Tanzania Ministry of Infrastructure Development for the TTFA component. The

xiii

components of the project funded by the ADF will be implemented over a period of 48 months including the time for procurement, starting from January 2007. Conclusions and Recommendations The project is expected to contribute to enhance trade and regional integration, by reducing general transport costs, increasing market sizes beyond national boundaries, increasing economic output, and giving rise to other socio-economic benefits. The decrease in transport costs will increase the competitiveness of the region’s exports and lead to increased production and farm gate prices. The World Bank took the lead in computing the economic internal rate of return of the whole project, which was estimated at 26%. The project is consistent with the objectives of the New Partnership for Africa’s Development (NEPAD) and part of its short-term action plan for infrastructure. It is also consistent with the Bank Group’s Policy on Regional Economic Cooperation and Integration, which provides the basis for the utilization of ADF resources for multinational projects. It is recommended that: i) A grant not exceeding UA 9.20 million from ADF resources for multinational projects be extended to the East African Community (EAC) Secretariat, the Northern Corridor Transit Transport Coordination Authority (NCTTCA), and the Central Corridor Transit Facilitation Agency (TTFA) for the purpose of implementing the regional components of the East Africa Trade and Transport Facilitation Project described in this report, subject to the conditions specified. The grant is broken down in UA 6.20 million for the EAC Secretariat, UA 2.00 million for NCTTCA and UA 1.00 million for TTFA.

1.

ORIGIN AND HISTORY OF THE PROJECT

1.1 The East African Community (EAC) is a regional economic community comprising the Republics of Kenya, Uganda and Tanzania. The three EAC countries cover an area of 1.8 million square kilometers with a population of about 115 million. The EAC countries are committed to enhance the competitiveness of their economies through increased production, trade, and investment and to deepen their regional integration. Rwanda and Burundi are also in the process of joining the EAC. The modernization of the regional transport infrastructure and the removal of non tariff barriers to trade are among the key priorities of the EAC. 1.2 The EAC member states signed a Customs Union (CU) Protocol in March 2004, to accelerate the pace of regional economic integration and cooperation. A Customs Management Law was approved on December 31, 2004, for a common external tariff and reduced internal tariffs to be applied starting from January 1, 2005. To implement the Customs Union, a joint customs administration, linking the newly established Customs Department at the EAC Secretariat in Arusha with the Revenue Authorities in the partner states will be established. 1.3 The elimination of trade tariffs however, will have only limited impacts in promoting intra-regional trade among the member countries unless it is accompanied by measures to address both the physical and non-tariff barriers including the poor condition of transport infrastructure, underdeveloped transport and logistics services, as well as slow and cumbersome bureaucratic procedures at ports and border-crossing points. 1.4 To tackle these challenges, the EAC, its member countries, and the other landlocked countries of the Great Lakes region approached the World Bank to solicit its financial assistance for a trade and transport facilitation project. The project was conceived as a multi-national/multisector program to support trade growth in the region, by securing an effective EAC customs union open to candidate countries, and reducing transit time, non tariff barriers and uncertainty along the region’s main logistics chains. At the AfDB/World Bank meeting on Regional Integration Strategic Partnership held in Tunis in June 2005, several regional integration projects were discussed for potential cooperation between the two institutions. The East African Trade and Transport Facilitation Project was jointly identified as a flag ship project that could be cofinanced by the two institutions based on their respective comparative advantages. Under the partnership arrangement, the World Bank would finance the countries’ national components, while the AfDB would finance the regional components of the project. 1.5 A Bank project identification mission visited Kenya, Uganda and Tanzania in August 2005, and a follow-up mission to Rwanda and Burundi was undertaken in November 2005. The missions were jointly undertaken with the World Bank which conducted also the initial fiduciary assessments of the whole project as part of its preparation. Project preparation has also benefited from several trade diagnostics studies carried out by the World Bank and USAID-funded East and Central Africa Trade Hub in Nairobi, Kenya. Besides the concerned governments, regional entities, and other project beneficiaries, the design and formulation of the project also benefited from the wide consultations carried out by the Bank and World Bank project teams, including the donor community, corridor groups, transport operators, shippers associations, manufacturers associations, Community-based organizations, and NGOs.

2

1.6 The project has been accorded high priority by all the concerned countries and the EAC. It is consistent with the objectives of the New Partnership for Africa’s Development (NEPAD) and part of its short-term action plan for infrastructure. It is also consistent with the Bank Group’s Policy on Regional Economic Cooperation and Integration, which provides the basis for the utilization of ADF resources for multinational projects.

2.

THE TRADE AND TRANSPORT SECTORS

2.1

Overview

2.1.1 The Governments of East Africa (Kenya, Tanzania and Uganda) and the Great Lakes region (Rwanda, and Burundi) see trade as a major driver of economic growth, poverty reduction and stability in the region. Tariff reduction alone, however, will not bring these trade benefits. Reductions must be complemented by improved transport infrastructure, trade and transport facilitation, private sector capacity to produce goods and services competitively, improved government service and reduction in risk and transaction costs for trade participation by the poor. 2.1.2 The East African and Great Lakes countries are still overly dependent on a narrow range of similar goods that may be negatively affected by more efficient suppliers elsewhere and market swings in demand and price. For this reason, the national trade strategies of these countries all focus on improving traditional exports while diversifying exports to new products with high growth potential. Current production trends offer new opportunities for trade diversification. Major global industries source inputs world-wide and various stages of the manufacturing process are outsourced to the optimal location based on such factors as skilled and/or low cost labor, reliable energy and resource proximity. Modern just-in-time and just-in-sequence manufacturing and retailing techniques minimize the cost of maintaining inventories through “warehousing in transit”. Such systems require not only fast, but predictable supply chains, cargo tracking and rapid electronic transfers of information and payments. East African supply chains need considerable improvement to capture more of this manufacturing opportunity. 2.1.3 East Africa and the Great Lakes region are served by a fairly extensive rail, road, lake, and pipeline network from the major ports of Mombasa in Kenya and Dar es Salaam in Tanzania. The landlocked countries (Rwanda, Burundi, Uganda and eastern DRC) depend not only on their choices of trade and transport strategies, but also on the choices made in the coastal countries of Kenya and Tanzania. Intergovernmental agreements guarantee access and maintenance of the routes. Crucial to current trade development strategies are efforts to rehabilitate the transport infrastructure, modernize transport operation and maintenance, increase the use of IT to insure efficiency and cargo visibility, and improve trade and transport facilitation measures. 2.1.4 Inefficient transport and logistics chains act like a tax on production and undermine the ability of the East African countries to compete effectively in external markets. The following example illustrates the high cost of transport and insurance which makes East African/Great Lakes products very expensive by the time they reach the international market. In 2004, out of US$4.9 billion in export revenue for the region, US$775 million was spent on international transport. For the three landlocked countries in east Africa the percentage of transport cost to export value represented 62% for Rwanda, 43% for Burundi, and 37% for Uganda. By comparison, the average of 10 countries in southern Africa for 2004 was 13% for coastal countries and 20% for land locked countries.

3

2.1.5 The importance of trade and transport as components of GDP in the participating countries is shown in Table 2.2 below. Improvements in trade and transport facilitation can play a major role in increasing overall GDP and for their positive impact on other sectors that depend on them, such as industry. Table 2.1 – Importance of Trade and Transport in GDP, 2003 Transport % of GDP Trade % of GDP Total

Burundi na na

DRC 4% 16% 20%

Kenya 8% 27% 35%

Rwanda 7% 10% 17%

Tanzania 5% 12% 17%

Uganda 7% 11% 18%

Source: African Economic Outlook , 2005

2.2

Trade Sector

Current Trade Environment in East Africa and the Great Lakes Region 2.2.1 Trade within the region is increasing, although there is considerable annual variability for each country. The increase is likely to become more sizable as the economies of the Great Lakes region improve their trade position following the cessation of civil and political unrest. External trade has been increasing at an accelerating rate. Table 2.2 below illustrates the current value of trade in the economies of East Africa and the Great Lakes countries. Table 2.2 – Trade of Project Countries in 2004 (US$ Millions) Merchandise Country

Import

Services

Export

Import

Total

Export

Kenya

4,553

2,693

675

1,150

9,071

Tanzania

2,490

1,338

963

845

5,636

Burundi

176

47

38

2

263

Uganda

1,491

635

679

436

3,241

Rwanda

285

99

136

72

592

8,995

4,812

2,491

2,505

18,803

Total

2.2.2 To generate economic growth, regional integration and to negotiate effectively in international forums, several regional economic groups have formed. The first is COMESA (Common Market for Eastern and Southern Africa) to which all except Tanzania belong. It began as a preferential trade agreement and has now formed a free trade area, which all COMESA members in this region, except Uganda and DRC, have joined. In 1999, the East African Community was formed by Tanzania, Uganda and Kenya to create a customs union and eventually an economic and political federation. Both groups develop trade policies and are part of different groups when negotiating in the WTO and with the European Community. Tanzania is a member of SADC (Southern African Development Community) with similar transport harmonization instruments and longer range trade community goals. National Trade Development Strategies for Growth 2.2.3 Countries in the project area are all following liberalized trade policies. To decrease their vulnerability to demand and price shifts in the international market, all are seeking to

4

improve performance of traditional exports, while diversifying export commodities, markets and sectors within markets. A major constraint to production for all these countries in achieving their aims is the existing transport and logistics systems – the cost of acquiring inputs and of exporting goods. This is a constraint that the East African Trade and Transport Facilitation project is seeking to address. Kenya: 2.2.4 After a promising start, Kenya’s economy declined considerably in the past two decades. The infrastructure stock was allowed to deteriorate and bureaucratic controls proliferated. A modern, efficient transport and logistics system, on which not only Kenya, but also the inland countries depend, was not developed. Kenya’s share of world trade is now roughly half what it was in the mid 1980s. The Government of Kenya (GOK) has now embarked on improvement of infrastructure, modernization and greater involvement of its increasingly dynamic private sector. Kenya’s trade policy is to improve the traditional agricultural export sector and diversify into new sectors. New exporting industries are supported by tax exemptions for inputs and anti-dumping enforcement. Kenya maintains a liberalized external trade policy with increasing focus on regional integration through COMESA and EAC, which now accounts for most of Kenya’s trade within Africa. Implementation of the EAC common external tariff lowered Kenya’s maximum tariff rate from 35% to 25%. Real GDP grew by an estimated 5.2% in 2005, led by trade, tourism, transportation and communications. Inflation averaged 10.3% in 2005. Food shortages and high fuel costs were both inflationary factors, causing the estimate to remain high for 2006 at 9%, but to drop to 6.5% in 2007. The Privatization Bill of 2005 provides the legal framework for the current railway concessioning and the proposed privatization at the Port of Mombasa and energy operations. Foreign direct investment was US$81 million in 2003 and US$46 million in 2004. Two areas of investor interest are petroleum exploration and titanium mining. Tanzania: 2.2.5 After two decades of socialism and a decade of transition, Tanzania made a firm commitment to economic liberalization in the mid 1990s. Tourism and gold have underpinned recent export performance: tourism income increased ten times between 1990 and 1995 from US$47 million to around US$500 million. Gold exports increased 15 times between 1990 and 2003 (US$27 million to US$400 million). From 1990 to 1999, traditional agricultural exports grew rapidly from 50% to 61%, but were overtaken by non-traditional exports between 1999 and 2003, which went from 39% to 79%. Nevertheless, policymakers are concerned that trade is moving away from an employment-generating sector, agriculture, to sectors that are major financial earners but do not generate significant employment. In addition, mining and quarrying are import-intensive causing the initial net gain to be comparatively small. Real GDP grew about 6.8 percent in 2005. Inflation averaged 4.3% for 2005 led by high food prices. Annual inflation is expected to rise to 5% in 2006, the highest in a number of years, and return to 4% in 2007. Foreign direct investment was US$527 million in 2003 and US$470 million in 2004. Uganda: 2.2.6 Uganda has followed a trade policy of economic liberalization and diversification. Uganda has had low import tariffs traditionally and the recent implementation of the EAC common external tariff has actually raised import tariffs slightly. After quadrupling from US$176 million to US$684 million between 1990 and 1997, Uganda’s merchandise exports dropped off, and then rose again to US$720 million in 2005. While traditional exports were

5

declining, non-traditional exports were becoming the dominant category. Fish exports led the new exports rising from US$4.4 million in 1993 to US$114 million in 2005. Service exports are dominated by tourism, reaching US$197 million in 2004. Uganda’s real GDP growth rate in 2005 was 5.5%. A drought-induced rise in food prices led inflation to 8.4% in 2005; however, it is predicted to decline to 7.5% in 2006 and 6% in 2007. Uganda received US$211 million in foreign direct investment in 2003 and US$237 million in 2004. Foreign investors have been especially interested in Uganda’s manufacturing and telecommunications sectors. Rwanda: 2.2.7 Rwanda’s trade and poverty reduction policy is focused on increasing the involvement of rural farmers in cash crops, insuring higher farm gate prices and improving rural transport to markets. In 2004, coffee and tea constituted 58% of total exports and tourism 25%. Rwanda’s policy is to strengthen these exports while diversifying into new sectors, including niche markets for specialty coffee and tea. The constraint is that Rwanda’s low production costs are offset by high transport costs. The tourism strategy involves improving civil aviation and land transport. Rwanda achieved a 5.3% GDP growth rate in 2005 due to a favorable growing season and forecast to reach 6% by 2007. Performance in services and mining and to a lesser extent construction is improving, but manufacturing is still weak. Rwanda received US$5 million in foreign direct investment in 2003 and US$11 million in 2004. Burundi: 2.2.8 Burundi is moving away from its previous policies of high tariff and non-tariff barriers, import surcharges and an export promotion emphasis. In preparation for joining the COMESA FTA and EAC, Burundi has engaged in trade liberalization policies. Burundi has diversified away from the situation in 1976 when coffee constituted 91% of exports, but at 50% in 2001 Burundi’s economy is still very dependent on the price of coffee. Regional exports have begun to recover since the lifting of regional sanctions on Burundi. GDP growth for 2005 was only 1.1%, but it is expected to rise to 4.2% in 2006 and 4.9% in 2007. Two factors driving inflation in Burundi are fiscal policy and food prices. Both factors are likely to drive inflation up to 11% in 2006 and 8.5% in 2007. After receiving no foreign direct investment in 2001-3, Burundi received US$3 million in 2004. 2.3

The Regional Transport System

2.3.1 East Africa and the Great Lakes region of Rwanda, Burundi and eastern DRC are served by two main Corridors. The Northern Corridor which connects the Port of Mombasa to Nairobi, Kampala, Kigali, Bujumbura and eastern DRC; and the Central Corridor connecting the Port of Dar es Salaam to Kampala, with branches to Kigali, Bujumbura and entry points to DRC. The two Corridors serve an area of 3 landlocked countries (Uganda, Rwanda and Burundi), the eastern part of DRC, southern Sudan and Ethiopia (See Project Area Map in Annex 1). Dar es Salaam also serves the landlocked countries to its southwest (Malawi and Zambia). These two corridors and the ports of Mombasa and Dar es Salaam form the backbone of the regional transportation system in east Africa carrying the import and export of the five countries with a population of more 115 million people.

6

Ports 2.3.2 The Port of Mombasa is approximately twice the size of Dar es Salaam with 16 deepwater berths (3044 meters in length), a container terminal, two bulk terminals for cereals and cement and two petroleum terminals. The container terminal was built to handle 250,000 TEU1 per year. The existing level of port security is being improved through procurement of new patrol boats and improved perimeter fencing. A Port Master Plan for the next 20 years has recently been published. The Plan includes improving the container yard capacity and expanding the quay handling capacity by 2008. By 2012, a second container terminal will be built and expanded by 2021. The construction of a second container terminal will enable the port to handle around 1.8 million TEUs per annum by 2021. 2.3.3 The demand for cargo throughput is increasing steadily for both containerized and non-containerized cargo. The Port of Mombasa handled 12.92 million tonnes in 2004 with an annual average growth in demand in recent years of 7.3%. Demand for container traffic is increasing fastest. TEUs handled rose from 290,500 to 438,600 between 2001 and 2004, at an annual average growth rate of 13.4%. It is estimated that by 2025 traffic at the Mombasa Port would be around 25 million tonnes. Transit cargo is highest from Uganda, which has a 77% traffic share, followed by Tanzania and Rwanda with 7% share each. 2.3.4 To meet container capacity constraints, additional equipment and productivity enhancements raised the capacity to the current level of 450,000 TEUs. At an average 6% growth rate in its hinterland, the container terminal will probably reach that capacity in 2006, or 2007 at the latest. Mombasa can only handle the increased volumes brought by the tradeled development strategies in the interior with improved handling equipment and operations, streamlined procedures and, most of all, implementation of readily available waterfront software technologies for container terminal information systems and yard/gate management as well as a community-based system to handle exchange of documents, releases and other communication among KPA, customs and port users. By 2008, the master plan will begin to deliver additional physical capacity to the existing container terminal and then the development of a second container terminal. A recent study indicated that Mombasa still needs capacity building, procedures setting and security monitoring to comply with the stringent security measures required under the ISPS2 Code of the International Maritime Organization (IMO). 2.3.5 The Port is operated by a parastatal, the Kenya Ports Authority (KPA). The Government of Kenya intends to concession port operations and make KPA a port landlord and regulator. An active stakeholder working group is seeking to streamline port procedures and reduce cargo dwell time. 2.3.6 The Port of Dar es Salaam has 8 deep-water berths (1478 m in length), a container terminal, grain terminal and petroleum terminals. A container terminal information system is used, but there is no community-based communication system in place at present. An audit of port security is currently taking place and it is understood that the port will need improvement to meet the ISPS Code. The lake ports suffer from old, unreliable cranes and loading delays, but will be developed for more effective use now that they are operated by the Tanzania Ports Authority (TPA). 1 TEU - Twenty-foot Equivalent Unit (6 meter) is the standard unit for counting containers. A Forty-foot (12 meter) container is represented as 2 TEUs. 2 International Ship and Port Facility Security Code

7

2.3.7 Overall traffic has been growing steadily on the two Corridors that the Port of Dar es Salaam serves. Approximately 53% of transit traffic is for the Central Corridor and 47% for the Southern Corridor (Zambia, Malawi, DRC-Lubumbashi area). Dar es Salaam handled 7.3 million tonnes in 2004 with an average annual growth in demand over the past 5 years of 10%. The port handled 100,000 TEU in 2004 and 112,000 in 2005. The demand for container handling is growing by approximately 13% annually. The demand from Uganda and Rwanda for transit cargo on the Central Corridor varies year by year, however, demand from Burundi and DRC has steadily increased. 2.3.8 Since 2001, the Container Terminal has realized a 60% increase in throughput and transshipments have almost tripled. The Container Terminal now operates at international standards. The Terminal area is constricted, however, and the growth in container throughput has congested the terminal area. This congestion is reducing efficiency in clearing cargo from the port. The general cargo terminal is also experiencing continued performance problems. The Port of Dar es Salaam is purchasing a community-based system with its own funds so that all members of the port community can interface more efficiently. An audit of security at the port is currently being done. It is anticipated that the requirements for additional investment will be similar to Mombasa with the addition of patrol boats. 2.3.9 A parastatal, the Tanzania Ports Authority, operates the Port of Dar es Salaam. Container handling operations were concessioned in 2000. Based on its experience with the Container Terminal, the TPA plans to concession the general cargo operations shortly and operate it as a landlord port. Northern Corridor 2.3.10 The Northern Corridor is a multimodal corridor (road, rail and pipeline) that connects the Port of Mombasa to Nairobi, Kampala, Kigali, Bujumbura and eastern DRC. The transit traffic demand on the Corridor is approximately 3.2 – 3.6 million tonnes for 2006 at current growth levels, mostly to/from Uganda. Kenyan traffic on the route adds another 8-10 million tonnes. 2.3.11 Rail: The Northern Corridor rail system operates between the Port of Mombasa and Kampala with a branch to Kisumu on Lake Victoria. It suffers from aging track and rolling stock, underinvestment in maintenance, inefficient operations, and inadequate tracking systems for optimizing rotation of wagons. While overall traffic to Uganda on the Corridor has been increasing 15% a year on average since 2000, rail cargo volume has remained almost steady. The railways used the same capacity throughout, while hauliers acquired the new traffic. 2.3.12 Attempts to develop a block train3 from the Port to Kampala, which would maximize on railway cost advantages for bulky goods over long distances, failed because of lack of railway warehousing and distribution capacity in Kampala and inability of the railway to turn the wagons quickly enough. The operation of freight services on Kenya Railways Corporation (KRC) and Uganda Railways Corporation (URC) is now being jointly concessioned. 3

A dedicated train that takes cargo from the port directly to a single destination (in this case Kampala) without any intervening stops or transfers of cargo and returns directly carrying cargo only for the port.

8

2.3.13 Road: The Northern Corridor route connects the Port of Mombasa to Kampala (Uganda), Goma, Bukavu, Mpondwe and Vurra (DRC), Kigali (Rwanda) and Bujumbura (Burundi). The trunk road network from Mombasa to Bujumbura via Malaba is 1970 km and to Goma is 1846 km, but sections need rehabilitation, especially in Kenya. The Government of Kenya is funding rehabilitation of some sections itself and sought donor funding from the EU, World Bank and other donors for additional packages. (This includes the World Bank Northern Corridor Project.) Border crossings within the region are characterized by poor infrastructure, inadequate coordination and congestion. The busiest and most congested border on the route is at Malaba between Kenya and Uganda. 2.3.14 Transport demand is growing while there are still major time constraints on the route. The road transport demand is about 2.7 - 3 million tonnes for 2006. Road transport along the Northern Corridor in Kenya averages 2,500 vehicles per day and as much as 5,000 – 10,000 vehicles per day near cities. Delays to pass the Kenyan and Ugandan border posts at Malaba can be as much as 1-2 days. It is further complicated because all conveyances use the same two-lane bridge to cross the Malaba River, which divides the two countries, leading to further delays and congestion. The East African Community has committed to initiating one-stop border posts within the Community as a way to halve the time spent at borders. A study and business plan for instituting a one-stop border post at Malaba for both road and rail traffic was undertaken by the USAID ECA Trade Hub and the Kenyan Ministry of Transport. 2.3.15 Pipeline: A pipeline connects Mombasa to Eldoret and Kisumu. The pipeline not only provides transport at a good price, but it keeps many heavy vehicles with hazardous cargo off the busiest section of the Northern Corridor. Currently, Uganda uses 61% of oil throughput, Rwanda 16%, Northern Tanzania 6%, DRC 6%, Burundi 5% and Sudan 1%. The Kenyan and Ugandan Governments are currently carrying out a study of continuing the pipeline from Eldoret to Kampala. The World Bank component will fund a feasibility study of extending the pipeline from Kampala to Kigali under this project. Central Corridor 2.3.16 The Central Corridor connects the Port of Dar es Salaam through Tabora to Mwanza and Kampala, with branches to Kigali, Bujumbura and entry points to DRC. The demand for the Central Corridor is currently approximately 600,000 transit tonnes plus about 750,000 tonnes of Tanzanian cargo. Burundi stands to gain the most from an upgraded Central Corridor that is 850 km shorter and crosses only one transit country instead of three transit countries. Rwanda will gain from a 200 km shorter route through only one transit country instead of two. Nevertheless, many products, such as tea, will continue to use the Northern Corridor because of the established auction houses or other facilities in Mombasa. 2.3.17 Rail: Tanzania Railways (2,706 km total length) joins the Port of Dar es Salaam to the lake ports of Mwanza on Lake Victoria and Kigoma on Lake Tanganyika. The rail system is characterized by lack of wagons, poor track conditions, congestion at Kigoma port, time lost in intermodal transfers and poor quality of service. TRC currently handles only 20% of the cargo from the Port of Dar es Salaam. The demand on the Corridor is approximately 1.3 million tonnes for 2006 and growing about 10% a year. Two factors may increase the overall demand, the success of inland trade development and diversion of traffic to the Central Corridor because of better tariffs and service. At 20%, the rail share is roughly 250,000 tonnes.

9

2.3.18 To reinvigorate the rail-lake route to Uganda and improve transport through Kigoma and Kalemie to DRC, modernization of the system is necessary. It is anticipated that the concessioning of the railway (anticipated completion by end of 2006) will bring about the necessary investments and operational improvements. The development of a new container depot/distribution hub at Isaka (Tanzania) could provide an effective multi-modal service to the Great Lakes region, and attract more rail traffic to the route. 2.3.19 Road: The Central Corridor is a combination of paved and gravel roads that can become impassable during the rainy season. An ambitious program to upgrade the whole road to bitumen standard with donor support is currently underway and includes rehabilitation (517 km), construction (527 km) and routine maintenance (200 km). The entire route in expected to be completed by end of 2007. Current demand on the road is approximately 1.1 million tones. Demand for the Corridor is likely to increase at more than the current 10% per annum if the anticipated time and cost savings are realized and transit controls do not proliferate. The improved capacity will relieve the current constraints on development in this part of the Project area. Comparative Prices on the Corridors 2.3.20 A review of current tariffs in the region indicates that the Central Corridor route to Rwanda and Burundi is generally cheaper than the Northern Corridor for both containerized and non-containerized cargo. For example, the road cost of a 20 ft import container from Mombasa to Kigali is 60% higher than through Dar es Salaam. Generally, the export leg is less than the import leg, but is still higher through Mombasa than Dar es Salaam. Improvement in Central Corridor infrastructure is likely to make this route even more attractive for Rwanda and Burundi. 2.3.21 Overall, the transit rates are extremely high. For example, transport of a 20’ container from Mombasa to Bujumbura (US$5,000) is 79% of the total rate from NW Europe to Bujumbura. For an import 20’ container to Kampala from NW Europe, the rate is US$1300 for the sea leg and US$2500 for the land leg (66% of total) and the rate of an export return is US$900 for the sea leg and US$1200 for the land portion, or 57% of total. The high rates reflect the costs imposed by the lengthy procedures, delays along routes, deteriorated infrastructure, and high vehicle/rail operating costs. 2.3.22 The Great Lakes Region has been highly dependent on the Port of Mombasa and a route that includes many bottlenecks and constraints. The Central Corridor, with its mix of paved and unpaved road, did not present a strong alternative. With completion of road works on the Central Corridor, however, users will need to re-evaluate their choices. Having these two routes compete on price and service will provide a stronger incentive to tackle the problems on the Northern Corridor and to avoid their occurrence on the Central Corridor. The necessary investment is being made in the infrastructure, and the critical factor will now be performance. Other Regional Transportation Corridors 2.3.23 The East African Community has identified six corridors that are critical to the development of intra-regional trade and economic development. The corridors were agreed to in 1998. The first two (Central and Northern Corridors) have already been thoroughly discussed. The remaining four corridors are the:

10

Corridor 3 - Biharamulo – Mwanza – Musoma – Sirari – Lodwar – Lokichogio Corridor (This Corridor connects the southern side of Lake Victoria to the Sudanese border); Corridor 4 - Nyakanazi – Kasulu – Sumbawanga – Tunduma Corridor, (This Corridor runs from NE Tanzania to the border with Zambia); Corridor 5 - Tunduma – Iringa – Dodoma – Arusha – Namanga – Moyale Corridor (This Corridor goes from the Zambian-Tanzanian border to the border with Southern Ethiopia); and The Air Sector 2.3.24 The East African Community is engaged in the liberalization of air transport and harmonization of civil aviation regulations in the region to facilitate establishment of a regional safety and security oversight agency, a search and rescue coordination center, administration of a unified upper flight information region, and personnel sharing for licensing and airworthiness inspections. The African Heads of State endorsed the Yamoussoukro Decision on air transport liberalization at a summit in July 2000 in Lome, Togo. The Yamoussoukro Decision aims to gradually liberalize scheduled and non-scheduled intra-African air transport services. The Decision takes precedence over any previous multilateral or bilateral agreements on air services. This Decision has been fully agreed within the region and the EAC Secretariat is in the process of establishing necessary structures for the full implementation. The EAC is the first sub-region in Africa to do so. The EAC Tripartite Search and Rescue Agreement was ratified in November 2004 for sharing resources and provision of a legal framework for cross-border search and rescue. Several studies have been undertaken for upgrading the civil aviation navigation system to a Global Navigation Satellite System status and for the feasibility of unifying upper air control over the three countries and later including Rwanda and Burundi. 2.4

Regional Transport Policy and Planning

2.4.1 The trade and economic success of the East African Community will depend in considerable part on the quality of its infrastructure. Transport is a key element of the infrastructure. A major EAC goal is to encourage intra-regional trade, which requires improvements in the regional transport network. To do so, the EAC is focused on the rehabilitation and development of the regional road network, frameworks to support regional roads and border post operations, harmonization of road regulations, privatization of railway operations and liberalization of air traffic. The East African Community Secretariat on behalf of the partner states plays a key role in network planning, reviewing transport projects and seeking donor funding for the projects. 2.4.2 With the re-launching of the East African Community, the three partner states established the goal of harmonizing and strengthening their efforts on the enforcement of road transport laws and regulations in the region. Their efforts focused on developing the Tripartite Agreement on Road Transport, the Permanent High-Level Standing Committee on East African Road Project, and the Committee for Easing Cross Border Movements. The Tripartite Agreement set out the basic objectives for transport facilitation: (1) promotion, regulation and facilitation of the traffic flow through transit routes and a fair distribution of road transport services, (2) minimizing customs fraud and delays in movement of goods, and (3) harmonizing documents and procedures. The Permanent High Level Standing Committee was formed to oversee the implementation of road projects. The Committee on Easing Cross Border Movements was designed to raise awareness of the critical issues of cross-border movements within the EAC. The Infrastructure Directorate of the EAC Secretariat has responsibility for implementation and coordination of these efforts.

11

2.4.3 The EAC partner states committed to concessioning operation of the regional railways with combined private and government ownership. This concessioning process is almost completed for the EAC railways on the Northern and Central Corridors. The EAC Heads of State Summit in 2004 authorized a Railways Master Plan, which is now being conducted to review the potential for reopening closed railway lines, complete missing links and develop the ancillary services that will enable the railways to operate more efficiently and profitably. An investors’ conference to showcase investment opportunities in the railway sector was also planned. 2.4.4 In the maritime sector, EAC is currently involved in implementing safety of navigation standards for Lake Victoria. A Draft Lake Victoria transport bill is currently awaiting consideration by the partner states. A Tripartite Agreement on Inland Waterway Transport has been ratified and the EAC Secretariat developed a framework for its implementation. EAC activities in the air mode were described in the previous section.

3.

THE TRADE AND TRANSPORT FACILITATION SUBSECTOR

3.1

Overview of Facilitation

3.1.1 Trade and transport facilitation refers to the process of reducing transaction costs and delays by simplifying trade procedures and document flows, harmonizing cross border procedures, modernizing customs and transport systems, promoting quality and safety standards and improving trade logistics. 3.1.2 The need for simplification at every stage of the trade process and its effect on competitiveness has been well documented and can be illustrated from a study completed in January 2006, which was based on statistical data from 146 countries. Two examples illustrate the handicap against which East African exporters/importers operate. In Denmark, an exporter needs three documents (export declaration form, bill of lading and a commercial invoice) and two signatures (customs and the port) to complete all requirements for shipping abroad. The process averages 5 days from the time he starts to the time the cargo is ready to sail. In Burundi, by contrast, it takes an exporter 11 documents, 17 visits to various offices, 29 signatures and 67 days on average before his goods are delivered to destination. According to the study, about 25% of delays are due to physical infrastructure and 75% are due to administrative hurdles. For landlocked African countries, these hurdles are magnified by the number of borders to be crossed, at each of which the requirements are different. Table 3.1 below shows the time and procedures involved in import and export for the east African countries compared with the sub-Saharan and OECD averages. The procedures involved were recorded starting from the final contractual agreement between the two parties, and ending with the delivery of the goods.

12

Table 3.1 – Time and Procedures involved in Import and Export Indicator

Burundi

Kenya

Rwanda

Tanzania

Uganda

Region

OECD

Documents for Export (number)

11

11

14

7

13

8.5

5.3

Signatures for Export (number)

29

27

10

18

18.9

3.2

Time for Export (days)

67

25

63

30

58

48.6

12.6

Documents for Import (number)

19

9

19

13

17

12.8

6.9

Signatures for Import (number)

55

46

16

27

29.9

3.3

92

51

73

60.5

14

Time for Import (days)

124

45

Source: World bank Group

3.1.3 Effective use of electronic communication and IT systems is enabling the speed achieved in export and import procedures for submission of documentation, risk assessment, accreditation based on past compliance with regulations, pre-shipment inspection, documentation, processing of releases, scheduling of cargo collection, tracking of cargo, acquittal of bonds, “weighing in motion” scales and many other aspects of the facilitation process. A 2003 OECD Study found transaction costs higher for agricultural and food products because of the number of inspections and certifications required, yet these are major exports of the East African region. Some of this added cost can be offset through electronic preparation and transmittal of inspection certifications and releases. Continued reliance on manual processing will preclude participation in global supply chains for perishable and higher value trade. 3.1.4 A recent World Bank study suggested that raising trade and transport facilitation in all countries to half the current global average would increase world trade by US$377 billion, an increase of 9.7%, mostly from domestic reform and capacity building. About US$107 billion comes from increased port efficiency, about US$33 billion in customs modernization, US$83 billion from improving the regulatory environment and US$154 billion comes from an improvement in information technology infrastructure across the trade value and logistics chain. (Wilson et al 2005). The 2005 WTO Hong Kong Ministerial Meeting agreed to consider amendments that would expand the WTO provisions for trade facilitation, including modernization of customs procedures. 3.1.5 As discussed earlier, East Africa and the Great Lakes region face a major trade handicap from high transportation costs, delays and unpredictability. Boosting their export competitiveness will require a set of measures geared to removing the remaining infrastructure bottlenecks, improving policy and regulatory frameworks at both national and regional levels, and enhancing regional cooperation by strengthening or setting up institutional mechanisms for trade and transport facilitation. 3.2

Infrastructure Bottlenecks

3.2.1 Part of the high transportation costs is directly related to the physical infrastructure and its operation. Success with current trade initiatives will make infrastructure improvement imperative. This section discusses the critical transport infrastructure bottlenecks and the measures taken under this project to mitigate their impacts.

13

3.2.2 Ports: A significant portion of the delays and uncertainties occur at the ports. The speed with which goods are unloaded and loaded on the ship is directly related to the type and availability of cranes and other handling equipment, to the productivity of the staff operating them and to the quayside space available for container or cargo stacking in preparation for loading and the storage (yard and warehouse) area available for holding cargo until it is released from the port. The Mombasa Port Master Plan includes handling equipment and port facility expansion. This Project will assist the Port of Mombasa with several of the problems identified. The World Bank component will provide technical assistance, equipment and training for the development and installation of the communitybased system (CBS) which will enable efficient submission of documents and execution of cargo verification, payments and releases. The World Bank component will also provide security surveillance and communication equipment, training and technical support and a consultancy on supervision and oversight. The Project will assist the Port of Dar es Salaam with several identified problems. The World Bank component will provide some assistance for the development and installation of their community-based system and a study of options for building a container depot to ease the congestion at the container terminal yard. It will also assist in meeting the ISPS Code for port security, including capacity building and technical assistance, equipment and supervision of installation. 3.2.3 Rail infrastructure: The KRC and URC railway infrastructure and rolling stock are in need of rehabilitation and modernization to provide an efficient component of the regional transport network. The World Bank component of the Project is providing support for the Ugandan and Kenyan Railways concessions, which includes among others, technical support, investment support, and provision of a partial risk guarantee. Assistance to the railway concession in Tanzania is being provided under a separate project. 3.2.4 Road infrastructure: The road infrastructure on the Northern and Central Corridor is being upgraded by the respective governments and donor funding. However, as indicated earlier, a coordinated framework for planning and operating cross border transport infrastructure is lacking. In order to systematically plan the regional transport network that will best facilitate intra-regional trade, the EAC needs a comprehensive study of modal development that will evaluate the transport requirements for achieving regional trade growth. It should provide the technical, financial and economic analysis necessary to prioritize projects for funding, to determine a phased development plan, to identify regional resources available to the EAC and to effectively present individual projects to donors for funding support. From the operational standpoint, an effective system of axle load control is crucial to insuring that overloaded trucks do not hasten the deterioration of the roads. The World Bank component of the Project provides funds for reviewing weighbridge management in each country and providing additional equipment. 3.2.5 Border infrastructure: A commitment has been made in the region to develop one-stop border posts as a means of expediting border crossing. Since the greatest time lost on the Northern Corridor is at Malaba, the introduction of one-stop border ports will be piloted there. The World Bank component of the Project is supporting construction of onestop border facilities, twin bridges and improved access roads at Malaba, followed by technical design and/or construction for the installation of one stop border posts at five other borders in the region. There is need to extend the concept to the remaining border posts along the Northern Corridor at the Rwanda/DRC border, Rwanda/Burundi and Uganda/DRC borders.

14

3.3

Policy and Regulatory Framework

3.3.1 Several international conventions as well as regional, sub-regional, and bilateral agreements provide the basic policy and regulatory framework to deal with trade and transport facilitation. At the international level, the World Trade Organization (WTO), and World Customs Organization (WCO) provide guidelines and standards to facilitate international trade through simple, predictable, cost effective and efficient procedures and practices for the clearance and transport of goods and movement of people. At the regional level, the regional economic communities of which the east African countries are members, including COMESA, EAC, and SADC have all adopted measures and instruments for trade and transport facilitation. International Instruments 3.3.2 The World Trade Organization (WTO) promulgated a number of trade facilitation instruments to establish an impartial trade environment. One of the main agenda items at the 2005 WTO Hong Kong Ministerial Meeting was the improvement and clarification of the three major trade facilitation Agreements, Article V (Freedom of Transit), Article VIII (Trade Fees and Formalities) and Article X (Administration and Publication of Trade Regulations) of the General Agreement on Tariffs and Trade (GATT). This is a clear manifestation that trade facilitation has moved to the forefront of the development agenda and has become a matter of major policy debate. The Ministerial Declaration highlighted the need for technical assistance for developing countries to enable them to implement the three Articles. 3.3.3 The World Customs Organization (WCO) provides standards and technical support to enable customs administrations to operate effectively. The Revised Kyoto Convention (RKC) outlines principles and practices for applying modern simplified, harmonized and standardized procedures. It is crucial in the development of trade policy and description of goods for customs purposes, for goods to be described and defined in standard codes. This code is spelt out in the Harmonized Commodity Description and Coding System (HS). A major standard that WCO developed based on modern custom procedures from WCO guidelines and instruments is the Framework of Standards. This Framework sets out standards that provide supply chain security and facilitation thus ensuring predictability and certainty. Corruption is a deterrent to transparent and predictable procedures. Customs administrations committed themselves under the Revised Arusha Declaration to take comprehensive and practical steps to implement enforceable integrity codes. To assist the administrations, the WCO has developed a model Code of Conduct. Regional Instruments 3.3.4 The Regional Economic Communities (EAC, COMESA, and SADC) have been very active in adopting trade facilitation programs to harmonize policies and regulations for the smooth flow of passengers and goods throughout the region. A number of instruments and common standards have been introduced to facilitate regional transport and trade including harmonized axle load limits, harmonized transit charges, regional carrier licensing, regional third-party motor vehicle insurance, and regional customs transit system. But despite being adopted by most member countries, effective implementation has been very erratic and generally very weak. These programs are discussed below.

15

3.3.5 Single Customs Document - The COMESA-CD (CD-Com) is a single, simplified and harmonized customs declaration form to replace a multiplicity of documents reducing delays and costs. All the countries in the region are using some variation of the single declaration document with some modifications to cater for their national requirements. This lack of harmonization, which is caused by the varying regulations, practices and standards in the region, causes delays in the clearance of goods. All the countries of the Northern Corridor countries are members of COMESA. The NCTTCA, with its mandate to simplify and harmonize procedures, is in a position to effect the full compliance of this instrument. The newly established TTFA, whose goal is to enhance the effectiveness of the Central Corridor route, will also be in a position to foster its use. 3.3.6 Regional Customs Bond Guarantee Scheme - The Regional Customs Bond Guarantee Scheme (RCBG) will provide security of goods through all transiting countries. It will eliminate avoidable administrative and financial costs associated with the nationally executed customs bonds guarantees for transit traffic when it comes into force. Kenya, Uganda and Rwanda have ratified the treaty establishing the Scheme and Burundi and DRC are expected to follow suit soon. The Scheme is expected to be launched in 2006 and will enhance the speedy movement, clearance and release of goods and save on transport costs. However, for the scheme to succeed there is need to ensure that all valuations for bond guarantees are harmonized and that bond acquittal is expedited by automation of customs systems. The WB component of the project is supporting the national customs administrations modernization and reform programs of Rwanda, Uganda and Kenya with equipment, infrastructure and training. Success of the scheme will be also contingent upon its effective implementation and monitoring by the corridor authorities. 3.3.7 Regional Vehicle Insurance Scheme - The COMESA Yellow Card is a motor vehicle insurance scheme, which is valid in all the participating countries. It covers third-party liabilities and medical expenses for the driver of the vehicle and his passengers should they suffer any bodily injury as a result of an accident to an insured vehicle. It also facilitates cross border movement of vehicles between COMESA member countries. As this card is valid in many parts of the region, transporters and motorists do not have to buy insurance cover at each border post they cross. Nevertheless, it is not widely used because the cost and coverage varies by country, and there are occasional non-refund of claims. These problems are further exacerbated by lack of insurance companies at some border crossings and the fact that the certificate is not forgery proof. Truckers therefore find it difficult to buy the card on entry or resort to buying forged cards. Strong support to the Northern Corridor Transit Coordination Authority is needed in order to make the instrument effective. 3.3.8 Harmonized Axle Load and Maximum Vehicle Dimensions - COMESA introduced the harmonized axle load and maximum vehicle dimensions instrument to prevent the excessive road damage caused by overloaded trucks. The implementation of this instrument has met with numerous difficulties, which have arisen from the manner in which axle load controls are enforced. The enforcement problems include numerous (often old and inaccurate) weighbridges in Kenya, the time-wasting convoy system, the manner in which penalties are administered in both Kenya and Uganda, and the fact that Rwanda doesn’t have a mechanism in place to enforce overloading. The World Bank component will provide mobile weighbridges to Rwanda, two weigh-in- motion weighbridges for Kenya, two weighbridges in Uganda and rehabilitation of weighbridge stations in Tanzania. It will also provide technical assistance on weighbridge management to the individual countries. However, regional coordination and monitoring by the corridor authorities is required to overcome the fragmented approach at the country level and improve operational practices for the Corridors as a whole.

16

3.3.9 Regional Carrier License - Liberalization of transport services at the regional level was formalized under the COMESA Carrier License scheme. The relaxation of restrictions allows foreign operators to enter new markets. Licenses issued under the scheme in any member State are accepted by all the others. The deregulated environment should lead to competition and efficiency in road transport because licensed operators can pick up backloads in other countries, which makes more efficient use of the region’s fleet and reduces the cost of trade. However the effective implementation of the scheme has met several constraints. The issuing of a COMESA Transit License is based on a valid national vehicle inspection certificate issued in the country where the vehicle is registered. This instrument has not been fully utilized by the member states because of lack of recognition of each others vehicle inspection certificates in the case of Kenya and Uganda, and lack of an operational vehicle inspection facility by 2005 in the case of Rwanda. There is need for support to the NCTTCA to assist in resolving the problem in utilizing this instrument. 3.3.10 The EAC Tripartite Agreement on Road Transport (TAORT) - The three member states of the EAC established the goal of harmonizing and strengthening their efforts on the enforcement of road transport laws and regulations in the region. The EAC Tripartite Agreement on Road Transport (TAORT) was promulgated to promote, facilitate and regulate international road transport services between and in transit through their respective territories and develop the road transport facilities, infrastructure, bridges and related services. The agreement also commits the partner states to minimize customs fraud and delays in movement of goods and the harmonization of trade documents and procedures. The EAC Secretariat has put together a program to implement and operationalize the TAORT, which will require considerable donor support. 3.3.11 Multilateral Transit Transport Agreements – The Northern Corridor Transit Transport Treaty and the Central Corridor Transit Transport Facilitation Agency Agreement were adopted by the respective member countries in 1985 and 2006. These agreements set common rules among countries sharing the Northern and Central corridors with the objective to provide seamless operations while maintaining sufficient control to prevent fiscal fraud and discrimination against foreign transporters. Both Agreements are managed by permanent secretariats in Nairobi and Dar es Salaam. 3.4

Institutional Framework

3.4.1 Effective national and intergovernmental arrangements are required to manage trade and transport facilitation programs and deal effectively with the cross-sectoral issues involved in harmonization, simplification and standardization of rules and documentation. Facilitating trade involves various stages driven by national and regional institutions, public and private players with both converging and diverging goals. It is therefore necessary to establish the impact that each of these players in the trade facilitation process, in order to identify where best to focus attention for improvement. This will help in establishing what is required in order to improve trade facilitation in the region. National Customs Administrations 3.4.2 Customs administrations are the lead agencies involved in the administration, control and taxation of imports and exports and are therefore. Customs clearance has been generally associated with long delays and cumbersome procedures which adversely affect trade. To adapt to the demands of modern trade, all the countries in the east Africa region have embarked in customs reforms and modernization to strengthen management capacity, make greater use of IT systems, and adopt risk management techniques.

17

3.4.3 In Kenya, a customs management information system (SIMBA) was introduced in July 2005. Since its implementation, the system has increased the speed of processing documents, ensured transparency, and established a clear audit trail, document tracking system and the ability to accept electronic declarations. Nevertheless, there is need to complement the system with other modernization measures to reap the full benefits of an integrated modern structure. These measures include the strengthening of risk management techniques, post release verification, audit and interconnectivity with the other customs administrations management systems. Effective strategies for intelligence gathering, compliance, enforcement and anti smuggling need to be developed to reduce time-consuming physical verification. Capacity building and training of staff in relevant areas and improvement in inter agency cooperation is necessary for the modernization and reform program to succeed. Adequate IT infrastructure and equipment is also a prerequisite, including cargo tracking systems to replace the current convoy system which is the source of long delays for transit traffic. 3.4.4 Tanzania Revenue Authority has been supported by a multi-donor funded Tax Administration Project (TAP). The Customs Department has implemented the roll out of ASYCUDA++4 to Dar airport and port, introduced Direct Trader Input (DTI)5 and established a new destination inspection scheme. Indications are that clearance time has been reduced thus facilitating trade. But a Time Release Study (TRS) carried out in 2005 indicated that there are still unnecessary delays from the arrival of cargo in the port to the time of release of goods. An Action Plan to rectify these delays involving all relevant stakeholders was developed. Further work is required to strengthen reform management, reinforce the compliance/enforcement components of the modernization program with special focus on risk management techniques, destination inspection and post clearance audit. Border controls and transit procedures need to be streamlined. 3.4.5 The first phase of the Uganda Customs modernization and reform program has been completed. It redesigned the organization to a leaner structure by conducting interviews to assess competency and integrity. New salary scales were established and a new integrity program is near completion. The second phase is concentrating on taxpayer’s rights and obligations, public education and improved services. Significant progress has already been made in some aspects like the introduction of the Kampala-based Customs Business Centre which incorporated DTI. Nevertheless increased effort is required in implementing transparent and appropriate tax and transit processes, the phased roll out of ASYCUDA ++ (with special focus on the transit module), risk based strategies, development of one stop border posts and their enabling legislation, reviewing of tariff and valuation decisions and improving relations with all stakeholders. 3.4.6 Rwanda has achieved considerable progress in improving its services in areas of implementation of ASYCUDA++, implementation of the Agreement on Customs Valuation, and establishing a generally perceived corruption-free department. Technical assistance is 4 Automated System for Customs Data, the computerized customs management system developed by UNCTAD It clears transactions electronically and can be configured to adapt to the operational requirements of each individual customs administration. ASYCUDA++ is an upgraded version of ASYCUDA 2.7 and has more functions. 5

Direct Trader Input is where the trader electronically submits self assessed information into the ASYCUDA system which then processes the information and responds.

18

required to prepare Rwanda in its bid to join the East African Community by streamlining its laws and regulations. Substantial support towards capacity building and training, increased awareness among the taxpayers and effective implementation of computerized systems is essential. Most of the key problems that affect customs clearance in Rwanda are related to the fact that it is landlocked. It is therefore imperative that the country effectively pursues bilateral and regional cooperation that will alleviate the problems along the Northern and Central Corridors. 3.4.7 Burundi Customs requires specific reforms to significantly speed up delivery of goods and lower transaction costs. Capacity building and training of customs officers, provision of equipment for customs stations, establishment of improved coordination between customs and other agencies and standardized customs clearance contract for clearing agents are key concerns of the customs administration. 3.4.8 The World Bank has already approved the national components of this Project to strengthen the national customs administrations of Kenya, Uganda and Rwanda by supporting their modernization and reform, rolling out customs IT systems to border posts, and providing training and equipment. The EAC Customs Union 3.4.9 In 1967, the newly independent states of Tanzania, Kenya and Uganda formed the East African Community, operating a fully-fledged customs union. It was dissolved in 1972 due to political differences between the member states. The Community was re-established in 1999 and in 2005 the EAC Customs Union was launched. Rwanda and Burundi are also in the process of joining the EAC. Under a customs union, a common set of customs rules, procedures and trade policy is applied. Given the three countries’ geographic proximity, close cultural, historical and political ties, and considering the fact that they had earlier on been a customs union, it was easier for them to move directly to a custom union. The program of implementation of the CU has been developed and includes among others the elimination of internal tariffs, preparation of harmonized and standardized regulations, customs documents, operating guidelines, training modules and the establishment of a common database and interconnection with the national custom administrations. It also includes strengthening the capacity of the EAC Secretariat and establishing a joint customs administration. Considerable donor assistance and collaborative effort is required to assist the EAC in the implementation of the customs union. Corridor Management Authorities 3.4.10 Transport Corridor Management Institutions such as the Northern Corridor Transit Transportation Coordination Authority (NCTTCA) and the Central Corridor Transit Transport Facilitation Agency (TTFA) are multilateral management and coordination structures dedicated to transit transport facilitation. They ensure the effective implementation of the provisions of the transit facilitation agreements, and develop monitoring and compliance mechanisms. These institutions complement the work of the RECs in implementing facilitation instruments on specific Corridors. 3.4.11 The NCTTCA was established 1985 by Kenya, Uganda, Rwanda, Burundi and DRC to insure transport access and facilitation along the Northern Corridor. The Authority has achieved commendable results in implementing transit facilitation along the northern

19

corridor. But it has limited institutional capacity and resources and needs to be strengthened and assisted to respond to the changing needs of transport and trade and accomplish its broad mandate. 3.4.12 The TTFA was established in 2006 by Tanzania, Uganda, Rwanda, Burundi, and DRC to play a similar role on the Central Corridor linking the port of Dar es Salaam to Kampala, Kigali, Bujumbura, and eastern DRC. The TTFA requires donor institutional support to build capacity during its first three to five formative years. Facilitation Interventions of Other Donors 3.4.13 The present project project will complement other ongoing initiatives in the region in trade and transport faciliation. Technical assistance is being provided to customs administrations and other trade-related agencies in the region by a number of organizations and donor agencies. The following table indicates the trade facilitation activities that have been funded, are ongoing, and those that have been pledged. Table 3.2 - Activities Funded By Other Development Partners Financier EU French Cooperation USAID/REDSO USAID/REDSO UNECA USAID/ECA Trade Hub WORLD BANK, WCO USAID/ECA Trade Hub WB,EU, DANIDA, SIDA, UNDP, USAID USAID DFID WCO, CIDA, SIDA

Activities Funded Preparation of EAC Customs Union Protocol Capacity Building on Ethics & Integrity Technical & Financial Support –Malaba OSBP Feasibility studies for OSBP – Malaba/Busia Kagitumba/Katuna Feasibility Study for a cargo tracking system Business Plan for the implementation of a cargo tracking system

Country /Organization

Status

EAC Secretariat

COMPLETED

Burundi

COMPLETED

Kenya, Uganda

COMPLETED

Kenya, Rwanda

COMPLETED

Uganda,

Northern &Central Corridor

COMPLETED

Northern & Central Corridor

COMPLETED

Time Release Study

Kenya, Tanzania

COMPLETED

IT Specialist (2 year contract)

Northern Corridor Secretariat

ON GOING

Supporting the Tax Administration Programme

Tanzania

ON GOING

Anti -Corruption Programme Customs reform & modernization programme WCO ESA Regional customs capacity building centre

Northern Corridor member states Uganda, Tanzania Rwanda East & Southern Africa Region

ON GOING ON GOING ON GOING

20

4.

THE PROJECT

4.1

Project Concept and Rationale

4.1.1 The AfDB in partnership with the World Bank, the EAC member states and Secretariat, as well as Rwanda and Burundi, formulated a comprehensive and coherent approach to trade and transport facilitation to tackle on a regional scale the inefficiencies of the region’s logistics chains, and to secure the effective implementation of the Customs Union. The East African Community (EAC) member states, after reforming the community in 1999, are moving rapidly on their economic, social, and political integration agenda. In March 2004, the member states signed a Customs Union Protocol which will expand the size of markets beyond national boundaries and promote trade, attract investments and foster economic growth. The elimination or reduction of trade tariffs however, will have only limited impacts on the promotion of intraregional and external trade of the member countries unless it is accompanied by measures to address both the physical and non-tariff barriers including the poor condition of transport infrastructure, underdeveloped transport and logistics services, as well as slow and cumbersome bureaucratic procedures at ports and border-crossing points. These obstacles to trade are even greater for the landlocked countries such as Uganda, Rwanda, and Burundi which all depend on transit trade through Kenya or Tanzania for their integration into the world economy. 4.1.2 The project is designed to address the development constraints caused by poor transportation and logistics systems in East Africa. The project is building on the achievement of previous projects financed by the Bank and the World Bank as well as other donors especially the European Union which now have substantially improved the condition of the road infrastructure of the two major transport corridors. This project was designed to address the trade and transport facilitation issues. The World Bank component provides national level assistance to Kenya, Uganda, Tanzania and Rwanda that is designed to improve the facilitation process. The components focus on: (i) port improvements in security, procedures and cargo handling; (ii) support of customs modernization and the greater use of IT software and electronic communications to streamline procedures, feasibility studies and implementation of one-stop border posts; (iii) improvement of overland transit regarding weighbridge equipment and operations, development of ICDs and improved intermodal handling throughout the corridor network; and (iv) support to the implementation of the Joint Concession of Kenyan and Ugandan Railways. The African Development Bank components provides regional level assistance to the East African Community, and the two main Corridor Authorities to strengthen their role in policy, planning, harmonization, advocacy and implementation of facilitation measures on specific corridors. The programmatic and institutional support to these organizations is designed to successfully integrate and implement the interventions of the overall program. 4.1.3 There have been considerable efforts on the part of the EAC to develop a regional transport policy and planning framework. Recent efforts of the EAC in providing regional impetus have lead to the establishment of the Sectoral Ministerial Council on Transport, Communications and Meteorology to serve as the regional policy organ. The EAC is also spearheading initiatives for the development of a regional railway master plan and in the aviation sub-sector. However, planning and management of regional road infrastructure in East Africa remains disjointed and without effective coordination. There is thus a need to develop a regional road sector strategy and regional road sector development program (RRSDP) which will identify regional strategic priorities and resources for sector development and operational needs for the medium term in line with the EAC objectives. The RRSDP will be the EAC key

21

planning document guiding the regional policies and investments in the road sector for 2008– 2018. In addition to infrastructure planning and management, there are several transport facilitation issues that need to be addressed to fully implement the Tripartite Agreement on Road Transport signed by the member countries. Some of the most pressing facilitation problems include standard specifications, traffic control and traffic safety, harmonization of vehicle registration and driver licensing, and environmental standards. This project, under the AfDBfunded components, was designed to help the EAC strengthen its capacity and address these problems. 4.1.4 The EAC member countries have formed a Customs Union (CU) and enacted a customs management law. A Common External Tariff on imports from outside EAC is being implemented. A gradual progressive elimination program of internal tariff based on the principle of asymmetry is applied. Total removal of internal tariff will be attained in five years from the commencement of the customs union. The existing national revenue authorities will maintain their responsibilities for the collection of customs duties according to the CU regulations. The effective implementation of the CU will require the harmonization of legal and regulatory provisions, the development and adoption of new procedures, and the training of the customs officers in the member states. The transition to a CU will also require the interconnection of the national customs administrations and the development of a common database for computerized risk management at the regional level. The AfDB-funded components under this project will assist the EAC in implementing and coordinating the regional aspects of the CU, while the World Bank is helping the national customs administrations bring their level of automation and capacity at part. 4.1.5 As discussed in earlier sections, the basic policy and institutional framework for transit transport cooperation exists in the form of a multilateral agreement particularly for the countries along the Northern Corridor. The facilitation instruments developed by COMESA and ratified by the countries sharing the Northern Corridor were meant to address the different administrative requirement applicable to cargo (Customs CD, RCGB), transport services (Yellow Card, Carrier Licence), and vehicles (Harmonized Axle Load & Vehicle Dimensions). Nevertheless, transit traffic constraints are still prevalent not because of lack of agreement, but because of poor implementation of the agreed provisions in the COMESA protocols and the Northern Corridor transit transport agreement. As a remedy, a comprehensive implementation program of transit facilitation along the Northern Corridor was elaborated by the NCTTCA and will be supported by this project including additional human resource capacity for its Secretariat. The program will provide for more effective and operational measures including training and workshops for government officials and the private sector, as well as administrative support to national trade and transport committees. The project will in addition support the NCTTCA in carrying out the preparation of a comprehensive infrastructure master plan for the northern corridor to provide long term visibility to the member countries in planning the expansion of the corridor facilities and addressing the institutional, financial, and management issues in their regional dimension. 4.1.6 While the basic policy and institutional framework for transit transport facilitation already exist for the Northern Corridor, such is not the case for the Central Corridor linking the port of Dar-es-Salaam to Uganda, Rwanda, Burundi and DRC. As discussed in earlier sections, all the missing road links along this corridor are either completed or under construction. The completion of the entire corridor upgrading to bitumen standard is planned for 2007. Transit traffic to Rwanda and Burundi, in particular stand to gain considerably because of a shorter distance to the sea and the crossing of only one transit country as opposed to two or three

22

countries with the northern corridor. Realizing this potential, Tanzania, Uganda, Rwanda, Burundi, and DRC have undertaken to establish the necessary policy and institutional framework for the utilization of the corridor. The five countries, with the assistance of the Bank and the World Bank, signed in September 2006 a multilateral transit transport agreement (the Central Corridor Transit Transport Facilitation Agreement) to replace the existing multiple bilateral agreements. They also established a permanent secretariat that will monitor the implementation of the agreement (the Central Corridor Transit Transport Facilitation Agency). At the request of the five member countries, the Bank is providing institutional support for the initial set-up of the Agency. The Agency will provide an appropriate multilateral management and coordination structure to ensure the effective implementation of the provisions of the multilateral transit transport facilitation agreement, and develop effective monitoring and compliance mechanisms for the central corridor transit route linking the port of Dar es Salaam to Uganda, Rwanda, Burundi, and DRC. 4.1.7 The project design took into account the lessons learned from previous interventions of the Bank in multinational projects, and project involving regional entities. In past intervention of the Bank involving regional entities poor implementation capacity has been the source of protracted delays in project execution. For multinational projects, poor or inappropriate regional coordination with ill-defined responsibilities and no resources has been one of the weaknesses that were identified. The proposed project design reflected these lessons by providing additional capacity to the regional entities and designing a strong regional project coordination steering committee with appropriate budgetary provisions. 4.1.8 Besides the concerned governments, regional entities, and other project beneficiaries, the design and formulation of the project also benefited from the wide consultations carried out by the Bank and World Bank project teams, including the donor community, corridor groups, transport operators, shippers’ associations, manufacturers associations, Community-based organizations, and NGOs. The project has been accorded high priority by all the concerned countries, and the EAC. It is also included in the NEPAD transport infrastructure short term action plan. The proposed Institutional Support for Trade and Transport Facilitation is consistent with the relevant Bank policies and guidelines, in particular the Bank Group’s Policy on Regional Economic Cooperation and Integration, which provides the basis for the utilization of ADF resources for multinational projects. 4.2

Project Area and Beneficiaries

4.2.1 The Project Area is Kenya, Tanzania, Uganda, Rwanda and the trade catchment area of the Northern Corridor to the Port of Mombasa and the Central Corridor to the Port of Dar es Salaam. Those areas include Burundi and DRC and they are incorporated into the regional corridor activities because of their membership in the NCTTCA and TTFA and use of the corridors. The Project serves a land area of 1.82 million square kilometers with a population of 115 million not including the DRC. The size of the economy for the five countries is US$43.5 billion. The GNI per capita average is US$323, with the lowest in Burundi at US$90 and the highest in Kenya at US$480. The region is endowed with some of the most fertile lands in Africa with the percentage of agricultural land to total land area varying from 45% to 85%. Diversification of production and markets is increasing, but these countries are still highly dependent on a few agricultural commodities, especially coffee and tea. The region is also one of the most traveled tourist destination in Africa. In fact tourism is the number one industry in both Kenya and Tanzania. Despite all its natural endowment and other potentials, poverty incidence in the region is still very high with the

23

percentage of people living below the poverty line as follows: Kenya (52%), Tanzania (57.8%), Uganda (38%), Rwanda (51.7%) and Burundi (54.6%). The poor in the region, most of whom are subsistence farmers in rural areas are disconnected from markets by extremely high transport costs and by severe constraints on their ability to shift out of subsistence farming. For instance, transport costs from the farm-gate in Rwanda to the port of Mombasa are about 80% of the producer price. The potential benefit from improved trade and transport facilitation in enabling trade in value-added exports is high. There are equally substantial potential in poverty reduction from initiatives that reduce trade and transport costs and facilitate movement out of subsistence into commercial activities. Project beneficiaries include poor households and the general public, transport/logistics operators, transport users, and government agencies. 4.2.2 Poor households: For subsistence farmers, the easiest avenue out of poverty is adding cash crops. Studies show that households that participate in the export sector, whether as producers or labor, are less likely to be poor in all the countries. In Rwanda, a simulation demonstrated that involving poor farmers in high quality coffee production could have significant impacts on poverty reduction. A simulation of Tanzania’s export sector showed that involving poor households in cash crops and tourism had the highest poverty reduction rate, while involvement in fishing and mining had a smaller, but positive impact. Since most agricultural production is dependent on inputs, poor farmers are affected by the high transport costs of both imports and exports and will be beneficiaries of the project. Improving trade and transport facilitation will not only benefit poor households through increased income sources, it will also increase economic growth and government revenue allowing greater provision of social services that will influence the other causes of poverty, such as improved health care facilities, schools, water and environment. Improving the supply chain will reduce the cost and improve the availability of medicine, text books, water purification systems and many other commodities and services on which people depend to raise their standard of living. 4.2.3 Government Agencies: Many government agencies are in the process of restructuring to better carry out their responsibilities. As they move away from systems dominated by parastatals, Government responsibilities have shifted from administering transport to setting policies and regulations within which the private sector is the main provider of goods and services. As a result, government agencies are becoming smaller and more specialized. To reap the full benefits of this reorganization, government agencies need to utilize available technologies to become more efficient. For example, customs administrations are in the midst of a modernization program to streamline procedures. They have depended on manual processing of paperwork and physical control of cargo movements in the absence of alternatives, which have greatly inhibited trade. Automation through the introduction of SIMBA 2005 in Kenya and ASYCUDA++ is addressing the paperwork and need to hand carry from office to office. This Project is funding interconnectivity of four national customs offices so that they can track cargo electronically to alleviate the need for convoys and multiple check points and to allow for electronic acquittal of bonds once goods cross the border. All these measures will have a huge impact on delivery time, reliability and cost. Freeing officers from paper processing will enable them to concentrate on compliance and those traders seeking to avoid customs duties. With the trade growth resulting from reduced transport and insurance costs, more net customs revenue will potentially be made. Immigration and other enforcement agencies stand to benefit from similar streamlining and automation on the corridors and at border posts.

24

4.2.4 Transport Operators: Two major international ports serve the project area, Mombasa and Dar es Salaam, which handled respectively 12.9 and 7.7 million tonnes of cargo in 2004. The port authorities are involved in major restructuring and modernization to better serve shippers on the Corridors. They need to make more effective use of information systems and EDI or web-based community systems to further improve their performance. While they have already met many of the international security requirements, they need assistance to meet the more stringent rules now being implemented for international shipping. The railways (KRC, URC and TRC) have been operating with minimal investment for some time. To regain a larger share of the traffic, they need investment in rolling stock, locomotives, tracks, intermodal/ICD/warehouses, and better communication systems. They also need efficient, market-oriented management. All three railways are being concessioned to inject investment and modern management. KRC and URC are beneficiaries of the Project through a partial guarantee for the Northern Corridor concessionaire and investment funds for intermodal or distribution facility needs as identified. 4.2.5 The private sector has been very pro-active in seeking improvements in the transport and logistics systems and is actively supporting the Project. The region has a large number of haulage companies. In Kenya, there are about 50,000 trucks on the road, but about 4,000 that do international haulage on the Northern Corridor. In Uganda, there are about 27,500 trucks, but only 800-1,000 are involved in international haulage, especially from Kampala to Sudan, Rwanda and DRC. Tanzania also has a significant trucking fleet serving its hinterland. Hauliers face long delays on the Corridors due to customs-imposed escorted convoys, enforced overnight customs parking lots, inefficient border post operations, multiple poorly managed weighbridges with old and often inaccurate scales, demands for informal payments, high vehicle operating costs because of poor roads in some segments, and lengthy inland clearance procedures. They will be major beneficiaries of facilitation improvements in terms of time saved, costs reduced and ability to plan for effective vehicle utilization and deliver a more reliable service. There are many freight forwarding and clearing agents; some are highly professional businesses while some are one-man operations operating out of a briefcase. They have formed quite active associations in each country which are working to make their members more professional and improve the reliability of service. Through an improved licensing system, they hope to limit the forwarders to only those who are qualified. They will benefit greatly from reduced paperwork, timeconsuming procedures, and extended warehousing costs. 4.2.6 Transport users and the general public: Transport users are very important beneficiaries. Shippers incur high costs to ship/order early to account for potential delays and pay high costs for transport and insurance because of the inherent delays and uncertainty in the route. Manufacturing and agriculture are inhibited because of the high cost of importing inputs. Many manufacturers choose not to enter the export market because of the high transport costs and risks. Agriculture provides opportunities for small farmers to add income, but the cost of fertilizers, insecticides and other necessary inputs is often too high to make it economical. Reductions in import and export costs will affect the financial viability of many enterprises and encourage entry into regional and international markets. Development of trade and value-added industries has the potential to create employment opportunities, both entry level and skilled, and customers for regional products. Enabling greater domestic production and economies of scale in production will also bring down the cost of domestic goods. Therefore large segments of the total population of the project area stand to be beneficiaries of the project.

25

4.3

Strategic Context

4.3.1 The sector goal of the project is to promote trade, economic growth, and regional integration of the East African countries and enhance the competitiveness of their economies through the modernization of regional transport infrastructure and the removal of non tariff barriers to trade. The proposed institutional support for the East Africa Trade and Transport Facilitation Project would greatly contribute to addressing the following trade and transport facilitation issues in the sub-region: (i) Alignment of national laws, procedures and documents with international conventions, standards and practices; (ii) Harmonization of safety, environmental and other standards; Insufficient use of ICT by customs administrations; (iii) Poor regional transport policy and planning framework; (iv) and absence of multilateral coordinating structures for cross-border transit transport. By addressing these key sector issues the project will contribute in significantly reducing transportation and transaction costs; improving the mobility of factors of production and introducing incentives to increase production; attracting domestic and foreign investments to enlarged regional markets; and improving the efficiency of resource mobilization and allocation. The project is in line with the key priorities of NEPAD’s infrastructure short-term action plan.

4.3.2

4.4

Project Objectives

The project objectives are twofold; (i) Improve the trade environment through the effective implementation of the EAC Customs Union Protocol; and (ii) Enhance transport and logistics services efficiency along key Corridors by reducing non tariff barriers and uncertainty of transit time. The achievement of these objectives will lead to the following outcomes: (i)

Harmonized legal and regulatory customs framework established and enforced, leading to an effective Customs Union and free trade area by the end of the project;

(ii)

Appropriate Corridor management institutions on the Northern and Central Corridors are set-up and/or strengthened and adequate transit transport facilitation is provided;

(iii)

Total transit time through the two main transport Corridors is significantly

reduced; and (iv)

4.5

Predictability of total transit and travel time along the region’s main Corridors is improved.

Project Description

4.5.1 The project includes country specific components in Kenya, Rwanda, Tanzania, and Uganda, and regional components targeted to the East African Community Secretariat the Northern Corridor Transit Transport Coordination Authority (NCTTCA), and the Central Corridor Transit Transport Facilitation Agency. As indicated earlier, under the partnership arrangement with the World Bank, the country specific components will be financed by IDA loans and grants while the regional components would be financed by an ADF grant. The following description covers all the components of the projects including those financed by the World Bank.

26

4.5.2

The project will include the following major components: A. Support to EAC Customs Union Implementation: This will include: (a) long term support to the EAC Secretariat for the implementation of the CU; (b) equipment to implement a modern customs integrated system and common database linking the customs departments in the member states and Rwanda to the EAC Customs directory in Arusha; and (c) support the strengthening and modernization of national customs departments. B. Institutional Support for Transport Facilitation: This will involve: (a) strengthening of the NCTTCA; (b) supporting Governments to establish an appropriate management mechanism for the Central Transport Corridor connecting Dar-es-Salaam with the Great Lakes countries; and (c) helping improve the regional transport policy and harmonize transport regulations. C. Investment Support for Trade and Transport Facilitation: The proposed support includes: (a) enhancing security and facilitation (e.g. Community Based IT Systems) in the ports of Mombasa and Dar-es-Salaam; (b) improving goods security by financing a regional/national electronic cargo tracking system from the ports of Mombasa and Dar es Salaam throughout the EAC and Rwanda; (c) financing the establishment of key joint border posts at main cross-border posts within the region; (d) investing in Inland Container Depots (ICDs), intermodal infrastructure; and (e) supporting the implementation of a common Weigh Bridges policy. D. Support to Kenya and Uganda Railways Concessions: This will include: (a) technical support to the KRC and the Uganda asset holding company; (b) support for the retrenchment and social mitigation of Kenya Railways Corporation (KRC) staff; (c) support for establishment of a Pension Fund for the staff of KRC; and (d) support for the Kenya Relocation Action Plan (RAP) implementation; (e) investment support for Uganda Railways Corporation (URC); and (f) E. Partial Risk Guarantee (PRG): Support to the Joint Railways Concession through the provision of PRGs to RVRC subsidiaries (concession companies in Kenya and Uganda set up to enter into and implement the Concession Agreements) to backstop GoU/URC and GoK/KRC contractual obligations to the concession companies under the two Concession Agreements.

4.5.3 The African Development Fund is funding the implementation of the regional elements of component (A) and component (B) supporting the EAC Secretariat and the two Transport Corridors Management Institutions. The World Bank (IDA) is funding the national elements of component (A), as well as components (C), (D), and (E). Detailed Description of the ADF-Financed Components Institutional Support to the EAC (i)

EAC Transport Sector Development Strategy – This component involves consulting services to conduct a regional road transport planning and prepare a regional road sector development program (RRSDP) that will identify regional strategic priorities and resources for sector development and operational needs for

27

the medium term in line with the EAC objectives. The RRSDP will be the EAC key planning document guiding the regional policies and investments in the road sector for 2008–2018. (ii)

Transport Facilitation – Consultancy services to review the EAC Tripartite Agreement on Road Transport and the road traffic acts of the EAC member countries to determine the issues that have the most impact on transport facilitation within the EAC and to develop a strategy for harmonizing/streamlining these systems including design standards, traffic control, safety and environmental standards, driver and vehicle licensing, etc.

(iii)

Implementation of EAC Customs Union – This component involves consultancy services for the development of the EAC customs strategy, development of customs implementation manuals and user guides, development of monitoring and evaluation mechanisms, preparation and execution of communication and sensitization strategy, and stakeholders’ workshops; Consultancy services to assess training needs, prepare training strategy, identify target groups in both the government and private sector, develop training modules, and conduct or assist in carrying out the training.

(iv)

Regional Customs IT Interconnection System - Information and documentation are key elements in the control of international cross-border trade. In today’s interconnected electronic environment, exchange of data electronically is the key to trade facilitation and an efficient trade environment. Second, the construction of a common database for monitoring and risk analysis purposes will enhance the efficiency of the information exchange among member countries and the capacity of the Secretariat to monitor implementation of the CU. This component will therefore comprise works on software, communications infrastructure and hardware for database management: (a) design study of Customs Interconnectivity; (b) Customs Interconnectivity Investment; (c) establishment of common database.

(v)

EAC Capacity Building – The capacity building to improve the effectiveness of the Secretariat provides for the acquisition of corporate ICT systems including video conferencing, training of EAC staff in both the transport and customs divisions within the overall human resource development plan, and recruitment of a fix-term trade policy adviser to provide capacity in WTO trade facilitation negotiations. The component includes also a provision for the EAC to carry out its oversight and coordination role for the overall East Africa Trade and Transport Facilitation Project.

Institutional Support for the Establishment of the Central Corridor Agency (vi)

Acquisition of Basic Equipments – This component involves the acquisition of information and communication equipments (Computers, Telephone/fax, copiers etc.), office furniture, and two motor vehicles;

(vii) Capacity Building – This component involves the recruitment of four (4) professionals staff and three (3) supporting staff for a period of 3 years; Provision for office accommodation, utilities, communication costs, insurance, maintenance, etc.

28

(viii) Five-Year Business & Strategic Plan – This component involves the acquisition of consulting services to develop a 5-year business and strategic plan for the TTFA, including a base line of existing infrastructure and facilitation, a prioritization of objectives, strategic plan for achieving them and a business plan for responsibilities of Secretariat staff and operational expenses. Institutional Support to the Northern Corridor Transit Coordination Authority

4.6

(ix)

Northern Corridor Infrastructure Master Plan - This component include (a) Preparation of a comprehensive infrastructure master plan for the Northern Corridor to provide long term visibility to the member countries in planning the expansion of Corridor facilities and addressing the institutional, financial, and management issues; and (b) Feasibility study and preliminary engineering for three additional one-stop-border post facilities.

(x)

Northern Corridor Transit Facilitation Program – This component includes (i) Improvement in the use of the COMESA Customs Document, the Regional Customs Bond Guarantee Scheme and the Transit Carrier Licenses, an integrated review of all the documentation and processes be carried out with the view to harmonize, simplify and facilitate implementation; (ii) To provide support to the National Trade and Transport Facilitation Committees and strengthen the Stakeholders Forum in order to enhance their roles in ensuring the implementation of the decisions and recommendations of the organs of the NCTTCA, existing national trade and transport facilitation committees (Uganda and Rwanda) should be strengthened and new ones created where they don’t exist (Kenya, Burundi and DRC); (iii) Study on the harmonization of regulations, procedures and modalities for the implementation of axle load controls of vehicles on the Northern Corridor. The study intends to introduce standardized equipments and accessories in all weighbridge stations. The objective is to eliminate disputes arising from different weights obtained from different weighbridges (non-standardized). It also intends to introduce the system of weighing vehicles in motion along the Northern Corridor; (iv) Comparative Transport Cost Study to develop an analytical model that can be used for exploring various assumptions and investments options. It should be capable of analyzing the impact of both technical and economic alternatives on the different modes of transport.

(xi)

Institutional Capacity Building – The project will finance capacity building in the form of a procurement specialist and an IT specialist each for 12 months. In addition short term training for the current staff is also provided.

(xii)

Project Audit Services - Independent external auditors shall be selected to provide project audit services. The purpose of the audit will be to ensure that the proceeds of the grant are used economically, efficiently and solely for the purpose for which they are intended.

Environmental and Social Impact

4.6.1 The project’s main environmental issues are linked to the Joint Railways Concession. The only other components for which short environmental impact analyses and mitigation measures may be needed during project implementation pertains to border posts,

29

weighbridges, and inland depot construction. All these components are financed by the World Bank. The related mitigations measures have been put in place in compliance with the World Bank environmental and social safeguards. 4.6.2 The regional components of this project that are funded through the ADF institutional support grant involve capacity building in the form of training, the preparation of regional transport programs and strategies, the development of regional policy frameworks in trade and transport facilitation, and the acquisition of ICT equipments to reinforce regional cooperation in customs and trade. Therefore the regional components of the project do not have any environmental implications. 4.6.3 The project, by reducing transportation costs, will contribute to boost the development of regional trade and contribute to raising the standards of living of the poor and other disadvantaged groups. The cheaper inputs for agriculture and manufacturing, cheaper access to market and trade programs will likely increase employment and opportunities for income generating activities in individual households and induce other socio-economic opportunities. The positive social impacts of the project are discussed further under the section on project benefits. However, one major negative social impact associated with the development of transport is the spread of HIV/AIDS and other sexually transmitted diseases by truckers, particularly when they are forced to delay for several days at weigh stations, border posts or ports. By reducing delays and streamlining customs and transit documentation and procedures along the main transit routes, the project will contribute to reduce the activities that lead to the spread of HIV/AIDS and other sexually transmitted diseases. During the formulation of the present project, after wide consultations with the concerned countries and other donors, particularly the World Bank and USAID, it was determined that the issue of HIV/AIDS and transport in East Africa was already adequately addressed and funded under other ongoing initiatives. Therefore no specific measures were incorporated into this Project. Some of the ongoing HIV/AIDS and Transport initiatives include the intervention under the World Bank Northern Corridor Transport Project in collaboration with the International Federation of Transport Workers and Kenya Truckers’ Association. The intervention include mobilization of truckers and local communities for prevention, dissemination of gender appropriate information, protection/prevention and voluntary testing/treatment, changing risky behavior and a comprehensive monitoring program. There is also the Great Lakes Countries Initiatives on HIV/AIDS targeted to transport workers and cross border populations for awareness, information dissemination, counselling, and care for affected people. One other such initiative is the USAID-funded 5-year ROADS Project (Regional Outreach Addressing AIDS through Development Strategies) which is supporting regional NGO activities to foster responsible behavior by truck drivers. The transit facilitation agencies, the NCTTCA in particular is involved with these programs and are dedicated to fostering safe practices on the Northern and Central Transport Corridors. 4.7

Project Costs

Project Overall Costs The estimated total cost of the project irrespective of the financing source is UA 195.50 million (USD 280.06 million), not including the Partial Risk Guarantee.

30

Table 4.1: Project Overall Costs per Component and Source of Finance Cost Estimate Components

Amount (US$M)

A. Support to implement EAC Custom Union: B. Institutional support for transport facilitation: C. Investment support for transport facilitation: D. Support to the Concession of the Railways: E. PRGs for the Railway Concessions: Total Project Costs (excludin of PRGs):

World Bank Financing

% of Total

Amount (US$M)

Other funding Amount (US$M)

ADF Financing

Percent

Amount (US$M)

Percent

45.41

16.21%

15.84

34.88%

6.00

13.21%

23.57

19.63

7.01%

10.36

52.78%

7.21

36.73%

2.06

129.43

46.22%

98.63

76.20%

-

-

30.8

85.59

30.56%

74.19

86.68%

-

-

11.4

60 280.06

N/A

N/A

N/A

N/A

N/A

N/A

100%

199.02

71.06%

13.21

4.72%

67.83

Table 4.2: Project Overall Costs per Country and Source of Finance Cost Estimate Components

World Bank Financing

Amount (US$M) 150.17

% of Total

Amount (US$M)

53.62%

80.32%

Rwanda:

28.5

10.18%

120.62 15

Amount (US$M) -

52.63%

Uganda:

39.3

14.03%

26.4

Tanzania:

47.9

17.10%

14.19

Kenya:

Regional institutions (EAC, Corridors Authorities): PRG Kenya:

-

Amount (US$M) 29.55

-

-

13.5

67.18%

-

-

12.9

37

77.24%

-

-

10.9

5.07%

-

-

13.21

93%

0.98

45

-

45

-

-

-

15

-

15

-

-

-

280.06

100%

199.02

71.06%

13.21

4.72%

PRG Uganda: Total Project Costs (excluding value of PRGs)

Other funding

ADF Financing

Percent

Percent

67.83

Detailed Costs for ADF-Funded Components Table 4.3--Summary of Project Cost Estimates by Component (Net of Taxes) US Dollars (million) Component

Foreign Local Cost Exchange

Unit of Account (million)

Total

Foreign Exchange

Local Cost

Total

EAC Components EAC Transport Strategy

1.60

0.13

1.73

1.11

0.09

1.20

Transport & Trade Facilitation

0.45

0.15

0.60

0.31

0.10

0.42

EAC CU Implementation

2.20

0.30

2.50

1.53

0.21

1.73

Regional CU IT Interconnection

3.50

0.00

3.50

2.43

0.00

2.43

EAC Capacity Building

0.50

0.42

0.92

0.35

0.29

0.64

Audit

0.08

0.00

0.08

0.06

0.00

0.06

31

US Dollars (million) Foreign Local Cost Exchange

Component

Unit of Account (million)

Total

Foreign Exchange

Local Cost

Total

Sub-Total EAC

8.33

1.00

9.33

5.78

0.69

6.47

NCTTCA Components Northern Corridor Master Plan

0.90

0.25

1.15

0.62

0.17

0.80

Transit Facilitation Program

1.20

0.24

1.44

0.83

0.17

1.00

NCTTCA Capacity Building

0.23

0.19

0.41

0.16

0.13

0.28

Audit

0.06

0.00

0.06

0.04

0.00

0.04

Sub-Total NCTTCA

2.39

0.68

3.06

1.66

0.47

2.12

TTFA Components Basic Equipment

0.12

0.00

0.12

0.08

0.00

0.08

Capacity Building

0.63

0.74

1.37

0.44

0.51

0.95

5-Year Business Plan

0.25

0.00

0.25

0.17

0.00

0.17

Audit

0.06

0.00

0.06

0.04

0.00

0.04

Sub-Total TTFA

1.06

0.74

1.80

0.74

0.51

1.25

11.78

2.42

14.19

8.17

1.68

9.85

Total

4.8

Sources of Financing and Expenditure Schedule

Source of Financing 4.8.1 The proposed project will be jointly financed by an ADF grant, the EAC, and the two Corridor Authorities (NCTTCA, and TTFA). The ADF grant will finance 95% of the EAC and NCTTCA components, and 80% of the TTFA component. The financing plan by source of finance and by component is presented in Table 4.4 and 4.5 below. Table 4.4 - Sources of Finance by Component (in UA million) Cost Estimate

Contributions of EAC, NCTTCA, TTFA

ADF Financing

Components Amount (UA Million)

% of Total

Amount (UA Million)

Percent

Amount (UA Million)

Percent

EAC

6.47

66%

6.15

95%

0.32

5%

NCTTCA

2.12

22%

2.02

95%

0.11

5%

TTFA

1.25

13%

1.00

80%

0.25

20%

Total

9.85

100%

9.17

93%

0.68

7%

Table 4.5 – Financing Plan by Source of Funds (in UA million) Source ADF Grant

F.E

L.C. 1.00

9.17

EAC

0.32

0.32

NCTTCA

0.11

0.11

TTFA

0.25

0.25

1.68

9.85

Total

8.17

Total Costs

8.17

% of Total 93%

7%

100%

32

Expenditure Schedule 4.8.2

The expenditure schedule by component of the project is shown in Table 4.6 below. Table 4.6 - Expenditure Schedule by Component (in UA million)

Component

2007

2008

2009

2010

Total

EAC Transport Strategy

0.60

0.60

1.20

Transport & Trade Facilitation

0.21

0.21

0.42

EAC Customs Union

0.35

0.87

0.52

Regional Customs IT Intercon.

0.49

0.49

0.73

0.73

2.43

EAC Capacity Building

0.16

0.16

0.16

0.16

0.64

0.40

0.40

0.80

Northern Corridor Master Plan

1.73

Transit Facilitation Program

0.20

0.50

0.30

1.00

NCTTCA Capacity Building

0.07

0.14

0.07

0.28

Basic Equipment

0.08

TTFA Capacity Building

0.19

0.08 0.29

0.29

5-Year Business Plan

0.13

0.04

Audit

0.06

0.06

0.02

0.14

3.87

3.57

0.86

9.85

Total

4.8.3

1.54

0.19

0.95 0.17

The expenditure schedule by Source of financing is shown in Table 4.7 below. Table 4.7 - Expenditure Schedule by Source of Finance (in UA million) Source ADF

2007

2008

1.51

EAC NCTTCA

0.03

TTFA Total

1.54

5.

PROJECT IMPLEMENTATION

5.1

Executing Agency

2009

2010

Total

3.63

3.26

0.76

9.17

0.10

0.12

0.10

0.32

0.04

0.04

0.11

0.10

0.15

0.25

3.87

3.57

0.86

9.85

The project will be implemented by the EAC and the NCTTCA, each for their respective components. The Tanzania Ministry of Infrastructure Development will be the executing agency for the TTFA component. The two Agencies and the Ministry are all currently executing projects funded by external donors and are familiar with donor procurement procedures. The procurement capacity assessment of the EAC and the NCTTCA were carried out in 2005 by the World Bank. The assessment concluded that both institutions

33

have made progress towards building procurement capacity but more still needs to be done. The current project will provide capacity building in this area. The TTFA Task Force under the Tanzania Ministry of Infrastructure Development will be the Executing Agency for the initial phase in establishing the TTFA. 5.2

Institutional Arrangements

5.2.1 The EAC will be responsible for the execution of its components through a Project Implementation Team (PIT). The PIT will be responsible for overall monitoring, reporting and coordination of the project. The EAC will assign a project implementation team leader and two assistant project coordinators to cover the Transport and Customs and Trade aspects of the project. The designated Team Leader and the other officers shall have minimum experience and qualifications that are acceptable to the Bank. This will be made a condition of the grant. 5.2.2 The Northern Corridor Transit Transport Coordination Authority will be the executing agency for its components. The Authority is staffed with experienced professionals including a highway engineer, a transport economist, and a customs adviser. The Authority will appoint a project Team Leader who will be responsible for the coordination of the different components under the NCTTCA. The current project will fund a procurement/contract specialist for twelve months in order to strengthen the capacity of the Authority in procurement and project management. The procurement/contract specialist will be in charge of the procurement activities of the project in addition to providing training to the NCTTCA staff. The designated Team Leader shall have minimum experience and qualifications that are acceptable to the Bank. This will be made a condition of the grant. 5.2.3 The Directorate of Transport under the Tanzania Ministry of Infrastructure Development (MID) will be the PIU for the establishing of the Central Corridor Transit Facilitation Agency (TTFA). The PIU will be headed by a project coordinator and members form the MID, Tanzania Port Authority (TPA), SUMATRA, and Tanzania Railway Corporation (TRC). The PIU will be assisted by a short term procurement/facilitation consultant whom the World Bank has proposed to finance. The oversight of the implementation of the TTFA project components will be carried out by the Executive Board of the Agency composed of the Permanent Secretaries of the Ministries responsible for transport matters in each of the Contracting Parties, or their appointed representatives; and one representative from the private sector, from each member state. The Executive Board will oversee the process of establishing the TTFA including the procurement of goods and services, the selection of Secretariat staff, and the approval of annual operating budgets of the Secretariat. 5.2.4 The three project execution units will generally be responsible for the following preaward and project management activities: Pre-award/Recruitment activities – (i) Prepare project implementation plan; (ii) Prepare bidding documents; (iii) Invite bids and expression of interest according to AfDB procedures; (iv) Conduct evaluation of bids; (v) undertake contract negotiations, and propose selection of staff, consultants, and suppliers as the case may be according to AfDB procedures; (vi) Follow up on all actions agreed with the Bank, related to these activities. Project Management Activities – (i) Supervise and monitor consultants; (ii) Manage the special account; (iii) Ensure timely payments to staff, consultants, and other contracting parties; (iv) Prepare and submit progress reports; (v) Ensure timely execution and submission of audit reports; (vi) Maintain all project records.

34

5.2.5 The overall oversight of the project will be carried out by the Regional Steering Committee of Permanent Secretaries (RSC) from stakeholders’ ministries under the coordination of the ministries responsible for transport. The RSC, which was formally established at a meeting held on September 9, 2005 at the EAC Secretariat headquarters in Arusha, Tanzania, would provide overall policy guidance and oversight for the whole EATTFP. 5.3

Supervision and Implementation Schedule

5.3.1 The provision of the consulting services under the project will be by renowned international or regional consulting firms depending on the complexities and expertise requirements. The supply of ICT equipment for the regional customs interconnection systems will be by renowned manufacturers or their representatives. The components of the project funded by the ADF will be implemented over a period of 48 months including the time for procurement, starting from January 2007. 5.3.2 The project tentative implementation schedule is shown on table 5.1 below. A more detailed implementation schedule is provided in Annex 3. Table 5.1 -- Summary of Project Implementation Schedule Activity Consultancy & Other Services EAC Transport Strategy Transport & Trade Facilitation EAC Customs Union Strategy Regional Customs IT Interconnect Study EAC Customs Training EAC Capacity Building EAC Project Audit Northern Corridor Master Plan NC Transit Facilitation Program Transport Cost Study NCTTCA Capacity Building NCTTCA Project Audit TTFA Staff Recruitment TTFA Operational Phase TTFA 5-Year Business Plan TTFA Project Audit Procurement of Goods Acquisition of TTFA Office Equipment Regional Customs IT Interconnection (Hardware & Software) EAC Video Conferencing Equipment

5.4

Start Date

End Date

Responsible Agency

Jan. 2007 Jan. 2007 Jan. 2007 Jan. 2007 June 2007 Jan. 2007 Jan. 2007 Jan. 2007 Jan. 2007 Jan. 2007 Jan. 2007 Jan. 2007 Jan. 2007 July 2007 Jan 2008 Jan. 2007

Nov. 2008 June 2008 June 2008 June 2008 Dec. 2009 June 2009 Dec. 2010 Sept 2008 Dec. 2008 June 2008 June 2008 Dec. 2010 June 2007 June 2010 Oct. 2008 Dec. 2010

EAC/ADF EAC/ADF EAC/ADF EAC/ADF EAC/ADF EAC/ADF EAC/ADF NCTTCA/ADF NCTTCA/ADF NCTTCA/ADF NCTTCA/ADF NCTTCA/ADF TTFA/ADF TTFA/ADF TTFA/ADF TTFA/ADF

Jan. 2007 June 2008

June 2007 June 2009

TTFA/ADF EAC/ADF

Jan. 2007

July 2007

EAC/ADF

Procurement Arrangements

Introduction 5.4.1 Procurement arrangements are summarized in Table 5.2. All procurement of goods, and acquisition of consulting services financed by the ADF grant will be in accordance with the Bank's Rules of Procedure for Procurement of Goods and Works, or as appropriate Rules of Procedure for the Use of Consultants, using the relevant Bank Standard Bidding Documents.

35

Table 5.2 - Summary of Procurement Arrangements Project Categories ICB

*Other

Short-List

Total

1. Consulting Services EAC Transport Strategy

1.20 [1.20]

1.20 [1.20]

EAC Transport Facilitation Program

0.42 [0.32]

0.42 [0.32]

EAC CU Implementation

1.04 [1.00]

1.04 [1.00]

Regional Customs IT Interconnect Study

0.35 [0.35]

0.35 [0.35]

Training CU Procedures

0.69 [0.61]

EAC Capacity Building

0.29 [0.19]

0.69 [0.61] 0.25 [0.25]

0.54 [0.44]

Northern Corridor Master Plan

0.80 [0.80]

0.80 [0.80]

NC Transit Facilitation Program

1.00 [1.00]

1.00 [1.00]

0.12 [0.12]

0.28 [0.18]

0.53 [0.53]

0.53 [0.53]

NCTTCA Capacity Building

0.16 [0.06]

TTFA Staff Recruitment TTFA Recurrent Expenditure

0.42 [0.17]

0.42 [0.17]

TTFA 5-Year Business Plan

0.17 [0.17]

0.17 [0.17]

Project Audit

0.14 [0.14]

0.14 [0.14]

2. Procurement of Goods Acquisition of TTFA Office Equipment Regional Customs IT Interconnection (Hardware & Software) EAC Video Conferencing Equipment TOTAL

0.08 [0.08]

0.08 [0.08]

2.08 [2.08]

2.08 [2.08] 0.10 [0.10]

2.08 [2.08]

1.74 [1.21]

0.10 [0.10] 6.02 [5.88]

9.85 [9.17]

[ ] Figures in brackets are amounts financed by the ADF. *Training, miscellaneous operating costs

Consulting Services 5.4.2 Procurement of consulting services for the ADF-financed components, as detailed in Table 5.2 above, will be undertaken in accordance with the Bank’s “Rules of Procedure for the Use of Consultants.” 5.4.3 The consulting services under the project will be procured on the basis of short-lists of qualified consulting firms or qualified candidates (for the recruitment of TTFA staff and fixterm technical experts for capacity building). The following services are included in that category: (i) EAC Transport Strategy, (ii) Regional Customs IT Interconnection Study, and (iii) Northern Corridor Infrastructure Master Plan, (iv) EAC Trade & Transport Facilitation Program, (v) EAC Customs Strategy, (vi) EAC Customs Training, (vii) NCTTCA Transit Facilitation Program, (viii) TTFA Business & Strategic Plan, (ix) Transport Cost Study, and (x) Recruitment of fix-term experts. The selection procedure will be based on technical quality with price consideration.

36

5.4.4 The training for institutional capacity building of the EAC and NCTTCA will cover individual training attached to specific institutions, on-site or off-site group training of technical staff experts, workshops, seminar, and attendance of international technical conference. The training may also involve secondment to other institutions like the EU, or SACU to learn from their experience in building a customs union. Some specialized training and capacity building may be provided by the UN specialized agencies including UNCTAD, WTO, and WCO. Detailed institutional training programs providing training curriculums, number of people to be trained, timing and costs will be submitted to the Bank for review and approval. 5.4.5 Audit Services - The audit services will be subcontracted to firms of auditors to be procured through short-lists. The selection procedure will be based on establishing the comparability of technical proposals and selection of the lowest financial offer. Acquisition of Goods 5.4.6 Procurement of goods for the ADF-financed components, as detailed in Table 5.2 above, will be undertaken in accordance with the Bank’s “Rules of Procedure for the Procurement of Goods and Works”. 5.4.7 Regional Customs IT Interconnection System (Hardware & Software) -.The Acquisition of the Regional Customs IT interconnection system and related computers and database systems will be carried out under International Competitive Bidding (ICB) procedures. 5.4.8 The Acquisition of the EAC Video Conferencing System will be through international shopping. The acquisition of basics ICT and office furniture and vehicles for the TTFA will be through national shopping. Miscellaneous 5.4.9 Operational costs include (i) costs incurred by the EAC, and NCTTCA on account of project implementation, management and supervision including communication costs, travel expenses, office supplies; (ii) costs incurred by the TTFA for utilities (electricity, water, and telecommunication), rental of premises, office supplies, and insurance costs. Detailed operating budgets relating to the miscellaneous costs items will be submitted to the Bank for review and approval on an annual basis. General Procurement Notice 5.4.10 The text of General Procurement Notices (GPN) was agreed to during appraisal and will be issued for publication in the United Nations Development Business, upon approval of grant by the Board of Directors. Review Procedures 5.4.11 The following documents are subject to review and approval by the Bank. 9 9 9 9

Specific Procurement Notices and Invitation for Expression of Interest Short lists of consulting firms and individual consultants Tender Documents and Requests for Proposals for consultants Tender Evaluation Reports and Reports on Evaluation of Consultants' Proposals

37

9 Draft Contracts, if the Form of Contract document in the Standard Bidding Document has been amended. 5.5

Disbursement Arrangements

The grant will be disbursed for categories of expenditure including Goods, consulting services, and non-consulting services. The Direct Payment Disbursement Method will be used for disbursement applications related to the acquisition of goods and consulting services. The disbursement related to the acquisition of non-consulting services (e.g. operating costs for the TTFA, training cost, project monitoring and oversight costs) will be through a special account (revolving fund). All disbursements will follow the procedures and standard supporting documents outlined in the Bank’s Disbursement Hand Book. The EAC, NCTTCA, and TTFA will open Project Accounts in financial institutions and under conditions acceptable to the Bank for the purpose of depositing the proceeds of the portion of the grant earmarked for their respective trainings and miscellaneous operating costs components. The opening of the project accounts will be made a condition for the effectiveness of the grants. 5.6

Monitoring and Evaluation

5.6.1 EAC, NCTTCA, and the TTFA shall regularly provide the Bank with quarterly progress reports in the established format for their respective components and covering all project activities. These reports will include statements of sources and uses of funds, procurement progress reports, and other reports as the Bank may reasonably request to assist in verifying the delivery of the project outputs. Regular coordination meetings of the Regional Steering Committee of Permanent Secretaries will provide general oversight and ensure that proper execution and cooperation is maintained. In addition, monitoring of the project will be done through joint implementation support missions by the Bank and the World Bank to ensure that the project is implemented with due diligence and take appropriate actions to correct any deficiencies. A mid-term review will be undertaken during the second year of implementation in 2009 to identify any major constraints facing the project and provide the required corrective measures. 5.6.2 Within six months of project completion, the executing agencies will prepare the Borrower’s Project Completion Report to be submitted to the Bank. Subsequently, the Bank will carry out its own PCR, which will form the basis for the post-evaluation of the project. 5.7

Financial reporting and auditing

5.7.1 Financial management and reporting of the ADF-funded components will be the responsibility of the Director of Finance and Administration of the EAC for the EAC components, the Head of the Finance and Administration Unit of the NCTTCA, and the Director of the Finance and Administration Division of the Ministry of Infrastructure Development of Tanzania. All the three executing agencies are currently managing projects financed by the World Bank and other donors. The EAC is also currently executing an ADF-funded project. During preparation and appraisal missions a financial management assessment of the three executing agencies was carried out by the Word Bank and AfDB task teams. The overall conclusion of the financial management assessment is that the current financial management arrangements at the three executing agencies can report on the use and sources of the project funds and satisfy donors’ minimum financial management requirements. The overall financial

38

risk is considered Low/Negligible. All three agencies have well-documented Financial Management Rules and Procedures, which outline internal control procedures as well as financial reporting arrangements. Their Accounting Systems are fully computerized and operational. The financial reporting under on-going projects supported by IDA and ADF was also reviewed and found acceptable. 5.7.2 The Financial units of the three executing agencies will open and maintain separate accounts for the project, and maintain all the necessary documentation and records supporting project related disbursement and financial transactions. The financial statements and project accounts will be audited annually during project implementation following the Bank’s Guidelines for Project Audit. Qualified independent audit firms procured based on terms of reference acceptable to the Fund shall undertake the auditing services. The Audit reports shall be submitted to the Bank regularly once every year and no later than six months after project completion. 5.8

Aid Co-ordination

5.8.1 Aid co-ordination at the regional level is carried out by the East African Community Secretariat in consultation with the Ministries in charge of finance and external affairs on the member countries. The EAC has appointed sector coordinators, with the responsibility of overseeing all sector issues and donor-assisted projects of regional significance in the member states. Regular meetings are held with the donor community to discuss issues pertaining to ongoing and planned regional initiatives and projects in the various sectors. The AfDB has been active in the donor coordination framework through the Bank’s three country offices in East Africa (Tanzania, Uganda, and Rwanda). The Tanzania Country Office in particular has been participating to all the EAC donor coordination meetings. 5.8.2 The proposed East Africa Trade and Transport Facilitation Project is a good example of coordinated donor effort to provide assistance to several regional member countries and regional organizations to tackle trade and transport facilitation challenges on a regional scale. Besides the World Bank which is the main co-financier, the Bank preparation and appraisal missions held consultative discussions with all the donors active in the trade and transport sector in the region including the EU, AFD, USAID, and DfID. The project was fully endorsed by the donor community as it holds great potential for improving the competitiveness of the region’s trade sector. The project implementation is also fully coordinated between the co-financiers with a common Regional Project Steering Committee which forms the apex body to provide policy guidance to all the bilateral and regional teams responsible for overseeing the development and operations of the project.

6.

PROJECT SUSTAINABILITY AND RISKS

6.1

Project Sustainability

6.1.1 The member states of the EAC are committed to implementing and effectively enforcing the Customs Protocol signed in March 2004 and the Customs Management Law which entered into force in January 2005. The EAC Secretariat is tasked specifically with facilitating the transition to a Customs Union, developing a common trade policy, planning the regional transport network to improve and expand transport as a means of furthering physical cohesion and evolving coordinated, harmonized transport policies and regulations.

39

Sustainability of the CU has been assured by the commitment of all governments. The fact that the national customs administration’s current implementation of modernization and reform programs shares similar objectives is a clear indication of their commitment to sustaining the project goals and objectives. 6.1.2 The sustainability of the various facilitation measures supported by the project will largely depend on how these measures affect corridor efficiency. By fostering greater corridor efficiency, reducing delays and costs, the private sector stakeholders will realize the benefits and mobilize for further facilitation initiatives. Capacity building at the two Corridor Authorities and effective monitoring and evaluation built in the project will contribute to the effectiveness of the measures. In addition strong participation and involvement of private sector stakeholders in the governing bodies of the corridor authorities is another way to insure momentum and sustainability. 6.1.3 The NCTTCA was created in 1986 by the governments of Kenya, Uganda, Rwanda, Burundi, and DRC. The agency has been financially sustainable through an allocation of support from each signatory government, either collected directly or through a levy on transit cargo. The TTFA was created by the governments of Tanzania, Uganda, Burundi, Rwanda, and DRC for the central corridor. Institutionally, TTFA is similar to NCTTCA but with greater private sector involvement in its governing body. This greater private sector involvement will insure that their concerns are reflected in the agenda, that they cooperate on implementation and fully buy-in and support the TTFA financially. The Project will provide capacity for the implementation of TTFA for the first three years and fund a consultancy to collaboratively develop a business plan for the first five years. After the first three years, operating support will come through the collection of a cargo levy at the port sufficient to cover operating costs. Therefore the likelihood for the TTFA to be sustainable is very strong. 6.1.4 The long-term sustainability of the Kenya-Uganda Railway system will be considerably enhanced under the project because of: (a) the involvement of the private sector in the rehabilitation, operation, and management of the system, which should lead to improved management and establishment of a more effective system of incentives and accountability; (b) a 25 year concession period which will allow the concession companies to implement long-term strategies and investments to improve and sustain performance; and (c) risk mitigation through the PRGs which will backstop Governments’ payment obligations to the concession companies. 6.2

Critical Risks and Mitigation Measures

6.2.1 Conflicts and civil unrest - The region seems to be stable at this point and Burundi has just removed their dusk to dawn curfew. Nevertheless, a renewal of civil unrest in the region would affect the delivery of the project. However, the likelihood of war occurrence or other violent confrontations is low given the involvement of the international community in maintaining peace in the region. Transport facilitation delivered by the Project will improve the competitiveness of products in external markets. The economic growth realized through trade will encourage the countries to maintain the current stability in the region to sustain and increase trade 6.2.2 Overlapping of RECs – The EAC member countries have overlapping memberships in other regional economic communities. Kenya and Uganda are members of COMESA, while Tanzania is a SADC member. Both COMESA and SADC are planning to form

40

custom unions. Because it is not possible to belong to two custom unions, the countries will have to make a choice as to which CU they want to belong. However, discussions at the country level show that the implementation of the EAC CU is the member states priority over their other memberships. The Government of Rwanda has also expressed its priority to join the EAC CU before any other similar agreements. 6.2.3 Poor regional telecom systems - For the interconnectivity of the EAC Secretariat and the National Customs Administrations, it is imperative that the telecommunication capacity of the region is adequate and reliable. The East African Submarine Fiber Optic Cable (EASSy) Project aims to provide high quality broadband international connectivity to serve the Eastern Seaboard from Southern to Northern Africa. The network will facilitate intercountry transmission thereby reducing and to a large extent eliminating the need to transit through third countries outside the region for country to country communication and information exchange. The MOU has been signed by 22 parties, the detailed feasibility study and system design has been completed, the financing model and legal regulatory framework for broadband ICT is under preparation, and the tender for the Construction and Maintenance Agreement has been placed. It is envisioned that the EASSy will be ready for commercial service by end of first quarter 2008 in time to meet the project requirements. 6.2.4 Resistance to Reform – Governance issues in government agencies involved in customs and traffic control at ports, border posts and along transit corridors are well known. There are considerable vested interests opposed to reforms which could jeopardize the project. The mitigating factor is that there joint donor funded programs addressing the governance issues in Uganda, Kenya, and Tanzania. Conflicts between national customs strategies and the EAC regional custom strategy could also occur. The business plans of the individual national customs administrations prioritize and develop schedules and time frames for the implementation of the organization’s objectives. These business plans may include targets that conflict with the EAC customs strategy which is a regional approach for guiding and monitoring the transition process from the current status of integration into a full fledged customs union. The coordinating role of the EAC is therefore crucial. In this connection the project has incorporated capacity building for the EAC to reinforce its coordinating capacity. 6.2.5 Project implementation and coordination capacity of the regional organizations – The already relatively modest capacity for project execution and coordination of the EAC and NCTTCA could be overstretched by the project. To mitigate this risk, a strong technical support to the oversight committee, the EAC secretariat and the corridor authorities has been built in the project.

7.

PROJECT BENEFITS

7.1

Economic Benefits

7.1.1 The net effects of estimating the impact of the CU on economic growth and welfare will depend on several variables such as the level of new common external tariff compared with the previous tariffs, the degree of trade integration between the member countries, the net effect of trade creation vs. trade diversion, the potential customs revenue losses, etc. Generally by harmonizing tariffs and regulations, a CU increases regulatory transparency and economic efficiency and thus leads to higher levels of growth. By enlarging the market for producers and widening the source of goods and inputs at competitive prices for consumers

41

and producers, the EAC CU should enhance intra-regional trade and services, promote crossborder investment and FDI. Generally, CUs require coordination and constraints on individual members especially in the early years. Therefore, enhancing the monitoring role of the EAC for customs and facilitation is built into this Project. A 2004 World Bank study of the EAC Customs Union showed a positive, but modest benefit. The real benefit comes from moving from a CU to a common market. 7.1.2 The World Bank took the lead in preparing the cost-benefit analysis of the whole project, excluding the railway concession. The net present value (NPV) derived is US$21.44 million at a 12% discount rate and economic internal rate of return (EIRR) of 26%. Project costs are based on US$118.36 million, excluding taxes. This includes (1) support to implementation of the EAC CU, (2) institutional support for transport facilitation, and (3) investment support for transport facilitation. Benefits would reach US$181.7 million at the completion of the project in 7 years with a resulting EIRR of 26%. The switching values and sensitivity analysis confirm that the risks are acceptable. 7.1.3 Implementation of the project is expected to have short term and medium term benefits. Short term benefits include reduction in transit time and unpredictability; and reduction in non-logistics costs such as inventory and storage costs. Medium term benefits include contribution to better transport service and lower tariffs; and reduced transport costs for transport operators and increase in transport supply. Increased competition will ultimately result in decreased tariffs and trade expansion. Increased reliability will enable some firms to become integrated into global supply chains. While some local manufacturers may lose out to foreign imports, others will gain from reduced costs for inputs and export of goods. The Economic Analysis focused on the most important and quantifiable benefits, on the import side, and on container traffic. Consequently, the estimates are conservative in that they do not capture benefits for export traffic or non-containerized cargo. 7.2

Social and Poverty Reduction Benefits

7.2.1 The project is expected to contribute to poverty reduction in all the concerned east African countries. The impacts on poverty reduction are expected to be significantly larger in the landlocked countries. Although it is difficult to accurately quantify these impacts, recent studies conducted in Rwanda and Uganda show that there is potential for substantial reductions in poverty from initiatives that reduce trade costs, enhance the quality of exportable goods and facilitate movement out of subsistence into commercial activities. In Rwanda for example, the studies show that a 50% reduction in rural transportation costs translates into a 20% increase in coffee producer prices and reduces the poverty incidence among coffee farmers by almost 6%. If international transport costs were also to fall by a similar magnitude, the impact on coffee farmers’ incomes would be approximately double. Furthermore, reducing transport cost has been shown to have a positive impact on the distribution of income – the poor benefit proportionally more than their wealthier counterparts. 7.2.2 Significant poverty reduction would also occur through a shift in household dependence away from agriculture. For example, in Tanzania where poverty rates dropped only 6% among the poor working in agriculture, poverty rates dropped as much as 1/3 for households headed by wage workers in other sectors. The Project objective is to increase trade through reduced cost, improved transit time and greater reliability. All of the countries are simultaneously working to expand trade in non-traditional exports. The result will be

42

increased employment opportunities outside agriculture, thereby reducing the vulnerability of families to weather and other natural calamities. Diversification of household income sources will reduce vulnerability and make it more likely that households which rise above the poverty line are able to remain there.

8.

CONCLUSIONS AND RECOMMENDATIONS

8.1

Conclusions

8.1.1 The project is expected to contribute to enhance trade and regional integration, by reducing general transport costs, increasing market sizes beyond national boundaries, increasing economic output, and giving rise to other socio-economic benefits. The decrease in transport costs will increase the competitiveness of the region’s exports and lead to increased production and farm gate prices. In this respect, in addition to enhancing trade and strengthening regional integration, the project will contribute to poverty reduction in the region. The economic internal rate of return of the whole project was estimated at 26%. 8.1.2 The project is consistent with the objectives of the New Partnership for Africa’s Development (NEPAD) and part of its short-term action plan for infrastructure. It is also consistent with the Bank Group’s Policy on Regional Economic Cooperation and Integration, which provides the basis for the utilization of ADF resources for multinational projects. 8.2

Recommendations

It is recommended that: i) A grant not exceeding UA 9.2 million from ADF resources for multinational projects be extended to the East African Community (EAC) Secretariat, the Northern Corridor Transit Transport Coordination Authority, and the Central Corridor Transit Facilitation Agency for the purpose of implementing the regional components of the East Africa Trade and Transport Facilitation Project described in this report subject to the conditions specified in the following paragraphs. The grant is broken down in UA 6.2 million for the EAC, UA 2.0 million for NCTTCA and UA 1.0 million for TTFA. A.

Conditions Precedent to Entry into Force of the Protocols of Grant Agreement The entry into Force of the Protocols of Grant Agreements shall be subject to the fulfillment by the recipients of the provisions of Section 4.01 of the General conditions Applicable to Protocol of Agreements.

B.

Conditions Precedent to First Disbursement of the Grant The obligation of the Fund to make the first disbursement of the Grants shall be conditional upon the entry into force of the Protocol of Grant Agreements and the fulfillment by the beneficiaries of the following conditions: i)

The EAC Secretariat, the NCTTCA, and the Tanzania Ministry of Infrastructure Development shall have nominated project coordinators whose qualifications and experience are acceptable to the Fund (Para 5.2);

43

ii)

The TTFA shall provide evidence to the fund that the Central Corridor Transit Transport Facilitation Agency Agreement has entered into force among its signatories.

iii) The EAC, NCTTCA, and TTFA shall have opened separate project accounts in a bank acceptable to the fund into which the proceeds of the grant to cover certain eligible expenditures will be deposited as required (Para 5.5.1); C.

Other Conditions of the Grant i)

The annual operating budget of TTFA shall be submitted to the Fund for review and no-objection (Para 5.4.9);

ii)

The EAC and NCTTCA shall submit to the fund on an annual basis for review and no-objection detailed budgets for their respective institutional training, project coordination and oversight costs funded by the project (para 5.4.9).

ANNEX 1 MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE AND TRANSPORT FACILITATION PROJECT Project Location Map

This map is provided exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the African Development Bank Group any judgment concerning the legal status of a territory nor any approval or acceptance of such borders.

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

ANNEX 2 Page 1 of 2

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

ANNEX 2 Page 2 of 2

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

ANNEX 3

Project Implementation Schedule

2007

ID

Task Name

Start

Finish

Q1

1

Board Approval

2

2008

2009

2010

2011

Duration

11/22/2006

11/22/2006

0w

Procurement of Goods & Services

1/1/2007

3/9/2009

114.2w

3

EAC Transport Strategy

9/17/2007

8/15/2008

48w

4

EAC Customs Union Strategy

7/2/2007

7/31/2008

56.8w

5

EAC Transport Facilitation

11/30/2007

12/31/2008

56.8w

6

Customs IT interconnection Study

10/30/2007

10/30/2008

52.6w

7

EAC Customs Training

8/1/2008

12/31/2009

74w

8

EAC Capacity Building

4/2/2007

6/30/2009

117.4w

9

Northern Corridor Master Plan

11/30/2007

5/29/2009

78.2w

10

NC Transit Facilitation Program

7/2/2007

12/31/2008

78.6w

11

Transport Cost Study

9/3/2007

6/30/2008

43.2w

12

NCTTCA Capacity Building

7/2/2007

6/30/2009

104.4w

13

TTFA Technical Assistance

7/2/2007

6/30/2009

104.4w

14

TTFA 5-Year Business Plan

2/1/2008

12/31/2008

47.8w

15

Project Audit

11/30/2007

12/31/2010

161.2w

16

Acquisition of TTFA Equipment

5/1/2007

8/31/2007

17.8w

17

EAC Video Conferencing System

11/1/2007

6/30/2008

34.6w

18

IT intercon. Hardware & Software

1/1/2009

2/19/2010

59.4w

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

ANNEX 4 Page 1 of 4

Overall Project Description US$ million This component comprises: (a) The strengthening of the EAC Secretariat; (b) Regional Customs Union Implementation; and (c) Support to Customs Department at national level.

AfDB

Project Component I - Support to Implement the EAC Customs Union

1. Support to EACCU implementation in the EAC Secretariat This component involves consultancy services for the development of the EAC customs strategy, development of customs implementation manuals and user guides, development of monitoring and evaluation mechanisms, preparation and execution of communication and sensitization strategy, and stakeholders’ workshops; Consultancy services to assess training needs, prepare training strategy, identify target groups in both the government and private sector, develop training modules, and conduct or assist in carrying out the training.

$2.50

2. Regional Interconnection of Customs IT systems - The construction of a common database for monitoring and risk analysis purposes will enhance the efficiency of the information exchange among member countries and the capacity of the Secretariat to monitor implementation of the CU. This sub-component will include: (a) design study of Customs Interconnectivity Customs; (b) Interconnectivity Investment; (c) Establishment of common database

$3.50 3. Support to Customs at National level - National Customs Departments will ultimately be in charge of implementing the CU regulations on the ground Support will be organized based on the Revenue Authority strategy agreed upon with the donor community including the IMF to help strengthen and modernize the customs departments of Kenya, Rwanda and Uganda by: (a) Funding the roll out of the IT systems to most border posts; (b) Training for customs officers and technical assistance in specific areas (rules of origin, PSI phase-out, risk assessment systems, scanners, etc); (c) Needed equipment and infrastructure.

World Bank

3.1 Kenya Support to Customs department KRA - Customs and Services department of KRA accounts for about 40% of the total KRA revenue. Minimal reforms have been carried but to improve its efficiency, ensure proper implementation of CU regulations, and streamline customs procedures, KRA has designed and began implementing a comprehensive Customs Reform & Modernization Program: (a) roll out of new IT systems and administrative procedures across all customs stations, and interface between KRA’s new Simba 2005 system and URA/TRA’s ASYCUDA++; (b) purchase of additional scanners; (c) training, capacity building and change management

$22.32

3.2 Rwanda Support to Customs department RRA - Rwanda is in the final stages of being accepted to the EAC, the RRA therefore needs to be ready to implement EAC’s existing instruments. The duties are already aligned on the existing EAC rates, but harmonization of procedures is still needed. The project will support: (a) Preparation and implementation of an action plan to include Rwanda in the EAC CU, through technical assistance and capacity building; (b) Interconnection of ASYCUDA++ with URA, KRA and TRA; (c) The acquisition of scanners for trucks, to be set at the borders with Burundi, Uganda, Democratic Republic of Congo and Tanzania. These include: Gatuna Border (with Uganda); Kagitumba Border (with Uganda); Rusumo Border (with Tanzania); Butare (Kanyaru bordering Burundi and Cyangugu bordering DRC) and Ruhengeri (intersection with Gisenyi bordering DRC and Cyanika bordering Uganda).

$11.20 3.3 Uganda Support to Customs department URA - URA has agreed with its donors on the principle of a Ugandan Customs Modernization Project, which is part of URA Modernization Plan 2005-2008. The project will support: (a) The funding of the interconnectivity cost within URA, which includes installation fees, Reuter costs and the construction of a data center over a period of 4 years; (b) The interconnectivity between KRA, RRA and TRA enabling link points to Malaba, Busia, Mutukula and Katuna equipped with LANs and FTP servers; (c) Equipment: Support to the “Customs modernization program” developed by URA, which will mainly include the purchase of computers, printers, laptops etc; (d) Training: URA will provide staff with training of computerized system and its relevant new procedure.

Project Component II: Institutional support for Transport Facilitation

$5.89 US$ million

AfDB

This component comprises of (a) strengthening of the Northern Corridor Transit Transport Coordination Authority (NCTTCA); (b) support to Authorities in establishing an appropriate management mechanism, Central Corridor Transport Facilitation Agency (CCTFA), for the Central Transport Corridor connecting Dar-es-Salaam with the Great Lakes countries; (c) support to the implementation of the EAC Protocol on inland transport, (d) Support to the implementation of regional/national transport regulation, and (e) project monitoring and coordination. 1. Support to the strengthening of Northern Corridor Management. T his support will include: a) Developing a the Northern Corridor Infrastructure Master Plan; b)Transit Facilitation Program; c) Capacity building; d) Comparative study of transport cost; etc.

$3.00

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

AfDB

2. Support to the establishment of Central Corridor management - A concept of a Central Corridor Transport Facilitation Agency (CCTFA) has been designed for the great lakes countries. It will be structured to respond to the needs of Tanzania and its neighbours for transit transport traffic on this corridor. The funding covers: a) General operating costs (gradually decreasing over time); b) Basic equipment; c) Development of a 5-year Business Plan; d) Audit.

ANNEX 4 Page 2 of 4

$1.80

3. Support to implementation of the EAC Tri-Partite Agreement on Road Transport - Support will be through studies, technical assistance and workshops, according to a comprehensive proposal agreed upon by the EAC Technical committee on transport and communications. Support will be through studies, technical assistance and workshops, according to a comprehensive proposal agreed upon by the EAC Technical committee on transport and communications. It will include: a) EAC Regional Transport Sector Development Program; b) EAC Transport Facilitation Program; c) EAC Capacity building (trade facilitation negotiations, coordination of OSBP, project oversight, staff training program).

$0.60 4. Harmonization of regulations and capacity improvement of transport administrations The project will strive to support the four transport administrations which are often operating ineffectively due to staff numbers, skills and equipment, in order to secure an efficient policy dialogue in the region. and enable them to implement national and regional polices. This support will be granted as follows: 4.1 Kenya : Support to implementation of regional/national transport regulation, and establishment of a transport data center - (a) help to implement the various conventions to which Kenya is part; (b) Reinforce data collection and sector analysis through the establishment of a transport data center in the MOT, linking with other data sources such as the Central Bureau of Statistics and the University of Nairobi.

$2.50 4.2 Uganda : Support to the implementation of regional/national transport regulation - The transport department of the MoWHC will receive capacity building support, and will carry out under the project studies related to regulations enforcement and analysis of transport services economics. This program may be modified depending on the final conclusions of the current PPIAF funded study on transport regulation and institutional organization.

World Bank

$0.81 4.3 Tanzania: Support to implementation of regional/ national transport regulations, reinforcement of the administration and of transport professional associations. a) SUMATRA in capacity building to secure appropriate capacity, and in specific technical areas such as maritime safety and security (with an aim at overseeing the Port safety and security policy implemented by TPA), transport regulations, licensing and economic oversight; b) establishment of clear accreditation processes to enhance the Freight Forwarding business.

$2.70 4.4. Rwanda: Support to implementation of regional/national transport regulation and transport policy - The department of transport is understaffed and the transport legislation is archaic The department will require substantial support in transport policy, notably to implement a new transport policy, which is currently being finalized as part of the preparation of the Bank-supported Rwanda Transport Development Project and as it prepares itself for joining the EAC Customs Union. The project will support Rwanda’s participation in regional dialogue, provide. technical assistance for the update of the legal and regulatory framework, capacity building and reinforcement of the transport department

$0.90 5. Project monitoring and coordination in countries In each country, a specific support would be funded by IDA, on the amount that is also earmarked for the structure in charge of project coordination, with a specific budget to cater for national, regional and bilateral coordination meetings, project technical and financial audits for monitoring and evaluation and, in the case of Rwanda, support to fiduciary responsibilities as the project is coordinated by a specific project unit in this country. 6. Kampala-Kigali pipeline feasibility study - This study was requested by the GoR, to complement current ongoing studies carried out by the Kenya and Uganda governments for the extension of the current pipeline from Eldoret (Kenya) to Kampala.

Project Component III: Investment support for Trade and Transport Facilitation

$3.75

$0.40 US$ million

This component will support the following areas: (a) enhancing security and providing IT investment to improve operations efficiency (e.g. Community Based System) at the ports of Mombasa and Dar-es-Salaam; (b) trade flows through the main transport corridors through improved load security and control; (c) financing establishment of key joint border posts at main cross-border posts within the region; and (d) Investment in ICDs and intermodal platforms. This will improve the situation along the supply from Ports to landlocked countries’ capital cities

World Bank

1. Gateway Security and operations improvements 1.1 Port Security improvements in Mombasa - A short-term support funded by the SSATP program which undertook a security assessment and investment identification .to establish whether the port was compliant with the ISPC Code indicated: a very strong need for capacity building, procedures setting and security monitoring; and priority areas of investment, mostly to secure appropriate access control and oversight of the Port premises. Project support will include: (a) integrating a Security System including Security surveillance equipment and communication; (b) training and technical support (US$1 million); (c) consultancy in supervision and oversight.

$17.50

World Bank

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

ANNEX 4 Page 3 of 4

1.2 Port Security and facilitation in Dar-es-Salaam - An assessment along the lines of that carried out in Mombasa will be finalized by February 2006. The needs are expected to be of the same magnitude, though the investment program in Tanzania should also include boats. Project will include support to: (a) capacity building and technical assistance in Port Security (US$0.7 million); (b) equipment investment to Port of Dar-es-Salaam and supervision of equipment installation (US$10.8 million, including US$0.8 million of technical assistance; the US$10 million contribution will feed into the TPA’s overall security investment program).

$20.00 2. Improvement of facilitation along the region’s main corridors - The project will support a more efficient cargo tracking system, and an improvement of load control equipment and enforcement policies along the Northern and Central Corridor. The project will support a more efficient cargo tracking system, and an improvement of load control equipment and enforcement policies along the Northern and Central Corridor. 2.1 Support to more efficient cargo tracking systems Sophisticated systems to track transit cargo will limit the risk of revenue loss due to diversion of transit trade has the advantage of limiting the need to forming convoys at the point of entry and reducing the cost of current bonds. Convoys are a major cause of transport delays, especially in Kenya. KRA has already started to procure such a system. The project will finance the establishment of such systems in Uganda, Rwanda and Tanzania and their interconnectivity for transit transport, with an option to expand it at a second phase to other stakeholders, such as the ports, railway lines, transport companies or shipping agents so as to avoid conflicting initiatives resulting in too many additional costs for the transporters. Bulk of the support will be channelled through IDA Credits/Grants to the Revenue Authorities,

World Bank

Kenya: Interconnection of KRA National Cargo tracking with URA and TRA Coordination by Customs in the four countries (as well as probably DRC and Burundi) on cargo tracking systems will be established in order not to overburden transporters and logistics operators with conflicting costly requirements for equipment. This component support TA costs necessary to secure adequate interfacing with the other systems.

$0.40 Tanzania: National cargo tracking system and interconnection with other countries (US $1.5 million project participation US$1 million): TRA chose to procure a Cargo and Fuel Tracking System to monitor transit traffic through the country, but using a concept of Public Private Partnership to run the service against a fee. and is being supported by the current multi donor Tax Administration Project The railway system will have to update its cargo tracking system capability, and connect it both with TRA and the other countries. The project would therefore, subject to the approval of the rail concession company of the TRC network, support the update of the current tracking system through technical assistance and equipment.

$1.50 Uganda: National Cargo tracking and interconnection with other countries - his activity would be carried out taking stock of what would be achieved in the coastal lands of Kenya and Tanzania whose systems are more advanced. from year 2 of the project. Support would be through: a) equipment and software purchase; b) technical assistance. Rwanda: National cargo tracking and interconnection with others - This systems being at the receiving end, will depend on what Kenya and Tanzania will install

$1.05 $1.00

2.2 Weighbridge policy and load control equipment

World Bank

The project will support the increase of efficiency of the main load control points that are located in the longest part of the corridor in Kenya and Tanzania, and obtain a more fluid way of implementing load control. Support in Rwanda and Uganda is mostly related to fine-tuning of the existing load control network (Uganda) and to the introduction of mobile weighbridges (Rwanda, but to be tackled under the upcoming transport sector development project). Overall coordination of the load control policy will be tackled as part of Component 2 under financing from the AfDB.

Kenya - Overload cargo transport has caused serious deterioration therefore to harmonize cross border regulations and management, an efficient load control policy with Weigh Bridges carefully located is required in the four countries. The project will finance: technical assistance (US$0.2 million) for the harmonization of axle load control between Kenya and neighboring countries and for the formulation of a clear policy on axle load control enforcement including management of weight bridges, as well as the rehabilitation and modernization of the two most important stations on the corridor, Mariakani (near Mombasa) and Athi River (entering Nairobi from Mombasa).

$10.60 Tanzania - This component will comprise mostly the rehabilitation and extension of the main weighbridge station of Kibaha, which governs all traffic in and out of Dar-es-Salaam, as well as a few selected rehabilitation of existing stations, in such a way as not to increase the number of stops along Tanzania’s main corridors.

$7.50 Uganda - The project will supply fixed weighbridges for the main border crossings of Malaba and Busia (US$0.66 m), plus additional fixed weighbridges to set up at Gatuna and Mutukula (US$0.3 m), and four mobile weighbridges which will enable supervision of some of the main international itineraries needed along Tororo-Mbale, Soroti-Lira, Kyotera-Mutukula, Mbarara-Kasese roads (US$0.3 m).

$1.26

MULTINATIONAL – INSTITUTIONAL SUPPORT FOR EAST AFRICA TRADE & TRANSPORT FACILITATION PROJECT

ANNEX 4 Page 4 of 4

World Bank

3. Financing and establishment of joint or juxtaposed border posts at main border crossings EAC authorities have agreed to move towards the implementation of One-Stop Border Posts, to address the unnecessary delays caused at border points. The most critical example of these delays is Malaba, the busiest border post in the region, between Uganda and Kenya, which has become a critical bottleneck in the regional transit transport along the Northern Corridor.The Bank has had extensive discussions on joint border posts with revenue and transport authorities in the region, and with the financial support of the USAID ECA Trade Hub and MOT in Kenya feasibility studies were conducted for several of these border posts. A total number of nine (9) border posts have been selected for transformation The proposed project will finance Information Communication Technology (ICT), TA to change customs procedures, enhanced traffic management facilities, and some needed infrastructure at the border posts.

Malaba Border Post - This is a priority case for fast tracking which will later be replicated to other border points in the region.USAID ECA Trade Hub, has financed the preparation of a business plan and Phase 1 of Malaba One-Stop Border Post. Other border posts : Busia (Kenya-Uganda), Lungalunga-Horohoro, Namanga, Taveta and Isebania,(Kenya-Tanzania), Gatuna (Uganda-Rwanda), Rusumo Falls (Tanzania-Rwanda), Mutukula (Uganda-Tanzania).

$3.57 $32.95

World Bank

4. ICDs and support to the establishment of intermodal platforms This measure will concern mainly domestic traffic, but the ease in congestion will benefit the whole traffic including transit. Development of ICD in Dar-es-Salaam and inland ICDs - the proposed solution to congestion at the port should involve private management and no form of monopoly or mandatory transit through the ICD; Project contributionwill be limited to advisory services to the Government on the subject, complemented by a general master plan study for TPA including all inland facilities. Uganda: Kampala Railways ICDs - The project would make a “lump-sum” contribution to the rehabilitation and/or construction of a basic infrastructure related to the container operations in Kampala, to improve the efficiency of the link.

$1.10

$2.31

Rwanda: ICDs and logistics platforms This will include only the Isaka Dry Port is strategic for Rwanda,Burundi and DRC, as the termination point of the railway from Dar-es-Salaam Project contribution is limited to a study top determine infrastructure and equipement requirements as implementation will not occur before year 2 or 3 after the project start.

$0.40 5. Trade points and data interchange

World Bank

Facilitation improvements in Mombasa - The project will support the joint subsidiary by KPA nad KRA to set up a Community Based System wil by providing technical assistance, equipment, and training. The final result will allow data exchanges among the various stakeholders in the transport logistics chain, increasing the efficiency by eliminating the need for paper movement. Community System, data exchanges in Dar-es-Salaam - Facilitation improvements in Dar es Salaam TPA intends to implement its CBS by itself after consultation with the main stakeholders The project contribution will be expected for the rolling out of the system and its interface with other users in Dar-es-Salaam and inland (estimated budget US$1.5 million).

$3.20

$2.00

Rwanda: Kigali Trade point - The implementation of the OPSW is expected to eliminate cumbersome procedures including multiple papers and stamps, by establishing a single clearance document. he OPSW will be located in Kigali within the premises of the Rwanda Investment and Export Promotion Agency (RIEPA), from where a hub server will be connected to satellite centers in the other major cities of the country. The project will help fund computer equipment, initial management cost of the trade point as well as other related costs. RIEPA is expected to define and implement a cost recovery scheme that would enable sustainable management of the trade point with little or no impact on transaction costs.

Project Component IV: Support to the Joint Concession of Kenya and Uganda Railways (project support US$85.59 million

$2.00 US$ million

World Bank

1. Kenya - Railway Concessioning Retrenchment scheme for Kenya Railways Corporation (KRC) (US$45 million contribution); Severance payments; Supervision consultants for the implementation of the retrenchment plan and the pension fund; Redeployment Support for Retrenched staff; Kenya Railways Staff Retirement Benefit Scheme ; Kenya Railways Staff Retirement Benefit Scheme.

$69.00

2. Uganda - Railway Concessioning Technical support to the KRC and the Uganda asset holding company ii.1.1 Institutional support for KRC subsequent to concession; Institutional support for URC or its successor; Investment Support; Social impact and implementation of the Relocation Action Plan in Kenya (project contribution

$5.19

ANNEX 5 Page 1 of 8 Abridged Terms of Reference Abridged Terms of Reference for Transport Sector Development Strategy (East African Community) Background Article 89 of the Treaty that establishes the East African Community (EAC) outlines the need for development of common policies on transport and communications in order to promote the achievement of the objectives of the Community. To this end, the Partner States undertake to evolve coordinated, harmonized and complementary transport and communications links and establish new ones as a means of furthering the physical cohesion of the Partner States. The goal is to facilitate movement of traffic within the Community. Development of the transport strategy involves consulting services, experts meetings and stakeholder consultations. It aims at identifying regional strategic priorities and resources for sector development and operational needs for the medium term in line with EAC objectives. The strategy will be the EAC key planning document guiding the regional policies and investments in the transport sector for 2008-2018. Objectives • • •

to provide a comprehensive analysis of the transport requirements for achieving the trade and economic development goals of the EAC and opportunities for the region in general. to prioritize projects for funding, to recommend a phased development plan and to provide the technical requirements and economic benefits for each project necessary to effectively present individual projects to donors for funding support. to strengthen the ability of the EAC to plan for the overall development and maintenance of the East African Road Network.

Program Description The study will be divided into the following components: • • • • • •

Develop a detailed analysis of transport projects focusing on economic and social parameters. Prioritize projects and recommended a phased development plan. Formulate strategies for sustainable funding for maintenance of regional roads. Recommend innovative and cost-effective methods of road maintenance with emphasis on utilization of local labour and construction materials. Research and propose institutional methods tailored to regional roads (e.g. financing, maintenance, etc.) Prepare guidelines and manuals.

Scope of Work • Review the existing transportation infrastructure, condition and capacity and the current development plans for EAC • Analyze the economic growth areas, product clusters and current traffic patterns to determine the transportation demand • Update the analysis of transportation capacity constraints and missing links in the system • Update the prioritization of transport projects for all modes and develop a phased development plan based on the transport demand assessment; prepare an analysis of funding requirements; prepare a prioritized action plan and timescale for implementing the proposed programmes and projects

• • • •

•

ANNEX 5 Page 2 of 8 Based on the plan, prepare project profiles including technical requirements, economic benefits and funding requirements Review and recommend benefits of relationships with relevant development programmes of other regional and African organizations and initiatives such as NEPAD, COMESA, IGAD, SSATP, UNECA etc. Review maintenance standards, manuals and specifications in use in the Partner States and develop harmonized documents; Analyze and provide benchmarks for projected improvement in the performance of the road links, including reduction of road transportation cost and transit times, improved level of maintenance and utilization, as well as other productivity indicators based on a comparative analysis of level of performance of other similar, but more efficient transport corridors elsewhere in the World; Assess and estimate possible evolution of inter-modal traffic share and, in particular, determine the levels of transfer of freight from roads to railways. Evaluate the effect of this transfer on the pavement life of the regional road network and the cost of transport services. Estimate the likelihood of traffic diversion.

Implementation Schedule Eighteen months Consultant Qualifications The team will be composed of a highway engineer, transport engineer, transport economist, contracts specialist, materials engineer, structural engineer, environmental expert and procurement expert. Abridged Terms of Reference for Transport Facilitation (East African Community) Background This component involves the implementation of the Tripartite Agreement on Road Transport, signed by the Partner States in 2001 and ratified in 2004. Activities will include consultancy services, task force reviews and workshops. The thematic areas will include, among others, review and regional harmonization of the following: • • • •

road traffic acts, traffic signs and markings, driver testing manuals and highway safety measures environmental standards relating to road programmes standards and specifications for roads and bridges registration and licensing of vehicles

The component will also support designing and implementing an institutional framework for implementation of the activities listed above. The responsibilities fall under the Joint Technical Committee, to be made up of experts drawn from the Partner States.

ANNEX 5 Page 3 of 8 Study Objectives 1.

Harmonization of Standards and Specifications • • • • •

2.

Protection of the Environment •

3.

Bring the environmental regulations and standards affecting transportation projects in East Africa into a harmonized regime.

Harmonization of Documentation and Procedures for Vehicle Licensing in the Region. • • • •

4.

Agree on common policies and standards for the manufacture and the maintenance of road transport equipment; Establish common road design and construction standards for the trunk roads connecting the Partner States and promote the use of local materials and resources; Exchange information and experience on issues common to roads and road transport within the Community; Encourage the use and development of low cost and non-motorized transport in the Partner States’ transport policies; Take measures to ratify or accede to international conventions on road traffic and road signs and signals; and take such steps as may be necessary to implement these conventions.

Harmonize the provisions of the Partner States’ laws concerning licensing, equipment, markings and registration numbers of vehicles for travel and transport within the Community; Adopt common standards for vehicle construction, vehicle inspection and vehicle inspection centers; Adopt common standards and regulations for driver training and licensing; Establish common measures for the facilitation of road transit traffic.

Harmonization of Road Safety Regulations • • • •

Adopt common regulations governing speed limits on urban roads and highways; Adopt and establish common road safety regulations, accident rescue, first aid, medical care and post-trauma systems within the Community; Prescribe minimum safety requirements for packaging, loading and transporting of dangerous substances; Harmonize rules and regulations concerning special transport requiring security (abnormal and dangerous goods).

Study Description/Outputs The study will be divided into four components. Specific deliverables to be produced during the study are: • • • •

Baseline databank and an analysis report on existing regulations Stakeholder views collected and analyzed Harmonized documents produced and presented to the Council of Ministers Road Safety Master Plan

ANNEX 5 Page 4 of 8 Study Scope 1. Harmonization of Standards and Specifications a. Review existing documents (including statutes) and propose improvements to the same. b. Identify areas of commonality which lend themselves to harmonization. c. Propose and implement the incorporation of areas unique to particular countries into the harmonized regimes. d. Conduct stakeholder workshops to gain consensus on the harmonization. e. Studies to include but not limited to: i. Design standards and specifications for roads and bridges, ii. Traffic signs including traffic signals, road signs and markings, iii. Safety and fitness of vehicles, iv. Dimensions of vehicles and vehicle combinations, v. Loads on vehicles, and vi. Abnormal, awkward and hazardous loads. 2. Protection of the Environment a. b. c. d.

Review of existing environmental regulations and standards, Collecting stakeholder views and conducting workshops, Tripartite experts meetings to harmonize the standards, and Preparation of detailed manuals.

3. Harmonization of Documentation and Procedures for Vehicle Licensing in the Region. a. Review laws and regulations concerning vehicle licensing and b. Hold stakeholder meetings to discuss ways of harmonizing the regulations. 4. Harmonization of Road Safety Regulations a. Identify viable projects and activities leading to the stemming of the problem of high incidence of accidents in the region; and b. Implementation of the recommendations of the decisions of Council of Ministers for the preparation of a Road Safety Master Plan. Implementation Schedule 24 months Consultant Qualifications The study will be carried out by a multi-disciplinary team comprising a highway engineer/transport economist team leader, highway engineer, transport economist, legal expert, traffic engineer, environmental specialist, structural engineer procurement expert and motor industry expert.

ANNEX 5 Page 5 of 8 Abridged Terms of Reference for WTO Trade Facilitation Negotiation Capacity Building (East African Community) Background The Vision in establishing the East African Community is to create wealth and enhance competitiveness through increased production, investment and trade in the EA region. The responsibility of the Community is to find the common ground among the partner states regarding trade facilitation and effectively promote those interests in the larger Africa group that negotiates the Trade Facilitation Articles at WTO. One of the main agenda items at the 2005 WTO Hong Kong Ministerial was the improvement and clarification of the three major trade facilitation Agreements, Article’s V (Freedom of Transit), Article VIII (Trade Fees and Formalities) and Article X (Administration and Publication of Trade Regulations). The Ministerial meeting also agreed to expand them to include relevant customs issues. Working group sessions are currently ongoing and it is imperative that the region is kept updated and contributes to these proceedings. As the Customs Union is implemented, the interest of the whole Union needs to be evaluated, to determine the specific trade facilitation measures that will most effectively benefit overall trade in the Union. This TOR has been developed to support that effort. Objectives The purpose of this study is to determine the current trade facilitation measures available to the EAC and partner states under the WTO framework and the options for improving them through negotiations. This will enable East Africa to fully participate in international trade and to gain the most trade benefit for the Union and its partner states. The study will provide EAC policy-makers and Trade Directorate staff with an understanding of WTO negotiations and an analysis of possible improvements to the trade facilitation articles and the proposed customs issues. It will also provide analysis of the negotiating strategy most likely to achieve EAC trade benefits. The study will prepare the recommended amendments to the Articles V, VII and X, the rationale and negotiating strategies. This will enable the EAC Trade Directorate to internalize the WTO negotiating systems, and be in a position to continue in its advisory role to the partner states, after the completion of the study. The Trade Directorate will be in position to advise the partner states during future WTO negotiations on trade facilitation. Programme Description Phase I: Analyses of WTO Trade Facilitation issues and negotiating options for EAC. Phase II: Development of negotiating strategy and training of negotiators. Scope of work The consultants will: Phase I I. Conduct an assessment of the current WTO negotiations on Trade Facilitation and the ongoing work under the WTO Trade Facilitation Working Group. With reference to UNCTAD technical Notes for the preparation of WTO Trade Facilitation negotiations for LDCs. II. Prepare an analysis of the implementation status of trade facilitation measures being implemented in each country and the current negotiating position of the region. III. Propose possible-negotiating strategies with preliminary analysis of provisions required to implement them and an analysis of potential economic benefits to flow from each.

ANNEX 5 Page 6 of 8 IV. Conduct a consultative workshop, presenting proposals to trade policy decision-makers (public and private sectors) in the EAC and partner states. Consensus will be sought regarding the most effective strategy to pursue. Phase II Following an indication of preferred position(s) from partner states: V. Based on the recommendations/proposals of the decision-makers, the team will develop negotiation strategies to be adopted by the EAC. VI. Conduct a training session for EAC Directorate of Trade staff and national negotiators.

Implementation Schedule Six of ten months which includes a break for consultations. Consultant Qualifications The study will be carried out by a multi-disciplinary team comprising a customs expert with knowledge of WTO negotiations, trade negotiation specialist, legal specialist and economist. Abridged Terms of Reference for Implementation of the EAC Customs Union (East African Community) Background In order to promote the objectives of the EAC and pursuant to Article 75 of the EAC Treaty, a Protocol for the establishment of the EAC Customs Union was ratified. This protocol lays down the scope of cooperation among the customs administrations in a bid to form a Customs Union. A Directorate of Customs was established by the Council of Ministers to initiate EAC policy on customs and trade related matters and to coordinate the implementation of these policies by the customs administrations. The EAC Customs Management Act 2004 (CMA) spells out the functions of the Directorate. Its main responsibility is to coordinate the customs administrations of the EAC with a view to monitor their transition from their current status to the implementation of a fully-fledged customs union. Currently, each Customs administration has its own organizational structure, modernization and reform strategy. There is need to harmonize these strategies and ensure that the EAC Customs Strategy defines the priorities, details action plans and benchmarks and outlines mechanisms to consolidate the customs union. It is the responsibility of the customs administrations to implement the strategy. The customs strategy must be in line with the EAC Development Strategy, 2006-2010, that comes under review every five years. This Strategy document spells out policy guidelines and priority programmes for the regional organisation. Objectives To enable the Directorate of Customs to carry out its mandate to initiate policy, coordinate and monitor the administration and management of the customs union, by: •

Obtaining agreement among the partner states on the CMA and regulations to implement it,

•

Prepare manuals and guidelines for using the new regulations,

•

Design a comprehensive strategy for EAC to implement the customs union,

•

ANNEX 5 Page 7 of 8 Develop a communications strategy for raising public awareness of the plans for achieving the Customs Union and its benefits; provide information sessions for the stakeholders in the public and private sector that will need to operate under the new regulations, and

•

Prepare a monitoring and evaluation for the implementation of the Customs Union strategy.

Description of Assignment Phase 1: Assess status of approval of CMA and regulations to determine differences among partner states and develop recommendations for resolving differences in consultation with partner states. Phase 2 A: Once CMA and regulations are finalized and adopted, then formulate the strategy for implementing the customs union. Phase 2 B: Once the CMA and regulations are finalized and adopted (and simultaneous with Phase 2 A), produce user guidelines and manuals for the operationalization of the Act and regulations. Phase 3: On completion of Phase 2, prepare a communication and sensitization strategy for mobilizing support for the implementation of the CU as well as to acquaint customs officials, customs agents and other stakeholders with the new regulations and practices for implementation. Phase 4: On completion of Phase 2, design and establish a monitoring and evaluation system for the CU strategy and the implementation of the CMA and regulations. Scope of Work Phase 1: (i)

Assess the current level of each member states progress towards achieving the customs union with the view of identifying the differences that affect the effective implementation of the customs union.

(ii)

Invite submissions from all stakeholders on how best to address the differences.

(iii)

Review proposals and recommend solutions for resolving differences.

(iv)

Review and recommend proposals for the improvement of the EAC Customs Union Management Act taking cognizance of appropriate and modern laws and recommend the expeditious completion of the regulations.

(i)

Draw up a detailed programme of legislative measures to be adopted or modified with a specific timetable. Formulate a strategy with clear guidelines, defined time frames and detailed action plan for the transition from the current status of the member states to a fully-fledged customs union and propose a road map.

(ii)

Formulate and produce user-friendly guidelines and manuals.

(i)

Develop an effective communication and awareness strategy.

(ii)

Develop a mechanism for monitoring and evaluation of progress toward achieving the EAC Customs Union, which includes annual reporting on the progress.

Phase 2:

Phase 3:

Phase 4:

ANNEX 5 Page 8 of 8 Output and deliverables 1. A specific, measurable, realistic, attainable, and time bound five year Customs strategy with a proposed road map, which will stimulate and sustain progress towards implementing and sustaining the EAC Customs Union 2. User friendly guidelines for implementation of procedures and regulations 3. An effective public awareness strategy Consultants Qualifications The strategy will be designed by a team comprising of experienced Customs experts (at least fifteen years experience) who are familiar with the EAC laws and regulations, international best practice and public private partnership, a legal expert and a public awareness specialist.

ANNEX 6 MULTINATIONAL Institutional Support for East Africa Trade & Transport Facilitation Project Project Processing Schedule Activities Identification Mission: (July 2005)

Stakeholders Met by the Bank Team Tanzania

-

East African Community

-

Ministry of Infrastructure

-

Shipper’s Association

Kenya Uganda -

Ministry of Finance Ministry of Roads & Public Works Northern Corridor Transit Transport Coordination Authority (NCTTCA) Kenya Ports Authority Ministry of Transport Ministry of Finance Ministry of Roads & Public Works

Donor Agencies -

Preparation Mission: (September 2005)

World Bank, European Union, DfID, USAID

Tanzania

-

Ministry of Finance and Economic Development East African Community

-

Ministry of Infrastructure Tanzania Railway Corporation

-

Shipper’s Association

Kenya Rwanda Burundi -

Ministry of Finance Ministry of Roads & Public Works Northern Corridor Transit Transport Coordination Authority (NCTTCA) Ministry of Transport Ministry of Finance Ministry of Infrastructure Ministry of Finance Ministry of Infrastructure

Donor Agencies: World Bank, European Union, AFD, USAID Appraisal Mission: (March 2006)

Tanzania

-

Ministry of Finance and Economic Development

-

Ministry of Infrastructure

-

East African Community Shipper’s Association

Kenya -

Truckers’ Association Tanzania Port Authority Ministry of Finance Ministry of Roads & Public Works Northern Corridor Transit Transport Coordination Authority (NCTTCA)

Donor Agencies: World Bank, European Union, AFD, DfID, USAID