Document of The World Bank
FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 30871-YE
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR26.6 MILLION (US$40.0 MILLION EQUIVALENT)
TO THE
REPUBLIC OF YEMEN
FOR A SECOND RURAL ACCESS PROJECT
IN SUPPORT OF THE SECOND PHASE OF THE RURAL ACCESS PROGRAM Public Disclosure Authorized
October 11,2005
Finance, Private Sector Development and Infrastructure Middle East and North Africa Region
in Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS
(Exchange Rate Effective March 3 1,2005)
Currency Unit = Yemeni Rial (YR) 186 YR = US$ 1 US$1.50803 = SDR 1
FISCAL YEAR January 1 - December 31
ABBREVIATIONS AND ACRONYMS
ADT Average Daily Traffic MOF Ministry ofFinance CAS Country Assistance Strategy MOLA Ministry ofLocal Administration CMO Central Management Office (Rural MOPD Ministry of Planning and Access Program) Development CPAR Country Procurement Assessment MOT Ministry ofTransport Report PAD Project Appraisal Document EA Environmental Assessment PCN Project Concept Note EIA Environmental Impact Assessment PIP Project Implementation Plan EMP Environmental Management Plan PIU Project Implementation Unit FMS Financial Management Specialist PMR Project Management Report GCRB General Corporation for Roads and RAMP Rural Access Master Plan Bridges RAP Rural Access Program GOY Government ofY emen RED Roads Economic Decision Model HDM The Highway Design and RMF Road Maintenance Fund Maintenance Standard Model ROY Republic ofYemen ICR Implementation Completion Report SDR Standard Drawing Rights IDA Intemational Development SEA Sectoral Environmental Assessment Association SFD Social Fund for Development IRR Intemal Rate of Retum TOR Terms ofReference LAL Local Authority Law voc Vehicle Operating Cost MPWH Ministry ofPublic Works and Highways
Vice President: Christiaan Poortman Country Director: Emmanuel Mbi Sector Director: Hossein Razavi Sector Manager: Hedi Larbi Task Team Leader: Jean-Charles Crochet FOR OFFICIAL USE ONLY YEMEN. REPUBLIC OF Second Rural Access Project
CONTENTS
Page
A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues ...... 1 2 . Rationale for Bank involvement ...... 3 3 . Higher level objectives to which the project contributes ...... 3
B. PROJECT DESCRIPTION ...... 4 1. Lending instrument ...... 4 2 . Program objective and Phases ...... 4 3 . Project development objective and key indicators...... 5 4 . Project components ...... 5 5 . Lessons learned and reflected in the project design...... 6 6 . Alternatives considered and reasons for rejection ...... 7 C. IMPLEMENTATION ...... 7 1. Partnership arrangements ...... 7 2 . Institutional and implementation arrangements ...... 8 3 . Monitoring and evaluation ofoutcomesh-esults ...... 9 .. 4 . Sustainablllty...... 10 5 . Critical risks and possible controversial aspects ...... 11 6 . Credit conditions and covenants ...... 12 D. APPRAISAL SUMMARY ...... 12 1. Economic and financial analyses ...... 12 2 . Technical ...... 13 3 . Fiduciary ...... 14 4 . Social ...... 14 5 . Environment ...... 16 6 . Safeguard policies ...... 17 7 . Policy Exceptions and Readiness ...... 19
This document has a restricted distribution and may be used by recipients only in the performance of their official duties . Its contents may not be otherwise disclosed jwithout World Bank authorization. Annexes Annex 1: Country and Program Background...... 20 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 27 Annex 3: Results Framework and Monitoring ...... 28 Annex 4: Detailed Project Description...... 32 Annex 5: Project Costs ...... 35 Annex 6: Implementation Arrangements ...... 36 Annex 7: Financial Management and Disbursement Arrangements ...... 40 Annex 8: Procurement ...... 52 Annex 9: Economic and Financial Analysis ...... 66 Annex 10: Safeguard Policy Issues...... 71 Annex 11: Project Preparation and Supervision ...... 76 Annex 12: Documents in the Project File ...... 77 Annex 13: Statement of Loans and Credits ...... 78 Annex 14: Country at a Glance ...... 79 Annex 15: Map (IBRD No. 33979) ...... 81
.(iv) . REPUBLIC OF YEMEN
SECOND RURAL ACCESS PROJECT
PROJECT APPRAISAL DOCUMENT
MIDDLE EAST AND NORTH AFRICA
FINANCE, PRIVATE SECTOR AND INFRASTRUCTURE
Date: October 11,2005 Team Leader: Jean-Charles Crochet Country Director: Emmanuel Mbi Sectors: Roads and highways (85%); General Sector Manager: Hedi Larbi public administration sector (15%) Themes: Rural services and infrastructure (P); Decentralization (S) Project ID: PO85231 Environmental screening category: Full Assessment Lending Instrument: Adaptable Program Credit
~~ [ 3 Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other:
For Loans/Credits/Others: Total Bank financing (USsm.): 40.00
Source Local Foreign Total BORROWEWRECIPIENT 9.87 0.00 9.87 INTERNATIONAL DEVELOPMENT 15.79 24.2 1 40.00 ASSOCIATION Total: 25.66 24.21 49.87
Borrower: Republic ofYemen, Ministry of Planning and International Cooperation Sana'a, Republic ofYemen Tel: (967-1) 256 078 Fax: (967-1) 250 605
Responsible Agency: Rural Access Program Central Management Office Sana'a, Republic ofYemen Tel: (967-1) 465 226 Fax: (967-1) 409 626 Project implementation period: Start: November 30,2005 End: May 3 1,2010 Expected effectiveness date: March 3 1, 2006 Expected closing date: November 30,2010
Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? NA [ ]Yes [ IN0 Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [XINO Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD D. 7 Project development objective Re$ PAD 23.2, Technical Annex 3 The long term objective of the Rural Access Program is an improved livelihood and reduced isolation for the rural population through improved year-round access to markets and services. By the end of the Program, it is expected that, along project roads, transport rates, price of essential commodities, and travel time will be reduced by 30%, 15%, and 30% respectively. In parallel, the institutional capacity to manage efficiently rural roads programs will have been established.
The Second Rural Access Project’s specific development objective is to reduce isolation of the rural population with high incidence ofpoverty. By the end of the project, about 250,000 people located in district centers and within 2.5 km of the project roads in rural areas, who do not currently have reliable access to Governorate centers, will be provided with such access.
Project description [one-sentence summa y of each component] Re$ PAD B.4, Technical Annex 4 (i)Upgrading of at least 200 km of intermediate rural roads and at least 75 km of village access roads (USD 34.09 million). (ii)Institutional support and capacity building to strengthen, at the central and local levels, institutional and technical capability for rural road planning, engineering, environmental and social analysis, management and implementation (USD 3.45 million). (iii)Maintenance of about 950 km of roads under perfonnance-based management and maintenance ofroads contracts and support to the Road Maintenance Fund (USD 12.33 million).
The proposed operation constitutes the second phase of the Rural Access Program, an adaptable program lending (APL) approach for the improvement ofrural roads in Yemen. The first phase operation approved on June 7, 2001, was aimed at setting up sound institutional and technical arrangements for the program and testing these through the planning and execution ofpilot sub- projects. The second phase operation is intended to extend the arrangements piloted during
- (vi) - ?hase I,continue the capacity building effort (especially through the introduction ofmodern road naintenance systems), and establish the basis for a decentralized management of the program, while expanding the population benefiting from improved road access.
The seven triggers to move from Phase Ito Phase I1have been met as follows: 1. Five pilot road sub-projects have been completed, through which methods and standards have Jeen successfully tested, adjusted on the basis ofexperience, and adopted; 2. Draft Rural Accessibility Master Plans have been prepared for five Governorates, based on a nulti-criteria economic and social methodology agreed by the Government and, for the remaining thirteen Governorates, the preparation ofthese master plans is well underway; 3. An assessment of the old rural road project portfolio in the national budget has been :ompleted and clear priorities defined for rural road investments, which are mostly going to be financed by donors; 4. A rolling rural road investment plan has been prepared on the basis of which donor projects %rebeing selected; 5. Technical preparation and bidding documents have been completed for the first year of the Phase I1project; and 6. A Sector Environmental Assessment (SEA) for the Phase I1 project has been completed and publicly disclosed and the first year road works program does not include any category A sub- projec ts. 7. A 10-year National Road Master Plan has been prepared, which includes a new classification of the road network and a plan for the management and financing of the secondary rural and local roads. The new classification has not been enacted yet since the Government has decided to submit it to the Parliament for approval within the context ofa new road law, which is still being prepared. This delay does not affect the fulfillment of the program's development objectives since reduced isolation ofthe largest possible share ofthe rural population during the program's period will be best achieved by allocating resources to a well defined core network of priority rural roads in the vicinity ofwhich most ofthe rural population lives. This core network has been clearly established and is receiving most ofthe available funding including all funds from donor agencies.
Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 (i)Environmental Assessment (ii)Natural Habitats (iii)Cultural Property (iv) Involuntary Resettlement
Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: None Loadcredit effectiveness: - Employment of such qualified staff in adequate numbers and restructuring of RAPCMO's organization, in such ways as needed in IDA'S opinion for RAPCMO to carry out its responsibilities under the project; - Restructuring ofthe Steering Committee so that its membership and terms ofreference are
- (vii) - satisfactory to IDA. Covenants applicable to project implementation: - Disbursements for Project Component 3 to be contingent upon establishment ofa fully functional financial management system for RMFIU; - RAPCMO and RMFIU to be maintained throughout project implementation with staffing, structure, resources, and facilities acceptable to IDA; - Principles ofoperation ofthe RAPCMO (including decision making autonomy, and staffing policies) to be acceptable to IDA throughout project implementation; - Methodologies and procedures for sub-project assessment, selection, design, and implementation to continue to be acceptable to IDA throughout project implementation; - RAPCMO to keep current a detailed eighteen-month rolling work program; - Implementation ofa financial management strengthening program for the RAPCMO; - Implementation of a financial management and procurement strengthening program for RMFIU; - Minimum annual road maintenance funding ofYR 3.1 billion by 2006, YR 3.9 billion by 2007, and YR 4.8 billion by 2008 and thereafter.
- (viii) - A. STRATEGIC CONTEXT AND RATIONALE
1. Country and sector issues
One of the main characteristics of Yemen and an essential factor of its current socio- economic development and high poverty is the isolation of much ofthe rural population, about 75% of the country’s total population. This is due to historical and geographical circumstances, especially the rugged and mountainous conditions in the northwest of the country where most ofthe population lives. It is also the result ofthe long term neglect of the rural roads network.
Developing rural areas and reducing isolation are key elements of Yemen’s 2003-2005 Poverty Reduction Strategy Paper (PRSP). Indeed, the first of the PRSP’s three main objectives is: ”Achievement of economic growth, creation of job opportunities and expansion of the economic opportunities for the poor by remedying the structural causes of poverty, focusing on the prevention of poverty, and providing sustainable means of livelihood” (page 5). Better rural roads are essential for this. In general, improving infrastructure is one of the four main axes of intervention (pillars) to meet the PRSP’s objectives. The PRSP also emphasizes that past infrastructure improvements were biased towards the urban areas and the more fortunate groups, to the detriment of the rural population. In the transport sector, the specific PRSP goals are: “Adding 3,300 km of asphalt roads and 2,950 km of gravel roads, besides the reinforcement and maintenance of about 3,194 km of asphalt roads, so as to achieve interconnection and to reinforce the transport traffic and facilitate the flow of commodities and sewices and movement of people, aside from maintaining the existing roads to ensure the safety of their use and their sustainability (page 55); and “Connecting rural areas to markets, easing access to services through the expansion of the roads network” (page 57).
By late 2004, Yemen has made good progress towards the PRSP output targets for the transport sector. The length ofpaved roads added to the network in recent years has been about 900 myear. Overall, the length of the paved road network has doubled in the period between 1990 and 2003. During the past years, funding for the road sector has been about US$ 100 million per year, with roughly half coming from external sources. The capability to plan and implement programs in the road sector has also made much improvement. Despite these achievements, some serious issues remain, as outlined below and described in Annex 1.
Insufficient coverage of rural areas with all-weather roads. One of the most critical constraints to economic growth and poverty alleviation is the land transportation challenge facing Yemen. In spite of the rapid growth of the paved road network, paved roads still constitute only about 12% of the total road network ofroughly 63.000 km and most of the secondary and tertiary network is in poor or very poor condition. In fact, about 75% of the roads are very rough earth roads or rudimentary tracks which can be used only by light four-wheel-drive vehicles at very low speed and at high costs, and which often get interrupted by rains. As a result, only about 28% of households throughout the country have access to all-weather paved roads. The provision ofroads of
-1- appropriate standards is especially challenging, given that a large proportion of the population lives in small settlements in rugged terrain relatively far from trunk roads. This situation is a primary obstacle for economic growth and improving the living conditions in rural areas, especially those distant from the main cities. The Government (specifically, the Ministry of Public Works and Highways - MPWH) is directly addressing this issue through its ongoing Rural Access Program (RAP) that started in 2001 under an adaptable program credit (Phase I)fi-om IDA. Other programs, such as the Social Fund for Development, improve small-scale village access tracks through participatory and labor-intensive work methods.
Institutional Challenges. The road sector also faces institutional challenges and, in particular, deficiencies in budget allocation processes, especially for the rural road network. This often leads to commitments for rural road projects that: (i)are not approved by Parliament; (ii)receive only very little funding through the annual budgets; and (iii)because of low funding, are not completed and do not lead to sustainable accessibility improvements for the rural poor. The RAP is designed to address this issue. It is a parallel system that uses a rational and participatory process ofRural Accessibility Planning to identify rural road projects. Final selection, design, and implementation of projects are based on sound, objective, technical, economic, and environmental criteria. This process was piloted and adjusted during the Phase Iproject, and it has proven successful. The Government and donors are gradually putting more money into the RAP, while budget allocations for the traditional inefficient system are being reduced. Over time this will lead to the gradual disappearance of the old practice, as Governorate and District Governments, as well as local communities, will recognize that they will “get their roads” much better through the RAP than by exercising political pressure on the central Government. In addition, the RAP has introduced rational methods for procuring and managing road contracts, and has initiated the necessary strengthening of the contracting industry and the consulting profession in the road sector. These improvements still need to be reinforced.
Inadequate maintenance of the road network. Despite the establishment of an independent Road Maintenance Fund (RMF) with its own revenue source and maintenance planning capability, and budget allocation of substantial resources, the road sector still suffers from inadequate road maintenance funding and management. The need for regular maintenance funding for all roads (including municipal roads) has been estimated at YR 4.8 billion (US$ 26 million) per year. However, in 2004, the combined resources allocated to road maintenance through the RMF and other budget allocations were only YR 2.3 billion (US$ 12.5 million). In addition, there is a backlog of road rehabilitation works, which is only partially addressed through road resurfacing projects funded through the general road budget and executed by the MPWH. Currently, the maintenance funding shortfall mainly affects the unpaved road network. Paved roads in Yemen have proved to be much more resilient because of low rain, good construction materials, and the prevalence of rocky terrain. About 64% of paved roads are in very good or good condition. The Government is addressing the maintenance issue in three ways. First, the Parliament has approved a law which would channel 5% of the price of fuel to the RMF, which, at present fuel price and consumption levels, would result in
-2- approximately YR 5 billion (US$ 27 million) per year. This would be sufficient to cover the maintenance needs of the entire road network. The practical implementation of this law has been closely linked, however, to the reduction or elimination of he1 subsidies, a step that has proven very difficult, but has been taken recently. Secondly, given the relatively low cost and high resilience of road pavements in Yemen, the Government is upgrading many unpaved roads to paved standards, through the RAP and through projects implemented by the MPWH. Thirdly, in order to address the maintenance management issue, the Government intends to continue to strengthen the RMF and introduce in Yemen the concept of long-term contracts for performance-based management and maintenance of roads (PMMR), which constitute a more integral approach to road maintenance and favors the participation ofprivate firms in the planning and execution ofroad maintenance.
2. Rationale for Bank involvement
The rationale for Bank involvement is that the reduction of rural isolation through improved rural access roads constitutes a key element for poverty reduction in Yemen, and that continued Bank assistance is important for strengthening ongoing efforts by the Government, as described above, and mobilizing other donors’ resources. More specifically, the three following reasons justify Bank involvement: (i)now that the RAP is attracting a significant number ofdonors (Arab Fund, USAID, EU among others), there is a need for coordination and leadership in the support to the sector, which the Bank has successfully provided under the Phase Iproject and is uniquely placed to continue to provide; (ii)through its involvement in rural access road programs worldwide, the Bank can effectively disseminate knowledge and support the capacity building efforts of the Government in this area; and (iii)the Bank also has wide experience in road maintenance issues, in particular the establishment of more reliable funding arrangements based on user charges, and in the introduction of PMMR. Other donors have indicated that their participation in the RAP is contingent on the continued participation and leadership ofthe Bank.
3. Higher level objectives to which the project contributes
The project is designed so as to be closely aligned with the PRSP and especially its priority objectives of improving access to basic social services, production inputs, and consumer goods, and promoting economic growth and the creation ofjob opportunities by encouraging agricultural production and activities associated with it. As such, the project will significantly contribute to poverty reduction. It will also contribute directly to the Government’s higher level objectives in the transport sector by increasing the coverage of all weather roads in rural areas, developing institutional capabilities in the road sector, and testing better systems for road maintenance. In addition, the project will support the Government’s decentralization process through the establishment of regional rural roads offices to be responsible for planning and implementation of rural access projects. The project is included in the Country Assistance Strategy (CAS).
-3- B. PROJECT DESCRIPTION
1. Lending instrument
Adaptable Program Credit (APC).
2. Program objective and Phases
The long term objective of the RAP is an improved livelihood and reduced isolation for ?he rural popula?ion. This objective is to be achieved through the improvement of clusters of rural roads, including intermediate access roads linking district centers with each others and to the main road network, combined with adjacent village access roads. In parallel, the institutional capacity to manage efficiently rural roads programs is to be established. Implementation of the Program started with the effectiveness (March 18,2002) of the Phase ICredit. Progress in meeting the program objectives is measured by three specific indicators (transport rates along program roads, price of essential commodities at rural markets served by program roads, and access time). The Program’s three phases are briefly described below (see also Annex 1):
Phase I: Institutional strengthening and definition of appropriate standards. Phase I is setting up the institutional and technical foundation for an efficient rural road improvement program and testing the planned approach through the establishment of the Rural Access Program Central Management Office (RAPCMO) and the execution of 15 pilot projects ofrural road clusters.
Phase 11: Access improvement and decentralized network management. This Phase is the subject of the present Project Appraisal Document. It is intended to roll out nationwide the institutional and technical processes piloted during Phase I(including the participatory road selection processes and the proper management of environmental and social impacts), continue the capacity building effort, and establish the basis for a decentralized management of the program, while expanding the population benefiting from improved road access. This phase will be implemented fiom mid-2005 until mid- 2010. In parallel to the Bank own funding, it will include large funding from other donors for projects prepared and implemented within the same institutional and technical framework.
Phase 111: Expanding the coverage of access improvement and consolidation of gains. This phase will expand capacity building at the regional level and improve access in rural areas not yet covered under Phases I and 11. It is also expected to fully institutionalize the processes developed through the first two phases and achieve sustainable management and maintenance of rural roads in Yemen. Phase I11 will be implemented between 2009 and 2012.
After a one year delay in its start, Phase Ihas made good progress and will be completed by mid 2006. The key institutional and technical objectives of Phase Iare being met fully and preliminary indications show that the program’s targets are being reached. In
-4- addition, overall good results have been achieved regarding the triggers that had been agreed between the Government and the Bank for the initiation of Phase I1 of the Program. As shown in Annex 1, with one justified exception which has no impact on the fulfillment of the program’s development objectives, these triggers have been met in substance or fully.
Triggers for Phase I11 of the Program were agreed at Negotiations. They include those described in the PAD for the Phase Iproject, to which were added two new triggers targeting progress in road maintenance. The list oftriggers for Phase I11 is in Annex 1.
3. Project development objective and key indicators
The Phase I1 development objective is to reduce isolation ofthe rural population enabling them to better reach markets and access services (social and administrative). Progress towards this objective will be measured through the overall program indicators (see above) as well as the number of persons who will have gained reliable low cost year- round road access through the project. The target for the end of Phase I1 is 250,000 persons. Details, including on the indicators for monitoring progress towards the intermediate results, are in Annex 3.
4. Project components
The project will have three components which are briefly described below (Annex 4).
Component 1: Rural Access Roads. This component is designed to address the sector issue of insufficient coverage of rural areas with all-weather roads. It will mainly consist of the planning, execution and supervision of works contracts to upgrade existing rural roads and tracks. The result of this component will be that at least 200 km of intermediate rural access roads and 75 km of village access roads are improved (IDA- financed roads only). As in Phase I,most physical works will be carried out by local small and medium-size contractors, and design and supervision will be done by a mix of local and foreign consultants. The target group for this component is the rural population in the area ofinfluence ofthe roads to be improved.
Component 2: Institutional Support and Capacity Building. This component is designed to address the sector issue of institutional challenges in the rural road sector. It builds on the results of the Phase Iproject and will mainly consist of training and technical support services carried out by local and foreign consultants. The result of this component will be that institutional and technical capability for rural road planning, engineering, environmental and social analysis, management and implementation is strengthened at the central and local levels. More explicitly, it is expected that, by the end ofthe project: (i)three decentralized rural road management offices are hnctional; (ii)at least 200 local professionals from the public and private sectors have received an average of 10 days of relevant high quality training; (iii)constraints to the development and efficiency of the road maintenance and construction industry and road sector consulting profession have been identified and adequate improvement measures have been designed;
-5- and (iv) the implementation of the RAP continues to be managed professionally and in conformance with legal and fiduciary requirements. The direct target group for this component consists of Yemeni road sector professionals from both the public and private sectors.
Component 3: Road Maintenance. This component is designed to address the sector issue of inadequate maintenance of the road network. It will mainly consist of the planning, execution and supervision of several pilot contracts to introduce PMMR in Yemen and the strengthening of the road maintenance management capability of the RMF. The results of this component would be that (i)at least 950 km of roads are properly maintained by the FWF through PMMR contracts with private firms and (ii)a modem Pavement Management System is functional and able to produce sound assessments ofpriority road maintenance and improvement expenditures for the primary road network of Yemen. The target group for this component consists ofthe users ofthe maintained roads who will benefit from sound pre-defined road service levels during the contracts’ period.
5. Lessons learned and reflected in the project design
Major lessons learned from previous projects in the transport sector in Yemen, particularly the Phase Iproject, are discussed below. These lessons which are consistent with the Bank’s experience with similar projects in other countries have been incorporated in the design ofthe Phase I1project.
First, in Yemen as in most countries, institutional performance can be substantially improved if it takes place within a transparent framework ofwell defined procedures and technical guidelines, if staff is recruited on the basis of merit, adequately motivated and remunerated, and offered sound work conditions, and if the institution can perform its daily tasks without outside interference. This has been the case for the RAPCMO and will be continued under Phase 11.
Second, the Yemeni road maintenance and construction industry and consulting profession have shown that they can develop relatively fast and reach satisfactory quality levels if they perform under a competitive and transparent selection process and professional supervision. At the same time, capacity constraints are expected to be binding in the near future as the RAP’S size is greatly expanded with the participation of other donors. The project therefore includes significant activities for the development of local contractors and consultants. Some contracts will also be procured in larger packages in order to attract intemational contractors.
Third, the rural population has shown that it is interested mostly by access and that high technical standards only have marginal benefits. In addition, the costs of improving rural roads may be lowered substantially if appropriate design and implementation methods are selected. On this basis, continued attention will be paid under Phase I1 to appropriate standards, taking also into account the future costs ofroad maintenance.
-6- Fourth, social framework agreements have shown of high practical value in rural road projects to maximize net benefits and avoid conflicts. These written and signed agreements initiated under Phase Ibetween the RAPCMO and the local beneficiaries of each road improvement project, which involve significant community participation in project design, have almost completely eliminated the difficulties and work stoppages which were commonplace earlier. The use of social framework agreements will be further strengthened in Phase I1of the RAP.
6. Alternatives considered and reasons for rejection
The altematives that were considered for the RAP at the time of preparation of Phase I are discussed in the corresponding PAD. In brief, these were (i)to focus solely on either intermediary or village access roads, (ii)to limit IDA’Sinvolvement to one large stand alone 5 or 6-year project, and (iii)if an adaptable program concept was selected, to embark on large scale road improvement as soon as Phase I.The reasons for rejections of altematives (i)and (ii)have been confirmed by experience. It has been indeed highly beneficial to provide clusters of intermediary and village access roads. Better knowledge ofrural roads has also shown that the needs were vast and that both capacity building and sheer investments needed IDA’s long term presence. As far as the third alternative is concerned, it has in fact been partly implemented since RAPCMO’s capacity has developed faster than expected and the relatively low unit cost ofroad works has made it possible to improve a far larger set of roads. Experience has therefore validated the choices made at the outset and the program has proven flexible when circumstances have warranted a change.
Regarding the proposed Phase 11, there appears to be only one other alternative in project design, which would be to exclude the pilot road maintenance component in order to simplify the project and not take risks with innovative PMMR contracts. However, the fact that poor road maintenance is an increasingly important issue in Yemen, and the high potential rewards from introducing PMMR contracts, if successful, are strong enough arguments to justify the rejection ofthis alternative.
C. IMPLEMENTATION
1. Partnership arrangements
The successful implementation of Phase Ihas generated not only strong political and popular support for the RAP inside Yemen, but also very substantial interest fi-om extemal donors to participate in the financing of the program. Already under Phase I, two donors (EU and USAID) have joined the RAP, both of which have vowed to continue their support in parallel to IDA’s Phase 11. The Arab Fund has also recently approved a credit ofUS$ 85 million for rural road improvements.
Depending on the final outcome of on-going discussions between the Government and donor agencies, the total size ofextemal financing for the RAP will be between US$ 150 and 180 million, to be complemented by Government counterpart financing of about 15-
-7- 20%, equivalent to about US$ 30 million. This would mean that, in the next four to five years, the RAP would be more than three times bigger than during Phase I,allowing the improvement of about 1500 km of intermediate rural access roads and some 300 km of village access roads. The implications in terms of size of the RAPCMO and capacity of the construction industry are being taken into account. External partners in the RAP have also expressed the wish that the Bank continue to be a leading partner, despite its relatively reduced financial contribution, in order to ensure continued conceptual and technical coherence of the program and high standards of its management and supervision.
2. Institutional and implementation arrangements
Project Components 1 and 2 will be implemented by the RAPCMO. Project Component 3 will be implemented by the RMF. Overall guidance and supervision would be provided by a steering committee.
The RAPCMO is an autonomous agency ofthe MPWH. It was created under the Phase I project. It is staffed by well trained, experienced staff, recruited competitively, and provided with attractive work conditions and benefits. It has fully proved its capability. It has, in particular, developed sound work methods and procurement and financial management systems, which will continue to be used under the Phase I1 project, with some improvements (see D.3 below). It has also developed the capacity to manage adequately the numerous consultants and construction contracts that are needed for fulfilling its tasks. As a credit condition, the principles ofoperation ofthe RAPCMO (see Annex 6) as well as the methodologies, and procedures for sub-project assessment, selection, design, and implementation will be continuously acceptable to IDA throughout project implementation. As noted above, however, the RAPCMO is evolving into the national agency for implementation of rural roads programs. It therefore needs additional staff and an organizational structure that is adapted to its new size. About ten staff members are currently being recruited. A draft new structure has also been prepared. The completion of staff recruitment and the implementation of the new structure are conditions of credit effectiveness. Also, to ensure consistency between its work load and staff and resources, the RAPCMO will keep current, as a credit condition, a detailed eighteen-month rollling work program. Other factors in the RAPCMO’s evolution in the coming years will be (i)the setting up of three regional offices, and (ii)the need, in a longer term perspective, to gradually establish the RAPCMO as a legally autonomous entity with hnding of its operating costs that is appropriate and mostly independent of donor agencies. The project will assist the RAPCMO in these changes. It will in particular provide training and technical assistance to ensure the RAPCMO’s continued project implementation capability and the integration of new staff, to assist in the development of the regional offices, and to assess the pro and cons of future corporatization ofthe RAPCMO.
The RMF is an autonomous State agency in charge ofthe maintenance ofnational and rural roads. Since its creation in 1995, it has gradually developed the technical and institutional capability to plan and administer road maintenance in an effective way. The RMF has
-8- recently designated a special unit - Road Maintenance Fund Implementation Unit (RMFIU) - for the implementation of Project Component 3. This unit will need strengthening as explained in Annexes 7 and 8. In particular, the establishment of a fully functional financial management system for RMFIU is a condition of disbursement for Project Component 3. Implementation of an action plan for developing financial management and procurement is also a credit condition. Given the innovative nature ofthe PMMR contracts used in Project Component 3, the RMF will need support for their design and implementation. Intemational consultants will be used for this purpose.
As a credit condition, the RAPCMO and RMFIU will be maintained throughout project implementation with staffing, structure, resources, and facilities acceptable to IDA.
Oversight of the RAPCMO, RMFIU, and the overall Project will be assured by the Steering Committee. This committee, which was established under Phase I, will be restructured. Its main duties will be to approve policies and work programs, appoint key staff, coordinate, and review performance in project implementation (Annex 6). Its membership will be limited to five high level representatives, two from MPWH (the Minister as chairperson ofthe Committee and the Deputy Minister for Roads), and one of each of the Ministry of Planning and International Cooperation (MPIC), the Ministry of Finance (MOF), and the Ministry of Local Administration (MOLA). The General Manager of the RAPCMO and the Chairman ofthe RMF will participate in the meetings of the Steering Committee but not in the Committee’s decision making process. As a condition of credit effectiveness, the Steering Committee will be restructured so that its membership and terms of reference are satisfactory to IDA. This will be maintained throughout project implementation.
Disbursements will be made separately by the RAPCMO and the RMF. There would be two separate special accounts, one for each organization. The Borrower’s share of project funding would be provided by the national budget under normal State procedures. Availability ofcounterpart funds has never been a difficulty under the Phase Iproject.
Both the WCMOand the RMF will prepare semi-annual progress monitoring reports in accordance with a format acceptable to IDA. These reports will include sufficient operational and financial information, particularly on the status of the RAPCMO’s work program, implementation ofall contracts, and expenditures.
3. Monitoring and evaluation of outcomes/results
Both the RAPCMO and the RMF will monitor progress against agreed-upon program and project performance monitoring indicators, as shown in the Results Framework. As far as program and project outcome indicators are concerned, the mechanisms established during Phase Iwill be used. In the past years, the WCMOhas organized surveys to collect data related to the rural access indicators before and after completion of improvements on each intermediate rural road and adjacent village access roads. The RAPCMO has also established a data base, on which the information is stored and may be regularly extracted and used by management to monitor progress. This will be
-9- continued under Phase 11. As far as results indicators are concerned, they are either simple quantitative work outputs which the RAPCMO and the RMF can easily prepare or qualitative indicators which the Bank supervision mission will assess. All results will be regularly reported in the semi-annual progress reports.
A key area for continued monitoring will be the environment for contract implementation and enforcement. There is for instance, an ongoing contractual dispute with a foreign contractor under a now-closed IDA-financed project. With World Bank support and encouragement, a technical opinion has been prepared by independent experts on the level of contribution that the Bank could finance out ofthe value ofthe disputed claims. Government has accepted the opinion and is prepared to use it as a basis for negotiations but the contractor has not. In view of this, the Bank expects to continue its effort to support both parties in reaching a satisfactory solution.
4. Sustainability
The RAP enjoys strong and widespread political and popular support in Yemen. It is also firmly anchored in both the Government’s PRSP and the CAS. The Government’s commitment has been demonstrated through the ready availability of counterpart funding. The RAP is also supported by several other donors, who count on the Bank to continue to plan and monitor the program, and to provide regular technical support. .
Within this supportive context, the long term sustainability of the project’s roads will depend on the provision of adequate funding for road maintenance and the increased capability to use funding efficiently. The situation regarding maintenance and the measures being taken by Government are described in Part A.l of this PAD. During Phase I, annual maintenance funding was increased to about the target agreed with the Bank (YR 2.5 billion). As a credit condition, the Government will ensure that the funding of maintenance is gradually increased to YR 3.1 billion in 2006, YR 3.9 billion in 2007, and finally at least YR 4.8 billion (the present estimate ofmaintenance needs) in 2008 and thereafter. In parallel, road maintenance management needs further strengthening. This will be the main objective ofProject Component 3. It will introduce and test in Yemen best-practice approaches for maintenance management. These approaches will be mainstreamed if successful. In addition, it will assist the RMF in developing its planning and monitoring capabilities as well as its management systems and institutional knowledge.
- 10- 5. Critical risks and possible controversial aspects
Risk Risk Minimization Measure
To project development Ibjective
’oor selection ofsub-projects M A sound planning and prioritization process for rural road investments has been established under the Phase Iproject. This process is now well accepted. Through the Rural Accessibility Master Plans, local communities have also been increasingly involved in the selection ofsub-projects
To component results
Lack ofcounterpart hnds M This has not been a problem in Phase I,but could become one if Yemen’s macroeconomic and fiscal situation changes. The programmatic approach allows the total size ofthe program to be adapted to the government resources available.
?oor quality ofimplementation M The principles upon which the RAPCMO has successfully operated Ifrural road upgrading sub- under Phase I(autonomy, decision making based on objective xojects and road maintenance criteria, competent and motivated staff) will continue. These 3ecause of reduce the risk ofinadequate project management and poor selection ofcontractors and consultants. Specific support will also inadequate project . be provided to the RMF in the implementation ofProject management Component 3. Training ofGovernment and RAPCMO staff as inadequate performance of well as ofcontractors and consultants will be provided under the contractors and consultants project. Foreign contractors and consultants will also be used to supplement the capacity oflocal ones. Technical audits will continue to be used.
Lack ofrelevance ofthe M The terms ofreference for technical assistance and training will be :ethnical assistance and training prepared on the basis ofa careful assessment ofneeds. They will xogram and resistance to also include actions for motivating the trainees and knowledge :hange receiving institutions. Efforts will be made to select consultants who are sensitive to the country’s specific circumstances.
Overall Risk Rating M
No possible controversial aspects have been identified.
- 11 - 6. Credit conditions and covenants
Effectiveness conditions: . Employment of such qualified staff in adequate numbers and restructuring of RAPCMO’s organization, in such ways as needed in IDA’Sopinion for RAPCMO to carry out its responsibilities under the project . Restructuring of the Steering Committee so that its membership and terms of reference are satisfactory to IDA
Covenants and other conditions: . Disbursements for Project Component 3 to be contingent upon establishment of a fully functional financial management system for RMFIU RAPCMO and RMFKJ to be maintained throughout project implementation with staffing, structure, resources, and facilities acceptable to IDA . Principles of operation of the RAPCMO (including decision making autonomy, and staffing policies) to be acceptable to IDA throughout project implementation . Methodologies and procedures for sub-project assessment, selection, design, and implementation to continue to be acceptable to IDA throughout project implementation RAPCMO to keep current a detailed eighteen-month rolling work program Implementation ofa financial management strengthening program for the RAPCMO Implementation of a financial management and procurement strengthening program for RMFIU . Minimum annual road maintenance funding ofYR 3.1 billion by 2006, YR 3.9 billion by 2007, and YR 4.8 billion by 2008 and thereafter
D. APPRAISAL SUMMARY
1. Economic and financial analyses
The economic analysis ofall intermediary roads proposed for improvement, as a result of the participatory process ofrural accessibility planning and screening, will be done using the Roads Economic Decision Model (RED). The RED was developed by the World Bank specifically for the economic analysis of low-volume roads, based on some elements of the more widely known HDM (Highway Design and Maintenance Model). The RED utilizes expected reductions in vehicle operating costs (VOC) as the principal economic benefits. This constitutes a conservative approach, since it is now widely accepted that the traditional VOC-based economic analysis is insufficient to capture the filleconomic and social benefits of low-volume rural road investments, in particular in the context ofprojects in poor areas. On the other hand, a truly reliable quantification of all benefits, in particular social benefits, would require a large amount of data, which is far too expensive to collect and to monitor for each road to be improved under the project. It therefore seems reasonable to use the RED to verify if a minimum required
-12- threshold intemal rate of retum (IRR) can be attained on the basis ofVOC savings only. This threshold will be an IRR of 12%. Based on the experience gained in Phase I,many of the intermediate rural roads in Yemen reach that threshold, because of the significant traffic levels on those roads. However, the Bank will consider applying a lower threshold where the isolation and poverty of specific rural communities warrant the road improvement works, notwithstanding a comparatively modest IRR. For example, in cases where the absolute poverty rate in the road’s zone of influence is 5% above the national average, the threshold might be reduced to, say, 9%. More details on the economic analysis are in Annex 9, including the basic assumptions and the results for five intermediate roads that are being started under Phase Iand will be completed under Phase 11. The results for the five roads show IRRs between 16% and 36% in the base case and acceptable outcomes in the sensitivity scenarios.
For village access roads, it was agreed that a different type ofthreshold would be applied, which is the maximum amount spent on the road improvement per beneficiary (or the marginal cost of the village access road divided by the number of inhabitants of the village). Based on the experience of Phase I,the threshold value was set at a maximum ofUS$ 75 per beneficiary. This amount will be revised annually during Phase I1in order to ensure realism and responsiveness to changing socio-economic circumstances.
Fiscal Impact: Project cost will be US$ 49.9 million, with the Government of Yemen (GOY) providing US$ 9.9 million (about 20%). The US$ 3.5 million needed in the peak year as counterpart funds would represent about 4% of2005 total budget allocation to the road sector from the Government’s own resources. This Project is thus not expected to have major implications for the national budget.
2. Technical
During Phase Iof the RAP, much effort has gone into the development of adequate technical design specifications for the rural road improvements to be carried out under the program. One challenge was to find an equilibrium between the objectives of keeping the costs low and still providing adequate service levels to road users. Another objective pursued was the inclusion of secondary benefits into the road design, such as water harvesting, terrace building, the use of local materials, labor-based techniques whenever appropriate, different types of surfacing, etc. A complete rural road design manual has been developed and applied for the about 15 roads presently completed or under execution during Phase I. Overall, the design criteria which have been adopted and applied are considered satisfactory. However, further efforts will be made during Phase I1to simplify the RAP rural roads design manual without sacrificing the quality ofworks, and to translate the manual into the Arabic language. The RAP is also in the process of developing a manual for construction supervision, in order to ensure that supervision by the numerous local and foreign consultants used under the program is carried out in accordance to technically sound and uniform standards.
-13- 3. Fiduciary
Financial Management. An assessment ofthe financial management (FM) arrangements for the Project was carried out in February 2005 (Annex 7). From the FM perspective, the RAPCMO has managed the implementation of the Phase Iproject in an acceptable manner. For the implementation ofProject Components 1 and 2 of the Phase I1project, it will continue to use the same FM arrangements while ensuring some enhancements such as updating its accounting software and financial policies and procedures to reflect changes in the operations of Phase I1 and reinforcing its FM staff to support new requirements. Therefore, as a credit condition, the RAPCMO will implement a financial management strengthening program satisfactory to IDA. Regarding Project Component 3, the RMF has already taken significant steps towards the development of acceptable FM arrangements at the newly established RMFIU, including the assignment ofa director and a financial officer from its current staff. It has also devoted a well equipped space to RMFlU’s activities and staff. Yet, as RMFlU has no prior experience in implementing Bank financed projects, the establishment of a fully functional financial management system is a condition ofdisbursement for Project Component 3 as described in Annex 7. Implementation of a satisfactory financial management strengthening program (including mostly training) is also a credit condition.
Procurement. An assessment ofthe procurement arrangements for the Project was carried out in October 2004 (Annex 8). It showed that the RAPCMO had performed well under the Phase Iproject and had full capability to implement Project Components 1 and 2. It will need, however, to recruit an additional procurement specialist, provide procurement training to its new technical specialists, and adopt a clear matrix ofresponsibility for the procurement function under Phase 11. Regarding Project Component 3, the RMF has taken useful steps to build the procurement capacity ofRMFlU, including the recruitment ofinternational consultants who will assist in the preparation and procurement ofPMMR contracts. RMFlU will also benefit from the experience of the RAPCMO. In order to further enhance its capability, the RMF will, as a credit condition, implement a strengthening program satisfactory to IDA (Annex 8).
4. Social
Primary beneficiaries and other affected groups. The primary beneficiaries of the project are the rural population in areas which have lower-than-average access to markets and basic services. These areas generally have high concentration of rural poor, of which women constitute a disproportionately high fraction. The primary beneficiaries will participate both directly and indirectly. Direct participation will occur during the design phase of individual roads, when local consultations take place and mitigation measures are coordinated between design consultants and the landowners adjacent to the road. Indirect participation will be through elected District Councils, which will be involved in the decision-making process related to accessibility planning and prioritization of individual interventions. Other stakeholders are from the private sector, such as local contractors, design engineers, consultants, transport service providers and traders. They
- 14- benefit from the overall program, which provides significant business opportunities and, in the case oftransporters and traders, large cost savings.
Social Framework Agreements. During Phase I, the RAP laid the groundwork for systematically addressing social issues in the planning and implementation ofrural roads. This has been done by incorporating social issues into standard procedures for project screening, planning, assessment ofimpacts and formulation ofmitigation or enhancement measures for the final design and implementation of each road project. The participatory mechanism for implementing these procedures is the road-specific Social Framework Agreement (SFA), which is developed through consultations with beneficiaries during the project design stage and appended to each road’s Environmental Management Plan (EMP). Separate consultations are held for men and women. The SFA lays out all areas ofpotential social concern, with agreed and specific mitigation or enhancement measures to address these concerns. The SFA also formalizes the beneficiary committee and serves as a framework through which unforeseen problems will be solved during the course of construction.
Rural Accessibility Planning. During Phase I, a methodology for rural accessibility planning has been established and applied for all 18 of Yemen’s rural Governorates. These plans provide a transparent and systematic framework for identifying priority rural road investments at the decentralized levels. This participatory methodology includes criteria that focus on providing basic access to the poorer areas, as well as gender-related access concems. During Phase 11, community participation is expected to become a routine feature of the rural accessibility planning process. In the medium term, elected Councils will gradually develop capacity to assume an active role in improving rural access roads and their management and maintenance.
Land Acquisition/Resettlement. Road improvements during Phase Iwere purposefully selected to occur within existing right-of-ways only, thus avoiding any significant land acquisition or resettlement issues. During Phase I,the SFAs have also proved useful in establishing frameworks through which unforeseen land acquisition issues are resolved, particularly where the roads pass through densely populated areas. In such cases, small parcels of land have been donated by their owners, confirmed through the beneficiary committee, because of the existing Government policy and practice which allows compensation only for assets located on the land, but not for the land as such. During Phase 11, it is allowed that certain rural roads will require altered alignments and more significant land acquisition or displacement of buildings. For this reason, a Sectoral Environmental Assessment (SEA) has been prepared, which contains a Resettlement Policy Framework (RPF), laying out the standard procedures for preparing a resettlement action plan acceptable to IDA if and when potential land acquisition or resettlement is identified during the initial screening (see section D.6 below).
The treatment of other social issues is described in Annex 10 (archeological and historical sites, graveyards and burials, and local employment).
-15- 5. Environment
Environmental institutions and policy framework. The Republic of Yemen has established institutions and responsibilities for environmental management. A National Environmental Action Plan (NEAP) was developed in 1995 and, the following year, the Environmental Protection Law was enacted. Since 2001, the Government has taken additional steps to consolidate environmental management through the creation of (i)the Ministry of Tourism and Environment in 2001 (converted to the Ministry of Water and Environment in 2003); and (ii)the Environmental Protection Agency (EPA) with a mandate to develop and implement the environmental policies and legislation. In October 2002, the EPA prepared the “Environment and Sustainable Investment Program 2003-2008”, which is the framework for the Government Environmental Policy. Although the Environmental Protection Law provides a broad framework for environmental management and the establishment of sectoral legislation, there is as yet no comprehensive regulatory framework for the road sector.
For this reason, the RAPCMO established an Environmental and Social Management Unit. Through this Unit, a standard environmental and social management process has been put in place, which has been tested during Phase I. For Phase 11, a SEA has been prepared, which provides a programmatic framework for all roads to be improved under the program. The SEA includes Policy Frameworks for Involuntary Resettlement, Natural Habitats and Cultural Resources (see Section D.6), which will be triggered when such issues are identified during road project screening or in the course ofimplementation.
Mitigation through avoidance environmentally-sound technical designs. A key aspect of the Program’s Environment and Social Framework Agreement is the participation of environmental and social specialists during the screening, design and implementation stages of the road project cycle. In this way, potential environmental and social issues may be avoided or significantly reduced through design considerations and meaningful analysis of alternatives. Phase Icarried out test sections on the pilot roads and village access roads, addressing such design issues as: (i)water harvesting on mountain roads; (ii)narrower platforms, and related to a reduced need for cutting into slopes and negotiate earth movements; (iii)more durable road surfacing on steep slopes to avoid erosion; (iv) slope stabilization on sections of the roads where slopes are unstable; (v) controlled disposal at designated sites of excess material cut from the hillside slopes; and (vi) embankment design and wadi hydrology. Based on these experiences, revised design standards have been developed, which will be regularly updated based on cumulative experience.
Reduction of potential impacts of physical works. Specific measures to reduce potential impacts of physical works will be identified for each road during the design and implementation stages regarding the detailed design, construction tenders, construction process and contractor performance monitoring. Contracts will contain requirements for proper management of construction waste; control measures for waste fbel, oil and lubricants; recycling ofoily wastes, reduction ofnoise and dust levels; safety in blasting; and rehabilitation of areas used for construction detours, and sites used to temporarily
- 16- store construction materials. Contractors will be required to provide and maintain equipment with proper noise abatement controls. RAPCMO has incorporated these and other Environment, Health and Safety Regulations into its standard bidding and contract documents. These regulations provide contractors and consultants guideposts for these practices, many ofwhich are new concepts. The regulations contain a standard RAP EMP Table, which is a comprehensive checklist to be adapted to each road project for implementation and monitoring. The project has thus provided an opportunity to introduce such regulations, where they did not previously exist in the road sector.
Management of Operational Impacts. The Project will address operational impacts for each road through maintenance contracts under the RMF, which will avoid deterioration of the rehabilitated road and associated dust and safety problems. Maintenance contractors will be required to follow procedures similar to those for the construction contractors concerning proper disposal of construction waste, control and recycling measures for waste fuel, oil and lubricants and adoption of health and safety measures for personnel. Expected increases in traffic levels are not expected to be so high as to bring about a significant increase in air pollution, and this may in fact decrease due to smoother and less dusty roads and improved vehicle standards. Suspended dust caused by vehicles will be reduced by the rehabilitation of the roads, due to the large number of road subprojects which include sealing.
6. Safeguard policies
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04)* [XI [I Pest Management (OP 4-09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1)* [XI [I Involuntary Resettlement (OP/BP 4.12)" [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety of Dams (OPBP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI * These policies will be triggered only if significant issues are identified during individual project screening under the program. Agreed Policy Frameworks (see below) will then apply in the design and implementation of these individual projects.
Safeguard Policy Frameworks. Because the location ofall project roads is not yet known, safeguards policy compliance will be assured through a programmatic approach. In particular, an Environment and Social Management Process has been agreed and put in place during Phase Ifor the identification, screening, implementation and monitoring of all project roads improved under the project. Environmental screening of individual projects could possibly trigger three safeguard policies: Involuntary Resettlement (OD 4.30); Natural Habitats (OP 4.04, BP 4.04, GP); and Cultural Property (OPN 11.03).
- 17- Accordingly, the Program’s Environmental and Social Framework Agreement contains Policy Frameworks for these three policies, which would be applied when triggered. Details of the Environment and Social Management Process and the Policy Frameworks are presented in Annex 10.
Environmental screening category. The project has been placed into environmental screening category “A”, based on the possibility that some project roads may involve departure from existing realignments, or impact on natural habitats or cultural resources. As noted above, Policy Frameworks have been developed, to be applied if such cases occur. It should be noted that, for the most part, projects are expected to keep within existing alignments, and the screening and design activities are geared towards avoiding or minimizing effects on land holdings and buildings, physical cultural resources or cause significant conversion, loss or degradation of critical natural habitats. Annex 10 summarizes the main results ofthe SEA.
Implementation capacity. The Environment and Social Management Unit will be responsible for the overall implementation ofthe safeguards policies. During Phase I,this unit has built up a good knowledge and capacity in environment and social management, through field application ofthe environmental review process on the pilot roads. The Unit is also responsible for the monitoring of socio-economic impact indicators. During Phase 11, the Unit will need to convert its role from one of “doing” to one of “managing and supervising” local consultants. It is envisioned that the Unit will retain its role of initial screening and categorization, but then utilize consultants to carry out subproject EAs and prepare EMPs and social framework agreements. To increase the pool of capable consultants, the Unit will carry out training and refresher courses. For Phase I1category B roads, EAs, EMP and SFA will be completed by consulting firms selected to do the preliminary designs and construction supervision. Category A EAs will be carried out by separate consultants.
Consultations. Regional consultations were carried out during the preparation of the SEA at four road locations between July and October 2003. Separate consultations were held with women. Consultations revealed an overwhelming desire for improved access and willingness to collaborate with the Program. Positive impacts noted include reduced transport costs and travel time, improved comfort and safety, increased mobility, stimulus to economic development, improved community cohesion and intercommunity cooperation and improved accessibility to social services and markets. Concerns expressed included effects on water harvesting and safety. Women’s concerns focused on job opportunities and impacts on water harvesting and irrigation systems, displacement of graveyards, and disruption of travel patterns for water and wood gathering.
Disclosure. The draft Sectoral EA was made available in the country for comment on January 10, 2005 at the RAPCMO’s office and website, the Environmental Protection Authority and the Governorate offices of MPWH. The Sectoral EA was also made available at the InfoShop on January 10,2005
-18- 7. Policy Exceptions and Readiness
The project does not require any exceptions from Bank policies.
Phase Iof the Rural Access Program (RAP) has been under successful implementation since 2001, and the Bank’s appraisal team confirms that Phase I1 ofthe project is ready for implementation, based on the following readiness criteria: 0 Proven financial management and procurement arrangements are in place for the RAPCMO. 0 Project staff and consultants have been mobilized. 0 Flow ofcounterpart funds has not been a problem until now. 0 Procurement of works has been completed for the initial contracts to be financed under Phase 11, and there is a pipeline of additional sub-projects under preparation. 0 The SEA has been disclosed. 0 Indicators have been specified and baseline data collected.
- 19- Annex 1: Country and Program Background YEMEN, REPUBLIC OF: Second Rural Access Project
A. The Road Sector
Road Network and Traffic. The paved road network in Yemen grew rapidly from about 2,900 km in 1980 to 6,631 km in 2001, and 7,236 km at the end of 2003. In 2004 alone, an additional 735 km of sealed roads were completed, whilst a fbrther 2,146 km were under construction. Due to the relatively young age of most paved roads in Yemen, about 64% ofthem are in very good or good condition while 21% are in fair condition and 15% are in poor to very poor condition. The gravel road network stood at 11,027 km at the end of 2003. Most of those roads are in a rudimentary state with little or no gravel surfacing. In addition, there are over 44,000 km of tracks and trails, some of which are motorable most ofthe year with four-wheel drive vehicles. The MPWH has planned to develop in the long- term a fbrther 9,263 km of paved road projects and almost 3,000 km of gravel roads. Construction contracts have been signed for those projects without however having been budgeted. The estimated average daily traffic (ADT) volumes on paved roads, based on the last national traffic count of 1998, range from around 14,000 ADT (near Sana'a) to just under 1,000 ADT on most of the network. For the first few years after unification in 1990, traffic grew rapidly, at around 8% per annum, and is now about 5%, reflecting continued increase in trade and transport among various parts of the newly unified country, and including oil exploratiodproduction related traffic.
Institutional Arrangements. Within the GOY, the Ministry of Public Works and Highways (MPWH) has overall responsibility for planning, construction and maintenance of all roads in Yemen, as well as for policy-making and regulation in the road sector. Prior to 1998, when the road authority function was moved to the MPWH, this fbnction was performed by the General Corporation for Roads and Bridges (GCRB), a public sector authority under MPWH. In January 1998, a Presidential Decree (PD Nr. 5 of 1998) redefined the mandate of GCRB to exclusively act as a GOY-owned contractor and to perform work under contract, mainly for the MPWH but also for Governorate administrations. This has left the Ministry with a much bigger work load without additional staff with the right kind of experience. With limited staff, MPWH has taken the challenge of building the institutional capacity to effectively manage the road network. It has had difficulties, however, to retain sufficient qualified technical and managerial staff under present civil service constraints. Within that context, the Ministry decided to strengthen the role and responsibilities of agencies or external directorates and to delegate to them many road management functions. It has already passed on its responsibility for routine and periodic maintenance on all roads to the RMF, whilst retaining full management control over major rehabilitation, new construction and development works. Similarly, the Central Management Office (CMO) for Rural Roads was established to implement the RAP.
Since 1998, the General Corporation for Roads and Bridges acts as a general road contractor, under MPWH, and operates with full financial autonomy. It can rely on its 22
- 20 - branches located throughout the country to perform construction and maintenance activities for central and local governments. For international projects, GCRB may be selected through international competitive bidding processes, for which it can apply market prices. For the remaining locally-funded projects, GCRB is directly contracted by the MPWH and has to apply the prevailing unit prices set by MPWH’s Cabinet. Those prices can be, in some cases, well below costs, a main problem that needs to be addressed. GCRB has increased its staff over time, from 3,200 in 1997 to about 5,500 staff (of which about 2,000 are employed on a daily basis) today. In 2005, GCRB started a five-year contract with the RMF to handle the routine maintenance ofthe whole paved network.
A Road Maintenance Fund (RMF) was established (Law No. 22 of 1995) in 1996 under the IDA-supported Transport Rehabilitation Project to improve the maintenance of roads and to enhance cost recovery in the road sector. An additional he1 levy was set up to provide the RMF with an annual budget of about YR 6-700 million (US$ 3.2 to 4.5 million). Due to the continuous increase in the paved network, these revenues were insufficient to keep the main road network in a stable condition. A significant amendment to the RMF law was thus adopted in 2000 to increase the fuel levy to 5% of the pump price (representing annual revenues of about YR 5 bn) and put the road network on a fee- for-service basis. To date this law has not been implemented, leading to a critical situation where the RMF has to handle a constantly increasing number of tasks but with tight resources. Under Phase I1of RAP, the RMF will sign multi-year performance-based contracts, for a total length of about 950 km. These pilot projects are expected to expand the role of the private sector and the effectiveness of maintenance by letting contractors identify the best ways to meet pre-defined performance standards.
The overall responsibility for rural roads under the Rural Access Project (RAP) is with the Central Management Office (RAPCMO). A Rural Roads Steering Committee, chaired by the Minister ofPublic Works and Highways, provides the necessary oversight, control and guidance to the WCMO.To date, the RAFCMO has launched 22 rural road projects under IDA-hnding, for a total length of roads close to 540 km, and three additional rural road projects financed by USAID and the European Union. With new donors (Arab Fund, FAD) ready to support the Rural Access Program, the Government decided in 2004 to transform the RAPCMO into a Government Agency responsible for implementation of the national program for rural roads. A decree establishing such Agency is expected to be issued in a near future. It should further strengthen the principles of autonomy, competent staffing, and transparent decision-making, which led to the success ofthe RAPCMO.
Public Expenditures in the Road Sector. Over the two decades 1980-2004, public expenditures in the road sector have been mainly concentrated on construction of new roads, to the detriment ofroad maintenance. Budgets have been allocated so as to support the ambitious expansion plans set by the Government for the paved network. This situation is unlikely to change in the future as the Ministry ofPublic Works has planned to build further 9,263 km ofpaved roads in the long term. To finance the expansion ofthe sealed network, the Government is increasingly relying on foreign donors’ assistance. In 2005, foreign contributions are expected to become the major source of financing for the
-21 - MPWH, representing about 60% ofthe total budget (YR 37.3 bn), compared to only 30% in 2001.
There are currently four issues in the budget allocation process: (i)new road projects are started irrespective of whether or not they are in the approved budget; at the heart of the problem is the system of making politically driven annual commitments for local road projects that are not fully funded; (ii)MPWH has not been able to prioritize its actions, thus launching too many road projects with too little budget allocations; consequently a lot of projects do not show much progress and stay in the budget for up to 10 years or more; it is estimated that, at present, GCRB has committed itself to execute 140 projects, or more than double its current ongoing projects; (iii)allocations for preparation (feasibility study and design) and supervision ofnew projects are inadequate, and quality and timeliness of the works executed is suffering; and, (iv) there is an overall lack of inter-ministerial cooperation and coordination in the budget process. To address such issues, the Government has gone towards a major decentralization process, through the new Local Authorities Law (Law No. 4 of 2000), that would provide local authorities direct responsibility for planning, development, finance, services and social affairs, all within a limited budget envelope. Although the practical implementation of the law will be slow and tedious, due to limited capacities at the local level, it is expected to bring better budget discipline and prioritization in the road sector. For the time being, the Government has developed a strategy based on five main components: (i)contracts are only signed for new projects for which financing is assured in the approved budget; in reality this has not led yet to a reduction in the number ofprojects, due to difficulties in cancellation of ongoing works contracts; (ii)the road budget is rationalized somewhat and projects are completed sooner than three years ago, although there is still room for improvement; (iii)a rolling multi-year investment program is created with better control ofnew projects entering the program; (iv) more funding is included for feasibility studies and for detailed design studies for new projects; and (v) funding is concentrated on the highest priority projects to reduce implementation periods to between 2 to 4 years.
B. The Rural Access Program
The overall purpose and long-term development objective of the Yemen RAP is an improved livelihood and reduced isolation for the rural population. To achieve that objective, year-round access to markets and services (both social and administrative) have to improve, especially in the rural areas where the large majority of the country’s poor live. The Program also supports the Government’s decentralization process, which has been initiated in the year 2000, and complements and enhances several community- based programs in Yemen, such as the Social Fund Project and the Public Works Project.
The Program reduces isolation by ensuring that rural people have reliable access through the local, regional and national road networks. This will be done by financing improvements to a “cluster” or “sub-network” of rural roads. The centerpiece of this approach will be to improve rural access roads which link larger centers in districts to the main road network, here referred to as “intermediary rural roads”. These rural roads carry a substantial level oftraffic in Yemen, are generally in very poor condition and are
- 22 - excluded from village-level infrastructure programs. These investments would be complemented on a limited scale by improvements to smaller access roads that link isolated villages to the improved intermediary roads, thereby promoting a continuous flow of goods and people to markets and services, and strengthening the poverty reduction impact. During Phase I,the institutional and technical basis of the program were established. In Phases I1 and 111, the Program focus will gradually be scaled up. The non-physical parts ofthe Program are also important and focus on capacity-building at all levels in the public and the private sectors related to rural roads.
The Program addresses poverty by improving overall mobility in rural Yemen and reducing the isolation of villages and communities. Between 1992 and 1998, Yemen’s rate ofpoverty almost doubled, growing from 19% to about 33%, with about half that in absolute poverty. The PRSP ofMay 2002 identified a number ofkey factors contributing to poverty conditions, including high population growth, low labor force participation, scarcity of cultivable land and water, insufficient infrastructure and inadequate access to main social services. Isolation aggravates and sustains these poverty conditions in the rural areas, which manifest themselves in illiteracy, poor health and low employment and income. In 1994, the combined basic and secondary enrollment rate was just 55%, with the overall rate of female enrollment at 24%. Due to isolation, only 50% of the population had direct access to health services. The country’s purchasing power parity (PPP) per capita of income is half the average for all low income countries. In a 1997 study, 43% ofmothers stated that the reason they did not deliver their babies at a health clinic was due to reasons of access. A study in rural Taiz Governorate showed that transportation comprised 32% ofthe total cost of a health visit.
The critical constraint of accessibility is being addressed under the RAP based on knowledge about where the poor are located and how well they are served by existing roads. Identification and selection of road improvements under the Program is being carried out through better planning systems based on rural accessibility master plans which have been developed as part ofthe Phase Iproject. Poverty and gender issues are taken into account, to the extent possible, in the identification and prioritization process of individual rural road projects. The sustainability of this process is being ensured through institutionalizing participatory activities which engage communities and districts in accessibility planning at the central and decentralized levels.
The Program is being implemented in three phases which are described below
Phase I:Institutional strengthening and definition of appropriate standards. Phase Iof the Program focuses on creating an adequate institutional, technical and participatory framework for planning, prioritizing and implementing rural access improvements. With the purpose of testing the new framework, Phase Iincluded the pilot implementation of physical access improvements of (i)about 22 intermediate rural roads located in several rural Governorates, and (ii)key village access roads located adjacent to those intermediate roads, using appropriate technical and environmentalhocial standards. All Phase Iroads have avoided any resettlement or land acquisition. During Phase I,baseline data on poverty and gender in Yemen have been gathered and used in the preparation of detailed rural accessibility master plans for Yemen’s 18 rural Governorates. Phase Ihas
- 23 - included the preparation of a SEA and the development of a kamework to deal with land acquisition and resettlement, should it occur during .the program. Phase Ialso included the preparation of the designs and bid documents (and sin some cases the beginning of works) for parts of the roads to be financed under the next phase of the Program and concludes with the formal adoption ofa rural accessibility master plans for Yemen's rural Govemorates.
Phase Iof the RAP also served as a vehicle to finance the rehabilitation of the 114 km long A1 her- A1 Naqabah road section of the Aden - Mukhalla road. This road project was originally part ofthe Transport Rehabilitation Project (TRP - Cr. 2819-Yem), but had to be dropped from the credit to make room for a much needed reallocation of funds to cover the costs of addressing emergency repairs to the runway and taxiway of the Aden airport, which had shown accelerated deterioration after suffering war damages during the 1994 civil unrest in Yemen. A supplemental credit for the TRP to finance the A1 Ahmer - A1 Naqabah road was requested by the Government, but it was agreed to include such financing in the following operation in the sector. The Phase Iproject ofthe RAP provided the first opportunity to do so, and this road rehabilitation project was thus included as a separate Part B ofPhase I,although strictly speaking it is independent from the RAP.
Phase 11: Access improvement and decentralized network management. Phase I1of the Program will focus on (i)physical rural access improvements to areas with widespread poverty, poor accessibility and latent rural development potential, utilizing the planning (identification and selection) process developed in Phase I;and (ii)continued capacity- building at appropriate levels for the management and, in particular, the maintenance of the intermediary rural road network, including improvements of contractors and consultants, the monitoring of key indicators, the implementation of EMPs, and the management of local participatory processes. This will also include the financing of village access roads adjacent to the intermediary project roads, the preparation of the third phase and a detailed review and assessment ofthe first two phases.
Phase 111: Expanding the coverage of access improvement and consolidation of gains. Phase I11 would expand rural access improvements and capacity building to critical intermediary access roads not yet covered under Phase 11. It would continue to support village access road development. Capacity building to achieve sustainable management and maintenance ofrural roads, using the demand-driven and poverty-based approach for identification and prioritization of rural road subprojects as initiated in Phases Iand I1 (rural accessibility planning) would also continue under Phase 111.
C. Triggers for Initiation of Phase I1 and Phase I11 of the Program
During the processing ofthe Phase Icredit, the Government and the Bank agreed on a set of triggers for the initiation of Phase I1 of the Program. Each of these triggers is listed below and its situation reviewed. With one justified exception, all triggers have been met in substance or hlly.
- 24 - (a) Proposed technical and environmental standards for rural roads have been tested, verified and adopted for Phase I1 through the completion of at least four pilot road projects: Complied with. Five pilot road projects have been completed, and the implementation of several additional ones is well advanced. Through these projects, standards have been successfully tested, adjusted on the basis of experience, and formally adopted. They are consistent with traffic demand and aim at optimizing the cost effectiveness ofinvestments.
(b) A rational methodology for planning, prioritizing and budgeting of rural road investments has been adopted: Complied with in substance. Draft Rural Accessibility Master Plans for five Govemorates have been prepared, based on a multi-criteria economic and social methodology agreed by the Government. For the remaining thirteen Govemorates, the preparation of these master plans is well underway. Threshold levels for investments in village access roads have also been determined and agreed between the Government and the Bank.
(c) An assessment has been completed for the current (2001) rural road project portfolio in the MPWH and a plan adopted for a reduction of the number of projects under construction, so as to allow their completion within 4-5 years with the allocated budget funds: Complied with in substance. The assessment of the 2001 rural road portfolio of the MPWH was carried out. As described earlier, the Government and the Bank have agreed on a strategy to move away from the traditional system of ad-hoc programming and budgeting of rural road projects, and towards a rational system of planning and prioritization ofrural road investments. The RAP is an essential part ofthat strategy.
(d) Budgeting in the RAPCMO for rural road investments is based on a rolling three- year plan to be updated annually: Complied with in substance. This is made more complex by the RAP’S success in attracting substantial donor funding. RAPCMO has prepared a three year plan for projects to be funded by IDA and other donors. A clearly prioritized 10-year pipeline of rural road projects to be implemented mostly through the RAP is also being established through the Rural Accessibility Master Plans, which provide the basis for a rolling planning process.
(e) Technical preparation and bidding documents have been completed for the first year of the Phase I1 program of roads: Complied with. The identification, design, and procurement ofprojects has become a continuous activity within RAPCMO. Projects are ready that will commit about one half ofthe credit for Phase 11.
(0 A legal reclassification of the road network has been enacted, and a long term strategy adopted by the Government on the management and financing of secondary (rural) roads and roads under the ownership ofthe Governorates and Districts: Complied with partially. The PRSP issued in May 2002 provides a sound strategic fkamework for the rural roads sector. In addition, the Government has completed a 10-year National Road Master Plan which includes, among many other elements, (i)a new classification of the road network, and (ii)a plan for the management and financing ofthe secondary rural
- 25 - and local roads. It is the Government’s intention to submit the new road classification to the Parliament for approval within the context of a new road law, the preparation of which requires much consensus building at political level and is a lengthy process. This delay does not affect the fulfillment of the program’s objectives since reduced isolation of the largest possible share of the rural population during the program’s period will be best achieved by allocating resources to a well defined core network of priority rural roads in the vicinity of which most of the rural population lives. This core network has been clearly established and is receiving most of the available resources including all funds from donor agencies.
(g) A sectoral environmental assessment (SEA) has been completed as well as Category A EAs for roads in the Phase I1 first year program: Complied with. The SEA for the RAP has been completed and publicly disclosed in Yemen and at the Bank. The SEA includes the procedures to be applied for all category A sub-projects. The first year program is ready and does not include any category A sub-projects.
The following achievements have been agreed as triggers for the initiation ofPhase I11 of the Program.
Phase Iof the Program completed satisfactorily; At least two thirds of the civil works planned under Phase I1 of the Program completed (measured by disbursement for civil works); Technical preparation and bidding documents completed for the first year (25%) ofthe Phase I11 program ofroads; EAs for Category A roads or EMPs for Category B roads in Phase I11 first year program completed; Satisfactory budget allocation for road maintenance in the preceding fiscal year; and Satisfactory completion ofroad maintenance management strengthening activities under Phase 11.
- 26 - Annex 2: Major Related Projects Financed by the Bank and/or other Agencies YEMEN, REPUBLIC OF: Second Rural Access Project
Sector issue Project Latest Supervision Ratings (Bank-financed projects only)
IDA-financed Poor access, institutional Rural Access Program (Phase I) weaknesses
Rural development Social Fund for Development Employment generation Third Public Works Project si S Other development agencies European Union Food Security Program (Khamis Bani Sa’ad - Alquata’a and Shafer - A1 Sali roads)
USAID Kamis A1 Wathat - Kouydinah road
UNDP Programs Environment and Eco-Tourism Government Capacity and Institutional Reform Poverty Alleviation and Employment Generation
Arab Fund Program ofabout 1,000 km road improvement being started
Arab Fund + OPEC Al-Beidah-Mukeiras-Lowdar Road
Omani Government Roads in Mahra Govemorate
IP/DO Ratings: HS (Highly Sati actory), S (Satisfactory), U (Unsatisfactory), HU (High1 Jnsatisfactory)
- 27 - Annex 3: Results Framework and Monitoring YEMEN, REPUBLIC OF: Second Rural Access Project
Results Framework
Program Purpose End of ProgramIndicators: Use of Indicator Information: Improved livelihood and reduced Transport rates along each (JA isolation for the rural population program road for goods and through improved year-round passengers are reduced on access to markets and services. average by 30%. Phase I: Price ofessential Institutional Strengthening and commodities at specific definition ofappropriate technical markets along program roads and environmental standards are reduced on average by Phase II: 15% (wheat, flour, sugar, Access improvement and rice water bottle cooking oil, strengthened road network ghee, petroleum, diesel, management kerosene, gas cylinder, Phase III: cement). Expanding the coverage ofaccess Average access time from the improvements and consolidation villages benefiting from each ofgains program road to the closest markets and services are reduced on average by 30%. PDO Outcome Indicators Use of Outcome Information Isolation is reduced for about 250.000 persons located in Lower number ofbeneficiaries 250,000 persons in rural areas district centers and within 2.5 km would flag either insufficient with high incidence ofpoverty, ofthe project roads in rural areas, implementation progress or enabling them to better reach who do not currently have shortcomings in screening and markets and access services reliable year round access to selection ofproject roads. (social and administrative). Governorate centers, will be provided with such access by the end ofthe project.
Use
Component One: Rural Access Component One: Component One: Roads 1 At least 200 km of Lower annual outputs would flag Rural Access Roads are improved intermediate rural roads are problems needing assessment and to ensure year round access. paved in accordance with remedial action, such as: (i)low acceptable industry standards. contractor performance; (ii)slow I At least 75 km ofvillage preparation of new road projects; access roads are improved in and (iii)procurement delays. accordance with acceptable I industrv standards. Component Two: Institutional Component Two : Component Two: Support and Capacity Building 1 At least 3 decentralized rural Non-achievement of targets Institutional and technical road management offices are would flag poor overall capacity for road planning, functional. organization and management management and implementation 1 At least 200 local and/or lack ofpolitical will. is strengthened at the central and professionalsitechnicians decentralized levels. from the private and public sector have received on average 10 days ofrelevant I
- 28 - high quality training. I Constraints to the development and efficiency of the road maintenance and construction industry and road sector consulting profession have been identified and adequate improvements measures have been designed I RAP is managed professionally and in conformance with legal and fiduciary requirements.
Component Three: Road Component Three: Component Three: Maintenance I At least 950 km ofroads are Lower output would flag The RMF maintains identified properly maintained by the problems needing assessment and road sub-networks to adequate RMF through performance- remedial action, such as: pre-defined service levels. based road maintenance and inadequate preparation andor management contracts. supervision ofmaintenance I A modern Pavement contracts. Management System is functional and able to produce sound assessments ofpriority maintenance and improvement expenditures for the primary road network of Yemen.
- 29 - -30- 0 5 e d g
m Y 2
0 0 m 0 m m cl s m s
m 0 m m vl s o\ F
m 0 m 0 m W s F s
0 0 0 m 0 z m 8 I2 s
0 m IN 8 s 0 s
m 0 8 s 0 8
- 31 - Annex 4: Detailed Project Description YEMEN, REPUBLIC OF: Second Rural Access Project
Project Component 1: Rural Access Roads (USD 34.09 million)
This component will include the upgrading of intermediate rural roads (linking Governorate capitals to District centers or District centers among themselves) and of village access roads (linking villages to the intermediary rural roads). The works will generally comprise earthworks, slope protection, drainage structures, repair or reconstruction of some minor bridges and culverts, and provision of pavement layers including bituminous surfacing. The technical standards will be those tested and validated through the Phase Iproject. These standards have been the subject of several technical audits and have been adjusted on the basis of experience throughout the Phase I project. They are adapted to the relatively low traffic generally found on these roads and the capabilities of Yemeni contractors. Unit costs will vary with the condition of the existing roads and related structures, and the terrain. They are estimated between USD 90,000 and USD 140,000 per kilometer for intermediary rural roads and between USD 35,000 and 50,000 for village access roads. Most contracts will be for improving a set of about 20 to 30 km of intermediate and village access roads. Their cost will be in the USD 2.0 - 3.0 million range. Based on the experience ofthe Phase Iproject, civil works are expected to be mainly carried out by local small and medium size contractors and to last 20-24 months per contract. Given emerging constraints in the local construction industry, however, some contracts will be tendered as packages so as to attract foreign contractors. It is estimated that about 200 km of intermediary rural roads and 75 km of village access roads will be upgraded in the project. The separate cost of road works is estimated at USD 3 1.48 million.
The roads will be selected from a long list already prepared on the basis ofthe first draft of the rural accessibility master plans and agreed by Government. Each candidate intermediary rural road will be screened, and then submitted to environmental, social, and economic analysis on the basis of the procedures established through the Phase Iproject. The village access roads will necessarily be roads that connect intermediary rural roads upgraded through the project to nearby villages. They will have to have a marginal investment cost ofless than USD 75 per beneficiary. Since the Phase I1roads will be part of a much larger nationwide program financed by several donors, with IDA being only a minor source of funds, the roads may be located in any part of Yemen. This is not expected to be a problem as the RAPCMO has the capability to adequately implement contracts over the entire country.
It has been agreed with the Government that, since the RAP has developed into a continuous national program, it was important that part of the Phase I1 road works be started under funding from the Phase Iproject and continued with funding from the Phase I1project. This will also accelerate disbursements ofthe Phase Icredit and expedite the start of the Phase I1 project. About nine contracts representing about one quarter of the Phase I1funding for improving rural access roads will thus be started under Phase I.
- 32 - Project component 1 also includes consultancy services for design and supervision of road works (including the detailed design of the first year road works program of the third‘phase). The estimated cost of these services, which will be provided by a mix of local and foreign consultants (with measures taken to encourage the development of local consultants), is USD 2.60 million. As with the road works, consultancy contracts will be procured and will start being executed under the Phase Iproject and their funding will be taken over by the Phase I1 credit upon exhaustion ofthe first credit. Some of the design work started under the Phase Iproject and continued under Phase I1will be for roads that will be financed by the Arab Fund. This was agreed at the Governrnent’s request in order to accelerate the start of the Arab Fund financed project, which is also implemented by the RAPCMO. This also recognizes and reinforces the institutional achievements ofthe Phase Iand the emerging role of RAPCMO as the national agency for implementation of rural roads programs.
Project Component 2: Institutional Support and Capacity Building (USD 3.45 million)
This project component will mainly include the provision of training, services of local and foreign consultants, and equipment for the following activities: . Establishment and operations of at least three regional offices of RAPCMO for the supervision ofworks required under the Program;
Development ofthe capability of the MPWH and RAPCMO, to manage the road sector, including follow up on the rural accessibility master plans, development of planning and budgeting processes, continuous review and adjustment of technical standards for roads and road works, improvement in procurement and contract implementation, development of management systems, development of the capability to address environmental and social issues, review of the first two phases ofthe RAP, and an assessment ofthe possible alternatives for restructuring RAPCMO to ensure sustainable achievement ofthe Program’s objectives;
Development of the Yemeni road maintenance and construction industry and road sector consulting profession, particularly through (i)the preparation of industry guidance manuals; (ii)the development of a training capability on project management, work planning, cost accounting, bid preparation, contract documents, legal aspects, works supervision, and the environmental and social aspects of project preparation and implementation, and (ii)the carrying out of a review of the institutional, financial, and regulatory framework for contractors and consultants; . Any assessment study of the transport sector issue as may be needed to achieve the objectives ofthe Program;
Operations ofRAPCMO and its regional offices.
- 33 - Project Component 3: Road Maintenance (USD 12.33 million)
This project component will include the maintenance of about 950 km of roads under performance-based management and maintenance of roads (PMMR) contracts. It will introduce in Yemen this innovative type of contract, which should help remedy current weaknesses in the management ofroad maintenance. The specific roads to be maintained have already been proposed by the RMF. They were selected so as to make this experiment both feasible and valuable. The main features of the contracts and the procedures for their procurement, supervision, and management will be established through a consultancy started under the Phase Iproject and completed under the Phase I1 project. It is expected that the contracts will cost about USD 10.92 million in total and will be implemented over a four-year period.
The project component will also include consultants’ services, training, and equipment, for (i)supervising the PMMR contracts; and (ii)strengthening the maintenance management capability ofthe RMF, including especially (a) improving the road data base and the planning/budgeting/monitoring systems of the RMF; (b) clarifying the technical and organizational options for maintaining the different classes and types of roads; and (c) supporting, as may be required, the activities of the RMF, including for the improvement ofroad safety.
- 34 - Annex 5: Project Costs YEMEN, REPUBLIC OF: Second Rural Access Project
Local Foreign Total Project Cost by Component US$ US$ US$ million million million
Rural Access Roads 14.82 14.82 29.64 Road works (2 7.3 7) Design and supervision services (2.26) Institutional Support and Capacity Building 2.22 0.81 3.03 Technical assistance services (0.32) Training (0.3 5) Equipment (0.3 6) Operating costs of RAPCMO (2.00) Road Maintenance 5.32 5.45 10.77 Road works (9.50) Supervision services (0.3 0) Technical assistance services (0.65) Training (0.20) Equipment (0.12)
Total Baseline Cost 22.36 21.08 43.44 Physical Contingencies 1.52 1.44 2.96 Price Contingencies 1.78 1.69 3.47 Total Project Cost' 25.66 24.2 1 49.87 Interest during construction Front-end Fee - - Total Financing Required 25.66 24.2 1 49.87
'Identifiable taxes and duties are US$ 1.70 million and the total project cost, net oftaxes, is US$ 48.17 million. Therefore, the share ofproject cost net oftaxes is 96.6%.
- 35 - Annex 6: Implementation Arrangements YEMEN, REPUBLIC OF: Second Rural Access Project
The RAPCMO will be the implementing agency for Project Components 1 (Rural Access Roads) and 2 (Institutional Support and Capacity Building). The RMF will be the implementing agency for Project Component 3 (Road Maintenance). These two organizations will be responsible for ensuring full compliance with IDA fiduciary requirements for the project components under their authority. In addition, the RAPCMO will be responsible for ensuring compliance with World Bank environmental and social safeguard policies for all three project components. Basic information on these implementing agencies is provided below.
Rural Access Program Central Management Office (RAPCMO).
During the preparation of Phase Iof the RAP in 2000, the decision was taken to create the RAPCMO to be responsible for the management and coordination ofPhases Ito I11 of the program. During the execution ofPhase 1, the RAPCMO has developed steadily and, on the whole, performed very well in all of its functions. The RAPCMO’s central office in Sana’s is staffed with well-qualified personnel (currently four engineers, two environmental specialists, and additional financial and administrative staff) recruited through an open and competitive process. As shown in the organizational chart below, the RAPCMO has four units: (i)Engineering/Planning; (ii)Environmental and Social Management; (iii)Procurement and (iv) Financial Management and Administration. It is led successfully by an experienced General Manager.
Orgarization Chart Rural Access Prqjram
Steming Cormittee Chairp”: Mrister d Public Works- and High~mys I
Rd-finiskation Pr0GU-d Plaming Erwim-rt and and AGG~U~S Design Social Swmuision Managermrt
During Phase I, the RAPCMO has also initiated the establishment of three regional offices in Hadramout, Hoddeidah and Taiz. This has had mixed results mostly because
- 36 - the volume of works has not been sufficient to justify the presence of highly qualified engineers in these offices. This will change in the coming years as the size of RAP will be multiplied by a factor ofabout three (as discussed in Part C. 1 above). During Phase 11, the regional offices will be fully established. Their role will be the follow up and monitoring of project implementation under the management and supervision of the central office ofthe RAPCMO in Sana’a.
Given the steady rise of project activities during Phase Iand the firther heavy increase expected very soon because of the preparation and execution of large projects under a variety of funding sources, it is necessary that the RAPCMO quickly recruits additional staff in the areas of engineering, environmental/social, procurement and financial managemedaccounting. It is estimated that about 10 additional RAPCMO staff are now required. While some ofthe additional work may be carried out by local consultants, the increase in the RAPCMO’s staffing as mentioned above is essential to ensure that it will be able to carry out successfully the Phase I1 project as well as the projects under other donors’ funding. The RAPCMO is currently in the process of recruiting such additional staff. Further staff may be hired in 2006 depending on the speed at which other donors’ project come on stream. The newly hired staff will require training in order to fully understand the program as well as the RAP’S procedures, standards and working methods. The organizational structure ofthe RAPCMO will also need to be adjusted to correspond to its expanded size and volume of work. It is agreed that RAPCMO would have four main departments, namely: (a) Administration and Finance, (b) Procurement, (c) Design and Supervision, and (d) Planninflrogramming and Environment/Social Management. These departments would be well structured. Underpinning these changes is the Government intention that the RAPCMO would become the agency in charge of implementing the Government’s entire rural roads program.
It has been agreed that the principles that led to the success of the RAPCMO (as well as the success of similar agencies in other countries) will continue to be applied: (i) decisions regarding all aspects of sub-project preparation and implementation will be made on the basis oftransparent, rational, technical, economic, environmental, and social policies and criteria; (ii)the RAPCMO will be able to operate autonomously within the scope of its mandate; (iii)the RAPCMO will have a full time general manager and department directors with high technical skills and proven experience in similar ’ activities; and (iv) competitive remunerations and adequate working conditions will be provided to staff at all levels.
During the Phase Iproject, the RAPCMO has developed sound methodologies and procedures for the selection of sub-proj ects, including their environmental, social, and economic analysis. These procedures, which are noted in Annexes 9 and 10, will be used under Phase I1 and, as has been the case under Phase I,will be kept under review and improved continuously. Any change in substance will be agreed with IDA. As part of these procedures, which are used on a continuous basis, the RAPCMO produces screening, environmental assessment, women’s consultations, traffic counts, and economic evaluation reports under standard formats agreed with IDA in order to inform the Government and obtain IDA’Sclearance for each sub-project.
- 37 - The RAPCMO has also developed sound principles and standards for the design of sub- projects. These are also kept under review and improved continuously with IDA’S concurrence.
Consultants are used for the preparation of sub-projects’ environmental and social analysis as well as for engineering and supervision of road works. The RAPCMO has developed standard terms ofreference for the services ofthese consultants.
Part of the success of the RAPCMO has been due to its ability to attract and motivate high quality staff through good salaries and work conditions. To make this possible, the Phase I credit has thus paid for 80% of the RAPCMO’s operations. This will be continued under Phase 11.
Road Maintenance Fund.
The RMF was established in 1995 under the IDA financed Transport Rehabilitation Project to improve the maintenance ofroads and to enhance cost recovery in the road sector. The RMF is an autonomous State agency. With technical assistance funded by IDA, it has gradually developed the technical and institutional capacity to plan and administer in an effective way the State financed maintenance program for national and rural roads. The RMF manages directly the funds that it receives from a fie1 levy as well as from the national budget. It has about sixty employees, many of them road engineers, and has an organization adapted to its role. The RMF has created a special unit - RMFIU - for implementation of Project Component 3 and, in particular, for carrying out procurement and financial management for such component. This unit will need strengthening as explained in Annexes 7 and 8. Given the innovative nature ofthe PMMR contracts used in Project Component 3, the RMF will also need support for their design and implementation. A qualified consulting firm is being recruited under the Phase Iproject to initiate this support, particularly in the design of the contracts. It is expected that another hlly experienced firm will assist the RMF in the management of the contracts and the supervision ofmaintenance works.
Project Coordination and Oversight.
Oversight of the RAPCMO, RMFIU, and the overall Project would be assured by a Steering Committee. This committee, which was established under Phase I, will be restructured. Its membership will be limited to five high level representatives, two from MPWH (the Minister as chairperson of the Committee and the Deputy Minister for Roads), and one of each of the Ministry of Planning and International Cooperation (MPIC), the Ministry of Finance (MOF), and the Ministry of Local Administration (MOLA). The General Manager of the RAPCMO and the Chairman of the RMF will participate in the meetings ofthe Steering Committee but not in the Committee’s decision making process. Any relevant agency may be called upon to participate in discussions whenever needed.
- 38 - The Steering Committee’s main duties and functions will be to: (i)approve plans and design criteria for rural roads; (ii)approve staff service rules and manuals ofprocedures; , (iii)approve employment contracts for senior staff of RAPCMO; (iv) approve annual budgets for the Project; (v) approve reports on the progress in implementing the Project prior to submitting same to the Association; (vi) employ the financial auditors; and (vii) approve contracts for the provision of goods and consultants’ services, and for the carrying out of works, whose price shall exceed the equivalent of $200,000. It is well understood that the Steering Committee’s role would be focused on the approval of policies and general plans and the monitoring of progress in implementation of these plans, and would not include involvement in management nor the exercise of prior control on matters ofexecution.
The RAPCMO and the RMF will have responsibility for the approval of contracts under USD 200,000. Contracts above US$l,OOO,OOO will be referred to the High Tender Board for final approval, in accordance with the Yemeni legislation.
Further information on financial management and procurement arrangements is in Annexes 7 and 8.
Flow of Funds
The Borrower’s share of project funding would be provided by the annual national budget under normal State procedures. Availability ofcounterpart funds has never been a difficulty under the Phase Iproject.
Monitoring and Reporting
Both the RAPCMO and the RMF would prepare semi-annual progress monitoring reports in accordance with a format acceptable to IDA. These reports will include sufficient operational and financial information, particularly on the status of the RAPCMO’s work program, implementation of all contracts, any problems that may have arisen and corrective actions being taken and expenditures. These reports will also provide an updated procurement plan and disbursement and commitment tables. In addition, monitoring and evaluation will be conducted continuously from the Bank’s country office in Sana’a, and, as in Phase I,through regular semi-annual supervision missions.
- 39 - Annex 7: Financial Management and Disbursement Arrangements YEMEN, REPUBLIC OF: Second Rural Access Project
Executive Summary and Conclusions:
An assessment of the financial management (FM) arrangements for the Project was undertaken in February 2005 to determine whether these arrangements are acceptable to the Bank. This project, referred to in this annex as RAP-2, will be implemented by two implementing agencies, RAPCMO and RMF. The first project, RAP-1, was instead implemented exclusively by RAPCMO (referred to in this annex as CMO).
The CMO, from a financial management perspective, has managed the implementation of RAP-1 in an acceptable manner. CMO will implement Project Components 1 & 2 of RAP-2. It will continue to use the same FM arrangements while ensuring some enhancements such as updating its accounting software and financial policies and procedures to reflect changes in the operations of the new phase and reinforcing its FM staff to support the requirements ofRAP-2.
The RMF will implement Project Component 3. It has already taken significant steps towards the development of acceptable financial management arrangements at the Implementation Unit (RMFIU) that it has recently established. RMF has assigned a Director, Financial Officer, Procurement Officer, and Engineer from the current RMF staff. It has also devoted a well equipped space to the RMFIU activities and staff. Yet, as the RMFIU has no prior experience in implementing Bank financed projects, the establishment of a fully functional financial management system will be a condition of disbursement for Project Component 3, as explained in the action plan below.
Completion Required Actions BY Date I Establish a fully functional financial management system at RMF PIU: Draft Financial Management Manual RMFIU As condition of disbursement for Project Component 3 Create a chart ofaccounts and simple RMFIU As condition of reporting and recording system disbursement for Project Component 3 Issue first set ofFinancial Monitoring RMFIU As condition of Reports (FMR) disbursement for Proiect ComDonent 3 Launch the process of auditor recruitment RMFIU As condition of disbursement for
I I ProiJ ect Comoonent-1 3 As Credit Covenant I Required Actions I By I Completion
- 40 - Date 1 RMF to implement the following activities : Training ofaccounting staff on World RMFIU Three months after Bank relevant guidelines effectiveness 2 CMO to implement the following activities: Revise the Financial Manual to reflect CMO Three months after activities and FM set-up for RAP-2. effectiveness Finalize the appointment ofan additional CMO Three months after accounting staff effectiveness Quarterly and comprehensive set of CMO- 45 days after each Financial Monitoring Report(FMR) should Auditor quarter be issued, reviewed, and sent to IDA Updating accounting software to reflect CMO Three months after changes peculiar to operations ofRAP-2. effectiveness Launching the process ofauditor CMO Three months after
Financial Management Analysis
1. Country Financial Management Risks: As reported and outlined in the CAS of 2002, inadequate governance in Yemen is a critical issue. The Country Financial Accountability Assessment (CFAA) report (2003) indicated that there had been some progress recently in the fiscal area, particularly in terms of budget expenditure classification and consolidation of investment and current budget. There is, however, a lack of progress on achieving budget comprehensiveness as well as on implementing a broader fiscal framework beyond the annual budgeting cycle. Efforts to move forward in reforming budget implementation, cash management, accounting and reporting have been pinned on the design and implementation ofthe Bank-supported AFMIS system, which is underway, although experiencing significant delays. On the other hand, the draft Reports on the Observance of Standards and Codes (ROSC) Accounting and Auditing report (2003) stated that, at present, the accounting and auditing practices in Yemen suffer from institutional weaknesses in regulation, compliance, and enforcement of standards and rules. Although some companies claim compliance with International Accounting Standards (IAS), full compliance is not readily achieved. There is also inadequate adherence to International Standards on Auditing (ISA) and professional ethics. These factors, as well as the poor quality of education and training in accounting, have contributed to the generally observed weaknesses of the financial reporting and auditing regime.
- 41 - Inherent Risk
Based on the findings of the various ESW conducted recently, serious weaknesses were identified in the accounting and auditing professions in Country financial Yemen. High Moderate Management Risk MM include: -Hire an independent qualified private audit firm. -Ring-fence the project implementation and funds. Although the experience with timeliness of local funds contribution to Bank Counter Part Funds Moderate funded projects in Yemen is quite Moderate mixed, there was a high level of commitment in RAP-1.
2. Project Financial Management Risk:
Control Risk - CMO: The CMO has managed the FM implementation of RAP-1 in an acceptable manner. However, in RAP-2, some risks exist which need to be considered.
Comment / Risk Mitigation Measures Issue / Risk (MM) Implementing Significant RAP CMO has managed the implementation Moderate Agency ofRAP Iin an acceptable manner. However, in RAP 2, more donors may be involved. MM include: - Reliable FM system will capture and reflect different sources of funds. - Coordination with donors with regard to reporting and auditing requirements. Information Moderate The FM software used in RAP-1 did not Moderate System allow issuing complete set ofFMRs. Furthermore, RAP-2 requirements are different.
-42 - MM include: - CMO will continue to use the current FM software after updating it for changes peculiar to operations ofthe new phase. Staffing Significant CMO had an experienced qualified Financial VIoderate Manager in RAP- 1 involved in development ofcomputerized accounting system, FMR and FM Manual. MM include: - The CMO will renew his contract - CMO will hire an additional accountant to provide assistance and to allow for segregation ofduties. Financial Moderate The CMO had comprehensive policies and Low Policies and procedures manual in Arabic. Procedures MM include: - The manual will be translated to English to facilitate Bank supervision. - It will also be updated to reflect changes in phase I1(eg. changes to chart of accounts). Flow ofFunds Moderate Special Account will be used for IDA credit Low proceeds. For high value contracts, direct payments will be used Internal Audit Moderate No internal audit exists at CMO level. Moderate However, MOP and MOF conduct a 100% ex-ante audit over all expenditures. Reporting and Significant CMO has been issuing quarterly financial Moderate Monitoring reports (FMRs) without procurement and physical progress. MM include: - CMO will issue a complete set ofFMR including procurement and physical progress reports. - FMR will be quarterly reviewed by private auditor. External Audit High An independent qualified private auditor acceptable to IDA will be hired to audit CMO accounts according to TORSupon which IDA would grant its annual No-
Obi_I ection.
Overall Control Risk Before MM
- 43 - Control risk - RMFIU: The RMF has no prior experience in implementing World Bank financed projects, which renders the implementation ofits component more risky.
Comment / Risk Mitigation Issue / Risk Measures(MM) Implementing Although the project design is not very vfoderate Agency High complex, RMFIU has no prior experience with implementing Bank projects. MM include: - Adequate training on Bank guidelines will be provided to accountants. - Initial oversight by CMO and close supervision by Bank FMS will be provided. Staffing High Staff has no prior experience with Bank Moderate guidelines. MM include: - A financial officer is already assigned from RMF staff to RMFIU. - He started to have on job training through CMO FM. Information Moderate Based on the relatively low volume of Moderate System transactions and the expected simple nature ofpayments (equal monthly installments under PMMR contracts), RMFIU will tentatively use simple recording and reporting. Upon kture findings, the need for a more complex automated software will be assessed. Financial Significant RMFIU has no policies and procedures Moderate Policies and manual in place. Procedures MM include: - RMFIU will develop its own manual as a condition ofdisbursement ofProject Component 3, in light of CMO manual, while taking into consideration the specific nature ofits operations (e.g. PMMR contracts) Flow of Funds Moderate Special Account will be used for IDA credit Low proceeds. For high value contracts, direct payments will be used. Internal Audit Moderate No internal audit exists at RMFIU level. Moderate However, MOPIC and MOF conduct a 100% ex-ante audit over all exDenditures.
- 44 - Reporting and High RMFlU has no prior experience with Bank Moderate Monitoring reporting guidelines. MM include: - RMF will design its first FMR template before credit effectiveness with the assistance ofCMO. - FMR will be quarterly reviewed by the same auditor. Extemal Audit High An independent qualified private auditor Moderate acceptable to IDA will be hired to audit PIU accounts according to TORS upon which IDA would mant its annual No-Obiection. Overall Control Risk Overall Control Risk Before MM Moderate Before MM
3. Institutional and Implementation Arrangements. The CMO will be responsible for Components 1 and 2 ofthe program. The RMF, on the other hand, will be responsible for the procurement and financial management of Component 3. The Rural Roads Steering Committee, chaired by the Minister of MPWH, will provide oversight, control and guidance of/to the CMO and the RMF.
4. The CMO General Manager (GM) has been designated officially as overall coordinator of the project. Reporting to the GM is the Financial Manager, who is supported by a cashier, who handles petty cash. The CMO Information Specialist is responsible for providing technical support for the CMO hardware and software including the accounting software. Both the Finance Officer and the Information Specialist demonstrate a reasonable knowledge and understanding of World Bank procurement, disbursement, project accounting, financial reporting and auditing guidelines and procedures. The CMO has initiated the recruitment of an additional accountant for further segregation ofduties and to assist the Finance Officer.
6. The RMF is an autonomous State agency. It generates its revenues from the collection of YR 0.5 per liter of gas, in accordance with the law issued by the Government, as well as from budget hdsprovided by the MPWH. The RMF is headed by a Chairman; it has a Finance Department headed by the General Director. RMF has set-up the RMFlU to manage Component 3 of RAP-2. This unit will be headed by a director with Engineering, Procurement and Accounting staff reporting to him. The RMF Chairman will assign one qualified accounting staff from the RMF Finance Department to handle the accounting of Component 3 ofRAP-2. Upon progress ofwork, the need for an additional accountant will be reviewed.
7. Accounting system. The project will use the International Public Sector Accounting Standards (IPSAS) cash basis of accounting and the outline of budget components for financial reporting. The books of accounts for the project will be maintained on double- entry bookkeeping principles. It is agreed that Project Accounting (cash basis) will cover
- 45 - all sources of Bank hnded project transactions and all utilization of said funds. All project-related transactions will be recorded in books of accounts and supporting documents will be kept at CMORMFIU. Direct disbursements made by the Bank and from the Special Accounts will be included in the project accounting system. Funds received from different sources would be identified separately and reflected in project accounts, FMR and FS.
8. Project-related transactions and activities are distinguished at the data-capture stage. An identifiable Trial Balance for the project capturing all projects receipts, expenditures, and other payments under the project is prepared. A Chart of Accounts for the project has been developed for RAP-1 and will be used and updated for RAP-2. The Chart of Accounts shall conform to the classification of expenditures and sources of funds as indicated in the project documents (Project Operational Manual, Program Appraisal Document). The Chart of Accounts allows data to be captured in a manner to facilitate financial reporting of project expenditures by: (i) project components; (ii) subcomponents, (iii)expenditure categories, and (iv) disbursement categories. A system of reconciliation between the Project Financial Statementdfinancial reports and the legal books of accounts has been defined under RAP-1 and will be utilized in RAP-2. The RMF will prepare its own Chart of Accounts and will complete this as a condition of disbursement ofProject Component 3.
9. Information System. The CMO will maintain its books of accounts using a computerized accounting system that was also used for RAP 1 managed under its responsibility, prepare and disseminate the financial management reports, and ensure timely transmission of these documents to the Board. The automated accounting books will reflect the government contribution, the balances related to the amounts disbursed, reflecting the transactions ofthe special accounts and the remaining balance at the end of each period. The Financial Manager is in charge of the issuance of the annual project financial statements and the quarterly Financial Monitoring Reports (FMRs) as well as the submission ofthese documents on a timely basis to IDA and to the auditors.
10. The RMF currently uses manual and computerized systems in parallel and reconciliation between these two systems are performed. The financial statement reports are prepared manually. The RMFIU will set-up its own accounting books for the project as a condition of disbursement of Project Component 3. Based on the relatively low volume of transactions and the expected simple nature of payments (equal monthly installments under PMMR contracts), the RMFIU plans to tentatively use a simple system (such as Excel or Access) for recording and reporting financial transactions and to produce financial monitoring reports in a consistent manner. Upon future findings, the need for a more complex automated software will be assessed.
11. Budgeting system. An annual budget for procurement and disbursement is issued by CMO based on its Project Implementation Plan. The proposed annual budget (Government contribution) is submitted to the Project Steering Committee, which is in- charge of approving the CMO budget. This is included in the overall budget ofMPWH,
- 46 - sent to the Ministry ofFinance (MOF) for approval and eventually sent for final approval to the Parliament.
12. The budget approved for the CMO is deposited to the local Project Account opened at the Central Bank of Yemen in the name of the RAP-2 CMO. At the beginning of the year, half of the budget is deposited into the CMO's Project Account at the Central Bank and the remaining balance is deposited only upon request of the CMO, when the funds are needed. The same process will apply to the RMFIU.
13. Financial Policies and Procedures. The financial policies and procedures are crucial for ensuring transparency, providing clarity regarding financial aspects to the various stakeholders and finance staff, ensuring uniformity, and enforcing accountability. These policies inter-alia cover the following aspects: (i)expenditures that would be treated as project expenditures including their classification; (ii)expenditures, which would be eligible for reimbursement from IDA credit; and (iii)project accounting policies. These policies include aspects such as efficient management and deployment of funds, internal control policies, etc.
14. In RAP-1, CMO financial policies and procedures manual outlined: (a) job responsibilities within the financial department, (b) accounting principles and policies (eg. evaluation of non USD expenses), (c) accounting system, and (d) operational procedures (eg. for withdrawal from Special Account, replenishment, payments to contractors, etc), (e) the accounting cycle and entries, the chart of accounts, and templates of forms to be used. The manual will be updated to reflect changes in phase I1 (eg. changes to chart of accounts), and the use of an imprest account. Since it was issued in Arabic language. it needs to be translated to English to facilitate and streamline Bank supervision.
15. RMFIU has no policies and procedures manual in place. It will develop its own manual as a condition of disbursement ofProject Component 3, in light of CMO manual, while taking into consideration the specific nature ofits operations (eg. PMMR contracts)
16. Flow of Funds. To ensure that funds are readily available for project implementation, the CMO 'and RMFIU would each open, maintain and operate a Special Account (SA) at the Central Bank ofYemen. Deposits into, and payments from the SAs, will be made in accordance with the provisions stated in the credit agreement. Disbursement under this credit will be made according to the transaction-based disbursement procedures that include withdrawal applications for direct payment, reimbursement and requests for the issuance of special commitments. Withdrawal applications and replenishments ofthe SA will be prepared and sent by the CMO and the RMFIU signed by authorized signatories. The name and corresponding specimen of signature of each of the authorized signatories will be submitted to IDA at effectiveness and before submission ofthe first withdrawal application.
17. For both CMO and RMFIU, procurement is done at the CMORMFIU level. No contracting is made at the regional offices. Invoices, together with supporting
- 47 - documentation, are submitted by the various consultants, contractors and suppliers to the procurement officer who reviews them against payment terms of contract/physical progress and then forwards them to the financial department. The financial officer reviews the payment package for completeness and accuracy in accordance with IDA guidelines and submits it for approval of the project director. Upon director’s approval the financial officer prepares a check or a withdrawal application which is duly signed by authorized signatories.
18. Internal Controls. A fiduciary responsibility of control ofthe budget execution and monitoring rests with the Project Steering Committee. For CMO, the financial manager will have two staff in the Finance section, an accountant and a cashier, with job descriptions that indicate segregation of duties to ensure there is internal control in the system. The CMO has also engaged the services ofan information specialist to verify the accounting data in the system prior to generating the FMRs. For the RMFIU, the size of staff in the financial department do not allow for complete segregation of duties. Due to the expected relatively low volume of transactions, only one financial officer has been assigned to the financial section of the RMFIU. For both implementing agencies, in accordance to IDA requirements, appointment of an independent private auditor acceptable to the IDA will be completed for RAP-2. In addition to the issuance of an opinion on the project financial statements, the external auditor will be required to submit an annual management letter highlighting his observations on the internal control system,
19. Reporting and Monitoring. Each of the CMO and the RMFIU will issue monthly financial reports (FR), quarterly financial monitoring reports (FMR) and annual project financial statements (PFS):
Report Frequency Preparation Due Date Responsibility Sent to FR Monthly 10 days from end ofmonth CMO / MOPICNOF RMFIU FMR Quarterly 3 weeks from end ofquarter CMO / MOPIC/MOF RMFIU IDA PFS Annually 3 months from end offiscal CMO / MOPICNOF vear RMFIU IDA
(zLJ Monthly un-audited FR. These reports will be prepared on a monthly basis and will not be sent to the Bank. However as part of Bank supervision, they will be reviewed and reconciled with the monthly withdrawal applications and quarterly FMR. The format of these reports should be quite simple (listing of sources and uses offunds and Bank reconciliation. (b) Ouarterlv reviewed FMR. The format and content of FMR will be agreed upon by negotiations, and included in the financial management manual. FMR include financial, procurement and physical progress information. There should also be an introductory narrative discussions of project developments and progress during each quarter. Reviewed FMR would be submitted to the IDA not later than 45 days after the end ofeach quarter.
- 48 - (CJ Annually audited PFS. The PFS should include: (i)a statement of sources and uses of funds indicating funds received from various sources, project expenditures, and assets and liabilities of the project; (ii)schedules classifying project expenditures by components, subcomponents and expenditure categories; (iii)a Special Account Reconciliation Statement; and (iv) a Statement of Withdrawals made on the basis of Statements of Expenditure (SOEs). Audited PFS would be submitted to the IDA not later than 6 months after the end of the Fiscal Year.
Audit Arrangements
20. Two separate annual project financial statements for Project Components 1 and 2 and Project Component 3 accounts will be audited by independent private auditors acceptable to IDA under two separate contracts. There will also be two separate audits ofthe Special Accounts managed by the CMO and the RMF. Each implementing agency will be responsible for the process of contracting its auditor in accordance with procedures agreed between the Government and IDA. Audit reports will be submitted within six (6) months after the end of the fiscal year. Reviewed FMRs would be submitted to the IDA not later than 45 days after the end ofeach quarter.
~ Report Due Date Responsibility Sent to Language Scope FMR 45 days Extemal MOPIC/MOF ArabdEnglish Review from end Auditor IDA ofquarter PFS 6 months Extemal MOPIC/MOF Arabic/English Audit from end Auditor IDA offiscal Year
21. The audit would be comprehensive and would cover all aspects ofthe project (i.e., all sources and uses of funds, and expenditures incurred). The audit will be carried out in accordance with htemational Standards on Auditing. Terms ofReference (TOR) for this assignment should cover an audit of financial transaction, the SOEs, SAs, FMRs, and an assessment ofthe accounting financial management system, including review of intemal control mechanisms. The CMO and the RMF would provide the auditor with access to project-related documents and records, and information required for the purposes of the audit. The auditors would carry out a concurrent audit during the fiscal year, to bring to management’s attention any issues, which need to be addressed. This would strengthen intemal controls, and would also facilitate early completion ofthe annual audit.
Disbursement Arrangements
22. Disbursement. IDA funds will be deposited in two Special Accounts (SA) to be opened at the Central Bank of Yemen, in the name ofthe CMO for RAP-2 and the RMF PIU respectively. Withdrawal applications and replenishments ofthe SAs will be signed
- 49 - by authorized signatories. Each withdrawal application will be signed by authorized representatives whose names and corresponding specimens of their signatures will be submitted to IDA.
23. For both CMO & RMFIU, the proceeds of the credit will be disbursed using transaction-based system (replenishment and reimbursement with full documentation or SOEs, direct payments, applications for special commitments). The signatories to the WASwill include a representative ofthe MPWH, with either the CMO General Manager or the FWF Chairman, as applicable.
24. Allocation of Credit proceeds. The allocation of credit proceeds by disbursement category and percentage to be financed is shown in the table below:
Amount of Credit % of Expenditures to be CATEGORY Allocated Financed (US$ million) (i)Civil Works (a) for road upgrading (Project 25.10 84% Component 1) (b) for road maintenance (Project 6.30 60% Comuonent 3) (ii)Goods 100% offoreign (a) for Project Components 1 and 2 0.40 expenditures, 100% of , (b) for Project Component 3 0.13 local expenditures (ex- I factory) and 90% oflocal expenditures (iii)Consultants’ Services 90% for firms and (a) for Project Component 1 2.44 87% for individuals (b) for Project Component 2 0.34 (b) for Project Component 3 1.09 (iv) Training 100% (a) for Project Components 1 and 2 0.36 (b) for Project Component 3 0.1 1 (v) Incremental Operating Costs for Project 1.73 80% Components 1 and 2 (including CMO staff salaries). (vi) Unallocated 2.00 Total 40.00
25. Use of Statements of Expenditures (SOEs). Full documentation for expenditures under contracts requiring the Bank’s prior review would be submitted with the corresponding application. Disbursements for contracts valued at less than US$l,OOO,OOO for works, US$lOO,OOO for goods; and US$lOO,OOO for services for consulting firms, and US$50,000 for services of individual consultants would be made on
-50- the basis of Statements of Expenditures (SOE). Documentation to support these expenditures would be maintained by the CMO and the RMF, and would be made available for review by visiting Bank missions and for project auditing.
26. Special Account (SA). Two Special Accounts would be maintained in the Central Bank of Yemen for RAP-2, and would be operated by the CMO and RMF, respectively, jointly with the MOF. The SAs would be operated in accordance with IDA’S and Government’s jointly agreed operational policies. The authorized allocations of the Special Accounts will be US$2,500,000 for the CMO with an initial advance of $1,500,000 until withdrawals from Credit Account and special commitments issued by IDA reach SDR 5,000,000 under Components 1 and 2 of the Project, and will be US$500,000 for the RMF with an initial advance of $300,000 until withdrawals from Credit Account and special commitments issued by IDA reach SDR 1,000,000 under Component 3 of the Project. These allocations represent a four-month average ofproject expenditures to be financed through the SAs. The Special Accounts would be replenished monthly or at least once every quarter. Advances into the RMF’s Special Account will not be deposited until the condition of disbursement is fulfilled (see Paragraph C.2. - Institutional and implementation arrangements).
27. Direct Payments and Special Commitments. The minimum amount for applications for direct payments, reimbursements,, and for special commitment will be 20% of the authorized allocation to the SA.
Supervision Plans.
28. Until early 2006, the development of RMFIU financial management system will be monitored in detail by the Bank’s FMS. The update of CMO financial management system to reflect changes peculiar to RAP-2 will be monitored as well by the Bank’s FMS.
30. Subsequently, as required, the Bank FMS will conduct periodic supervision missions. FMRs and audit reports will be reviewed by the Bank FMS and issues identified will be followed up. In general, during supervision missions project’s financial management and disbursement arrangements (including a review of sample of SOEs and movements in the Special account) will be reviewed to ensure compliance with Bank minimum requirements. A financial management rating for ISR purpose will also be developedreviewed twice a year. More intensive supervision will be devoted to RMFIU in the initial stages as it is new to implementation ofBank financed projects.
3 1. Upon closing of RAP-2, both the CMO and the RMF should prepare a list of assets accumulated during the life of the program, and these assets should be turned over formally to the MPWWMOF.
- 51 - Annex 8: Procurement
YEMEN, REPUBLIC OF: Second Rural Access Project A. Background
A Country Procurement Assessment Report (CPAR) for Yemen was carried out in late December of CY2000. The report showed that the current procurement legislation (Law No. 3 of 1997 concerning Government Tenders, Auctions and Stores, and corresponding regulations introduced by Decree No. 234 of 1997) was a significant improvement over the previous legislation of 1991, but was not yet up to international standards, notably in the following areas: (i)gaps in the legislation; (ii)absence of use of Standard Bidding Documents (SBD's) by public agencies; and (iii)conflicts with procurement guidelines of donors, including IDA'S. Even where reasonable rules existed, they were not necessarily followed. As a transition strategy, until a revised procurement law is enacted, the CPAR recommended a set of national Standard Bid Documents (SBDs) for goods, works and services. This is under preparation together with a comprehensive National Procurement Manual (NPM) to support capacity building ofthe Government's procurement function at all levels. IDA, through an IDF Grant for procurement capacity building, and the Government ofthe Netherlands are supporting the development ofthe NPM and requisite SBDs, which also includes preparation of a separate volume on procurement procedures for local authorities. The assignment to prepare and roll out the NPM through pilot workshops and training-of-trainers for civil servants in core spending ministries is expected to be completed by the end of2005.
B. Use of Bank Guidelines
In the interim, procurement for the proposed RAP Phase I1project would be carried out in accordance with World Bank "Guidelines: Procurement Under IBRD Loans and IDA Credits", May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", May 2004, and the provisions stipulated in the Development Credit Agreement (DCA) at Negotiations. The General description ofvarious items under different expenditure categories are described below and summarized in Table A. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, pre-qualification requirements above specific thresholds, estimated contract costs, prior review requirements, and time frame for contract processing will be finalized by Negotiations. The Procurement Plan will be updated at least every six months or as required to reflect the actual project implementation needs and improvements in institutional capacity at the RAPCMO at the center, its regional branches, as well as the RMF.
C. Procurement Capacity of RAPCMO.
A formal procurement capacity assessment of the RAPCMO was carried out in October 2004 in accordance with the OPCPR Guidelines dated July 15, 2002. Procurement activities for Components 1 and 2 under the proposed Phase I1project will be carried out by the WCMOas has been the case since 2001 for the Phase Iproject. The assessment
- 52 - reviewed inter alia the organizational structure, procurement staffing levels, and procurement administration and filing and system, in the context ofimplementing a much larger RAP Phase I1program.
Despite the overall nationwide limitations in handling procurement effectively, the RAPCMO has emerged as one of the very few agencies in the Yemen context that can deliver its projects efficiently and in a cost-effective manner. During Phase Iin contrast with the rest of MPWH and even other implementing agencies, the implementation arrangements were such that the RAPCMO has been able to retain a reasonable degree of autonomy; this has helped it maintain the necessary independence and reasonable degree oftransparency in handling the important volume ofprocurement for consultancy services and civil works that it has had to carry out.
Since the start of the RAP in 2001, the procurement capacity of the RAPCMO has been satisfactory overall. Despite some deficiencies identified during a recent audit in the area of proper of procurement filing, and compliance with DCA with respect to publicity and invitations, the RAPCMO has demonstrated its ability to deliver many subprojects in reasonable time. An experienced Procurement Manager with a long experience in IDA procurement is on board and the CMO has recently recruited a Procurement Assistant to ensure maintenance of proper procurement administration of the subprojects. A number of CMO staff have received procurement training provided by ILO and the World Bank. However, in order to be able to maintain and improve upon the current overall capacity to carry out an acceptable level of compliance with the requirements of the DCA with respect to procurement when the RAP expands further under the proposed Phase 11, the RAPCMO is recruiting an additional procurement specialist. All new technical staff that are currently being recruited (see Annex 6) would also participate in Procurement and Financial Management in-depth training prior to project launch, in order to enhance implementation capacity for the Phase I1project.
In addition, it is proposed that the RAPCMO specify a clear matrix of responsibility as regards the procurement function during implementation of Phase I1 led by the experienced Procurement Manager anchored at the RAPCMO. In view of the above, the procurement risk for Project Components 1 and 2 for implementation by the RAPCMO is rated as Average.
D. Procurement Capacity of the RMF
A formal procurement capacity assessment of the RMF was carried out in October 2004 in accordance with the OPCPR Guidelines dated July 15, 2002. The RMF has a cadre of staff who has knowledge and experience in a range of activities involved with road network maintenance and management. However, the performance ofthe RMF as pointed out in the ICR of the Transport Rehabilitation Project closed in 2002 with regard to procurement aspects was such that there were persistent problems of successfully completing procurement packages under Bank guidelines during implementation. Under Component 3 (Road Maintenance), procurement activities in Phase 11, which the RMF will undertake, will for the most part consist of planning for and managing the
- 53 - implementation of several pilot PMMR contracts with the private sector for maintaining about 950 km of roads. During the capacity assessment, one ofthe key findings was that RMF staff in the Technical Audit Department have begun to familiarize themselves with the trial sample bidding documents for PMMRs, and, in particular, have utilized these documents for procuring a PMMR contract with the General Directorate of Construction of Road and Bridges (GCRB). The GCRB has recently been restructured to operate as a parastatal reporting to MPWH, but is ineligible for IDA financing, as it does not meet the autonomy and commercially operated entity criteria ofIDA guidelines.
Nonetheless, this initial exposure to PMMR contracts has in the mission’s view been a useful capacity building first step for RMF staff, which now need to scale-up their skills in procuring and managing performance based road maintenance in accordance with IDA guidelines and sample PMMR bidding documents. The RMF management is now in the process of establishing an Implementation Unit (RMFIU) with a core staff of Engineers, ProcurementKontract Management Specialist, and Financial Management Specialist to spearhead the procurement and management of PMMR contracts for financing under Component 3 of the proposed Phase I1 project. In addition, during the implementation phase, the RMF will undertake to take all steps necessary including the preparation of a study on identifying the necessary steps it needs to take for transforming the current Directorate of Routine Maintenance ofthe RMF to the Directorate ofPerformance Based Road Maintenance Contracts.
Given the overall procurement risk rating of the RMF component as High, the mitigation measures identified in the capacity assessment are summarized in the following Action Plan.
Action Plan Activity Issue 1 Actions 1 Responsibility I TimeLine
Establish Project Determine a suitable RMF Completed ImplementationUnit location for the RMFIU at with core staff the RMF building
Additional IT IT equipment & furniture RMF September 30, equipment and procured using Phase I 2005 furniture for new PIU resources, as required
Implementation Staff designated to be Provide procurement RMF Before June 30, Unit (RMFIU) members ofthe training abroad for at least 2006 RMFIU do not have two staff in RMFIU in-depth experience with IDA procurement Supported continually by IDA 2005 to 2008 procedures World Bank staff and documents for guidance.
- 54 - Issue Actions
Limited Experience of PMMR consultants RMF October 30, RMFIU staff to appointed 2005 prepare PMMR contracts Consultants provide prior EWFIU in-depth training on November 2005 planning, designing to June2006 execution and supervision ofperformance-based contracts for the Implementation management and of Performance maintenance ofroads Based assets) Management & Maintenance Special training offered on RMF of Roads supervising PMMR May 3 1,2006 (PMMR) Projects
Preparation ofPMMR Prepare Procurement Plan RMFIU By Negotiations Procurement Plan and for first year activities documents Prepare selection process 2006 steps. Advertise, Issue BDs, evaluate, and award PMMR contracts.
Established a Satisfactory filing system procurement filing established and archive RMFIU December I system in the RMFIU procurement files on a 3 1,'2005 satisfactory to IDA continuous basis
Procurement Records Management
Records on claims and Keep adequate records for PIU From 2006 on dispute resolutions all procurement processes including importantly, claims and disputes resolutions under PMMR contracts
E. Procurement Arrangements
Advertisement
A General Procurement Notice (GPN) will be issued in the United Nations Development Business and DGMarket, to advertise for major consulting assignments (as well as obtain expressions of interest) and for any ICB for works and goods, not less than eight weeks
- 55 - prior to the publication ofthe first Specific Procurement Notice (SPN). The GPN will be updated annually for all outstanding procurement. The GPN will also be published in the national press or official gazette for purposes of obtaining expression of interest for contracts under NCB and to obtain expression of interest from national consultants.
Procurement Planning.
The mission reviewed with the RAPCMO the procurement action plan for the first year investment and concluded that with the current capacity level and implementation arrangements, timely procurement actions could be carried out satisfactorily. A draft Detailed Procurement Plan (DPP) indicating the procurement method and processing time for each contract covering the first year of Phase I1implementation for Components 1 and 2 (see Table C below) was reviewed and agreed at Negotiations. The RMF would also be preparing a draft Procurement Plan for about three PMMR contracts expected to be financed under Project Component 3 for IDA review and approval. An updated procurement plan for both the RAPCMO and RMF project components will be submitted for IDA review during every supervision. The progress reports forwarded to IDA will report on the procurement activities in appropriate degree of detail.
Procurement of Works
Civil Works contracts financed by IDA are estimated to cost US$42.40 million, including physical and price contingencies. Bid packages, with an estimated contract value above US$l.O million equivalent would be procured using ICB procedures and documents and procedures, and they would be advertised in UNDB/DgMarket and local newspapers. Bid packages, with an estimated contract value below US$l.O million would be procured using NCB procedures and documents or national SBD if they become available and advertised in at least two local news papers. Component 3 of the project (Road Maintenance) will include three or four PMMR contracts. These will be procured under ICB procedures and the Bank’s Sample Bidding Document for PMMR contracts will be used.
Procurement of Goods
Contracts for Goods financed by IDA relate mainly to furniture, office equipment, computers, and vehicles. ICB and NCB procedures would apply for goods contracts estimated to cost above US$lOO,OOO and US$50,000 equivalent respectively. International and Local Shopping method would be applied for contracts estimated to cost below US$50,000 equivalent.
Selection of Consultants
Consulting services financed by IDA would be for: (i)studies, technical design, civil work supervision, preparation of bidding documents, financial management support, technical audits, and financial audits; and (ii)consultancies on technical matters and training. Consultants financed by IDA would be hired in accordance with the Bank’s
- 56 - Guidelines for the Selection and Employment ofConsultants (May 2004). The CMO aand RMFlU would issue widely publicized procurement notices to get candidacies from consultants (firms and individuals). Services for lectures, advisory services, small studies and small works supervision assignments would be selected through comparison of qualifications among Individual Consultants (IC) expressing interest in the assignment, or approached directly. Based on agreed upon criteria, the CMO will maintain and update a long list ofqualified Individual Consultants which will be used to establish short-lists.
Training
For training abroad and in-country, the training program containing names of candidates, costs estimates, content of courses, periods of training and selection of training institutions, will be approved by IDA annually.
F. IDA Prior Review.
Contracts above the prior review threshold would cover about 94% of the contract amounts for works, goods, and consultants. Contracts for works financed by IDA, above a threshold value of US$l,OOO,OOO equivalent, will be subject to IDA’s prior review procedures. Contracts for goods financed by IDA, above the threshold value of US$lOO,OOO equivalent, will also be subject to IDA’s prior review procedures. Prior review will not apply to contracts for the recruitment of consulting firms and individuals estimated to cost less than US$lOO,OOO and US$50,000 equivalent, respectively. Prior review for the selection of consultants will include the review of budgets, terms of reference, short-lists, selection procedures, requests for proposals, evaluation reports, proposals for contract awards, and negotiated contracts. However, the exception to prior IDA review will not apply, regardless ofthe contract value, to: (i)the Terms ofReference of contracts; (ii)single-source hiring; (iii)assignments of a critical nature as determined by IDA; and (iv) amendments of contracts raising the contract value above the above- mentioned prior review thresholds. Documents related to procurement below the prior review thresholds will be maintained by the borrower for ex-post review by auditors (technical and financial audits) and by IDA supervision missions during project implementation, and for at least two years after the Project’s closing date.
G. Procedures Manuals
During Phase I, a Procedures Manual on administrative procedures and internal organization was prepared and applied, and the same manual will be applied during Phase 11. The manual, which should be updated periodically, includes: (i)eligibility criteria for selecting sub-projects for implementation under the proposed project; (ii)procedures for calling for bids, selecting contractors, consultants, and vendors, and awarding contracts; (iii)internal organization for supervision and control ofworks; (iv) financial management, budgeting, accounting, and disbursement procedures; and (v) procedures for handing over completed works.
- 57 - H. Agreements Reached at Negotiations
During Negotiations, the Government gave assurance that it will: (a) use and apply the Procedures Manual; (b) use the Bank’s Standard Bidding Documents for ICB, the Standard Request for Proposals for the selection of consultants, and the Standard Bid Evaluation reports; (c) update the procurement plan on a regular basis before IDA supervision missions, or more frequently if needed, and transmit it to IDA (including in particular a comparison of target times and actual completion); and (d) carry out, during supervision missions, an assessment of the effectiveness of bidding procedures and performance, as they relate to the program’s procurement experience, and propose for IDA and other donors’ consideration any modification to the current procedures to the extent that those would accelerate procurement, while still maintaining compliance with the Bank’s Procurement Guidelines and adequate control over contract awards and payments.
The Government also gave assurance at negotiations that it will take the necessary measures to ensure that procurement phases do not exceed the following target time periods:
Preparation of bidding documents for goods 4 (6 for large contracts) and consultant services Time given to bidders for preparation of bids 4 (6-10 for ICB) Bid evaluation 2 (4 for large contracts) Signature ofcontracts 2 (after IDA non-objection) Payments 3 (after submission of invoice)
Table A: Project Costs by Procurement Arrangements (US$ million equivalent)
Procurement Method’ Expenditure ICB NCB Other’ N.B.F. Total Cost”’ Category 1. Works 42.40 0.00 0.00 0.00 42.40 (33.00) (0.00) (0.00) (0.00) (33.00) 2. Goods 0.00 0.00 0.56 0.00 0.56 (0.00) (0.00) (0.56) (0.00) (0.56) 3. Services 0.00 0.00 4.61 0.00 4.61 (0.00) (0.00) (4.61) (0.00) (4.61) 4. Inc. Operating Cost 0.00 0.00 2.30 0.00 2.30 (0.00) (0.00) (1.84) (0.00) (1.84)
42.40 0.00 7.47 0.00 42.40 Total (33.00) (0.00) (7.00) (0.00) (40.00) */ Numbers may not add due to rounding ‘Figures in parentheses are the amounts to be financed by the Credit. All costs include contingencies.
- 58 - 2 Includes civil works and goods to be procured through national shopping, consulting services, services ofcontracted staff of the project management office, training, technical assistance services, and incremental operating costs related to managing the project.
Table A1 : Consultant Selection Arrangements (US$ million equivalent)
Selection Method Consultant Services Expenditure Category QCBS LCS SFB IC CQ Y.B.F.
A. Firms 4.36 0.10 0.00 0.00 0.10 0.00 (4.36) (0.10) (0.00) (0.00) (0.10) (0.00) B. Individuals 0.00 0.00 0.00 0.05 0.00 0.00 (0.00) (0.00) (0.00) (0.05) (0.00) (0.00) Total 4.36 0.10 0.00 0.05 0.10 0.00 (4.36) (0.10) (0.00) (0.05) (0.10) (0.00)
Table B: Thresholds for Procurement Methods and Prior Review
Contract Value Contracts Subject to Expenditure Category Threshold Procurement Method Prior Review (US$ thousands) (US$ millions) 1. Works I 21,000,000 I ICB I ~llcontracts 1 All contracts < 1,000,000 NCB ~,000,000 12.Goods 2100,000 ICB All contracts All < 100,000 NCB contracts 2100,000 < 50,000 IS, NS First three contracts I 3. Services (Firms) 2100,000 QCBS All contracts QCBS First three contracts < loo’ooo 1 (National advertisement) I < 100,000 I CQ,LCS I I Section V of consultants 4. Services 250,000 All contracts r(Individuals) Guidelines Section V ofconsultants < 50,000 All TOR Guidelines 5. Training
- 59 - Total value of contracts subject to prior review: US$49.3 million
Overall Procurement Risk Assessment: Average
Frequency of procurement supervision missions proposed: One every six months (includes special procurement supervision for post-review/audits)
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0 r '9 .o Annex 9: Economic and Financial Analysis YEMEN, REPUBLIC OF: Second Rural Access Project
Framework approach. The RAP is the Government’s framework under which it is carrying out large-scale rural road improvements, with financing from various external sources and the national budget. During Phase Iof the RAP, this framework was designed in terms of road selection methodology, engineering criteria and design standards, economic analysis, procurement, financial management, environmentalhocial planning and monitoring, etc. The text below describes the methods and tools for economic analysis which will be applied under Phase 11.
Methodology for economic analysis. The economic analysis of intermediate rural access roads to be upgraded under the RAP will be done using the Roads Economic Decision Model (RED). The RED was developed by the World Bank specifically for the economic analysis of low- volume roads, based on some elements of the more widely known HDM (Highway Design and Maintenance Model). It has been used during Phase Iand will continue to be used under Phase I1 to “test” all intermediary roads proposed for improvement, as a result of the participatory process of rural accessibility planning and screening. The RED utilizes expected reductions in vehicle operating costs (VOC) as the principal economic benefits. This constitutes a conservative approach, since it is now widely accepted that the traditional VOC-based economic analysis is insufficient to capture the full economic and social benefits of low-volume rural road investments, in particular in the context of projects in poor areas. On the other hand, a truly reliable quantification of all benefits ofrural roads, in particular social benefits, requires a large amount of data, which is far too expensive to collect and to monitor for each road to be improved. It therefore seems reasonable to use the RED to screen all candidate roads under the RAP in order to verify if a minimum required threshold internal rate of return (IRR) can be attained on the basis ofVOC savings only. This threshold will be an IRR of 12%. Based on the experience gained in Phase I, many of the intermediate rural roads in Yemen reach that threshold, because of the significant traffic levels on those roads and potential for traffic generation. However, the Bank will consider applying a lower threshold where the isolation and poverty of specific rural communities warrant the road improvement works, notwithstanding a comparatively modest IRR. For example, in cases where the absolute poverty rate in the road’s zone ofinfluence is 5% above the national average, the threshold might be reduced to, say, 9%.
For village access roads, it was agreed during the preparation of Phase Iof the RAP that a different type of threshold would be applied, which was the maximum $-amount spent on the road improvement per beneficiary. In other words, the expected additional cost of the village access road is simply divided by the number of inhabitants of the village (beneficiaries). If the resulting figure is below the threshold, the road is considered eligible. Based on the experience of Phase I,the threshold value was set at US$ 75 per beneficiary. This amount will be revised annually during Phase I1 in order to ensure realism and responsiveness to changing socio- economic circumstances.
Economic evaluation of five Roads. The results ofthe economic evaluation conducted for five of the intermediate rural access roads that are being started under RAP Phase Iand will be
- 66 - continued under RAP Phase I1 are presented below. For each of these roads, the economic analysis compares three project alternatives: (i)a “without-project” scenario in which only emergency maintenance is applied; (ii)an upgrade with pavement by bituminous surface treatment , which is the “project” scenario; and (iii)an upgrade with pavement by asphalt concrete.
Present traffic levels and composition. Traffic surveys on the network were conducted by categorizing vehicles into nine different groups: cars, utilities, three types of buses (light, medium and heavy), and four types oftrucks (light, medium, heavy and articulated). For the five roads presented in this chapter, all traffic was concentrated during the dry season, as rains during the ninety-day long wet season made those roads impassable or inaccessible. It was observed that, for four roads out of five, almost all traffic was composed of utility vehicles, such as four- wheel drive passenger vehicles and pick-up trucks. This situation is even more patent for those roads located in mountainous areas where, due to very bad geographic and road surface conditions, no passenger cars or buses were counted.
Present Traffic Levels during the dry season (in No. of vehicles per day)
AI Dhabab - AI Manaom 3 82 7 7 99 Orod - Soug AI Horiah 0 137 0 2 139 AI Madn -AI Shabareeg 52 37 2 15 106 AI Masqh -AI Aglain 0 41 0 2 43 AI Qabie - Shaharah 0 55 0 0 55
The improvement of those four roads to paved standards should bring significant changes in traffic composition and lead, in the future, to a situation closer to the one seen in the A1 Madn - A1 Shabareeg road, where a wider variety of traffic was counted. After the projects’ completion, it is expected that many of the current utility vehicles will be replaced by passenger cars, small and medium-size buses, and light and medium-size trucks. However, in the absence of a reliable basis for estimating the change in traffic composition, traffic growth rates were applied similarly to all types ofvehicles. Consequently the proportion of vehicle types will remain constant in the model throughout the 15-year period ofevaluation.
Future traffic growth rate. In the RED analysis, traffic on the improved road is composed of: (i)normal traffic, which is ofthe same nature as the existing traffic; (ii)generated traffic, which is traffic that is suppressed today because of the bad road conditions and the high Vehicle Operating Costs (VOC); and (iii)diverted traffic, or traffic that is currently using an altemative road, but will switch to the new road because it is shorter and/or in better condition. For all those different types of traffic, average growth rates are applied during the 15-year period of analysis. These growth rates have been set at 4.3% for the initial five years, 4.5% for the following five years, and 4.6% for the remaining period ofanalysis. Compared to RAP Phase I,which was built on a conservative scenario where traffic growth rates were planned to decrease significantly after the first five years (from 5% to 2%), RAP Phase I1 is based on the assumption that traffic growth rates will remain stable over the considered period oftime.
- 67 - Generated and diverted traffic. Within the RED model, the volume of generated traffic was calculated as a function ofthe elasticity between transport cost and transport demand. In the case of RAP Phase 11, the price elasticity of demand for transport was set at 1.2. This figure remains in the lower range of price elasticity usually found in developing countries (between 0.6 and 2). This conservative scenario was preferred as most roads upgraded under Phase I1 will be located in remote areas. As experienced previously in Yemen, generated traffic may however be stronger than first anticipated and could materialize soon after the completion of the road. As far as diverted traffic is concerned, the five roads examined under this analysis were not probable alternatives to other existing roads, even once upgraded from unpaved to paved standards. Such roads are indeed unlikely to play the important function of links within the main road network. No diverted traffic was therefore included in the economic analysis of the five roads.
I AlDhabab-AlManaom I 81 I 88 I 110 1 138 1 70 I 76 I 94 I 118 1 Orod-Soug AI Horiah 114 124 154 193 97 105 131 165 AI Madn -AI Shabareeg 87 95 118 147 69 75 93 116 wqh-AI Aglain I 39 I 43 I 53 I 66 I 36 I 39 I 49 I 62 I I AlQabie-Shaharah I 43 I 49 I 61 I 77 I 39 I 44 I 55 1 69 I
Costs of the road improvements. The investment duration for most roads upgraded under RAP Phase I1 was brought to two years to reflect the lessons learnt in Phase Iof the Program, during which road execution time ended up being about 18-24 months (compared to initially planned execution times of 8-10 months). The estimated costs for the five roads presented in this chapter are as follows:
I AI Dhabab - AI Manaom I 2 I 115,200 I 18 I 2.074 I Orod - Soug AI Horiah 2 115,200 30 3.456 AI Madn -AI Shabareeg 2 76,800 23 1.766 AI Masqh -AI Aglain 2 105,600 17 1.795 AI Qabie - Shaharah 1 144,000 11 1.584
Summary of results for the five road projects and sensitivity analysis. For the five roads assessed in this chapter, the Internal Rate ofReturn (IRR) is between 16% and 36%, in the base case scenario, i.e. well above the threshold of 12% set for the Program. The economic analysis also includes a sensitivity analysis which estimates the IRR and the Net Present Value (NPV) in the case of: (i)costs increase by 25%; (ii)benefits decrease by 25%; and (iii)a simultaneous cost increase of 25% and a benefit reduction of 25%. For the first three roads that, currently, have daily traffics between 75 and 105 vehicles per day, the IRR in the worst scenario never falls below 12%. For the two remaining roads, that are located in mountainous areas and have low first year daily traffics (between 36 and 41 vehicles per day), the IRR in the worst scenario will
- 68 - be 7%, which is low but still acceptable given that the analysis does not account for unquantifiable social benefits.
Yemen - Rural Access Improvement Program (Phase II) Economic Analysis Summary Table for five roads
IRR 25% 20% 19% 14%
IRR 36% 29% 28% 22% Orod - Soug AI Horiah NPV 4.623 3.960 2.805 2.142 IRR 25% 20% 19% 14%
IRR 16% 12% 11% 7 ?h AI Masqh -AI Aglain NPV 0.390 0.006 -0.092 -0.476 IRR 17% 12% 11% 7% AI Qabie - Shaharah NPV 0.340 0.022 -0.063 -0.381 (NPV in $ million, at a 12% Discount rate)
- 69 - Yemen - Rural Access Improvement Program (Phase 11) Economic Analysis - Summary Data for five Rural Roads
Project Characteristics
Length (km) 18 30 23 17 11
Terrain Type Rolling Mountainous Flat Mountainous Mountainous
Road Type Earth Earth Gravel Earth Earth Bituminous Bituminous Bituminous Bituminous Bituminous Surface Surface Project Surface Standard Surface Standard Surface Standard Standard Standard
Investment Duration (in n n n L L L 2 1 vears)
Road Roughness Without Project 20 20 18 25 25 " With Project J J 3 3 3
Socio-Economic Data
Direct Population Served 15,000 15,000 15,000 7,000 15,000 (persons)
Annual Normal Daily Traffic 75 105 80 36 41 (veh/day) in 2004
Composition: Cars 3 yo 49% Utility 83% 98% 35% 96% 100% LightBus 7 yo Medium Bus 2 Yo Heavy Bus Light Truck 1% 1% 10% 2% Medium Truck 6% 1Yo 2% 2 Yo HeavyTruck 2% Artic. Truck
Economic and Financial Analysis
Financial Investment 115.20 115.20 76.8 105.60 144 1'000$/kml Financial Investment Cost 2.07 3.46 1.77 1.80 1.58 ($m) I I I 1 I
- 70 - Annex 10: Safeguard Policy Issues YEMEN, REPUBLIC OF: Second Rural Access Project
Safeguard Policies Triggered
I Policy I Applicability
“These policies will be triggered only if significant issues are identified during individual ‘project screening under the program. Agreed Policy Frameworks (see below) will then apply in the design and implementation of these individual projects.
Environmental Studies and Assessments
Phase I Environmental Management Plans. Phase Iof the RAP was placed in environmental screening category “B”, because projects were purposefully screened and selected to limit civil works to improvement of existing road alignments, with no need for land acquisition, resettlement or other significant environmental impacts. EAs and EMPs were carried out for each selected road project by the WCMOEnvironment and Social Unit and individual consultants trained by the Unit. These included local consultations with both men and women and resulted in a Social Framework Agreement, signed by a beneficiary committee, local authorities and the CMO.
Phase I1 and I11 Sectoral Environmental Assessment. Phase I1 of the RAP has been placed into environmental screening category “A”, given the possibility that some selected roads may involve departure from existing realignments or fall into sensitive areas. Roads therefore may be identified during screening as “A” or “B”. As all roads for the remainder ofthe program are not yet identified, a SEA has been prepared, which assesses the range of environmental issues that could confront rural road projects and establishes a programmatic framework for incorporating environmental and social considerations into the screening, planning and implementation of all rural road projects carried out under the Program. During the scoping and screening phase, the scale and scope of potential impacts are assessed so as to categorize each subproject and determine whether any particular Safeguard Policies are triggered in ensuing studies. The SEA was prepared by Techniplan Consultants.
- 71 - Road specific Environmental Assessments. Under the procedures specified in the SEA, each prospective road project will undergo screening by the RAPCMO Environment and Social Unit. The EAs for roads screened as Category B will be carried out by individual consultants or the consulting engineers engaged for the design. The EAs for roads screened as Category A will be carried out by independent consultants.
Safeguards Related Risks and Measures Taken
Involuntary Resettlement. Based on experience of Phase Iand the SEA, the major safeguard- related risk involves the triggering ofthe Bank’s Involuntary Resettlement Policy when technical design and safety considerations require a significant departure from existing rights ofway, and in doing so, the taking of property or land. For this purpose, a Resettlement Policy Framework has been prepared as part of the SEA (Volume 2), which specifies criteria for when the Policy Framework is triggered, principles and procedures for preparing Resettlement Plans, methods for determining affecting affected persons and valuing assets, implementation processes and grievance mechanisms.
Natural Habitats and Cultural Resources. As a nation-wide program, there is a possibility that RAP financed road subprojects could run through or adjacent to natural or critical natural habitats, or affect known or chance find cultural resources. In this context, a Natural Habitats Policy Framework and a Cultural Resources Policy Framework were prepared and also form part ofVolume 2 ofthe SEA.
Consultation Processes
SEA Consultations. The preparation ofthe SEA included consultations with sector stakeholders in Sana’a and at four selected regional sites country in July - August 2004. They included separate consultations with local men and women, engineers and contractors, local government, research institutions, and NGOs. These consultations provided valuable input to the specification ofpotential impacts and the mitigation and avoidance measures to be considered in the design ofRAP subprojects (as noted above). For example, women’s consultations indicated the need to account for potential disruptions in traditional water harvesting structures, as well as footpaths to drinking water sources.
Subproject Consultations. For all individual subprojects, local consultations with both men and women form an integral part ofthe environment and social management process specified in the SEA. These consultations result in the Social Framework Agreement (SFA), which is signed by the Beneficiary Committee, the Governor and the RAPCMO.
Safeguard Related Impacts and .Mitigation
Main impacts. Rural roads have a range of potential positive and negative impacts, depending on their location within the country. Roads located in the escarpments are characterized by hairpin bends whereas in flat areas they follow rather straight alignments. These geometric features affect the volumes of earthworks and consequent impacts on the environment. Water harvesting along and even on the road surface is routine practice and is a major consideration in
- 72 - rural road design, as is cross-drainage, discharge to adjacent lands, flood protection and wadi hydrology. Slope stabilization is a key issue in vertical alignment design to avoid landslides in the mountainous zones. Traditionally, rural roads designs in Yemen have featured a roadbed of7 meter width, with a road surface 6 meters wide and shoulders of 0.5 meter on each side. In the case ofmountain roads, this design requires rather deep cuts into the mountainside to achieve the design width ofthe roadbed, leading to the erosion of exposed slope surfaces and often to slides of slopes onto the road. In addition, such road widths can lead to land taking through populated or agricultural areas, which is difficult to justify, given the volume oftraffic on these roads.
Mitigation through avoidance and improved and environmentally-sound technical designs. A key aspect of the RAP’S Environment and Social management process is the participation of environmental and social specialists during the screening, design and implementation stages of the road project cycle. In this way, potential environmental and social issues may be avoided or significantly reduced through design considerations and meaningful analysis of alternatives. Phase Icarried out test sections on the pilot roads and village access roads, addressing such design issues as: (i)water harvesting on mountain roads; (ii)narrower platforms, and related to a reduced need for cutting into slopes and earth movements; (iii)more durable road surfacing on steep slopes to avoid erosion; (iv) slope stabilization on sections of the roads where slopes are unstable; (v) controlled disposal at designated sites of excess material cut from the hillside slopes; and (vi) embankment design and wadi hydrology. Based on these experiences, revised design standards are being developed, which will be regularly updated based on cumulative experience.
Environmental Management Plans. Each road specific EA will include an EMP, which summarizes the impacts, mitigation measures and responsibilities for environmental and social impacts associated with the road. It will be summarized in a standard table, which will be an adaptation ofthe SEA Environmental Management Plan Table.
Capacity and Commitment of Implementing Institutions
The Environment and Social Management Unit at the CMO will be responsible for the overall implementation of the safeguards policies. During Phase I,this two-person unit has built up a good knowledge and capacity in environment and social management, through field application of the environmental review process on the pilot roads. The Unit is also responsible for the monitoring of socio-economic impact indicators. In its transition to Phase 11, the Unit is converting its role from one of “doing” to .one of “managing and supervising” local consultants. To this end, the Unit has trained a pool of local consultants in preparing EAs, including women to conduct the women’s consultations. Because of the increasing workload, the Unit will be increased by two persons, so as to assure adequate screening and follow up monitoring of the numerous subprojects.
Mitigation Funding
Cost of Design Measures. The quantities, specifications and estimated costs ofdesign measures to avoid or mitigate negative impacts will be assessed by the design consultant and incorporated
- 73 - into the works bidding documents. The contractor will execute all required works and will be reimbursed through pay items in the bill ofquantities, which will be financed by the project.
Temporary Land Acquisition. Temporary acquisition for diversions, camps, borrow areas and other work sites will constitute a community contribution, under the auspices of the Beneficiary Committee and confirmed through Social Framework Agreement. Additional costs of rehabilitating all such areas to their original state will be incurred by the contractor and bome by the project, as a pay item in the bill ofquantities.
Resettlement Costs. All resettlement related costs will be governed by the Resettlement Policy Framework. The Policy Framework specifies that the costs of replacing affected buildings will be borne by the project and will be reimbursed through pay items in the bill of quantities. In conformance with Yemeni traditional rural practice, owners of affected lands will not be compensated by the project in cash for loss ofland, but the affected owners will donate such land for public purposes and community benefit. However, this donation will occur within the context of a mutually signed community-based Agreement, which is appended to the SFA, and which specifies the terms under which the donation is made.
Natural Habitats and Cultural Resources. Mitigation measures involving civil works or habitat restoration will be funded as a Project cost and will be included in the Bill of Quantities as a pay item to the contractor, who will implement the said measures to a specified standard at the agreed location(s). The project will not finance any recurrent costs, which must be bome by the Ministry of Water and Environment (MWE), the agency responsible for management of the critical natural habitat, or the community in the case ofnon-critical habitats.
Cultural Resources. Mitigation measures for protectionhestoration of cultural resources sites involving civil works will be funded as a project cost and will be included in the Bill of Quantities as a pay item to the contractor, who will implement the said measures to a specified standard at the agreed location(s). The costs of conservation or other non-civil works mitigation will also be included in the project’s financing. This may include, for example, the temporary secondment of, and logistical support to, a qualified archaeologist or cultural resource specialist to the project. The specialist will supervise the implementation of relevant mitigation and management activities, as well as the treatment of any chance finds. Relevant findings will be recorded in the Works Supervision reports. Aside from civil works directly related to the road, the project will not finance any recurrent costs, which must be born by GOAMM or other responsible agency.
Operational Costs. During operations, the costs of mitigation in the course of maintenance contracts will be incurred by the contractor and borne by the employer, who may be the Road Fund, Government or local government, and reimbursed as a pay item in the bill of quantities. The maintenance of water harvesting, footpaths and other social measures will be the responsibility ofthe community. In addition, the community will be expected to carry out basic cleaning of drains and culverts as part of their contribution to maintenance. The cost of safety and driver information campaigns will initially be borne by the project, however the communities will be responsible for continuous community education and safety campaigns. Selected safety checks will be carried out by the project, in conjunction with communities.
- 74 - Environmental Covenants in Development Credit Agreement All subprojects will be planned and implemented in accordance with the environmental and social management process, as specified in the SEA (Volumes Iand 11).
Monitorinp Arrangements
The WCMO through its Environmental and Social Unit (E&SU) shall be responsible for monitoring of the overall environmental and social management process. During road construction or maintenance, the Resident Engineer (RE) will be responsible for monitoring the Contractor's compliance with all contract clauses addressing environmental and social impact mitigation, to be carried out under the purview of the General Safety, Health and Environmental Regulations. For this purpose, the RE will refer to the project-specific EMP and report on such compliance in his monthly reports. The E&SU shall maintain a dossier for each project road. This dossier will include: Initial requests for support and all ensuing correspondence 0 Screening Report and all attachments 0 Draft and Final EA, EMP and SFA 0 Records ofall consultations at Govemorate and local levels 0 Copies of Special Reports, such as Resettlement Plans, Natural Habitats Plans or Cultural Resources Plans, when applicable
Supervision Arrangements
Following its exercise ofprior review, the Bank will monitor the implementation ofroad specific EAs, SFAs, Resettlement Plans and specific mitigation plans for Natural Habitats or Cultural Resources. As part of regular supervision or separate missions, the Bank will also carry out targeted and spot review of EMP implementation, including consultations and specific social cases and resettlement plans involving land donation and asset replacement.
EAs and other environment/social documents for category "A" sub-proj ects will be submitted to the Bank's MNA Environment and Social Cluster for early review in order to ensure that any issues are resolved well before final design and construction.
- 75 - Annex 11: Project Preparation and Supervision YEMEN, REPUBLIC OF: Second Rural Access Project
Planned Actual PCNreview 1/15/2004 Initial PID to PIC Initial ISDS to PIC 1/26/2004 Appraisal 1/30/2005 Negotiations 4/18/05 Board/RVP approval 11/20/2005 Planned date ofeffectiveness 03/3 1/2006 Planned date ofmid-tenn review 03/0 1/2008 Planned closing date 11/30/2010
Key institutions responsible for preparation of the project: . Rural Access Program Central Management Office (RAPCMO) . Road Maintenance Fund (RMF) Bank staff and consultants who worked on the project included:
Name Title Unit Jean-Charles Crochet Sr. Transport Economist MNSIF Andreas Schliessler Sr. Transport Economist AFTTR Robert Fishbein Environment Specialist AFTTR Hisham Labadi Highway Engineer MNSHD Jerome Leyvigne Transport Specialist MNSIF Abdelghani Inal Highway Engineer MNACS Richard James Operations Analyst MNCA3 Ghada Youness Sr. Counsel LEGMS Matthew Parish Counsel LEGMS Thao LeNguyen Disbursement Officer LOAGl John Bryant Collier Operations Officer MNSRE Mikael Mengesha Sr. Procurement Specialist MNACS Josephine Masanque Sr. Financial Management Specialist MNACS Mohammed Yehya Abd El Karim Financial Management Specialist MNACS Yaa Pokua Afiiyie Oppong Social Development Specialist (YP) MNSRE Tuyet C huppe Program Assistant MNSRE Elena Gagieva Program Assistant MNSIF
Bank hnds expended to date on project preparation: 1. Bank resources: US$272,502 2. Trust funds: N/A Total: US$272,502
Estimated annual supervision costs: US$85,000
- 76 - Annex 12: Documents in the Project File YEMEN, REPUBLIC OF: Second Rural Access Project
. National Highway Master Plan, Government ofYemen, SMEC Consultants, 2004 . Draft National Road Classification, Government ofYemen, SMEC Consultants, 2004 . Draft Rural Accessibility Master Plans for Five Govemorates, Government ofYemen, SMEC Consultants, 2005 . Sector Environmental Assessment, Government of Yemen, Techniplan Consultants, 2004 . Resettlement, Natural Habitats, and Cultural Resources Policy Frameworks, Government of Yemen, Techniplan Consultants, 2004 Screening reports and detailed economic analysis for five roads, RAPCMO, 2004
- 77 - Annex 13: Statement of Loans and Credits YEMEN, REPUBLIC OF: Second Rural Access Project
Difference between expected and actual Original Amount in US$ Millions disbursements Project FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm' ID Rev'd PO761 85 2005 RY-Basic Education Development 0 00 6500 000 000 000 6332 -1 70 0 00 Program PO74413 2004 RY-Groundwater & Soil Conserv Proj 0 00 40.00 000 000 000 4020 6 80 0 00 PO82498 2004 RY-SOCIAL FUND FOR 0 00 60.00 000 000 000 58 59 17 76 0 00 DEVELOPMENT I11 PO82976 2004 RY-THIRD PUBLIC WORKS 0 00 45.00 000 000 000 41.79 0 45 0 00 PO57602 2003 RY URBAN WTR SUPPLY & 000 13000 000 000 141 90 5415 0 00 SANITATION APL 000 PO651 11 2003 RY-PORT CITIES DEVELOPMENT 0 00 2340 000 000 2328 1043 0 01 PROGRAM 000 PO64981 2003 RY-SANA'A BASIN WATER MGMNT oo PROJ 2400 000 000 000 2463 5 60 0 00 PO70092 2002 RY TAIZ MUNICIPAL DEV & FLOOD oo 45.20 000 000 000 3041 2443 -2 15 PROTEC PO76183 2002 RY Higher Education 0 00 5 00 000 000 000 5 73 179 0 00 PO43254 2002 RY-Health Reform Support Proj (HRSP) 0 00 2753 000 000 000 3040 4 40 0 00 PO43255 2001 RY Basic Education Expansion Project 0 00 5600 000 000 000 2603 4 64 0 00 PO62714 2001 RY-IRRIGATION IMPROVEMENT 0 00 21 30 000 000 000 1797 1444 0 00 PO70391 2001 RY-RURAL ACCESS IMPROVEMENT oo 4500 000 000 1970 1228 3 20 PROGRAM 000 PO05906 2001 RY-RURAL WATER SUPPLY & SANITATION 0 00 2000 000 000 000 1622 1108 -0 74 PO50483 2000 RY CHILD DEVELOPMENT 0 00 28.90 000 000 000 1238 1012 0 00 PO50706 2000 RY-CIVIL SERVICE MODERN 0 00 3000 000 000 000 21 46 1902 0 00 PO05902 1998 RY-Southem GOV AGRI PRIVATIZA 0 00 2470 000 000 401 5 93 10 20 0 00 Total
YEMEN, REPUBLIC OF : STATEMENT OF IFC's Held and Disbursed Portfolio In Millions of US Dollars
Committed Disbursed
IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1999 ACSM 8.00 0.00 0.00 0.00 8.00 0.00 0.00 0.00 2002 Ahlia Water 1.51 0.00 0.00 0.00 1.51 0.00 0.00 0.00 1998 Radfan 0 95 0 00 0.00 0 00 0.95 0.00 0 00 0 00
Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic
- 78 - Annex 14: Country at a Glance YEMEN, REPUBLIC OF: Second Rural Access Proiect
M. East POVERTY and SOCIAL R North Low- Yemen Africa income Development diamond' 2003 Population, mid-year (millions) 19.2 312 2,310 Life expectancy GNI per capita (Atlas method, US$) 510 2,210 450 GNI (Atlas method, US$ billions) 9.8 689 1.038 7- Average annual growth, 199703 Population (%J 2.9 1.9 1.9 Labor force (%) 3.0 2.9 2.3 SNI Gross primary Most recent estimate (latest year available, 199703) :apita enrollment Poveriy (% of population below national poverty iine) 42 Urban population (% of total population) 25 58 30 Life expectancy at birth (yean) 57 69 58 i Infant mortality (per 7,000 live births) 83 44 82 Child malnutrition (% of children under 5) 46 44 Access to improved water source Access to an improved water source (% OfpOpulatiOn) 69 88 75 Illiteracy (% ofpopulation age 15+J 50 31 39 a"+A** Gross primary enrollment I% of school-age population) 81 96 92 Yemen, Rep Male 97 100 99 Low-income group Female 64 92 85
KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1983 1993 2002 2003 Economic ratios' GDP (US$ billions) 4.9 9.9 11.0 Gross domestic investmenffGDP 20.2 20.5 21 0 Trade Exports of goods and servicesiGDP 27.4 38.7 37.7 -17.2 19.1 Gross domestic savings/GDP 18.8 T Gross national savings/GDP -5.2 25.8 23.0
Current account balance/GDP -25.5 5.4 1.8 Domestic Investment Interest paymentdGDP 0.4 0.5 0.5 savings Total debffGDP 120.9 54.1 49.0 Total debt servicelexports 5.2 3.0 4.6 Present value of debffGDP 35.9 32.5 1 Present value of debffexports 68.3 65.5 Indebtedness 1983-93 1993-03 2002 2003 200347 (average annual growth) GDP .. 5.5 3.9 3.1 3.7 - -- Yemen, Rep GDP per capita .. 2.5 0.8 0.1 0.6 Low-income orouo Exports of goods and services .. 5.4 8.6 21 -7.0
STRUCTURE of the ECONOMY 1983 1993 2002 2003 (% of GDPJ Agriculture .. 22.6 11.4 10.8 Industry .. 23.1 41.5 41.6 Manufacturing .. 12.7 5.4 4.9 Services .. 54.3 47.1 47.6 Private consumption .. 98.2 64.1 63.6 19.1 16.7 17.6 General government consumption .. -GDI -GDP Imports of goods and services .. 64.9 40.2 39.9
(average annual growth) Agriculture Industry Manufacturing Services Private consumption General government consumption Gross domestic investment 50 17 57 ---"Exports -.c1-lmports Imports of goods and services
~~ ~ Note: 2003 data are preliminary estimates * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing. the diamond will be incomplete.
- 79 - PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 Inflation (Oh) Domestic prices (% change) 45 T I Consumer prices 35.8 6.8 11.9 30 Implicit GDP deflator 19.2 4.9 12.5 15 Government finance 0 (% of GDP, includes current grants) Current revenue 15.2 33.9 33.9 -15 Current budget balance -9.5 6.0 5.0 )*IIUUIUI*I GDP deflator -0’CPI Overall surplus/deficit -12.8 -0.7 -2.3 i I
TRADE 2003 1983 1993 2002 Export and Import levels (US$ mill.) (US$ millions) Total exports (fob) 1,167 3,684 3,934 CNde oil (government share) 277 1,600 1,828 “OoO T Crude oil (company share) 556 1,546 1,631 Manufactures 20 138 139 Total imports (cif) 2,138 2,932 2,932 Food 548 997 1,153 Fuel and energy 148 416 480 Capital goods 502 747 852 97 98 99 00 01 02 Export price index (1995=100) 100 134 154 Import price index (1995-700) 89 83 91 kk! Exports Imports Terms of trade (1995=100) 112 162 170
BALANCE of PAYMENTS 1983 1993 2002 2003 Current account balance to GDP (%) (US$ millions) Exports of goods and services 1,344 3,861 4.222 Imports of goods and services 3,182 3,992 4,468 Resource balance -1,838 -131 -246 Net income -408 -718 -828 Net current transfers 998 1,384 1,274 Current account balance -1,248 535 199 Financing items (net) 1,391 217 383 Changes in net reserves -144 -752 -583 Memo: Reserves including gold (US$ millions) 148 4,056 4,445 Conversion rate (DEC, /ocal/US$) 4.6 48.6 175.7 183.4
EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) 1 Composltlon of 2003 debt (US$ mlll.) Total debt outstanding and disbursed 2,796 5,923 5,352 5,394 0 0 0 0 IBRD I G: 438 IDA 253 726 1,350 1,417 Total debt service 85 119 158 252 IBRD 0 0 0 0 IDA 2 10 29 34 Composition of net resource flows Official grants 231 109 3 55 Official creditors 454 49 60 60 Private creditors 14 10 0 0 Foreign direct investment 8 897 39 -131 Portfolio equity 0 0 6 2 World Bank program
Commitments 0 27 163 47 A- IBRD E ~ Bilateral Disbursements 55 46 83 89 B - IDA D ~ Other multilateral F - Private Principal repayments 0 5 19 23 C-IMF G - Short-term Net flows 55 41 64 66 Interest payments 2 5 10 11 Net transfers 53 36 54 55
Development Economics 9/20/04
- 80 - Annex 15: Map (IBRD No. 33979) YEMEN, REPUBLIC OF: Second Rural Access Project
- 81 - ETHIOPIA 14 16 18
° ° °
Red Sea Red ERITREA 42 An Nadirah-Damt, 42 °
20 km (14+6) ° A14 RURAL ACCESS PROGRAM — PHASES 1 AND 2* ROADS Al Luhayyah Al Hodeidah Salif DJIBOUTI Maydi SECONDARY ROADS PRIMARY ROADS (INTERMEDIATE ROAD + VILLAGE ACCESS ROADS) TOTAL LENGTH OF PROJECT RURAL ACCESS PROJECT (RAP) PHASES 1 AND 2* RURAL ACCESS PROJECT (RAP) PHASE 1 Az Zaydiyah
Al Qanawis
A10 HODEIDAH HAJJAH Al Kadan PERCENT OF HOUSEHOLDS UNDER FOOD POVERTY LINE Mocha Seham Bajil
Bani Al Awan
A20
AL- MAHWIT Turbah Al Magrabah
Hays A6 Hajjah At Malhan District Center Al Mansuriyah Governorate) (Yemen -
Khamis Bani Sa’d
Bora’a Barim TAIZ Aden
Al Mahwit
SAADAH A17
Al Jamimah
AMRAN
A19
A11 Kuhlan
Al Udien A2
A16
A8 44
Saadah
IBB DHAMAR Thulla °
44
SANA'A A1 Turbah At A9 Amran ° Mudykhirah REPUBLIC OF YEMEN
Raydah A21
Akamat Al Agoud Ibb
Taiz A18
A4 A15
Yarim SANA’A Sana’a Mabar
Bahah Tor Al
LAHEJ
CITY
A7 A14 Dhamar
JIhanah DHALE’E Al Nadirah
Ghadir Al Khadra
Beni Shadad
AL- ADEN
Qatabah AL-BEIDA Al Hazm Lahej
30% – 39% 25% – 29% 20% – 24% 15% – 19% 10% – 14% FOOD POVERTY: Rida AL-JOWF Aden At Taffah Jaar
Harib
MARIB A12 Marib and are not represented in this map * Roads to be financed only under Phase 2 have not been selected yet
Zinjibar A3
Awin A13 Al Beida Al Kura’a Bayhan Shaqra 46 Nuqub °
Safir A22 Wasit Lawder
46 ABYAN ° Mudiyah INTERNATIONAL BOUNDARIES GOVERNORATE BOUNDARIES PORTS AIRPORTS NATIONAL CAPITAL GOVERNORATE CAPITALS TOWNS AND VILLAGES
Al Ahmer
Gulf of Aden SHABWA Al Hamiyah
Nisab B1 Shabwah Ahwar Ataq Al Mahfad Al Nagabah Rawdah Al Huwaymi Ar
Zamakh B2 Al Ribat 48 ° Azzaher Al Magharim
Haynin 48 A5 ° Atud
Shibam HADRAMOUT Hawra As Sufal Ali Bir Tarim Seiyun
Al Ghuraf
SAUDI ARABIA
A14 A15 A16 A17 A18 A19 A20 A21 A22 Al Mukalla 55 5100 KILOMETERS 75 50 050 25 0
Ar Riyan Lawer–Jisr Malihah, 22.8 km (18+4.8). Rusabah–Shareh–Al Qubah, 10.8 km. Al Madn–Al Shabareeq, 23 km. Al-Dhabab–Al-Manaom, 20 km. Al-Mesqah–Al-Haqlain, 21 km (17+4). Orod–Souq Al Horiah, 31 km. Al Qabie–Shaharah, 11 km. Jabl Al Dar–Ribad Emran, 14 km. An Nadirah–Damt, 20 km (14+6). Rural Access Project (RAP) Phases 1 and 2*: Thamud Al Ghaydah 50 57 100 MILES 75 25 ° 50 ° Quaseyr Saddat ash Shuqqah Mar’ayt Sanaw Sayhut
Qishn MAHARA (Yemen - 52 °
Al Ghaydah AL- 'Abd al Kuri Nishtun
Tabut Aden Governorate)
A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11 A12 A13 B1-2
52 ° OMAN
Habarut
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown other information denominations and any The boundaries, colors, on this map do not imply, of The World on the part Bank Group, any ugeto h ea ttso n ertr,or any endorsement status of any territory, judgment on the legal acceptance of such boundaries. Al Ahmer–Al Huwaymi, 232.7 km. Abyn, 14 km (Rural roads only). Bayhan–Al Harajh–Al Kura’a, 22 km. Al Udien–Mudykhirah, 17 km. Al Qanawis–Al Kadan, 34 km. Qratiel Hamdan, 4 km. Akamat Al Agoud–Mudykhirah, 36 km. Al Khadra–Beni Shadad, 27 km. Seham–Bora’a, 29 km. Azzaher–Al Ribat, 43 km. 18.7 km (8.8+9.9). At Turbah–Tor Al Bahah, At Taffah–Awin, 44.5 km (42+2.5). 23.8 km (15.8+8). Kuhlan–Al Magrabah (Section 1), Thulla–Amran, 38.7 km (25.6+13.1). Rural Access Project (RAP) Phase 1: Hawf Damqawt Samhah (Yemen - Aden Governorate) The Brothers 54 (Yemen - Aden Governorate) ° Darsah REP. OF YEMEN Socotra 54 ° IBRD 3 JUNE 2005 3979 18 °