-ASV -C Y6-- X'v -Doemmzat Of

The World Bank

FOR OMCIAL USE ONLY

Repo No. P-6168-PAN

MEMORANDUK AID RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANE FOR RECONSTRUCTION AND DEVELOPME

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$60 MILLION

TO

REPUBLIC OF PANAMA

FOR A

ROADS REMABILITATION PROJECT

NOVEMBER 29, 1993

MICROGRAPHICS

Report No: P- 6168 PANType: MOP

This document has a restricted distribution and may be used by recipients only in tbe perfornance oftheir official duties. Its contents may not otbenrse be discosed without World Bank authorization.

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CURRENCY EQUIVALETS

Currency Unit BalboaUS$ 1.00 Balboa 1.00

FISCAL YAR

January 1 to December 31

UNITS OF WEIGHTS AND MEASURES

Metric British/US fquivalent

I kIlometer (kIn) 0.62 mile (mi)1 meter (m) 3.28 feet (ft)11 gram (g) 0.0022 pound (lb)1 kilogram (kg) 2.20 pounds (lb)I ton 2,205 pounds1 liter (It) 33.28 fluid once (ft. oz)

FOR OFFICIAL USE ONLYABBREVIATIONS

APN National Ports Authority [Autoridad Portuaria Nacional]BOT Build, operate and transferCPAR Country Procurement Assessment ReportDA Training Division [Divisidn de Adiestramiento]DAC Directorats of Civil Aeronautics

[Direcci6n de Aeronautica Civil]DINAC National Directorate of Contract Admiaistration (MOP)

lDirecci6n Nacional de Administraci6n de Contratos]DINAMAN National Directorate of Maintenance (of MOP)

[Direcci6n Nacional de Mantenimiento]DINATRATE National Directorate of Land Transport (of MOP)

[Direcci6n Nacional de Transporte Terrestre]DIPRODI Directorate of Progammming and Institutional

Development (of MOP) [Direcci6n de Programaci6n yDesarrolo Institucional]

DNT National Directorate of Traffic and Land Transport (ofMGJ) [Direcci6n Nacional de Trinaito y TransporteTerrestre]

EA Environmental AssessmentPP Panama Railways [Ferrocarril de Panamd]GDP Gross Domestic ProductGOP Government of PanamaHDM Highway Design and Maintenance Standards ModelIBRD International Bank for Reconstruction and DevelopmentICB International Competitive BiddingIDB Inter-American Development BankIPDP Indigenous Peoples' Development PlanLCB Local Competitive BiddingMGJ Ministry of Govemment and Justice [Ministenio de

Gobiemo y Justicia]MEPPE Ministry of Planning and Economic Policy (Ministerio

de Planificaci6n y Politica Econ6mica)MOP Miistry of Public Works Mmnistero de Obras

Piblicas]PAH Pan-American HighwayPCMA Panama City Metropolitan AreaSAR Staff Appraisal ReportSOE Statement of ExpensesTMS Traffic Management SystemsUA Environmental Unit (Unidad AmbientallUECP Special Project Coordination Unit [Unidad Especial

Coordinadora del Proyecto]UNDP United Nations Development ProgrammeUPTI Urban Passenger Transport LawUSAID United States Agency for International Development

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

PANAMA

ROADS REHABLATATION PROJECTLOAN AND PROJECT SIMMARY

BorrowQ: Government of Panama (GOP).

ectin Ag Ministry of Public Works (MOP)Ministry of Government and Justice (MGJ).

Beneficiaries: Project benefits would accrue to the economy asa whole. The reduction in t,ansport costs fromthe project is expected to increase thecompetitiveness of Panamanian exports.

US$60 mllnion.

Terms: Repayment in 17 years, including 5 years ofgrace, with interest at the Bank's variableinterest rate.

stim~Eated ProjectCosts: Local Foreign TotalJS$ million-

Civil WorksInterurban Roads 80.04 134.19 214.23Urban Strets 24.43 42.57 67.00

Equipment 0.08 1.57 1.65Consulting Services 7.07 20.22 27.30

Basic Project Costs 111.62 198.55 310.17

Physical Contingencies 11.16 19.86 31.02Price Contingencies 12.17 21.64

Base Cost 134.95 240.05 375.00

I1B Financing Costs 0.00 31.00 1L3Q

Total Project Costs 134.95 271.05 406.00

Other Investments ' 91.77 163.23 255.

Total Road Program Costs 2 226.72 434.28 661.00

1. 'he Government has identified several major justifiable road upgrading andimprovement investments, which will be mostly cared out under build, operato andtransfer (BOI) angements with the private sector. The Government has ageed touse the same technical, economic and environmentl criteria to select and implementthose roads.

2. labeled Pluri-Annal Plan in the MDB Prqect Document.

Financing Plan: Local Foreign ToWa-US$ million--------------

EbojectIBRD 0.00 60.00 60.00IDB 0.00 180.00 180.00GOP 134.95 31.05 166.00Total 134.95 271.05 406.00

Total Road ProgramIBRD 0.00 60.00 60.001DB 0.00 190.00 190.00GOP 226.72 184.28 411.00Total 226.72 434.28 661.00

Esilmated Bank Disbursments:Bank FY:1994 1995 16 1997 1998 12 20Q0

--------------US$ million----------------

Annual 5 6 1i 12 13 12 2CumuMlave 5 11 21 33 46 58 60

Fconomic Rate of Return: 36%

Staff Apprasa Report: IlDB's Project Document (PN-0022), datedAugust 31, 1993 - in lieu of Bank SAR.

Mas. IBRD 25124IBRD 25232

Poverty Category: It is expected that some 14 percent of theeconomic benefits to be accrued by the privatesector due to the project's interaroan works andabout 50 percent of those due to urban workswill go to low-income individuals.

MEMORANDUM AND RECOMMENDATIONS OF THE PRESIIDENTOF THE INTERNATIONAL BANK FOR RECONSRUCTION AND

DEVELOPMETTO THE EXECUTIVE D)ECTORS

ON A LOANTO THE REPUBLIC OF PANAMA

FOR THE ROADS REHABIfTATION PROJECT

1. I submit for your apprval the following memorandum and recommendation on aproposed loan to the Republic of Panama for US$60 million equivalent to help theGovermment of Panama implement its Road Rebabilitation Progam. The loan would berepaid over 17 years, including a 5 year grace pertiod, with interest at the Bank's variablerate. The project will be cofinanced by the Inter-American Development Bank (1DB), whichhas already approved a loan in an amount equivalent to US$180 miLlion. The two banksworked closely together on the project's preparation and appraisal and the IDB's ProjectDocument No. PN-0022 has been distributed to you in lieu of the Bank's Staff AppraisalReport.

2. Background. Panama has a relatively well-developed transport infrastructue for bothinternational and domestic transport. However, due to inadequate maintenance and higherthan anticipated traffic volumes and loads, its roads, streets and bridges have badlydeteriorated. In 1985, about 74% of Panama's roads were estimated to be in fair to goodcondition; currently this figure is only about 40%. This deterioration resulted from very littlemaintenance funding, average of about USS5 million per annum, during the 1980s when thecountry's economic growth ground to an almost complete halt, due first to the slow down ineconomic activity in Latin America generally and later to the economic sanctions imposedagainst Panama. Over the past three years, maintenance funding has picked up again to aboutUS$ 16 million per year on average. However, about US$80 million per year would berequired over the next five years to remove the backlog of maintenance and to prvent itsfuture accumulation. Of particular concern is the ongoing rapid deterioration of theTlansisthmian Highway and stretches of the Pan American Highway, by far the country'stwo most important land transport axes and traditionally the main corridors crucial toPanama's economic development. The Panama City Metropolitan Area (PCMA) dominatesthe political, economic and social activities of the country, with over 40% of its totalpopulation, 44% of its work force and over 50% of GDP. PCMNs physical layout andspatial development have led to long travel distances concentrated mostly in a narrowcorridor along the Transisthmian Highway and resulting in unacceptably high levels of trafficcongestion, PCMAs transport problems are further aggravated by an inefficient bus transportsystem, inadequate traffilc management and insufficient maintenance of city streets.

3. The present Government has taken several significant initiatives since 1989 toimprove the roads subsector. Maintenance funding has been gradually increased; a moreappropriate law governing vehicle weights and dimensions has been passed and its policinghas been intensified to save the country's road infastructure; a beginning has been made toreduce the redundancy in the Ministry of Public Works (MOP) by cutting staff by about 20per cent; MOP has been reorganized to streamline its functions and make it mainly anormaive agency. relying more on the private sector, through both consultants andcontractors, to carry out its former construction activities; plans are underway to sell offmost of MOP's road and quarry equipment and to resume staff reductions as the above shiftto the private sector continues; an evironmental unit has been established in MOP to give

2

greater attention to environmental impact assessments; and a iew Urban Passenger TSansportLaw (UPIL) has been passed to improve efficiency in this critically important area.

4. Panama has no ministry or agency responsible for intennodal transport investnent andpolicy coordination. The transport subsector agencies - the National Port Authority (APN),the Panama Railways (PP), the Civil Aviation Department and the MOP for highvways -establish their own investment programs, strategies and policies, and report to differentministries. Ib better coordinate among the different modes of transport and, as a first steptowards the eventual creation of a single sector entity, which would be responsible foroverall coordination, policy, strategy formulation, and regulation of the transport sector, theproject would pwvide for the establishment of a lbnsport Planning and Coordination Unit.

5. Responsibility for the management of the urban transport subsector is divided betweenMOP and the Ministty of Government and JustiL (MGJ). MOP's role is that of planning,design, construction supervision and maintenance of the physical infrastmcture as well astraffic managerent. Overseeing and policing urban passenger transport services is theresponsibility of MGJ. It also assigns certificates of operation (cupos) permitting entry intothe market, assigns routes and sets tariffs and manages and polices traffic. The project wouldprvide technical assistance to both MOP and MGJ to strengthen their capacity to cany outthese functions, as recently defined in the new UPIT of May 26, 1993, and to train staff.

6. The truckdng industry in Panama is, for the most part, free of inefficient regulations.However, for ttucking to add from the Colon Free Zone, some trucking cooperatives,uions, lare trucking companies in agreement with the Admministator of the Colon FreeZone do, in fact, restrict entry into the market leading to a doubling of tariffs compared tothose of international freight handled by non-Panamanian truckers to the Free Zone. Underthe project, these rstrictions would be eliminated.

7. Bus passenger transport in Panama is provided mostly by private operators who comeunder the regulatory authority of MG In Panama City, most operators own a single vehicleand their entry and route assignments are controlled by the "cupo system", which is acommon practice in Latin America. The new UPL unprowes the cupo systm by requiringcupo holders to show evidence of vehicle ownership and by strengtbening the Government'sauthoity to revoke cupos. The project would provide technical assistance to identify whatfurther changes may be needed in the cupo system to minimize distortions and to implementthe ,hanges.

8. Project Objectives. The project aims to: (a) increase competition in the madtransport industry and provide the foundation for futne, regulatory reform; 0) improve themanagement of the tansport sector through through the coordination of imvestments and theformulation of policies; (c) continue strengthening the istrion and maintenance ofroads, through support to MOP in: (i) pavement management; and (ii) private sectorparticipation in road maintenance; (d) assist the MOP in removing the existing roadmaintenance backlog and preventing its future occurrence through the implementation of awell-coordinated rehabilitation and maintenance program; and (e) reduce the traiccongestion and provide more efficient, safe and reliable passenger transport services in thecity of Panama and other major cities in the country.

3

9. Project Description. The project, which would finance a four-year (1994-1997) timeslice of GOPs publicly-financed Road Program satis1actory to the Bank, would comprise: (1)an urban transrt co1m pnent (US$89 million of project base costs) covering: (a) street.ehabilitation and/or widening and maintenance, intersection improvement, improvedsignazation and traffic management; and (b) institutional reforms and regulatoxy changes inpublic road transport; (2) an inter-urban roads component (US$278 million total cost)comprising: the improvement, rehabilitation and maintenance of roads and bridges; and (3) _oligy reform and an institutional strengthening component (US$8 million total cost) aimed

at: (a) refonning the regulatory policy of the for-hire road transport services; (b) improvingoverall transport sector planning and policy formulation, the institutional set-up for managingurban tansport, and MOP's capacity to coordinate investments in the entire transport sectorand to address environmental issues; (c) training MOP staff to prepare projects for privatesector implementation and to manage the contracts; and (d) preparing studies for possiblefollow-up activities. The other elements of the total Road Program are justifiable roadupgrading and improvement investments, which the Government intends to cany out mostlyunder build, operate and tansfer (BOT) arrangements with the private sector. TheGovernment would use the same technical, economic and environmental criteria to select andimplement those roads.

10. Project Costs and Flnancing Plan. The project is estimated to cost about US$406million, including contingencies. The Government would finance US$166 million, the IDB,US$180 million, including US$31 million of financial charges on its loan, and the Bank,US$60 millon. Both banks would finance parts of the urban and inter-urban components ofthe project as wel as specific technical assistance activities. No individual contact would befinanced by both the Bank and the DB. Fimancing of routine maintenance would be coveredentirely by the Government, except for a pilot program of about US$500,000 to assist inintroducing routine maintenance by contract to the private scztor. Retroactive financing ofabout US$4.0 million is recommended to cover expenditures incurred after June 30, 1993 forcivil works to be initiated during the construction season and for consulting servicesnecessary for project start up, in line with a similar agreement reached between theGovernment and 1DB. The detailed cost estmates and financing plan are siown inSchedule A.

11. Project Implementation. Implemenlation of the project is expected to take six yearsfrom March 1994. Execution of the road works, technical assistance for sector coordinationand strengthening of MOP and the study of truckdng in the Free Zone, would be theresponsibility of MOP, which would carry out the activities through its national directorates.MOP would create and staff a five-person Special Project Coordination Unit (UECP), tocoordinate project implementation activities, including the preparation and submission ofproject reports and bidding documents. The project would provide a training program toMOP focussing on contrct management to assist in implementing the project. MGJ would beresponsible for: the review of the effectiveness of the new trsport law in improving thequality of urban public passenger transport, the review of public bus tansport tarffs andtechnical assistance and training for MGJ staff. All subprojects would be selected inaccordance with technical, economic, financial and environmental criteria satisfctory to theBank. These criterna as well as further details on proj'- implementation and specific acdonsand their mming are given !n the Government's Implementation Letter. The Government'soverall sector stategy is speLed out in the Government's Thnsport Sector Plicy Statement.The Bank's Standard Bidding Documents would be used for the procurement of civil works

4

and goods and the engagement of consultants. A Special Account would be established in the'3anco Nacional de Panama or any other commercial bank acceptable to the Bank with an

initial deposit of US$3.(0 million. A Revolving Fund for the project's counterpart fundswould also be established with an initial amount of UTS$2.0 million in the Banco Nacional dePanama or any other commercial bank acceptable to the Bank. Methods of procurement anddisbursements are shown in Schedule B and detailed in Annex 2. Schedule C presents thetimetable of key project processing events and Schedule D, the status of Bank Groupoperations in Panama.

12. Project Sustainability. The project's focus on refonns in the policy and regulatoryfaxmeworks goveniing the road transport industry and on institutional development, aimed atbetter managing the highways subsector, should contribute to the project's sustainability. Theimplementation of the recommendations of the highway subsector financing study is expectedto lead to a more reliable funding source for the subsector, and ensure adequate roadmaintenance and rehabilitation.

13. Lessons From Bank Experience in the Sector. The Bank has played a significantrole in the development of the transport sector in Panama with four highway projects, twoport projects, an aviation project, a Panama Corridor Thnsport Study, and the UNDP-financed National lTansport Study, for which the Bank was the executing agency. The Bank-financed projects, in general, have achieved their principal objectives. Physicalimplementation in all cases, however, was delayed by frequent changes in projectmanagement, a shortage of qualified and experienced staff, lack of counterpart funds anddifferences between the Government and the Bank on procurement procedures as well astheir cumbersome nature. The design of the proposed project draws heavily on thisexperience and provides specific measures aimed at preventing their occurrence, namely: (a)technical assistance for organizational support and staff; (b) annual and mid-term reviews ofbudgets and the establishment of a Revolving Fund to ensure liquidity; and (c) use of theBanks Standard Bidding Documents.

14. Rationale for Bank Involvement. The Bank is supporting GOP's economic reformprogram thlough the on-going Economic Recovery Loan. The Bank's medium-term countryassistance stategy is to foster a deepening of the reform agenda through deregulation of thedomestic economy, improving efficiency and management in the public sector, alleviatingpoverty and improving efficiency and equity in the d-elivery of social services, rehabilitngbasic infmstructure and safeguarding the environment. In the transport sector, the abovestrategy implies: (a) carrying out the necessary policy reforms to improve the efficiency ofthe road transport industry; (b) improving transport sector planning and policy fonnulationand increasing the participation of the private sector to improve efficiency in the provision oftransport services; and (c) concentrating on selected investments, particularly in improvingthe country's urban and interurban road systems. The Bank's involvement, jointly with theIDB, in the proposed project is essential for effecting and sustaining important improvementsin the above three areas. The Bank's imnolvement has been, and would continue to be,catalytic in helping the Government bnng about the necessary changes.

15. Agreed Actions. During Negotiations, agreement was reached with the Governmenton a policy and institutional reform program, incorporated in its Transport Sector PolicyStatement and Implementation Letter (Annex 1). The agreements include: (a) a review byJune 30, 1996 (about 30 months after the anticipated date of loan signature) of the

5

effectiveness of the new UPL, particularly the effectiveness of the cupo system, andimplementation of the agreed recommendations by September 30, 1996 before the Bank'sappioval of the following year's road program; (b) discussions of the Free Zone study withthe Bank following its completion and implementation of the recommendations by September30, 1996, as a condition of Bank approval of further annual road programs; (c) a review ofurban public passenger transport tariffs by December 30, 1995 and implementation of thenew tariffs by June 30, 1996; (d) the establishment of a Dmnsport Sector Investment andPolicy Coordination entity; (e) the adoption of technical, ecanomic ant environmental criteriafor selecting and implementing investments in the Road Program (detailed in Annex 2); (f)the structure, staffing, functions and strengthening of the envirormental uidt (Annex 2); (g)the functions and responsibilities of the UECP (Annex 2); (h) dhe provision -f adequatecounterpart and road maintenance funding iy the Government (Annex 1); vi) the list ofinvestments to be included in the first-year program (Annex 2); (j) the scope of the annualand mid-term reviews together with specific Progress and Performance Indicators (Annex 2);(k) the environmental guidelines for MOP's activities, to be reviewed and approved by theBank not later than December 31, 1994 and issued immediately thereafter; and ,l) the use ofthe Bank's standard bidding documents for procurenvent of civil works and goods and of theBank's guidelines for the recruitment of consultants and of agreed standard documents forLocal Competitive Bidding.

16. Conditions of Effectiveness. The conditions of loan effectiveness would be: (a) theGoverment would create a permanent entity for overall coo:Jination of investments andpolicy in the transport sector, with staling and functions acceptable to the Bank; (b) theGovernment would create and satisfactorily staff the UECP; and (c) the Government wouldestablish and make an initial deposit of US$2 million into the Revolving Account.

17. Environmental Aspects. MOP has established an environmental unit which would bestrengthened under the project both through the recruitment of additional staff and throughstafF aining. By March 31, 1995, the Governnent would staff the unit with qualifiedpersonnel, and provide equipment and sufficient funds to operate it. The project roads andstreets would be subject to environmental impact studies. Where the studies indicate thatmitigatory measures are needed, these would be undertaken before the works are approvedfor financing. The bidding documents for the project works would include mitigatorymeasures for direct adverse envionmenal impacts expected to be caused by roadworkactivities such as quarrying, opening of borrow pits, disposal of used road materials andtemporary work camps. FBor the Quebrada Aguacate-CaAitas-Bayano Rr'd, which theGovernment intends to include in the Road Program, works would not start on the road until:(i) a satisfactory Indigenous Peoples' Development Plan (IPDP), as required by OD 4.20, hasbeen completed by the Govermment and agreed with the Bank and (ii) agreed mitigatoryactions identified as being necessary before the beginning of construction have been carriedout. Also, while there are currently no known project components that would requireresettlement, the Government would have the right to adjust the road progran duringimplementation and include resettlement components. The Government would fiurnish to theBank a satisfactory resettlement and compensation plan before initiatn any projectcomponents requinng resettlement. While the MOP is developing the environmentalguidelines indicated in pargraph 15 above it would use the Bank and IDE guidelines,respectively.

6

18. Benefits. Tihe project would improve transport efficiency and reduce costs throughoutthe country, particularly along the PanAmerican Highway, which is needed for the transportof agricultural produce, and in the PCMA, where it would support the intemationally-oriented service sector and urban industry. In addition, the project would prolong theeconomic life of existing badly deteriorated roads and streets thereby helping to avoid costlypremature reconstruction. The project's policy reforn component would ensure moreefficient for-hire road transport service and lead to lower transport costs and better quality ofservice. A high percentage of the beneficiaries of the improved efficiency in urban bustransport would be th.. lower income urban group. Significant, but unquantifiable, benefitswould also accrue from the institutional strengthening and training components of the project.The improvement in investment coordination would avoid gaps, wasteful duplication andbadly timed investments. The assistance for strengthening MOP would increase itsimplementation efficiency and reduce delays. The improvement in environmental awarenessand the capacity to take environmental factors into account in the design and execution ofroad projects would prevent damage to the country's natural resources.

19. Risks. The main project risk is that the Govemment might be unwilling or unable totake difficult policy decisions. Up-front actions, such as the creation of the sectorcoordination unit as a condition of effectiveness, annual and mid-term reviews with well-defined and measurable objectives and a mechanism for withholding the approval ofsubsequent amual sector investment programs, if the key policy and institutional reforms arenot met, would help to reduce risks. To provide for likely staff changes and reassignmentsthat might result from the transfer of power to a new Govemment in September 1994, onlythe key technical assistance positions necessary for project start-up would be filled before thisdate and staff training would be initially limited primarily to mid-level staff who are unlikelyto be affected by the change in Government. Other risks relate to possible capacitylimitations, both financially and institutionally, to implement the project. To reduce thisrisk, the fbur-year program would be programmed for implementation in six years. Also,maximum use would be made of private consultants and contractors, both local andinternational. Finally, to ensure adequate counterpart financing, the Government, in itsTransport Sector Policy Statement, has committed itself to provide satisfactory funds in theannual budgets.

20. Recomnendation. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank and recommend that the Executive Directors approve theproposed project.

Lewis T. PrestonPresident

AttachmentsWashington, D.C.November 24, 1993

7

SCHIEDULE APage 1 of 3

iIVIE WORK9

1.1 lote,wmn Roadsa. Read Rebabllitatlon 44.S 9 t7sb. Routie Maintenance 22.33 27.30 493c. BddsRabaitatlonlprevnnt 10.13 1.9 224. Rosd Sagna & Tralfic Ssfety 1.84 S1 4AO. Rral Reads 1.16 2.16 .31

.2 Man Streetsa. Stret Rebabhtation 753 13S 21.51b. Routin Mdnhtmanen 4.00 6.00 9.10c. Coniee ad Tsfie Mansm Schemas 11.58 21.61 33.d. Road S%gnaoe, SgnalizatIon snd Trafc Safety 1.22 2A. 3.31

b Total 104.47 178.78 291.22

WJPMENT:

1 S a and Sinal SWtems .07 1.41 1.4SVehiclbs 0.01 16 0.17

kb Total 0._8 1.57 1.6

ONU1LTINS SERlICES:

1 Prabvotimet tu and DOein 8ar.* 1* 704 Om3Suwiaz en Ses 3.23 7M5 10.5

.3 Studis 0.26 .9 1.24Tac4 hnisdAssistance 1.4 3.47 48Trall 0.12 029 0.41

ToweTd 7n07 202 _ 27.30

- .IITW6ENCIES12.17. 21 .4 ,

loa RNANCIH6 COST 0A 3l.0 _3tSD

LTER MNSTM -S _ S1.7 103.231 2M5S

* '.. s 3~SS B

8

SCHEDULE APage 2 of 3

ROECT FINANCING

BRD 0.00 60.00 60.00OB 0.00 190.00 100.00Omnmment of Panama 134.96 31.05 108.00

ITHER INVESTMENTS FINANCING

08 0.00 10.00 10.00ovenment of PansmalPrivate Sector 91.7 163.23 245.00

ILURI-ANNUAL PLAN FINANCING

SRO 0.00 60.00 60.000B 0.00 100.00 190.00|omlwmeni of Panama 228.72 18428 411.00

9 SCHEDULE APage 3 of 3

*V, o

MIVL WORKS:.

1.1 Interurban Roadsa. 9oad Rehabilitation 20.28 80.23 28.88 127.b. Routine Maintenance (1) 0941 0.00 48.21 49.c. Bridge Rehabiditationllmprovement 0.00 24.81 3.97 28.7d. Road Signage & Traffic Satety 1.85 0.00 3.31 4.9a. Rural Roads 0.00 0.00 3.31 3.31

1.2 Urban Streetsa. Street Rehabilitation 7.44 6.2 7.44 21.5.b. Routhae Maintenance 0.00 0.00 9.10 9.1c. Corridots and Traffic Management Schemes 11.58 8.62 14.88 33.0d. Road Signage, Signalization and Traffic Safety 2.21 0.00 1.1. 3.31

ub Total 43.5e 118.28 118.38 281.22EQUIPMENT:

2.1 Signals and Signal Systems 0.99 0.00 0.50 1.4Z2 Vehicles 0.11 0.00 0.08 01

Sub Total 1.10 0.00 0.6 1.85ONSULTING SERVICES:

3.1 Preinvestinent Studies and Design Services 1.32 3.31 5B29 9..32 Supervision Serces 1.32 0.83 8.80 10.7.3 Studies 0.41 0.68 0.17 1.24

3.4 Tchnical Assistance 1.77 2.44 0.76 4.93.6 Training 0.14 0.21 0.08 0.41

ub Total 4.98 7.44 14.89 27.30

HlSAL CONTINGENCIES 4.98 12.57 13.48 31.02

IOIECONTINGENCIES 5A41 1.0 14.70. 33.8,1

1)B ank FINAnCInG w d Q 28.0f 3ad t 31.00

IOTHER INESTMENTS OWOO~~~~~~~~~~~.0 10.00 245.W 250

(1) Bank finaindng would be for a pilot demnrosration project only.

10 SCHEDIULE BPage 1 of 2

PANAMARoads Rehabilitation Project

Procurement Method and Disbursements

PROCUREMENT METHODCom£Q nen Amount and Procurement Methoe- 1/

ICB LCB aTHER N.B.F. 2/ TIOTAL(US$ million equivalent)

1. Civil Works 62.1 11.0 0.0 266.9 340.0(44.7) (8.0) (0.0) (52.7)

2. Equipment 1.8 0.0 0.2 3/ 2.0(1.2) (0.0) (0.1) (1.3)

3. Consulting Services 8.6 24.4 33.0(6.0) 4/ (6.0)

TOTAL 63.9 11.0 8.8 291.3 375.0 5/(45.9) (8.0) (6.1) (60.0)

1I Fiures in pcsi ae amouns financed by the prposd Bak loan.2Y Not Bnk financed.3/ Veicls to be pwoud undr LD proeur in ICCordn with Bank Guidelines.4/ ConaCting of conwu in accodnce with Bank guidelies. It includes US$300,000 for th pocmen of reltd equipmect folowing

procurt prcedutes acceptable to th Dank.;/ botal roect cost of US$406 million includes US$31 mlilion of IDE financing costl

DISBURSEMENTSCategory Amount Pecenage of lendix_ i to Be

(US$ million equivalent) Pinanc 1/

A. For the Ministry of Public Works1. Civil Works 47.4 72.0%2. Pilot Maintenance Demonstration Program 0.5 80.0%3. Equipment 1.2 70.0%4. Consulting Services 2/ 4.7 100.0% 3/

B. For the Ministry e, Government and Justice1. Consulting Services 2/ 0.8 100.0% 3/

C. Unallocated 5.4

I/ Pacentoges =fer to the tota financing of each catqaot, and not to inivida supijeu withn each calgc.V Includi treinig matceal and small pieces of eqipmt necesy for carig aut the tcical assiance pmUQm.31 Excluding taxes.

Schedule BPage 2 of 2

Bank FY 1994 1995 1996 1997 1998 1999 2000

Annual 115 6 10 12 13 12 2Cunulative 5 1t 21 33 46 58 60

*11 A special account would be opened in the Central Bank, with aninitial deposit of up to US$3 million equivalent Retroactivefinancing of up to US$4 million eqivalent is proposed forexpenditures incurred after July 1, 1993.

12 SCHEDULE C

PANAMA

Roads Rehabilitation Project

Timetable of Key Project Processing Events

(a) Tume taken to prepare: Two years

(b) Prepared by: MOP with consultants assistance

(c) First Presentation to the Bank: August 1991

(d) Departure of Appmisal Mission: June 1993

(e) Negotiations: November 1993

(t) Planned Date of Effectiveness: March 1994

(g) List of Relevant PCRs:

Panama - Second Port Project, Loan 2182-PAN, Report No. 10616, May 11,1992.

Pnama - Road Rehabilitation Project, Loan 2020-PAN, Report No. 9588, May20, 1991.

Panama - Colon Urban Development Project, Loan 1878-PAN, Report No. 8305,December 29, 1989.

Panama - Fihway Maintenance Project, Loan 1565-PAN, Report No. 5152,June 22, 1984.

SCHEDULE D13 Page 1 of 2

SrATUS OF BANK GROUP OPERATIONS IN PANAMA

A. STATEMENT OF BANK LOANS AN) IDA CREDIT9

(As of Sentember 30. 1993)

32 loom ilIy disbursed 505.63

Of hich SECALa, SAI. and Pam Lom a>

LA. 2357-PAN 1984 Panama Suctul A4justnnt 1 60.20Li. 2768-PAN 1987 Panama Stutural Adjudmet U 49.83

Subtoal 110.03

*L 3438-PAN 1992 Panama Economic Reoovoy Loan 120.00 59.72

Total 625.63 59.72OfWhich has been repaid 378.63

Tol now bold by BankandIDA 247.00

Amounsold 9.21Ofuwhich has been read: 21

Tota undiursed 59.72 59.72

a> Approved dudngoraaer FY8O.

* SAL, SECALt or Program Loan.

FBetmicoudt:LA2COFle :PAN0993 (al.o60)November 1, 1993

SCHEDULE D

14 Page 2 of 2

PANAMASTATEMENT OF I1C INVESTMENTS

as of September 30.1993(In MWIons US$)

_Origiml Gross Commitments Held Held by UndisbursedFaeal Year IFC IFO Partid- by Partici- Qncludig)Cornmmitd ObUlgo% Tywe o Busirass Loan jgg& pnts Totla IFC w_nts Ptmcloants

1971 Corp de Hotelero el Towiisn 1.17 0.30 - 1.47 - - -

1978 VkdrlosPanamerssJ /lassFactory 2.40 1.40 - 3.80 - -

1979/818M 1co. LatinoAmeoainode eportcioes. SA Money & Capital Market 47.33 2.50 - 49.83 7.09 -

1903 Banco Continental Credit Line 8.00 - - 5.00 6.00 - 5.00

Less Cancellations, terminations.repayments and saes 45.90 2.11 - 48.01

Pending Comm :menb.

a/ iNestment which bave been ful cancelled, terminated. vuitfen-off. sold, redeemed or repaid.b/ Gross Cornmmtents consktof approved and signed projects.ci Held Commitments consist d disbursed and undisbursed iwestmesr.

15 ANNEX 1

PANAMAROADS REE[ABILffATION PROJECT

Transport Sector Policy Statement and Action Plan

1. The Government of Panama has submitted a Tiansport Sector Policy Statement andAction Plan to the Bank. The salient features of the statement, which outlines the transportsector's needs and the Government's objectives, policies, and strategy, are presentud below.

2. The principal objectives of the Government's transport sector policy are:

For the Tansport Sector in General

(a) to reduce the direct involvement of Government in transport sector operationsand activities and to increase the participation of the private sector;

(b) to increase the efficiency of the sector's agencies and to ensure the financialautonomy of the revenue-earing agencies through, inter alia, adequate cost-recovery and increased productivity; and

(c) to rationalize the management of the transport sector as a whole, especially thecoordination of the sector's investments, policies and regulations.

For the Roads Subsector

(a) to remove adverse economic regulations from the road transport industly andto foster efficiency through inproved competition;

(b) to increase the private sector's participation in carrying out road and bridgeworks, including studies, engineering, supervision and work exution;

(c) to rehabilitate the road network and maintain it adequately;

(d) to ensure adequate cost-recovery and funding for road rehabilitation andmaintenance and network management;

(e) to strengthen MOP's capacity, especially for procurement and contractmanagement, road traffic management and safety, overseeing the truckingindustry, road maintenance management and road plnning; and

(f) to strengthen MOP's capacity to integrte environmental work with its otheractivities.

3. Private Sector Inmolvement: The Government is reviewing and assisting inprivatization in the ports, railways and civil aviation subsectors. Grovernment is analyzingbids from the prvate sector fior container handling at both the Cristobal and Balboa ports. Inthe highways subsector, Govermment has already increased substantially the use ofconsultants and private contmactors.

16

4. Efficiency and Financial Autonomy: The Government, since coming to power in1988, has made strong attempts to streamline the operations of the National Port Authority,the Panama Railways, MOP and the Civil Aviation Department by reducing staff andoperating costs in an effort to improve financial autonomy. The Government is activelyseeking further efficiency and financial autonomy through the abovementioned involvementof the private sector through various schemes, including outright private ownership; build,operate and transfer (BCI) arrangements; and management and operation of faci}lties viaconcessions.

5. Sector Manaement: The Government recognizes the need to improve thecoordination of sector investments, policy and regulations and intends to study the bestinstitutional arrangements for this. The proposed project would finance the study and theimplementation of its recommendations (see Action Plan attached).

6. Ro:ads The Government's objectives and actions required to implement itspolicy for the roads subsector are outlined in the attached Action Plan Matrix for PolicyReform and Institutional Strengthening. The Govermnent attaches particular importance tothree areas: the project's counterpart funding and funding of the maintenance of the road andcity streets network; the strategy for institutional strengthening of MOP; and the plannedsystematic substitution of pnvate contractors for MOP's force account in the execution ofroad maintenance.

7. Enndjng: The Govenment would carry out, under the proposed project, a study ofaltemative mechanisms for financing the roads subsector and then implement the study'srecommendations. In the meantime the Govemment would make the counterpart andmaintenance funds available in its budget. The Government would make the followingminimum amounts available:

Year Goverment Countepart MaintenanceContribution EPnds Fun«ds

1994 30.8 9.3 21.51995 40.2 19.0 21.21996 39.4 18.5 20.91997 39.0 18.1 20.91998 39.0 18.1 20.91999 38.5 17.6 20.9

The Government plans furthermore to implement the recommendations of the proposed roadfinancing study.

8. Stiategy of lechnical Assistance to MOP: The Government recognizes the need tostrengthen MOP to meet its newly-defined role and intends to accomplish this through fillingkey vacancies, augmenting MOP's capacity through techaical assistance and training staff. Tbprovide for likely staff changes and reassignment that might result from the transfer of powerto a new Govermment in September 1994, only the key technical assistance positionsnecessary for project start-up would be filled before October 1994 and staff training would be

17

initially limited to mid-level staff who are unlikely to be affected by the change ofgovernment.

9. Maintenance by Contract: The Government intends to systematically substitute privatecontractors for MOP force account in the execution of roads and bridge maintenance. Tbensure the smooth efficient introduction of this approach, the project would provide for: (a)technical assistance to assist in expanding the private sector's role; and (b) theimplementation of a pilot progmam of routine maintenance by contract. The Government hasset the following targets for the private sector participation:

XYat &-Percente of Maintenanceby Contract (interurn paved andgravel roads!

1994 15.01995 30.01996 50.01997 75.01998 75.01999 75.0

PANAMA AnneK 1Roads Rehabilitation Project Attachment 1

Action Plan

OBECrIVES _ INMUMEN AMON RESPONS- TMl GI MPACTmu ImILIY CONDrnONALrYj ENVISAGED

1. POLICY ANDINSMITUTIONAL REFORMS

1.1 Tasport Sector

A. Coordinab seclor investment Now planning a) Creat a unit, by decnee with staffing and fuctions acceptable GOP Condition of IMPove sectorplanning and policy formulation and policy to the Bank, and assign to it the sponsdbility for the ovealU planni and

coordination unit coordination of tansport instmes and policies. coordination ofinvestments

b) Make the unit operational. GOP 12194

c) Provide technical asislance for the onnrntion, set-up, ad GOP, 12195trainiqg of the tansmport inetmt planniqg and ivestment Consultantscoordination unit. ,

Updated Review and update enisi tansport sector investment plans to GOP, 12/95 tgrte andtranspor sector obtain a now and inegrted pan fiw the secer. Review presen Consultans updae transporti wnem plan transport sector policy and sttgies secor plan and -and policy _ policy 00

B. Strengthnovernment's lstonal p MOP Improve sectormagem and plannire strengtenin Ct) Developl6naliM progmrks in aeeas of procuremen and MOP, Start by 12/93; planig and

capabilities prgamn for contract manaement; pri%ste secor participation in eoad Consltants annual and mid-ter ma _MOP in maintenace; environmt a ments and studies; ad review of proress improve MOP'spro_ct"OWNt pavement and maintenane maan sm arenes ofconteact () Implement prograM environmenlmanAgemnt, (iii) Conduct a review of the inpact of the on°g downsizi of Discuss tview and prouemtpaet and MOP, and discuss with te Bank recomaendations on fiuther reult with Bank by issuesmaintnance do ng or staffing cha" s. Implement ageed changes. 6195 and statmanagement, implememntation byenvironmenml 9/95assessment b) MOP - DIM MOP, Starst by 12J93;

Provide teical asdistnce to DINATRATE in the areas of Consultants annual ad mid-temtransport plannig, trf¢ managefenti and safety, and to improve view of proessits capacity to ovesee e trucking industry.

c0) MGJMol, Start by 12193;Provide technical asistsace to MCI in the ara of traffic safety Consuls wa al and mid-termand police and to improve its capacity to oveoee the bus tnasit review of progressIa.i-y

C. Imnprve cost recovey in die Rwiew cusre Conduct a study of the hbow sector revente and exnditurs. (OP, Filiz sudy by e costbighway sector cost recarery Analyz the conAribution of the differan categories of ase to Consullans 6195; discus with recoey (of atmehnis in expenditues and twenues. Discuss with the Bak the Bank by 9195; leat maqiinathe bighway on how to impwove cost recovy in the sector implement by 6196 cost) in tesecr hihway sdec (1) tor

L. Uba S&bseter

A. mprove bus trnch level of New utban (t) By mean of a new uban tmnsport law and an inarinsitutional GOP, Bank i m Law P%ased in mpmved levelservice, operational effcidenqr ad transport law agremen included in a Presidential Decree, leerly defin 5M93: Psidentisl of service andsen tanspancy i s for oveseen bus tnsit ope"ations MW) and DM" s%f injjmj apency infor infstrucue planng And mangeame 1OP). Tie t3 die gulatoyisses of liceases or 'cupoe to vebicles, irmprovir the imn o sysm, with a

bnaisty of die regulaoy Syslem.tn, aAn ; need for(it) Agree on not changig the abo_vioned ineCninis Oi) sgeed dutring iceasd_ agreemt wit ans appoval. - ngoao mWeMsozy

Imprved vehicle Reviw ad iptpoeei adstg veMicle sandarde, and inspecton _ _, Sta study byinspection Nd polution contrdl procedures. Consltas 12/93; compleb

study and implement_____________

_________ ~~~~~~~~~~~~~by 12/94

Review bus Review uban publc passenr tanspot tariffs ad Mete MaJ, Fnaliz roview bytans tariffs recommndedw taiff leeds (I) Consu 12/9S; implement by_ . . ~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~6196_B. lmprove traffic safety Inplemenaton Cary out die traffic safety componto of the Project. MGJ. Sta by 12193 and Iinpoe safetyof usban MOP, comnplet by 12196 awarees;

tranpr safty Consulns reduced number__________________________ .subcomponent _ _______ of sccidet

C. fster econoav and efficiy pvemes to a) Review the effctivess of the new utban ttnport law, WUG, Complete by 6/96, Improved accessby inproved compefitive die urban pardcuady: (t) the appopiateness of tax breas on vehicle and MOP, about 30 monts to the bus transfma4mork in bus tamnsit industry transponrt lw spare part associatd withdi cupos; (ii) rO transpa y in the Consulants afifer loan signatue industyuse of the cupo sytem (iii) the appmpriate of de prescbedcoucesin peiods, and (iv) the division of isaponsibilitiesbetween MOP and MGJ. Agree whh the Boak on sppropriatechages to thl urban tranisport law.

b) Imolement aeed charses to the urban tranoat la. (1) GOP, 9196, condition forConsultats appro al of faurter

a. p_rogms _

1.3 Interaban SWibsector

A. Foster private seebr Implementaton Design a pilot mamntenance demonstiation proect for roadway MOP, Fnlize design by lIproedparticipation in road maintenance of a pilot toutine mnenanc by contct for MOP. Technical assistance Consultans 12194, discu; 1 eflicienty ofwork mainance will include the devlopmen of appropriae biddiqg documen for 2/95 and complete routinedemonttion routine maintenance contacts. Discuss and agree with the bank implerentation by mnsirnenanceproj¢ct on the program design. Select a pilot district tProvince) and 12/97 opeations;

implement the poam. ._ . erhancedpviwesctorirnvolvement

Patie rod Systemicay substtu privt contmotm for MOP fxce MOP, Anima and mid-mantance accou in tbe execton of meds and bidp manC e Cons s urm reiew ofwor foUliog a sae goals for mainteance work by cont:c 1994 plOgIes

- 15%; 1995- 30%; 19 - SD%; 1997 - 75%; 1998 - 75%; ad1999- 75%.Assess Governmes oerfrmae in the orivati=tion of road_aneae actiies. (1)

B. Fre-up trUcktIg industy Application of Impove the enfrcemet of the curnt law on vebicl weights MOP. Beig implemented Impoved sa&tylaw on vehile and masmem in the rea of vehiele dimensions. With the Consul for vhicle and prevetwes and help of technical assisance, desin a national proqam for ale dimensions_ finish accelertedneasuI*ments load contol atd vehicb inspection. Imolemen the nom. (1) study on axe loads dam=e to

control and start pavementenaf_lomen by 6194 stuctr

Fr-up ent"r Conduct a tudy to snly and reommend the bet appoach to GOP, Sta study by 6194. Incrasedinto the Fee,- fiee up entry into the Free-Trade Zone. Review the poseble Consultants finis by 319S; competion inTthde Zone impacts on present practices. I)iscss and agree with he Bank on discuss with the the trucking

the proposed appmach. Iplemeant the rsbs of the sbtdy, fiee Bank and age on industry withinentry into the Free-Tiade Zone (there is already fie etry into the plan of actions by tie FreeTraerest of Panama). Specifically, this action im,plies: (a) agowing 6195; iplemn by Zonea& shipper to deliver or pick up cargo in the Free-Tlde Zone at 9'96, condition forprivately-nego_ted rates, and O) allowing businesses in the Fre apprval of fAtherTrade Zone to use their own trucks to mabiliUm cago. (1) - annual programs

11. IMLEM0NTATIONARRANGEWME1__AR AN D E'1S_ __ __ __ _ ___ _ _ _ _ _ _ _ _ _ _ ____ ____ _ _ _________t

A. Imprope MOP's supEect Appbng list of Agee with the Bank on the list of cika for subptoject selection. MOP Agreed durin EnsueOevaluation and selection criteria fbr During scheduled annual project reviews, agree on subpoject lists negotiations compliance withprocedures subpect based on the selection criteria. Bank economic;

selection fiandia, sociaandenvironmental

________________ _______________________________________________ ___. guidelines

Applic.tion .f .(i Coduct envinmenal anlyses of mubpqects to be MOP, 30 Done, (11/93); Ensusound implemenAed du,isg the fir year of tie Project. Consuan (ii) pp complane itheavironmen acctble Rankpolicies (ii) Pepare ppoiae amnen guidelines for MOP, environmen er l

includi thn specifications in bidding documeab, to be guidines with guidelines;revieed by the Bank. Arily dth guideiines to subonfiects to be tecn inonese MOP'simalemead bqsin the second Vr of Project implementation. specifications by overal(1) t1294, is them awareness on

itniediatae eninmenCiii) Do not at work on the Quebmda AuabCafts-Bqano thereaft4 apply issuessubproject unti: a a stidctory Indlen Peoof gudlines for annuaDvelnmna Pban (MPDP) bas beeo comAaltd and agred with the ubprajject slcton,Bank. and bl anteed nmitittory actio necessar beore as conditon forconstuton have been canied out. (1) Rank apprual of

fiurther nnuaA(iv) Fbuish to the Rn satisfctor resetttnent and pam; Ciii) andcom henstiontan f ony suboa oect which maty so R4Ui (v) befzrebefore that siboniect is iit. () reti rks

start, as condition(v) Mequadtey staff an equip the eninmnt unit (oU). (I) fr Ban approval of

their flnancirg andof frither analpra; (v) by3/95

Agrement on New road investmets wouv d meed accepiable _eonomcal, GOP Loa conditon EnsurPntject tschnical and environmenWt critria. throghout compliance withconmposition implmkntation Bank economic t

financial, social -andemnAonmental

.__ _ _ _ _ _ _ _ _ _ _ _ _ _ ,__ _ _ _ _ _ guidelies

B. Fcilitate project Refinement of Q) Fnali thde definition of the list of first year sbprojecrs. MOP, Items (i), ( and Facifirte hojectimplementation implemeion Cu) Agree on fimncons nf Special Project Coordination Unit Bank Cii) finalized or management ad

armarements (UEP. agreed upon duneg inrplenenationh1) Reach an ageement with MOP to ensu SDn acCeptable loan negotiatonsmimum period of asignment of keY staff to the project, brD (1113)thty ate assigned to other duties.Cxv) Create a stAff adequatety the UECP. (Iv) co of

effecti%vness

Annual and mid- Agree on monirng cdiea and perrorance indicato defined MOP, Agreed during Allow forterm reviews during appraisal. On an annual basis and during nid-term Bank nation; review chasges in

riew, revise implementation actions ad schedule. annuly during direcion andimplemenattion eome actons

to takeplae, asapproprit; incame projecconditionality isnot met, alowfor withholdingappvml offuther anmual

.______________ ._____________________________________________________ _ p srog m sDefinition of io Agtee on acceptable LCB document. to be used during GOP, Bnk (1) Before Board Avoid futurprocuemnt implamenntion. presenaon (12/93); implemnesionprocedues () Agre on use of Bank Standd Bidding Documents and (i) agreed during deiap due to

Consultans' Guidelines, negotiations; procument(ii) Pas a Presid l Decee regulating Article 38 of the C6dipo (i) done. (1 1/93).Fiscal to fiutr establih the applicability of Bank procedues forprocurement under the pmposed loan.(IV) Review the adoquacy of contrct review procedures. (iv) anMual and mid-

term reviews;(v) Submit to the Bank legl opinions confirming the precedence (v) Conditions ofof the Bank's procmen pocedures. _ effeciveness.

C. Ensure provision of (3VwerMMS IncAude comnitment to prvide appropriate levels of cowntrpart GOP Done, (11193) Maximriadequab countepart policy statmen funds in Governents policy satamen. likeliood of

funds obtainingReview annmal (i) Review anna budget alocations to the road sector to ensue GOP, Bank Annually, 3 months adequatebudget adequsle prwision for the Project. Include saisfctory fndig in before budget counterpartallocations the budget proposal. submnission to the funds during

Assembly proectimiplemeftation

(i) Assess governments pefimance on the prvision of Mid-term reviewcounterpat funds. 9__ (/96)

Revolving fund Under the Project, establish a revolving find (for counuerpart GOP Condition ofand special funds) and a special account (for loan funds). efectivenesaccount

D. Ensure sustainability of project Provision of Review annually the share of road maintance expeditues in GOP Done, (I 1193). for Ensureinvestmens adequate road the road budget with a view of increasing it to provide appropriate Ist year, annual and sustainabiCtv of

routine leves. Commit funds for roadway rotine maintenance, in mid-term review for projectmaintenance G nmes policy staement. subsequent yea, investments

Assess Govem tas nerfrmance on the Provision of adefaute condition for Bankmaintene funds. (1). approval of furtherAssess Govemens Perfmance in the imelementtion of the annual programsdifferent Proiect c_sonent. (I)

I) Key itemn for nud-term review to Seplere- 1996 and desion for appioval of fuer annual programs.

23

ANNEX 2

PANAMAROADS REHABILITATION PROJECr

Project Implementation, Supervision Strategy, Environmental Considerations,Procurement Procedures and Disbursements

Project Implementation

1. First-year subprojects were selected during appraisal and confirmed duringnegotiations (see Attachment 1). Implementation of the project works, expected to take sixyears starting from March 1994, would be the responsibility of MOP through its variousnational directorates (see Attachment 2). The study for rationalization of transport sectormanagement would be supervised by MIPPE and the review of the urban transport law, thetechnical assistance to the National Department of Traffic and Land ITansport (DNTI) andthe road safety program would be the responsibility of MGI. The project would becoordinated by a Special Project Coordination Unit (UECP) to be created in MOP, in itsDirectorate of Progamming and Institutional Development (DIPRODI). The UECP wouldhave a Project Coordinator, three engineers (two for the IDB component and one for theBank component) and an accountant/administative officer. The UECP would be responsiblefor coordinating the implementation of all project components, including those to beimplemented by MGJ and MIPPE, preparing semi-annual progress reports and coordinatingthe prparation of the documentation for the annual and mid-term reviews. The UECPwould assist the Minister of MOP in its communications with the Bank. Full staffing of theUECP, satisfhctory to the Bank, would be a condition of loan effectiveness.

2. Successful implementation of the urban transport component would depend heavilyupon close cooperation and coordination between MOP's DINATRATE and MGJ's DNTr.Such coordination would be facilita'-d by the recently signed Interninisterial Agreementbetween MOP and MGJ Any substantial changes in this arrangement would be discussedand agreed with the Bank.

Selection Criteria

3. To ensure the technical, economical, financial and environmental feasibility of theindividual subprojects included in the total Road Program, the subprojects would satisfy thefollowing criteria:

(i) must belong to the network managed by MOP;

(ii) must be evaluated and selected based on criteria presented to the Bank, including adetailed investment cost estimate;

(iii) should consist of the appropriate maintenance, rehabilitation, reconstruction orimprovement warranted by the condition of the road or bridge, restoring the existingpavement surface and structures to their original condition or improving them tosatisfictory levels from technical, economical and environmental view points;

(iv) must have an economic rate of retum of at least 12 percent;

24

(v) must include the necessary measures to prevent and/or mitigate any possible negativeimpacts that they may cause to the environment, following guidelines agreed with theBank; and

(vi) should, in the case of access roads, enable nural communities to access markets orstorage centers; must prevent and/or mitigate any possible negative impacts that theymay cause to the environment, particularly protected areas or forests, followingguidelines agreed with the Bank; and must guarantee the maintenance of the works.

4. lb ensure the technical, economical, financial and environmental feasibi1ity of theindividual subprojects included in the proposed Project, the following selection criteria mustbe met:

(i) subprojects must follow criteria (i), (iii), (iv), (v) and (vi) above;

(ii) acquisition of the required right of way for any subproject and any necessaryresettlement involved must have taken place and must follow appropriate Bankguidelines;

(iii) in the case of interurban subprojects, they must be evaluated and selected using theBanl's Highway Design and Maintenance Standards-m (RPM-HI) Model or analternative model acceptable to the Bank; and

(iv) in the case of urban subprojects, they must belong to the list of subprojectscontemplated in the updated Urban Transport Five-Year Plan.

Sutpemvision Strategy

S. MOP would submit semi-annual reports to the Bank, by June 30 and December 31 ofeach year for the previous semester. The implementing agencies would prepare progress andcompletion reports for their respective components. lhe ,UECP would be responsible for thephysical and financial monitoring of project activities and would coordinate preparation of allreports and consolidate them for submission to the Bank. The Government would alsosubmit to the Bank a project completion report not later than six months after the closingdate of the loan.

6. No later than September 30 of each year staring September 30, 1994, the Bank, IDBand the Government would conduct formal Ieviews of progress made in implementing theproject. These annual reviews would be used to evaluate the annual investment plan andbudget for the following year, and the Enancial projections of MOP, as well as to assessproject performance, as detailed in the Supervision Plan (see Attachments 3, 4 and 5).

7. By September 30, 1996 (about 30 months after loan signature), the Bank and theGovemment would conduct a mid-term review of project execution. In addition to coveringall the areas included in the annual reviews, the mid-term review will be used to assess theperformance on: (a) implementation of necessaxy changes in the urban passenger transportlaw; (b) the freeing of trucking in the free zone; and (c) the improvement of sector planningand policy coordination. A more detailed description of the actions and indicators to beevaluated during the mid-term review is presented in the Supervision Plan (Attachment 3).

25

Studies. 3Thhnical Assistance and ItaininW

8. The project's institutional component is summarized in Attachment 6. Government'sagreement to it was confirmed at negotiations. The terms of reference (included in theProject File) for the proposed studies and technical assistance (see Attachment 6), agreedwith Government at appraisal were confirmed at negotiations. The new Government, whichis expected to take office in October 1994, may propose changes in the insdtutionalstrengthening component as well as reassign some senior staff. Therefore, to the extentpossible, the schedule of implementation of the technical assistance and raining componentswould make allowance for the new Govenment to have an input before major effort isexpended. Also, to reduce the risk of tmaining efforts being lost, training before October 1994would be restricted to courses aimed at mid-level staff who are unlikely to be affected by thechange of Government.

9. The project would include three major training elements (Attachment 7): (a) overseastraining, which includes attendance to courses, workshops, conferences and seminars andout-of-country technical visits; the project would provide funds for travel, subsistence andcourse inscription fees; (b) local training, which includes courses, workshops, conferencesand seminars organized by MOP with local or expatriate instructors or pxesenters; the projectwould fund oranization costs and expatriate fees, travel and subsistence; and (c) overseasscholarships and twinning arrangements.

10. The following areas of overseas taining would be emphasized (Attachment 7): (a)highways management geared to road authority-type organization; (b) contract (maintenance)management; (c) pavement management; (d) maintenance management; (e) roadrehabilitation; (f) HDM; (g) highways safety; (h) environment and highways; (i) effectiveutilization of computers; and 0) training.

11. Local training in the form of workshops and short-duration training courses would beorganized by MOP's Tmining Division with the assistance of a local or expatriate trainingspecialist and a local or expatriate expert in the field of taining. The following areas oftraining would be emphasized (numbers in brackets indicate number of courses to beadministered): (a) procurement of civil wors (4); (b) contract management (4); (c) modemroad construction, rehabilitation and maintenance techniques (2); (d) HDM appLhcations (6);bridge inspection and maintenance (4); (e) environment and highways (8); (f) highways safet(4); (g) effective utilizaion of computers (8); and (h) effective taining (4).

12. The project would also provide for short-term (not more than six months per course)overseas training/twinning in overseas highways departments, highways institutes anduniversities in various courses (Attachment 7), including: (a) traffic engineering andtransportation planning; (b) environment and highways; (c) highways safety; (d) contractadministration; and (e) highways administration.

13. During loan negotiations, the Government agreed to implement the above trainingprogram. Furthermore, to ensure clear understanding on the areas of traing and numbersof staff to be trained, the tmaining component outlined in Attachment 7 would be included asan anmex of the loan documents and made an important element of the annual and mid-termreviews. MOP has a capable training unit and sufficient physical facilities to carry out theProject's in-house training activities.

26

anvironmental Considerations

14. The project roads and streets in the total Road Program would be subjected toenvironmental impact screening and, if appropriate, full environmental assessment (EA)studies; studies for roads to be worked on during the first year of the project have beencompleted. MOP is currently developing envirnmental guidelines for its activities. Theguidelines should include: (a) specific functions of the Environmental Unit (UA), indicatingthose points in MOPs internal cycle where the UA would be expected to provide input, suchas initial environmental screening, drffting terms of rference for EA studies, approval ofEA studies, ensuring that project-specific environmental requirements are incorporated withinthe bidding documents, and field supervision of environmentally sigificant road works; (b)criteria and procedures for initial environmental screening to determine which roadsubprojects require detailed EA studies, some additional environmental review or no furtherenvironmental review; and (c) environmental mules for contractors, including standardrequirements, such as prohibitions on irresponsible waste disposal, and requirements tailoredfor each contract, such as acceptable locations of borrow pits or disposal areas. Theguidelines would cover three principal environmental aspects: (a) physical/chemical(hazardous substances, noise, vibration, air and water pollution), (b) biological (bio diversity,ecosystems, wild lands, habitat), and (c) social (involuntay and unplanned resettlement,indigenous peoples, cultural property, aesthetics, etc.). The guidelines would be submitted tothe Bank and the IDB for their review and approval not later than December 31, 1994, andwould be issued immediately thereafter.

15. One of the wads in the Goverment's total Road Progm, the Quebrada Aguacate-Canitas-Bayano Road, would facilitate access to a proposed indigenous reserve. Even thoughthe road is not slated for financing by either the IDB or the Bank, agreement would besought that no works would be started on the road until: (i) a satisfactory IndigenousPeoples' Development Plan (IPDP) has been completed by the Government; and (ii) agreedmitigatory actions identified as being necessary beFore construction have been carried out.Additionally, for any subproject which may require resettlement, an agreement would besought that the Govermnent would furnish to the Bank a satisfactory rsetlement andcompensation plan beiore that subproject is initiated.

16. MOP's UA has been made responsible for the environmental screening of subprojects,using guidelines under preparaton in MOP. This screening would indicate whether asubproject needs further environmental study and the appropriate level of that study.Evidence of this envionmental screening and the results of BA studies will be submitted tothe Bank, along with technical and economic evaluations, for every proposed subproject. Asummary of BA study results and proposed mitigatory measures should accompany thematerials provided to the Bank before each annual project review, and prior to receiving therequired no objection to each subproject. The Government would be required to staff theUA with qualified personnel, and provide equipment and sufficient funds to operate it byMarch 31, 1995.

17. A key element of the institutional development component for MOP would be theinstitutional strengthening of UA, which comprises: (i) technical assistance, and (ii)environmental studies, (iii) training, and (iv) equipment. The technical assistance envisionedwould:

27

(i) assist in producing environmental guidelines for MOP's activities, which shouldsatisfy the requirements of both the IDB and the Bank;

(ii) assist the Environmental Unit in the environmental planning and screening of projects,environmental management of road works and dissemination of environmentalguidelines, regulations and manuals;

(iii) provide on-the-job training for MOP's environmental staff and assist in designing aproam for further training; and

(iv) review MOP's existing portfolio of roads and assist in the recruitment of qualifiedconsultants to carry out environmental studies of any controversial subproject.

Procument EMr res

18. Procurement of goods and civil works for the components financed by the Bankwould be done in accordance with Bank Guidelines for Procurement (May 1992 version).The contracting of consulting services would be done in accordance with the Bank'sGuidelines for the Use of Consultants (August 1981 version). lb the extent possible, theprocurement of goods and works would be done by grouping the various equipment/materialitems or constnuction jobs in bid packages estimated to cost the equivalert of US$100,000and US$500,000 or more per package, respectively, in order to enhance the interest ofsuppliers/contractors to bid. Such packages would be procured through ICB procedures, inaccordance with Bank Guidelines. All procurement of goods and civil works under ICBwould be done using the Bankes standard bidding documents Bidders for works and goodsestimated to cost more than the equivalent of US$1,000,000 and US$200,000, respectively,would be prequaified in accordance with Bank Guidelines.

19. Civil works valued at less than US$500,000 per package or contract and noteeding US$l .0 million in aggregate would be procured through LCB proceduressatisfactory to the Bank, using standard bidding documents agreed by the Bank.

20. Contracts for vehicles estimated to cost less than US$200,000 in total would beawarded through limited interational bidding (LI) procedures in accordance with Bankguidelines, from suppliers that can provide maintenance and servicing in Panama. Contractsfor equipment valued at less than US$25,000 each, up to an aggregate amount ofUS$300,000, would be awarded following local/international shopping prceduressatisfactory to the Bank. The following table details the procurement methods to be usedunder the project.

21. All contracts for goods estimated to cost US$100,000 or more, all contracts for worksestimated to cost US$500,000 or more, and the first LIB contract and the first LCB contractsfor works in each category as per Schedule A, would be subject to the Bank's prior review.Consulting agreements with firms estimated to cost US$100,000 or more and contracts withindividual consultants would also be subject to the Bank's prior review. For consultingcontracts with fiEms valued at less than US$100,000 and not exceeding US$2.0 million inaggregate, the Bank will review ex-ante the corresponding terms of reference, and ex-post,during supervision, the relevant supporting documentation.

28

Procurement Method

PROCUItEMENT METHODComiponent Amount and Prcurement Method 1/

ICB LCB OrTHER N.B.F. 2/ TOAL(US$ million equivalent)

1. Civil Works 62.1 11.0 0.0 266.9 340.0(44.7) (8.0) (0.0) (52.7)

2. Equipment 1.8 0.0 0.2 3/ 2.0(1.2) (0.0) (0.1) (1.3)

3. Consulting Services 8.6 24.4 33.0(6.0) 4/ (6.0)

TOTAL 63.9 11.0 8.8 291.3 375.0 5/(45.9) (8.0) (6.1) (60.0)

1/ FPuS in paWnts am aXmuns fnancd by die proposed Dpk loan2/ Not Bank financed.31 Vehice to be pocrd ude LID procecdu im accordance with Bank Guidelines.4/ Ceonutat of ocasut i acQorde with Bank guidelines. I icluds USS30O,000 for the proueuo of rlad upipmet fdlawig

pwemnat prncuo accptal to the Dank.5/ Tbtl Projct ofst o USS406 mo incudes US$31 milion, of IDB finamnc coas

22. A Country Procurement Assessment of Panama recently concluded by the Bankcon. 'ded that the Govennent's present procurement procedures differ in significantrepects from the Bank's, as partally indicated below:

(i) For serviees: (a) Panama's C6digo Fiscal (Fiscal Code) requires that proposals besubmitted in person by a local representative of the firm, effectively requirng foreignfirms to associate themselves or enter into a joint venture with local firms; and (b)bidders must present a "certificado de postore (legal capacity for the purpose ofsubmitting a bid), clearing their legal capacity to bid and their tax status.

(ii) For pcurment of goods and civil works: (a) proposals must be received only withinone hour of bid opening and must be presented in person by the bidder or his/herepresentative; (b) bids must be in local currency (Balboa); (c) the Codigo Fiscal

specifies that bid security cannot be presented in some of the forms allowed by Bank'sprocedures, such as leters of credit; (d) the bids must be presented on specially-stamped sheets; (e) the winning bid is the one found "most fihorable" to theGovermnent, rather than the lowest evaluated bid; (f) a provisional winner must beannounced at bid opening; and (g) rebidding is mandatory in the case of only oneevaluated bid.

(iii) For procurement of goods: transportation, maintenance and operating costs;performance; and productivity cannot be used as additional factors in the evaluation ofbids.

29

Covenants in the loan agreement will specifically address each of the observed differences,such as those cited above, to ensure that Bank procedures are followed.

23. Article 38 of the C6digo Fiscal indirectly recognizes the precedence of theprocurement procedures of intemnational institutions over Panamanian legislation forintemationally-funded civil works. The Govermment issued a Regulation before negotiationsextending this provision to the procurement of goods and services. However, becauseprocurement under Panama's laws differ in some very significant respects from the Bank'sstandard documents, the Government would be required in the legal opinion for effectivenessto confirm that the Bank's procedures take precedence over local law.

24. The Govenmnent does not usualy exempt foreign consultants from local taxes.Therefore, to reduce possible delays in recruiting and paying consultants, the Governmenthas agreed to proide all the necessary counterpart funds, including local taxes in theproject's Revolving Fund. The Bank's funds for these services would be released only afterthe Government has contributed its share.

25. Approval of contuacts amounting to more than US$250,000 bi the Cabinet andsigning by the President of contracts exceeding US$150,000 is a legal requirement inPanama. However, over the past year, MOP has successfully reduced the time between bidopening and contract award to about two months. It was agreed that the length of time forprior review would be monitored during implementation and that, should the Bank judge thetime too lengthy, the Government would make changes acceptable to the Bank to ensure thatthe approval time does not exceed 60 days.

Countmar Pnd

26. In its policy staement, the Government has indicated a strong commitment to theProject, evidenced in a commitment to provide appropriate levels of counterpart funds androad maintenance funds. The Goverment and the Bank have agreed on minimum levIs ofannual funding for counterpart funds and road routine maintenance expenditures duringappraisal, with a view of increasing the latter one to appropriate levels. Government hasagreed to send annually the proposed road budget to the Bank for review, includingapprpriate levels of funding for counterpart funds and routine maintennce expenditures.An assessment of the Government's performance on the provision of countepart funds is akey item for the project's mid-term rview.

Disbursements

27. While this project is a four year time slice of MOP's ongoing road program, theinvestments to be carried out during this period have been identified. The mission's bestestimate is that it will take about six years to fully disburse the loan funds associated withthese investments, although MOP plans to complete the bulk of the project in about fouryears. With a project completion date of March 31, 2000, the closing date is estimated to beSeptember 30, 2000. The initial loan proceeds allocations and corresponding percentages tobe disbursed by category are shown in Schedule B.

28. MOP will be the bonoweres agency in chare of disbursements under the loan.Expenditures under contract wlued below US$500,000 for civil works, and below

30

US$100,000 for goods and for consulting services would be made on the basis of certifiedstatements of expenditure (SOE). Disbursement claims above these amounts would be fullydocumented. MOP and MGJ would retain the supporting documentation and make itavailable for examination by Bank staff during supervision missions. To expedite projectexecution and manage the loan proceeds, a Special Account would be established in theBanco Nacional de Panamn or any other commercial bank acceptable to the Bank with aninitial deposit of US$3.0 million. A Revolving Fund would be established with an initialamount of US$2.0 million in the Banco Nacional de Panama or any other commercial bankacceptable to the Bank for the project's counterpart funds. In view of the desirability ofstarting the project without delay, retroactive financing up to US$4 million equivalent (6.7per cent of the loan) is proposed for expenditures incurred after June 30, 1993. Retroactivefinancing will be used to finance the initial cost of the first batch of works, as well as someconsultant services required to start up the project. During negotiations, agreement wasreached on these disbursement arrangements.

Aounts and Audits

29. During negotiations, agreement was reached on acceptable Project auditingprocedures. MOP's and MGJ's accounts, including Project accounts, the special account, therevolving fund, and the statements of expenditures, would be audited by independent auditorsacceptable to the Bank; and audit reports for each financial year would be furnished to theBank within six months of the closing date of the audit period. The past audit performanceof MOP has been satisfactory.

31Annex 2

Attachment 1

0 FIP~~RST-YEAR SUBPROJECTS TO BE flNANCEO BYl IBRDI~~~~~~~~~O nUS$P

lntarurban Setdr 7.517,342

Roads Rehabilitatioe 7,517,342San Carlos -Rio Hato 7,517,342

Urban Sectr 11,046,242

Street Rehabiltation 4,777,037

Periodic Maintenance 762,775Panama City 662,775Colon 100,000

Wdenings 1,973,8B1Extension and Widening of 3 de Nov. 1,973,861(from Ave. Balboa to Ave. de los Marires)

Intersection Improventw 1,348,662littm Via Espana with Va F. de Cordoba 244,308Inters. Via Espana with Va Argentina 465,055Inters. Via Bras witV Israel 237,002Inter Ave. Sta. Elena with Ave. Cincuentenario 173,039Interm. Ave. Emesto T. Lefevre with Ave. 2a Sur 229,258

Pedestrian Bridges 313,000Av. Peru with Av. Central & Via Espana wI 12 de Oct. 313,000

Signage and Signaling 1,870,907Sinals 1,370,00020 Intersections 640,000Signal Systems Control Center 730,000

Signage 500.907First Package Alfaro, Borivar, Espana, Brasil & 12 de Oct.Lefevre 303,625Second Package Balboa, BoydlBatista, Irael, Cinc. & 50 197,282

TOTAL 18,563,584

32

Annex 2Attachment 2

Page 1 of 2

Project Implementation Responsibilities

Projie Item fim0a7 CoflabonitonRtesponsibility

[. hJprovement & Rehabilitation

Annual Selection of Projects DIPRODI DINATRATE.l DINAMAN,

.___ _ __ _ __ _ _ _ _DINACFeasibility Studies DIPRODI DINAIVATE

(Urban),.DINAMAN(Maintenance and

________________________ __________ Rehab.), DINAC

[Design, Conttacting & Supervision DINAC __ __

f 2. Periodic MJtI

Selection of Projects 1 DIPRODI DINAMAN,,,I__ A DINATRAE

__ _ | ~~~~~~~~~~~~(Urban)

Contmacting, Supervision DINAC

3. Routine Maintenance

Selection of Projects _D_ _AMAN_r

Contacting DINAC

Supervision DINAMAN

33

Annex 2Attachment 2

Page 2 of 2

Project Implementation Responsibilities

4. Intersections and Conridors _

Selection of Projects DIPRODI DINATRATE

Feasibility DIPROVI

Design, Contracting & Supervision DINAC

5. Traffic Signals .___

Selection DINATRATE DIPRODI

Studies DINATRATE DIPRODI

Design, Contracting & Supervision DINAC DINATRATE

6. Road Safety ____

a. Critical Spots _

Data Collection & Analysis MGJ

Design of Remedies MOP (DINAC) DINATRATh,MGJ

Contracting & Supevision MOP (DINAC)

b. Road Safety Campaign MGJ

c Hfighway Police MGJ

7. Stdies and Tech. Asst DIPRODI AffectedAgencies

34

Annex 2Attachment 3

Supervision PlanStaff Input for Project launch and Annual and Mid-Course Reviews

1. The nature and scope of the project, especially the subsector reforms and theincrease in maintenance by contract, would necessitate extensive and close supervision,especially during the first two years of project implementation. On the other hand, theclose involvement with the IDB including cooperation with their field office forsupervision should lead to some savings, particularly after the initial intensive phase.

2. A project launch mission and yearly project reviews will be orgaiized, assistingthe staff of the implementing agencies to develop a common understanding of theproject's overall development objectives, operational procedures, coordination needs andpotential implementation problems and to select the components to be implementeddunng the subsequent year. A qualified local expert would be engaged, for about twoor tihree days a month, to follow up project implementation for the Bank.

3. The tentative supervision timetable and required staffing is the following:

Project Launch Workshop. Third Quarter FY94.

Focus: reviewing and fine tuning, as necessay, theimplemenion plan of each executing agency(MOP, MGJ and MIPPE), idenfyig andplanning required coordination among agencies,project management, procurement,environmental assessment, disbursement andauditing procedures and requirements.Technical assistance and training programs.

Duration: 5 days.

Participating Bank Staff: - Task Manager (Bank)Proje,. Leader (IDB)

* Urban Transport Engineer (Bank)- Environment Specialist (IDE)- Procurement Specialist (Bank)- Highway Engineer (JDB)- Tansport Economist (Bank,

(Consultant)

Total rume Required: 7 staffweeks (Bank)

35

Annual Project Implementation Reviews.

No later than September 30, 1994, 1995, and1997.

Focus: Project Progress review, identification ofinmpleinentation problems and issues andplanning for the upcoming year, including theselection of subprojects.

Duration: 5 days.

Participating Bank Staff: - Task Manager (Bank)- Project Team Ieader (1DB)- Institutional Development

Specialist (1DB)- Environment Specialist (Bank)- Urban Transport Engineer (Bank)- Wighway Engineer (1DB)

Time Required: (Bank) FY1994 - 8 sw I PY1995 - 6sw I FY1996 toFY99 6 sw per year.

Mid-Term Implementation Review:

No later than September 30, 1996.

Focus: Annual review coverage plus: projectperformance; identification of areas in need ofadjustment; stt of: (a) implementaton ofnecessary changes in urban passenger transportlaw, (b) freeing entry into free zone tmcking,and (c) introduction of sector investment andpolicy coordination; impact of technicalassistance; effecveness of environmentalassessment; and avalability of counterpatfunds.

Duration: 5 days.

Particpating Bank Staff: - Task Manager (Bank)- Project Team Leader (IDB)- Insiutional Develop. :ent

Specialist (IDB)- Environment Specialist (Bank)- Engineer (1DB)- Urban Tansport Engineer (Bank)- Lawyer (Bank)

36

Time Required: (Bank) 6 staff weeks.

4. The Project Launch in FY94 would require 7 staff weeks. The Annual ProjectImplementation Review would require about 7 staff weeks per year. In addition, oneregular supervision mission (one of one-week duration), comprising the Task Managerand an Urban Specialist will be necessary. The Mid-Tern Review would require 6 staffweeks. Thus, total field supervision would amount to 67 staff weeks, and officesupervision is expected to amount to an additional 30 weeks, for a total of 97 staffweeks during the life of the project, i.e. an average of 16 staffweeks per year.

5. During the first two years of project implementation, supervision efforts willfocus on organization and team development with a view toward strengthening the PC'soperational capacity. The Project Launch workshop will be followed by additionalsupervision input to familiarize selected local staff with the Bank's procurement,disbursement and auditing procedures and guidelines. It is expected that Batik staff willassist MOP and the other executing agencies in prioritizing investments as well as staffresource allocation.

Proposed Agenda for Annual and Mid-Term Inplementation Reviews

6. The annual project reviev--to be organized by the UECP-wir take place bySeptember 30 of each year, beginning in 1994, with the participation of the UECP,representatives of the executing agencies, and IDB and Bank staff. Annual reviewswould focus on evaluation of progress against the implementation of the TransportSector Policy and Strategy Statement and Action Plan and against agreed objective-oriented implementation and impact indicators (Attachment 4), and would serve toupdate and revise the 1994-97 toal Road Program (see Attachment 5 for the presentproject schedule) and to discuss issues of project management. The result of the annualreview would be the agreement on the following year's program, and on remedialactions required to address problems or changing circumstances during implementation.

7. The mid-tenn review to be conducted no later than September 30, 1996 wouldfollow the same format as the annual reviews but the analysis of project impact wouldbe expanded. In addition to covering all the areas included in the annual reviews, themid-term review would pay particular attention to reviewing compliance with theTransport Sector Policy and Strategy Statement and Action Plan, including: (a)Government's freeing the trucling industry from restrictions into the Free Zone; (b)Government's reviewing the urban passenger transport law and implementingrecommended changes; (c) progress made in sector investment and policy coordination;(d) Govermment's performance on project counteipart funding and on adequately fundingroad maintenance; (e) Govermment's reviewing urban public passenger transport tariffs;(f) the environmental guidelines for MOP's activities; (g) achievement of statedperfonnance goals (Attachment 4); (h) effectiveness of technical assistance carried outunder the project; and (i) experience with the environmental assessment of subprojects.

8. A summary of the areas to be addressed in the annual and mid-term reviews ispresented below.

37

Sector-Wide Issues:

Coordination of Sector Planning and Policies: Progress in the establishment ofa functioning institutional framework for the coordination of sector investmentsand policy fornulation;

Road Subsector Issues:

(a) concentration of road subsector investments on rehabilitation and prioritycompletion of projects;

(b) availability and timeliness of project counterpart funds and roadmaintenance funds;

(c) progress in continuing reductioii of MOP staff (Attachment 4);

(d) effectiveness of technical assistance;

(e) effectiveness and experience with the environmental assessment of sub-projects,

(f) technical ability, soundness of judgement and compliance with Bankguidelines in procurement and disbursements; and

(g) private contractors' participation in road maintenance activities.

38

Annex 2Attachment 4

Key Perfornance Indicators

Item _ Targets

_ __________________________ 1994 1995 1996 1997 1998

1. MOP Institutional Strenghtening- Staffing Strength 4583 4117 3683 2955 2955- Fill Ratio Key Staff 85 90 100 100 100- Staff Receiving Training 10 30 30 25 12

2. Govemment Contribution(US$ Million)

- Counterpart Funds 9.3 19.0 18.5 18.1 18.1- Routine Maintenance 21.5 21.2 20.9 20.9 20.9- Total 30.8 40.2 39.4 39.0 39.0

3. Road MaintenanceExpenditures (US$ Million) 42 41 40 39 39

- Periodic 20 20 19 18 18- Routine 22 21 21 21 21- % of Total Road Expenditures 30 32 35 35 35

4. Network Maintained (km)- Interurban Roads

Rehabilitation 281 280 280 280 280Periodic Maintenance 704 700 700 700 700Routine Maintenance 7,720 7,720 7,720 7,720 7,720

- Urban RoadsRehabilitation 43 50 50 50 50Periodic Maintenance 33 30 30 30 30Routine Maintenance 500 500 500 500 500

5. Contractor Maintenance- % of Total Maintenance in

financial terms 15 30 50 75 75- Disposition of DINAMAN's

Equipment (# of pieces) 699 546 433 424 0- Disposition of Indusrial

Equipment (# of pieces) 7 11 2 0 0

6. Contract Management- Days until Approval of Signed

Contracts 60 60 60 60 60

7. Urban Passenger Tansport- % Carried by Bus Companies 15 20 25 30 30- No. of New Cupos 50 50 25 25 25

Annex 2Roads RehabiUon Pro)Jt Attachment 5

sttpOt Mt190 106 16 117 001101

?UNUII _t. .00. as at a t 01 0t 0 0_ . t CBGu"uil 1 trkb 2 2V-0" M3D

to 3Jul.94a6 3J9 _ t

12 t2L9A_SutOuio.tW to _ .t0

Sm0u1uMwWd~W,ui *2 12M4912 3._M6 J9

I*aae0JO _t 6 12,Uh4 412 _ _ _96 3J"

@01rwS*tS 12 3Jtl94

fCmd&EVWBMV 3JsN94

harc4RO_ 12 :9 m

_ ~ ~ ~~~~~6 t2ar

6 12,U4q_ - -- t 12 3JU 94

C htB~1' 6 3Ju94

4bt e0t~utuf 16 _ 2.11

WI Pud01nhrt~s 6 3J9

I

Yr I 8 _w 2t SJut.4

Y3 d _ 26 3J x4_Yb3et Wu Wd" 96 3jt24

WCI Pafwm &dp a &*m.4

Yt I n8Upangtub01n 6 71t.94

Ylr 1 1jStgv_ ~ J SJur44 tYr 1Ug MrSt 12 t 1J9

Yr q _m~*3 tS SJu _Yr I Lk0bUlI21!U 3Jug4MYr 1 8004"We Qr~18 3J

AtI w,a8dWMwik s1 12"94

Yoti PAW sw p 9 3sml_

Ytpo Re 42 6 4A F

WI

VWt L tkmmmmtl 3 3JU4 MEMO

Yf2u&s"9out4 27.0 SO&I-94

YlR 2Sd MIt2s" O 30t9PYr P10*1 42 W94

Y*r 2. 6 ,3 b3P.0

Yr2U l S6 t34

Vr2SftRh*W 27.9 93O_-94Yr2P4M%**Wo&*rj 3 934,.94YW2Ott3UWMed 4 a0, :Y(24W*sffMf a 9 W^fatt2_

Yr 2PftM _ 2 mg"I

Yr2O T93W JOSai 1

w2 29WOMO 3 30 twg 2A_ a 9SSm

Y"Wm 2_** -3 . -94 U

Y, : 2N010"1fm =WO 9S dW1

a~~~~~~~~~a

t~~~~~~~~~~I I I i'

I IIfIIlu I 1 U1Fl1

8 DI BI

i1 8 tl0 10 Dit0 0 if0

Roads Rehabltatlon ProgramSd*k of Tedr" Asdtce S8des wed Tn*ft

T#kNare U*~s~ _oo 194 _95 _ ; 99S 199? 1999Task Nmie Mftt Oa at I , a aa . a a . a Shdes 29 6 i-Nov.93

RoI Safety 9 1 -No-3M*tm. PFb&clgAkwmr 5 I -Not-93Tovpct Seta Cowdrukan 2 1-NOv-93Rew Udban Pam Tsi Low 3 1-Feb-96O0*atbn cf MOP 3 15-M- sMsPt* Paessw Tpi Taufs 3 8ers

Tedvo Assltnre 48 1-Nov-93DesWSm ds 1-Nov-93Odsa B* NODMMMSIQS 24 1 Nov-3 _TinRt Mattg 6 1 -Nv-3VdfeWC tcbrt1d 1i 1-Nov-93Enhvw - 24 I-Nbvw3 Labostav 12 1-Nov93M*twna by Corta 8 160-D,94TfWcat Sel,r Ccxyd -tA 1t2 6-JU,-94 _rno xm bswiert P=o 6 .-Nov-93

Tvpaxt Inckby 6 3Jar95 C =

U;bwm Tp Pln/Trtb Mgit 24 1-Nov-93T-shg 49. 2 1-N-93

Los Tt*fI 43 5 1 Jfeb94Pnsocemut t1 9Ma4 4 4

CoaseNc I 0.2 1-Ma-94 0CseNo 2 0.2 -Now-94 Cse Na 3 Q 2 2. lsm- 0GuseNo 4 a 2 15-Sep6 O

Ca-tract Umugesr7.4 A744Cuse Nc 1 0 2 14p4 eCuse Na 2 0.2 1-060-94 0Curs Na 3 0 2 3Ap-95 Case Na 4 d 2 2-ct-96 9

C,iRstwmakt Te t1.68 1-Feb-94.

CcasNci2 0L 2 t-Feb-96 tHOM AlRixs 15 5 1JtJ-94

CourseNO I 02 t-k094 Cause Na 2 a 2 1-NovW4 0OCseNa 3 _ _ 2 1hb4-9 0CatseNa 4 0_ 2 tMq4-9CasNo5 0 2 14S 1CassNa 8 02 1-Nov-9G

_ 17.4 iJLn94 , C se Na I 0 2 JuA94 eCma .Na 2 0 2 t10e-94 0CxtNseNa 3 02 -Juis9 BComeNe 4 O.2 lg-2

Ere*cslt md IH Wqs 4a 3 2 -94Couse NM 0 L2 2**-94 8CasNot 2 0 2 1-Nov-94 aCouseNa 3 0 2 2*%V4s 8Coin NM 4 0.2 -NSov-95 8

Roads RehabltIRafon ProgramnWm" ofd T.ti A*dAwIS Shx.dseand Tr**ig

Tadt Nxu it Des a1 at a a ag a a as al a co a a

Owes Nu 8a2 No-Owes NQo.0?IM4CoLzs Nok.82 NM9

Course Nok I_a2 ___s"

asses No.2 __2 _ 1__k____

CasesNo. 240.2 ______

Causes No.2 Q13iSM9

CmssetNo. 4 Q U1-N-

Ccmx, No. G M 2 USM-

Casse NM S aa TN-Bloc"r Tmk*ig St_a _____b__

Oaise No. I O _2 I____4

Cases Nok2 Ot2 9b0COLOs No.8 3 02I-eCausesNo. 4 (123f

S-mn-Ter, OVusmB Tr*ft 148 3 1-Feb-94 ~

PwsomvfdfrDIACIRAIE __ iS-Mw-S4

Parsr-vidfrom DMNTRA7E I 1 W-S4d

PW$wrdfrauwnouq I 1-3MprSd

Pwer4DNACADINMANDMOINA I im-Mw-ISL!xgRTwMOVwsea Tm,*kg 49.21 1-NCAt-1

HVi*W aiegam1 _81 3a.

Co-tied t.igsmwt so_pmwai,otmaiemiat 48 1-Nov-58

Raa1RetwaoW 48 1-Nov-58HDM 48 1-Now43Hy"vf Sddyt 4____ - Z,m

_ _ _ _ _t_andH _ __W 48 1-Nov.5

Annex 243 Attachment 6

PANAMAROAD REHABILITATION PROJECrInstitional Sgtrengteing Componeat

(US$1000) __ _

CATEGORY TOTAL BANK IDB

STUDIES

Road Safety 300 300Maintenance Financing Alternatives 300 300Tranvrt Sector Management 100 100Review of Tanwport Law 50 S0Organization of MOP 50 50Public Passenger Tranport Tariffs 100 100Indigenous Peoples' Development Plan 30 30Non-Allocated 570 170 400

Subtotal Studies 1.5-) 700 800

TECHNICAL ASSISTANCE

Design Standards 100 100Data Bank, HDM/SAM/GIS 500 500Traffic and Signals 400 400Vehicle Weight Control 1,200 1,200Environment 200 200 200Laboratoiy 200 200Mainteance Contracting Management 600 50 550Implementation of Sector Management 200 200Procurement and Disbursement Proedures 100 100Trnsport Industry 100 100Traffic and Traffic Safety 1,000 1,000Urban Transport Planing 500 500Non-Allocated 700 700

Subtotal Tecbical Assistance 6,000 3,050 2,950

TRAINING

Local Trainig 300 200 100Overseas Trainng 200 50 150Subttal Training 500 250 250

Total Institutiom Strengthenig 8,000 4,000 4,000

44

Annex 2Attachment 7

Overseas Training for MOP's StaffStaff to be Trained by Type of Training and Department

TYPE OF DIPRO |DINAC DIA DINAT 1 DATRANING JDI IMAN RATE

Long&mn g__ -'

Highways 4 2 2 j2Management

Contract Management 2 6 4 2

Pavement 1 - 4 2Management

Maintenance 2 8 -

Management

Road Rehabilition - 4 4 2

HDM-m 4 - 4 - -

Hghways Safety - 1 - 3

Environment and 4 2 2 2Highwys

Computer Applications 4 2 2 2

Timing - - 4

Short-Ternn ¶ainin _

Traffic Engineering 2 - - 2Trmaport Planning

Environment and 6 2 1 1Highways

Highways Safety - 1 - 2

Contract 2 -

Administration

Highways 2 1 1 1Management

I$RE) 2S I24

PANAMA A P A ArIR

ROADS REHABIUTATION PROJECT 4 Ar-;;eLOCATION OF FIRST YEAR SUBPROJECTS C A R/ 8 B E A N S F A

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NOVEMBER 19931

NICARAGUA (O o .CAP;JfiAN SFA

PANAMA COSTA\

PANAMA CITY RKA

ROADS REHABILITATION PROJECTFIRST YEAR SUBPROJECTS FINANCED BY IBRD e

PROJECT: PACIfIC OCEAN

INERSECTION IMRROVEIASNTS '

ROAD WIDENING

EXISTING:

MAIN ROADS

SECONDARY ROADS

RAILROADS

INTERNATIONAL BOUNDARIES

K)~~~~~~~~A/METROPOLITAN NL

AATIONAL PARK ) ,

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