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The Implementation Completion Report (ICR) on the Ethiopia Transport project (Credit 2002-ET, approved in FY89) was prepared by the Africa Regional Office, with Appendix A contributed by the Borrower, was reviewed by the Operations Evaluation Department (OED). The credit, in the amount of US$72 million equivalent, was approved on April 11, 1989, and closed on June 30, 1995, two years behind schedule. A total of US$30.8 million was disbursed; the remaining funds were canceled. Cofinancing was provided by the African Development Bank and the European Investment Bank. The ICR does not contain comments by the cofinanciers.

This project was the first Bank-supported operation in Ethiopia to focus on the transport industry as well as on transport infrastructure. The project was prepared following a period of severe droughts, when inadequate transport capacity had became a major bottleneck to the distribution of relief supplies and to economic development. Project objectives were to modernize the road transport industry, improve freight forwarding services and customs’ clearance, expand the capacity of the port of Assab, and strengthen coordination among the entities operating in the transport industry. To achieve the objectives, project components comprised: (i) construction of facilities at Assab port; (ii) provision of new trucks and rehabilitation of old ones to both the State-owned transport corporation and the private sector; and, (iii) technical assistance and training for several parastatal companies and public services in the transport sector.

Two years after project approval, a new market-oriented government took power and Ethiopia lost control of the Assab port as a result of the Eritrea secession. Institutions such as the control and planning system for road freight and the national road freight parastatal company, were either abolished or restructured. At the same time, transport capacity increased with the inflow of new equipment and spares –particularly to the newly enfranchised private sector– following liberalization of the economy and increased assistance to the transport industry by other donors.

The project was only partially implemented, and most of its objectives, which became irrelevant and even counterproductive in light of changing country conditions, were not achieved. Only about half of the trucking component was implemented: trucks for a State-owned company and spare parts for private and government-owned trucks were procured, but the purchase of trucks for the private sector and the rehabilitation of public sector vehicles were canceled due to extensive procurement problems. Only a small part of the large technical assistance and training component was implemented. Equipment for the Djibouti-Ethiopia Railway, added to the project in 1992, was procured as envisaged, with the exception of the emergency telecommunications equipment. The Assab port component was canceled. Despite efforts by the supervision missions, IDA was unable to reach an agreement with the Government of Ethiopia on ways to amend the project to support the revised transport sector policies of the new administration.

The ICR did not recalculate the project's economic rate of return, but noted that the rate of return for the trucking investment is "substantial". At appraisal, the return for the trucking component was estimated to be 30 percent.

OED concurs with the ICR in rating the project outcome as unsatisfactory, its institutional development impact as negligible, and Bank performance as satisfactory. Since the few results which were achieved lost relevance, OED rates sustainability as unlikely (compared to uncertain in the ICR).

The main lessons of this project are that: a) projects of an emergency nature should focus on resolving the short term emergency issues, and not take on long term institutional strengthening goals; b) it makes little sense to support the strengthening of State-run commercial enterprises (such as, in this case, a road vehicle transport system), which worldwide experience has shown are poor substitutes for market-oriented, private sector alternatives; and c) the Bank needs to increase its efforts to rapidly establish effective dialogue with new governments that are committed to establishing market-oriented policies.

The ICR is of satisfactory quality and presents an honest account of events and of Bank performance.

In view of the unusual circumstances which surrounded it, the project may be audited.

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