VZCZCXRO4960
PP RUEHROV
DE RUEHKH #1624/01 1920726
ZNR UUUUU ZZH
P 110726Z JUL 06
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 3624
INFO RUCNIAD/IGAD COLLECTIVE

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 
--------------------------------------------- ---------- 
¶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 
-------------------------- 
¶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 
--------------------------------------------- --- 
 
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 
------- 
 
¶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