Southern Sudan Road Reconstruction - Current Problems Being

UNCLAS SECTION 01 OF 02 KHARTOUM 001624

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR AF/SPG
DEPT PLS PASS USAID FOR AFR/SUDAN

E.O. 12958: N/A
TAGS: EAID ELTN PGOV KCOR IBRD SU
SUBJECT: Southern Sudan Road Reconstruction - Current Problems Being
Addressed, But Far From Resolution


1. (SBU) Summary: Two issues have slowed road construction in
Southern Sudan: financial accounting and introduction of
anti-corruption standards. The World Bank believes that both
current obstacles will be overcome, and not dampen donor enthusiasm
for developing key Southern infrastructure necessary for its
economic development and the return of internally displaced persons
(IDPs). However, USAID/Sudan Engineer reports that underlying
problems are far from being resolved, and that tension among the
GoSS, WFP, and the World Bank is growing. A sectoral analysis will
follow by septel. End summary.

Two Issues Hold Up Roads: Accounting & Anti-Corruption
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2. (SBU) For road reconstruction projects outside of Juba being
done under the supervision of the World Food Program (WFP),in which
$30 million is EU funding channeled through the World Bank, a World
Bank-WFP agreement on how to manage all financial accounting has
been finalized and a new clause recently was added to cover the
World Bank's anti-corruption standards as released by the World Bank
President. The proposed new anti-corruption clause to the road
contract is under review currently by the World Bank in Washington.



3. (SBU) For road reconstruction projects inside of Juba, to be
contracted out by the GoSS via open tender, World Bank Country
Manager Asif Faiz said that the first ten contracts for the overall
Sudan Emergency Transport and Infrastructure Development Project
(SETIDP) were released recently by the GoSS. However, a final
review by the World Bank on two of the ten contracts that involved
road construction revealed that neither followed acceptable
international contract practices, and that both were highly "nasty
and suspect" in terms of the possibility for corruption. Faiz noted
that the scope of the two contracts had been changed by the GoSS
without World Bank approval, resulting in costs that were three
times higher than the original estimates. Another serious concern
involved a bidder who had promised to reduce the cost of his bid by
one-third if selected; after winning, in the final negotiations, he
dropped the clause from the final contract language. Also, a bidder
from Northern Sudan had been disqualified unfairly and eliminated
from the bidders list.

Issues Are Being Addressed
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4. (SBU) On June 29, Faiz informed EmbOff he expects the new
anti-corruption clause to be approved by the World Bank within a
week. At that time, the EU's $30 million will be released by the
World Bank. However, USAID/Sudan Field Office Engineer stated that
the release of the EU funds will occur due to pressure from the
GoSS, WFP, EU, and donors, not because underlying problems have been
resolved. He added that the issue of the World Bank's involvement
in the management of EU funds is far from being revolved.


5. (SBU) On July 5, the GoSS Ministry of Transport and Roads signed
a $30 million grant to the WFP for some of the same work planned for
the SETIDP, heightening Embassy's concern that, with Sudan's
increasing oil revenues, GoSS will continue to see less need for
donor funds and the international transparency rules that come with
them.


6. (SBU) Regarding the two road construction contracts released by
the GoSS, the World Bank representatives in Sudan have been in
discussion with the GoSS, and believe that an agreement will be made
to finalize one contract with only limited adjustments, but to
cancel the second, although more critical, contract and open a new
tender. Faiz said that he had proposed this solution to World Bank
officials in Washington, and awaits a reply. He dded that the GoSS
has more or less agreed to most of the proposed World Bank
proposals; the World Bank is not certain how flexible the GoSS is in
agreeing to further revisions, having balked at the World
Bank/Khartoum's recommended solution. He added that a GoSS official
stated that if the World Bank wants to block its one-third share of
the funds, then the GoSS would fund the project on its own fully.



7. (SBU) USAID/Sudan Field Office Engineer emphasized the same
concerns regarding the recent contracts released by the GoSS, but
said that canceling or revising the contracts will be difficult now
that the contractors have started preparations. The GoSS position
is that all World Bank guidelines and procedures were followed in
the procurement of the 10 contract packages that make up the Juba
Infrastructure Projects. The World Bank reviewed and approved four
of the ten, for 30 percent MDTF co-financing. USAID/Sudan Field
Office Engineer added that post reviews of project, after awarding,
are rare, but in this case the World Bank feels they have bent their
procedures too far.

Add'l Background on Road Reconstruction Projects
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KHARTOUM 00001624 002 OF 002



8. (SBU) Under Sudan's Joint Assessment Mission (JAM) plan, the
SETIDP calls for a total of $777 million to be spent during
2005-2010 on transport, electricity, urban infrastructure, water,
health, and agriculture development. Of this total, $150 million is
available during 2006, with donors covering one-third of the total
($50 million) under the Multilateral Donor Trust Fund (MDTF),and
the GoSS covering the remaining $100 million. Outside of Juba, the
WFP's Emergency Accessibility Improvements Program manages all road
reconstruction projects. At the March 9-10 Sudan Consortium meeting
in Paris, the GoSS Ministry of Transport and Roads reported that the
WFP road repair program planned to cover a total 1716 km of roads,
and almost 60 percent already had been completed. Inside Juba, the
GoSS would manage all projects by contracting the work out to
eligible Sudanese bidders.


9. (SBU) The overall SETIDP objectives for Sudan is to develop a
network of well maintained roads and transportation services that
allow for better connectivity, improved access to markets and social
services, and movement of displaced refugees. A 6-month action plan
laid out at the Paris Sudan Consortium meeting called for early
progress on SETIDP, including establishment of a road authority for
Southern Sudan as well as meeting specific benchmarks for road
reconstruction. Donors were told in Paris that road infrastructure
assessment needs for 2007 would be presented to as specific 2006
benchmarks -- showing GoSS readiness to proceed, as well as
demonstrating project implementation capacity. According to the
plan, the donor community would be briefed in August. Faiz did not
provide information on where the World Bank sees the road
reconstruction projects in terms of meeting the 6-month timeline,
but did say that he believed these current two slowdowns should be
resolved soon.

Comment
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10. (SBU) Since the Paris Sudan Consortium meeting in March, the
Embassy has tracked progress of road reconstruction in Southern
Sudan, as well as humanitarian de-mining efforts. Improved and
safer roads will lead to increased economic activity, which will
generate higher levels of trade, particularly with Kenya and Uganda.
Road reconstruction will also lead to improved connectivity between
Northern and Southern Sudan and thus facilitate the return of IDPs.
However, Embassy Khartoum is concerned that progress on the roads
are slowing down as tensions among the GoSS, WFP, and the World Bank
are growing. USAID funding is in addition to the funds channeled
through the World Bank, since the funds do not go into the MDTF.
(See septel for additional information on progress of USAID roads
projects.) Embassy will continue to coordinate closely with USAID
Sudan, WFP, World Bank, and the donor community to ensure the
Southern Sudan's road reconstruction stays on track.

HUME