Malawi Public Expenditure Review: Road Sector

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Malawi Public Expenditure Review Road Sector

• 21 November 2007

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What have been the key expenditure trends?

• Total road sector expenditure declined since
  1999/00 as a of GDP but increased back since
  2005/06
• The share devoted to maintenance has decreased
  steadily over the period
• Expenditure on upgrading construction of new
  roads has increased substantially, both as a
  share of roads expenditure and as a of GDP

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Main Findings
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(1) Funding for road maintenance has been
inadequate, in favour of construction of new roads

• Good practice in road sector in any country is to
  adequately maintain existing network, before
  spending new construction (dont let existing
  network go bad)
• During last 3 years about 60 of road sector
  expenditures have gone to new construction
• Funds spent on maintenance have been inadequate
  to meet the maintenance needs of the network
• Routine maintenance undertaken on around 50
  percent of core network and 25 percent of total
  public roads network
• Full maintenance and rehabilitation cost of the
  network is around US50 million/year, which is
  much higher than can be provided by Road Fund
• The fuel levy is the major source of funding for
  Road Fund but its value has decreased in real
  terms by 40 since 2001

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(2) Need system for planning and prioritization
in road maintenance construction activities

• Decisions on road maintenance and constructions
  have been made without any clear criteria or
  method of analysis
• Project selection and planning often subject to
  political interference
• Choice often limited by tied funding from donor
  sources
• Recently MoTPW has developed the Road Data
  Manager, but RDM is not yet used to guide
  decisions

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(3) Less attention is paid to rural roads

• Road network is imbalanced
• A small network of main roads mostly paved and in
  very good conditions
• The rest of the network (74) unpaved and mostly
  in poor conditions
• Access roads heavily favours the richest
  households
• Rural communities are located on average 20km
  from a tarmac road
• Roads in rural areas are often impassable for up
  to 4 months in the year

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(4) There is lack of good road sector data for
policy setting, monitoring, evaluation

• Monitoring and analysis of sector expenditures
  are done irregularly and inconsistently
• Little monitoring and analytical capacity of the
  MOTPW, MOLGRD and RA in areas of planning,
  programming, and effective monitoring
• Little or no monitoring and evaluation of all
  maintenance, rehabilitation and construction
  projects
• Efforts to improve monitoring and evaluation has
  been made in recent years
• a complete road inventory and condition survey
  has been completed in 2006
• a set of possible indicators have been recently
  identified, which need to be operationalized

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(5) The capacity of domestic construction
industry is too weak to meet demands

• National construction industry has a considerable
  number of local contractors and consultants
  registered but level of participation and
  performance is very limited

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Recommendations
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(1) Fuel levy should be adjusted upwards in order
to increase funding for the road sector

• Gradually increase in fuel levy from current 7
  US per liter up to 16.5 US per liter needed to
  cover (routine and periodic) maintenance of the
  full network.
• Government should carry out a poverty and social
  impact analysis of such a large increase in the
  fuel levy
• Assess alternative options to raise the required
  funding for the maintenance of the road network
• Funds levied from the road users through the fuel
  levy should be utilized for the sole purpose of
  maintaining the roads
• Need to operationalize the annual formal review
  mechanisms of the fuel levy, in accordance with
  the 2006 Road Fund Act

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(2) Ensure that funding for the routine
maintenance is adequate and consistent

• Fully fund routine maintenance of at least the
  core network and carry out systematic periodic
  and backlog maintenance on the entire network
• Decide what size of network can realistically be
  managed based on available resources and the
  amount of rehabilitation to be undertaken.
• If internally generated funds for the sector are
  insufficient, prioritize any external funding
  towards covering backlog and periodic maintenance
  before reconstruction

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(3) Ensure planning prioritization in road
maintenance and construction activities

• Adopt the Road Data Manager system (at RA) to
  assist in prioritization and allocation of funds
  more efficiently
• by basing decisions on road maintenance and
  construction on thorough project analysis and
  appraisal
• Make the evaluation based on the Road Data
  Manager become a core part of the procedures
  agreement envisaged in the 2006 Road Authority
  Act

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(4) More attention needs to be paid to rural roads

• Establish a more equitable balance of finance
  between rural and main roads
• MOTPW and the RA need to work with MLGRD to
  identify an appropriate mechanism of sourcing and
  allocating funds for road maintenance at district
  level
• The formula used to channeling maintenance
  resources is biased in favor of the paved
  network, and needs to be revised

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(5) Maintain a good data base for policy setting,
monitoring, evaluation

• MOTPW and NRA should establish a unified system
  for reporting sector expenditures
• data on outputs (e.g. kilometers of roads covered
  by the various activities) is also required to
  accurately calculate unit costs for maintenance,
  rehabilitation and construction
• Build on recent efforts to improve monitoring and
  evaluation of sector performance by
  operationalizing the indicators which have
  recently been identified
• Complete the recently carried out road
  reclassification study, by preparing the relevant
  legislation and submitting it to Parliament

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(6) Increase the capacity of the domestic
construction industry

• Level of participation needs improving through
  capacity building, training and access to
  financial resources for equipment purchase or
  hire
• Consider expansion of duration and coverage of
  the routine maintenance contracts (started in
  2006)
• to provide firms a more stable income stream
  which would allow increase in investments and
  capacity
• Maintain preferential treatment in public works
  tender for foreign companies that go into a joint
  venture with a local company, to facilitate
  know-how transfer