Cecilia Briceño-Garmendia and Nataliya Pushak

1. Cecilia Briceño-Garmendia and Nataliya Pushak

2. Republic of Congo’s Infrastructure: A Continental Perspective

3. Africa Infrastructure Country Diagnostic:a multi-stakeholder effort

4. Methodology and approach • Methodology • Data collection by local/international consultants and Bank staff based on standardized methodology • Baseline year for data is 2006, does not reflect subsequent evolution • Approach • Focus on benchmarking Republic of Congo’s infrastructure against African neighbors • Benchmarking group includes Resource rich countries, DRC, Benin, Nigeria and Cameroon

5. Why infrastructure matters

6. Historic contribution of infrastructure to growth lower than in other SSA countries Most of that contribution to growth comes to increased access to ICT. In contrast, ICT quality acts like a constraint Quantity and quality of power supply has set a break to the economy Headlines

7. Quantity and quality of power supply has set a break to the economy Changes in growth per capita due to changes in infrastructure (2001-5 vs. 1991-5)

8. Congo still has a lot to gain from improving its infrastructure Potential changes in growth per capita from improving infrastructure to level of African leader (Mauritius)

9. If Congo’s infrastructure platform could be improved to the level of the African leader – Mauritius – per capita growth rates could increase by 3.7 percent per annum. Substantial share of this impact would come from improvements in the power sector. Quantity and quality roads would also have significant contributions Headlines

10. The State of Congo’s Infrastructure

11. Republic of Congo’s power network

12. Key findings for the power sector • Highly under-developed power sector in terms of generation capacity, power consumption, access and reliability. • Installed capacity. National power system very small and dependant on imports from DRC. • Reliability. Outages are quite frequent forcing firms to accumulate a stock of self-generation capacity. • Access. Electrification rates very low particularly for rural areas. Current investment program aims to create a national electricity grid. • Quality of Network. Close to half of the energy produced is lost in transmission and distribution.

13. Benchmarking indicates very poor reliability of power provision, low capacity and high prices Source: Preliminary results AICD 2008

14. While costs of power utility inefficiencies are relatively low, distribution losses are significant

15. Congo’s power prices among the highest in Africa Power tariffs in other developing countries: upper bound Power tariffs in other developing countries: lower bound

16. Congo’s transport network

17. Key findings for the road sector • Trunk road network. Low density, quality and road condition major concern • Rural road network. Poor coverage. No effective network of rural roads • Institutional framework. Second generation road fund recently created but not fully functional. • User charges. Fund replenished by collecting 50% of taxes on forestry activity, 40% of VAT on fuel products, and other taxes. • Financing trends: • Maintenance funding steadily increasing : doubled between 2005-07, and added additional 50% in 2008 • Investment program represents huge effort with strong focus on multimodality

18. Benchmarking indicates low density and very poor quality of roads

19. Roads funding aligned with maintenance and rehab needs, however actual transfers of resources flawed

20. Recent spike on roads fund spending sufficient to fund maintenance and even rehabilitation

21. Key findings for the rail sector • Rail Network. Operating below potential. One third of the 885-km network out of operation • Institutional Framework. Publicly owned and administered. 2005-concession failed. • Traffic and Usage. From 1987 to 1996 traffic reduced by two thirds. Stop functioning due to conflict. Rail never resumed to work at full capacity • Tariffs. At 0.16 $/ton-km among the highest of the region (up to 3 times as high as in southern Africa) • Reliability. Very slow service and bad safety condition. Among the worst in Africa in both accounts.

22. Benchmarking indicates poor unreliable service and high cost for users

23. Key findings for the ports sector • Physical Infrastructure. One of the best natural deepwater ports in SSA in good operational conditions • Institutional Framework. Service port under a 27-year concession with a target to expand port to receive large vessels (up to 6,000 TEU) • Modernization plan: extend container terminal, rehabilitate wharfs and warehouses, drainage and electricity supply networks, construct a timber yard. • Performance. Productivity could be increased by improving custom and logistics procedures (particularly in Pointe Noire)

24. Benchmarking underscores port’s good performance and competitive tariffs

25. Key findings for the air transport sector • Access. Domestic market is medium size and international market small, with a declining trend in traffic • Service. Seat capacity high for route served • Connectivity. Significant loss of connectivity as measured in city pairs between 2004 and 2007 • Safety concerns. recent ICAO audit found Congo well below international standards in safety oversight

26. Benchmarking suggest the market is well served though poor connectivity, safety a source of concern Note: All data based on estimations and computations of scheduled advertised seats, as published by the Seabury Aviation Data Group. This captures 98% of world-wide traffic, but a higher percentage of African traffic is not captured by the data.

27. Republic of Congo’s ICT network

28. Key findings for the ICT sector • Access. • Two-thirds of the population under GSM coverage • Competition in mobile market (3 operators) • Fixed line marketismonopolized by the incumbent SOTELCO (la Société des Télécommunications du Congo) • Access is decreasing in fixed lines due to malfunctioning incumbent • Pricing. • Telecom prices are high, particularly for broadband services

29. Benchmarking indicates high coverage, high mobile subscription and high prices Source: Preliminary results AICD 2008

30. High international call charges driven both by technology and market power

31. Key projects in the ICT sector • Important infrastructure projects • WACS - Project West Africa System Cable • financed and initiated as a partnership of 5 South-African operators (MTN, Neotel, Telkom s.a., Infraco et Vodacom) to connect RoC to the West Africa System • CAB2 -Central African Backbone • The aim of the project is to improve transparency, governance and fair competition • PCN - Project de couverture national • The purpose of the project is to extend access to remote areas and increase affordability • Pricing. • Telecom prices are high, particularly for broadband services

32. Key findings for the water and sanitation sectors • Water. • High proportion of people using piped water sharply contrast with one third of the population using surface water, overall • Coverage by improved water sources in rural areas a huge problem. Two thirds of rural population use surface water • Costs due to utility inefficiencies amount to 150% of the utility turnover, mostly driven by under-pricing • Sanitation. • High reliance in traditional latrines but excellent progress in reducing open defecation

33. Benchmarks indicates relatively high population share still uses poorest water quality while tariffs are set low

34. Access to piped water skewed to urban areas, while rural relies on surface water

35. Traditional latrine main source of sanitation across the board

36. Water utility losses due to inefficiencies more than double revenues, driven by huge under-pricing

37. Financing Republic of Congo’s Infrastructure

38. Key findings on infrastructure finance • Spending needs of US$780 mln for infrastructure are skewed towards capital expenditure and transport and power sectors • Burden of 13% of GDP is not as daunting relative to Republic of Congo’s economy • Existing infrastructure spending of US$365 mln mainly on roads and power • Effort on infrastructure spending relatively high • Public financing accounts for a lion share in both O&M and capital funding • Infrastructure financing gap of US$302*mln or 6% of GDP, mainly in power investment • * assuming complete fungibility of funds across sectors

39. Possible infrastructure targets over next ten years

40. To meet these targets, Republic of Congo would need to spend US$780 mln per year for next decade

41. Burden of financing needs not daunting relatively to Congo’s economy

42. Existing infrastructure spending in addressing needs is already substantial

43. Most of the existing spending directed to transport and power

44. Road public spending dramatically increased in recent years

45. Budget expenditures plummeted in 2006 but increased dramatically in recent years, notably in Roads

46. O&M is predominantly financed by SOEs and the Road Fund in the case of transport, while investments by central government

47. Potential gains from inefficiencies amount to $US 113 million per year or 1.9% of GDP Substantial scope for improving cost recovery in water and improving operational efficiency and budget execution in the power sector Scope for reallocation of public funds across sectors of 1.7% of GDP Over manning amounts to $US 20 annually, chiefly in power sector How much more can be done with existing resources?Potential efficiency gains:

48. Potential efficiency gains: Composition and details

49. The funding math * assuming complete fungibility of funds across sectors

50. Overall financing gap of only US$302 mln or around 6% of GDP, mainly in power investment